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The No. 2 mutual-fund manager of 2019 is a green-energy and tech investor. He told us how he picks the companies with the brightest futures — and offered a peek into his portfolio.

Thu, 01/16/2020 - 4:04pm

  • Garvin Jabusch told Business Insider how he chooses companies for the tech- and renewable-energy-focused Shelton Green Alpha Fund, the second-best performer among large-cap mutual funds in 2019.
  • Jabusch said he has succeeded in investing in innovators with strong intellectual-property positions and those benefiting from long-lived economic trends.
  • He combines that approach with a value- and fundamental-based philosophy that emphasizes revenue growth and cash flows.
  • Click here for more BI Prime stories.

Investing in the technologies of the future involves keeping track of things that aren't easily measured in numbers.

But Garvin Jabusch managed to stay on top of them in 2019, and then some. He comanages the Shelton Green Alpha Fund, which invests in innovative technologies and beat 97% of its peers. With a 43.7% return, it ranks No. 2 among large-cap US mutual funds for the year, according to Kiplinger.

While the fund had endured a couple of rough years before that, Jabusch said his strategy hasn't changed since its inception in 2013. He said sentiment shifted in his favor while he focused on the trends that matter most for his investments, a combination of company performance and focus on new technologies.

"We want to find the firms with the best fundamentals. And then we want the ones that own the most IP around the best innovation," he told Business Insider in an exclusive interview. "We want to think about what is going to grow into not just the next quarter or even year but over the next half decade, decade, even couple of decades."

Intellectual property is key to that approach. Jabusch said he wanted to find the companies that have developed technologies that their competitors would have to build on, giving them an advantage and long-term sources of revenue from licensing.

Here's an example of how those threads can come together: One of the Green Alpha Fund's biggest investments is in First Solar. According to Jabusch, the company benefits from the plunging cost of solar energy, an economic trend that has giving it a crucial advantage over fossil fuels. Meanwhile, in America it has a near monopoly on the type of solar panel that's cheapest to make.

"That's an example of the intersection of a great new technology that's more productive than its predecessor and then seeking the owners of the smartest IP," he said. "The overall approach is to think a little bit more about economics and a little bit less about finance."

Other major areas of focus include wind energy, CRISPR gene therapies, and chipmakers with an eye on developing industries like artificial intelligence and robotics. He also has positions on Tesla and Alphabet. Its largest current positions are on the Danish wind-turbine company Vestas, chipmaker Applied Materials, First Solar, the solar and wind company TerraForm Power, and the tech-consulting giant IBM.

Despite his futuristic focus, Jabusch does consider himself a fundamental investor. He looks for companies that are growing and betting on themselves and ignores per-share numbers entirely, he said.

"I want to see expanding revenue. I want to see proven ability to expand margins. I want to see increasing free cash flows, and I want to see the firm doubling down on its innovation," he said.

He added that he uses a modified version of Graham-Dodd valuation to asses them. He combines a look at companies' discounted cash flow and the value of its assets with an assessment of the economic trends supporting their businesses.

"With the world changing so fast, it's hard to do value investing without marrying it to macro even though that would be heresy to a traditional value person," he said. "We think you've got to be looking ahead, and you have to marry macro to your overall approach because without that, you don't have a very informed view about what kind of growth you can expect."

SEE ALSO: A strategy chief at $7 trillion BlackRock reveals the 4 trends that will shape how the world invests for the next 10 years — and why the trade war won't scare her away from China

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

FREE SLIDE DECK: The Future of Fintech

Thu, 01/16/2020 - 4:02pm

Digital disruption is affecting every aspect of the fintech industry. Over the past five years, fintech has established itself as a fundamental part of the global financial services ecosystem.

Fintech startups have raised, and continue to raise, billions of dollars annually. At the same time, incumbent financial institutions are getting in on the act, and using fintech to remain competitive in a rapidly evolving financial services landscape. So what's next?

Business Insider Intelligence, Business Insider's premium research service, has the answer in our brand new exclusive slide deck The Future of Fintech. In this deck, we explore what's next for fintech, how it will reach new heights, and the developments that will help it get there.

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I inherited $10,000 when my grandpa died and spent the money in 3 ways that changed my life

Thu, 01/16/2020 - 3:38pm

  • When my grandpa died, my dad gifted my sisters and me $10,000 each from the money he inherited.
  • I used it to pay off debt, buy a used car, and start an emergency fund. This set me on a path to financial security that changed my life.
  • The gift also motivated me to start building wealth. Even though I don't want to have kids, I want to be able to show the same kind of generosity to my loved ones one day.
  • Read more personal finance coverage.

A few months after my grandpa died, I woke up to an email from my dad with the subject, "Check Your Bank Accounts."

The email was sent to my sisters and me. It read, in part, "It amazes me that my mom and dad were able to raise seven kids on a single income. We weren't rich but lived a nice middle-class life. My mom was the queen of coupons." Knowing my dad, this didn't surprise me.

He continued, "What's even more amazing is that not only did they raise a family on one income, but they were also able to save. My dad left a significant inheritance to his kids and I want to share part of that with you girls."

He'd deposited $10,000 in each of our accounts. I couldn't believe it.

To someone with a massive trust fund, this probably doesn't sound like a life-changing amount. But for me, it completely changed my finances and the way I think about money.

I used it to pay off debt, buy a car, and start an emergency fund, and my entire life changed

Around the time I received that email from my dad, I'd been working for the past two years to pay off credit card debt using balance transfer credit cards; I'd accumulated the debt after moving abroad and changing careers. 

My balance was down to $3,000, and I had just six months left before the 0% introductory APR would end and I'd have to pay the regular interest rate on my remaining balance.

The first thing I did that morning, after processing what I'd read, was log on to my credit card account and pay off my entire balance. Just like that, I was officially debt-free. It felt like a huge weight had been lifted — I could do anything!

I still had $7,000 left. Toward the end of the email, my dad had written, "Don't just pay bills, (although maybe you need to use some of it for that). Think about how to use at least part of it for something that's memorable and meaningful for you."

I thought for a while about how I could use the rest of that money in a way that would meaningfully impact my life, and not just in the short run. I knew I wanted to save a portion of it, but I also wanted to spend a little on something special.

I'd moved to Costa Rica several years prior, and I'd been living there car free ever since. While I do enjoy life without a car, it had become difficult to go anywhere without one because the rural town where I live only has bus service once per day. 

Apart from making everyday errands a bit of a pain, living without a car meant I rarely got to take advantage of living in a country so filled to the brim with beauty, because going on trips to the beach or to a new hiking spot was such an ordeal. 

So, I spent $3,000 on an older, used car that I paid for in cash.

Finally, I put the remaining $4,000 in a high-yield savings account. This would be the beginnings of my emergency fund, something I'd long wanted to create once I paid off my debt. As a freelancer with unstable income, and as someone living abroad, far away from any family, I needed one. 

I've since built up that emergency fund to $30,000, leaving me enough to cover emergencies or loss of work, but also to invest in myself and take risks when opportunities arise. This has improved my quality of life just as much as being debt-free.

Why my family's generosity made me want to start building wealth, even though I don't want to start a family of my own

If you had asked me what $10,000 could do for my life a couple of years ago, I would've recited the things I could use it for. 

I knew that money could help me in a material sense, but I didn't anticipate just how much it would shift my mentality, the sense of optimism and freedom I would feel to finally be on the road to financial security. 

Achieving a sense of financial security changed every aspect of my life, from my mental health to my career to my relationship. While I could've gotten here without that $10,000, that timely boost was just what I needed to see the light at the end of the tunnel and realize that I was capable of taking control of my financial life.

This made me understand the power that even small gifts can have in a person's financial life, especially in times of need. I'd never considered wealth-building or worried about leaving something behind before because I didn't plan on having kids. 

However, that gift from my grandpa made me realize that I didn't need to have kids to give back in the way that he had. If I could manage to build a little wealth, that would give me the power to help and support any of my loved ones if they one day need it. 

I could save money to go toward a niece or nephew's college tuition, pay for my youngest sister to go on a graduation trip, or help my best friend pay for a costly car repair. Maybe one day I could take my dad on a trip as a thank you for everything he's done for me.

This motivated me to kick my savings rate into hyper speed and finally start investing for the first time in my life. The basics of wealth building are this: make more money, save more money, and invest more money.

I set a goal to increase my income as a freelancer last year and already achieved it, so my goal for this year is to continue moving steadily upward while further diversifying my sources of income for added stability. 

My other goal is to save at least 50% of my income, made possible by the fact that I live with very few fixed costs — a low rent payment, thanks to living in a rural area, and no car payment — and a high income level relative to those costs.

That savings will be split between making sure I always have sufficient cash reserves on hand in a high-yield savings account and building my medium- and long-term investments.

At the end of last year, I opened an investment account with Vanguard and started with a basic three-fund portfolio, which includes three index funds: the Vanguard Total Stock Market Index Fund (VTSAX), Vanguard Total International Stock Index Fund (VTIAX), and Vanguard Total Bond Market Fund (VBTLX). This will be the foundation for building my net worth in the years to come.

If I were only thinking about myself, I wouldn't feel pressed to build wealth. I'm comfortable living on relatively little, and as I mentioned, I don't want to start a family. But my grandpa and dad's generosity made me want to be capable of doing the same for others.

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Stocks are the most expensive since the 1980s based on one critical metric

Thu, 01/16/2020 - 3:16pm

  • Traders are paying the most relative to the S&P 500's price/earnings-to-growth ratio in more than three decades, Bank of America wrote in a Thursday note.
  • Bank of America began tracking the PEG ratio in 1986, and the index's current ratio of 1.8x is the highest the bank has observed.
  • The S&P 500's price-earnings ratio recently hit its highest level since 2002 at 18.6x.
  • The US market "is running on fumes," BofA strategist Savita Subramanian wrote, and stocks could see "multiple compression" before the year is out.
  • Visit the Business Insider homepage for more stories.

US stocks are the most overvalued they've been in at least three decades judging by their price/earnings-to-growth ratio, according to Bank of America.

The S&P 500's PEG ratio sits at an all-time high of 1.8x, the bank's analysts wrote in a Thursday note, adding that they only began tracking the measurement in 1986. A PEG ratio above one typically means a stock is overvalued relative to its long-term earnings growth expectation.

The PEG metric is calculated by dividing a stock's price-earnings ratio by the growth rate of its earnings over a specific period of time. The ratio is often used to determine a stock's value while also factoring in expected profit growth. 

The major index is only 1% away from the bank's year-end target of 3,300.

"The S&P 500 is running on fumes," bank strategist Savita Subramanian wrote. "We have pulled forward some of the gains from later this year, and could see some multiple compression."

Amazon and the index's energy stocks are the main culprits to watch for a pullback in the forward-looking ratio, she added.

The S&P 500 also trades at a price-earnings ratio of 18.4x, its highest level since 2002. The simpler multiple was mostly fueled by the S&P 500's dividend payout ratio, as shareholder payments have grown rapidly over the last decade.

"Payouts aren't likely to get much higher from here, and thus further P/E expansion on cash return is less likely," the team wrote, adding that financial stocks are "one sector with more upside in payout."

The bank used 20 different valuation methods to judge whether the 500-stock index is overvalued. The S&P 500 is undervalued only on the basis of price-to-free-cash-flow, according to BofA.

As for the fourth-quarter earnings season, the health care sector "screens best" based on predictive metrics, the team added.

Now read more markets coverage from Markets Insider and Business Insider:

US consumer confidence hits highest level since 2000

Charles Schwab touts record-high $4 trillion in client assets after erasing trading fees

A USC student and TikTok star with 1.6 million followers explains the 3 main ways she earns money, and how much she makes

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Here are the 30 most powerful people in Bank of America's $8 billion bond-trading division, which just had a big shakeup

Thu, 01/16/2020 - 3:04pm

  • Business Insider is mapping out the power structure in the global banking and markets businesses overseen by Bank of America Merrill Lynch COO Tom Montag — one of the most powerful executives on Wall Street. 
  • In the kingdom that Montag rules over, no group looms larger than fixed-income, currencies, and commodities.
  • The group accounted for $8.4 billion in revenue in 2019, more than any other investment-banking business line at the firm. 
  • Our FICC org chart for BAML features more than 30 of the division's highest-ranking sales and trading executives. 
  • Click here for more BI Prime stories.

In the kingdom that Tom Montag rules over as Bank of America's chief operating officer, no group looms larger than fixed-income, currencies, and commodities — home of the firm's vaunted bond-trading group.

At Goldman Sachs, where he spent two decades and ascended to co-head of the firm's global securities division, Montag climbed the ranks on the back of a stellar fixed-income career.

After defecting to Merrill Lynch in 2008, and following the crisis-era merger with Bank of America, he quickly assumed control over the firm's sprawling investment banking and markets operations. And he built a juggernaut credit-trading operation that has routinely competed for the industry's top honors and raked in billions of profits for the firm.  

Business Insider in 2019 mapped out the power structure in the firm's global banking and markets businesses that Montag oversees. We started with FICC, as no division is more crucial to those operations, accounting for more revenue than any other investment-banking business line at the firm.

Even as the overall industry FICC wallet has contracted more than 20% to $64 billion in 2018 from more than $80 billion in 2013, Bank of America has cornered a top-3 position on industry league tables.   

In 2019, it pulled in $8.4 billion globally, second only to JPMorgan Chase and Citigroup, according to company reports. 

The firm's formidable FICC division has strength globally, but its legacy was burnished and its power center is rooted in the Americas, where it ranked second behind JPMorgan last year, according to Coalition's league table.  

Business Insider spoke with insiders, ex-employees, consultants, and other industry experts to gain insight into the reporting structure within Montag's fixed-income division. We've focused on front-office execs that bear the primary responsibility for driving the group's revenue — no operations or back office roles appear in our chart. 

A Bank of America spokeswoman declined to comment for this project. 

Business Insider updated this chart in January 2020 after breaking the news of a large reorg of the fixed-income trading group, including the departure of Frank Kotsen, a 23-year company lifer who ran global credit and special situations trading. We'll continue to update this chart as needed.

We have also mapped out the most powerful people in equities and investment banking

Here are the 30 most powerful people under Tom Montag in Bank of America Merrill Lynch's fixed-income division. 

Have more information about the organizational structure within Bank of America Merrill Lynch? Contact the reporter at amorrell@businessinsider.com or via encrypted chat with Signal or Telegram

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Casper's money-losing mattress business will face a tough IPO path, and some observers think the IPO might even get scrapped

Thu, 01/16/2020 - 3:03pm

  • Online mattress company Casper, which filed for an initial public offering last week, could find it hard to complete its IPO, business experts told Business Insider.
  • Wall Street has soured on unicorns, or startups valued at $1 billion or more, that lose money.
  • Casper is losing money, thanks to high marketing, administrative, and return costs.
  • But the company's valuation could also hinder its IPO; comparable public companies that are actually profitable are valued far less on a price-to-sales basis.
  • "They all want to pitch themselves as tech companies," Synovus' Dan Morgan said. "To me, this isn't a tech company. I hate to tell you, you're just an online marketer that sells mattresses."
  • Click here for more BI Prime stories.

Wall Street may not end up being a friendly place for Casper.

There's a good chance that the company's bid to go public will meet with a chilly reception from public investors, business experts told Business Insider. WeWork's aborted initial public offering and the poor performance of many of the high-profile startups that completed their offerings last year could dampen demand for shares in yet-another money losing and arguably overvalued young company, they said.

"I would refer to Casper's IPO as 'Casper's possible IPO,'" said Robert Hendershott, an associate finance professor at Santa Clara University's Leavey School of Business. "If WeWork is any sign, it's going to be very hard for them to go public."

Casper filed for a public offering last week. Its IPO document revealed that it lost $65 million in the first nine months of last year, or about 20 cents for every dollar of revenue. Huge marketing and administrative costs have weighed on its results.

Wall Street has shied away from money-losing unicorns

So too have product returns. Like many of its competitors, Casper offers a generous return policy; customers can send back mattresses up to 100 days after receiving them. And consumers have taken advantage of that. Refunds, returns, and discounts cost the company $80 million in the first three quarters of last year.

Unfortunately for the company, Wall Street hasn't had much of an appetite lately for money-losing unicorns, or startups with a valuation of $1 billion or more — a level Casper reached with a funding round in February. Uber, Lyft, and Slack shares are all trading well below the prices at which they debuted last year. Pinterest and Peloton are barely above their IPO prices.

"I think that gravity is back," said Rob Siegel, a lecturer in management at Stanford Graduate School of Business, adding that companies both public and private are being forced to focus on their unit economics rather than on growth at all costs. "This is going to be a tough market to go public in."

Investors got burned so much last year by companies that were bleeding cash, that they almost certainly will be less aggressive about investing in such companies this year, Hendershott said.

"I think that we are going to see a lot fewer money-losing IPOs in 2020 than we did in 2019," he said.

Casper's valuation looks pricey compared to its peers

Part of what could hinder Casper's public offering — in addition to its losses — is its valuation. The company hasn't given an estimate of what it expects to be worth in its public offering, but private investors valued it at $1.1 billion last year. That would give it a price-to-sales ratio of about 2.7, based on its trailing-twelve-months revenue.

When compared with some of last year's IPOs, that doesn't seem super-excessive, said Dan Morgan, a senior portfolio manager at Synovus Trust and a longtime tech investor. When Uber debuted last year, it had a price-to-sales ratio of around seven to eight. Lyft's ratio at the time of its IPO was 11. And Slack's was a whopping 50.

But those aren't necessarily the best companies to which to compare Casper. The company after all is basically a mattress manufacturer. As such, its peer group includes Tempur Sealy, Sleep Number, and Purple Innovation. Collectively, those companies are valued at about 0.8 times their sales — or about one third Casper's corresponding valuation. What's more, unlike Casper, all three are profitable.

Purple may be the best company to stack up against Casper. It had similar sales in the first nine months of last year — $304 million for it, compared with $312 million for Casper. But its revenue grew at more than twice Casper's rate in that time period —47% compared with 20%. Unlike Casper, it turned a year-earlier loss into a modest profit of $126,000.

From those numbers, you might think that Purple would be worth a lot more than Casper. But you'd be wrong. Purple's market capitalization stands at $607 million, or about half that of Casper's last private valuation.

"I think it will be interesting to test this billion-dollar valuation point for this particular category," said David Hsu, a professor of management at the University of Pennsylvania's Wharton School. "It's not a great IPO market, obviously."

Casper isn't really a tech company

Another factor that could weigh on Casper is that investor sentiment has completely reversed on startups like it that aspire to be considered as tech companies but really operate in other industries. WeWork was the pre-eminent example of that phenomenon, Hendershott said. 

A year ago, SoftBank valued WeWork at $47 billion, and in its IPO documents, the company tried to play up its technology bona fides. But Wall Street investors saw through the ruse, recognized its as a real-estate company that was bleeding lots of money, and scoffed at the idea of paying a tech-like premium for its shares. The company ultimately pulled its offering, even after reportedly being willing to consider a valuation of as little as $10 billion. When SoftBank bailed out WeWork this fall — weeks before it was expected to run out of cash — it valued it at less than $8 billion.

Casper appears to be following in WeWork's footsteps, at least in terms of trying to present itself as a tech company. Its IPO paperwork mentions the words "technology," "technologies," and "technological" 121 times combined. That's more than even WeWork did.

In the document, Casper touted its "cutting-edge technology," bragged about its "large digital product and technology engineering teams," and talked about how its growth will be driven by "new technologies."

"We believe that technology will increasingly play a role in the continuous optimization of a sleep environment," the company said in the IPO paperwork. 

But the business experts weren't buying it — and they suspect Wall Street won't either.

"They all want to pitch themselves as tech companies," Synovus' Morgan said. "To me, this isn't a tech company. I hate to tell you, you're just an online marketer that sells mattresses."

Got a tip about Casper or another startup? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: WeWork wants investors to think of it as a tech company. These 5 slides illustrate how its numbers tell a different story.

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How to estimate the size of your refund before you even file your taxes

Thu, 01/16/2020 - 2:04pm

Tax season can bring about headaches, but many Americans look forward to the annual consolation prize: a tax refund.

According to IRS data, over 111 million Americans received federal tax refunds for the 2018 tax year, averaging $2,860 per refund. The IRS will begin accepting tax returns for 2019 on January 27. You can file your taxes as soon as you have all the appropriate tax forms from your employer and any other businesses from which you earned income (wages, interest, dividends, etc.) throughout the year.

These forms must be filed and postmarked by businesses on or before January 31, so you should have everything you need to file your tax return by mid-February. If you file electronically and select direct deposit — the method recommended by the IRS — you should have your refund within 21 days.

But you don't have to wait until you file to find out the size of your refund, if you're owed one. As soon as you have your W-2 or 1099 forms from every employer you had in 2019, you can estimate your tax refund (or tax bill, if you underpaid in taxes) with the help of an online tax preparer.

Use a tax refund estimator to find out how much you could get back

H&R Block has a super simple tax refund estimator that takes just a few minutes to complete — you don't have to sign up for an account or pay for anything up front.

You begin by answering a few questions about yourself, including your marital status and age.

Next you can enter the necessary figures from your W-2 and 1099 forms. 

These are the only three numbers you'll need from your W-2:

  • 2019 total wages (box 1 on your W-2)
  • Federal income taxes withheld (box 2 on your W-2)
  • State income tax (box 17 on your W-2) — you can ignore this one if your state doesn't tax income

If you had multiple W-2 jobs in 2019, then you can enter the information for each one separately. If you had 1099 income, you can select "no" in the prompt above and you'll be able to add up all the estimated pretax wages from your various 1099s and include them as one. If you paid quarterly taxes, you can enter that amount a few steps later.

Next, you'll get a rough estimate of your tax refund.

If you want a more accurate figure, you'll have to provide more information about your financial situation, including whether you're a homeowner, have children, earn investment income, or have potentially deductible expenses. 

After you enter all your income sources and expenses, you'll get your refund estimate. It's good to remember that this estimate is only as reliable as the information you provide. If you left out a source of income, or your numbers are just approximations, your refund will likely look different.

A smaller refund doesn't always mean you paid more in taxes

Though many Americans rely on the windfall from a tax refund, financial experts say a larger or smaller refund is not indicative of whether a person paid more or less in taxes, but rather of the amount withheld from their paycheck. Receiving a smaller refund doesn't necessarily mean you had a higher tax bill than previous years. It could even mean you went home with a bigger paycheck throughout the year.

Big tax refunds generally mean you paid too much in taxes — you had too much income tax taken out of each paycheck, and now the IRS is returning what is rightfully yours. Instead of keeping your money in a savings or retirement account where it could earn interest all year, you essentially gave an interest-free loan to the government, Business Insider previously reported.

As Lauren Lyons Cole, a certified financial planner, said, "I always try to either owe slightly or break even when filing my tax return." A tax refund of zero means you optimized your income throughout the year, putting yourself in the best possible position to increase your net worth, she said.

Learn more about H&R Block »

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How to file taxes for 2019

Thu, 01/16/2020 - 2:03pm

The IRS will begin accepting tax returns on January 27.

The deadline to submit your tax return in 2020 — or file an extension with the IRS — is Wednesday, April 15. The earlier you file, the sooner you'll get your refund if you're owed one. 

Here's what to expect when you submit your tax return this year.

You can file your taxes for free if you know where to look

Many online tax services allow you to file your federal taxes for free — and sometimes state taxes as well — if your adjusted gross income was less than $69,000 in 2019. You can check your options using the IRS Free File lookup.

You can also download the IRS2Go app to find free tax-filing assistance, check your refund status, or make a payment.

You can still file for free if you make more than $69,000, but to do so, you'll need to use the Free File Fillable Forms. The IRS recommends using those forms only if you have experience preparing tax returns on your own.

You should receive all of your tax documents by early February

Before you file your taxes, you need to collect all your 2019 tax documents. If you're an employee, that means your W-2; if you're a freelancer, you may have multiple 1099 forms. You should also have your adjusted gross income (AGI) amount from your 2018 tax return handy.

In some cases, you may have other statements for 2019, such as income earned from an interest-bearing savings account or interest paid on a loan, or even taxable bitcoin gains. Brokerages often issue corrected 1099s in mid-March, so if you have any brokerage accounts, it may be prudent to delay filing until the final, corrected brokerage 1099s are issued.

Most tax-related documents must be filed by your employer or other institution by January 31, and the statements must be postmarked by that date as well. That means you should have received everything you need by early February. 

In the meantime, you can estimate your tax refund for this year using an online tax calculator.

The IRS recommends e-filing and choosing direct deposit

The IRS says the fastest way to get your tax refund is the method already used by most taxpayers: filing electronically and selecting direct deposit as the method for receiving your refund. Those who file electronically and opt for direct deposit may receive their refunds the fastest — less than two weeks from the date your return is received by the IRS.

The IRS says direct deposit — which the government also uses for Social Security and Veterans Affairs payments — is "simple, safe, and secure."

Popular online tax services like TurboTax and H&R Block are easy to use, even for tax novices — but they aren't the only option for e-filing your taxes for free. If you plan to visit an accountant, make an appointment early to avoid the rush.

When will I get my tax refund? Usually within 3 weeks of filing

Your tax refund should hit your bank account within three weeks of filing online, assuming you opt to receive it via direct deposit. Often, you'll get your money even faster.

You can check the status of your tax refund using the IRS's return-tracking service 24 hours after filing your tax return online or four weeks after mailing a return.

States that tax income also issue refunds, and you can check the status of your refund on your state's government website.

If you owe taxes, you don't have to pay all at once

Your tax situation can change over time — for example, if you get married, buy a home, or have a child — so it's always a good idea to review your W-4 tax-withholding form at the start of a new year. If you didn't review your withholding this year, changes in your tax situation may result in a larger or smaller tax bill.

Regardless of when you file your tax return, your 2019 tax bill is due April 15. You can file early and schedule a payment for that day (or anytime before) if you aren't quite ready to pay.

But, if you can't afford to pay your tax bill in full, don't pull out your credit card or ignore the situation. The IRS offers reasonable payment plans at much lower interest rates than most banks. You may even be able to settle the bill for less than you owe, called an offer in compromise, or request a deferment until you can make a payment. Offers in compromise and requests for deferment require additional paperwork and must be approved by the IRS.

Keep copies of your old tax returns for at least 3 years

You don't have to save your tax returns forever. The IRS recommends holding onto copies for at least three years — the typical length of time the IRS would look back if you happen to get audited. For those with more complicated tax returns, many accountants recommend holding on to tax returns for six years, due to the substantial omission of income IRS lookback rules. Under this rule, the IRS extends the lookback period to six years when there is a substantial omission of income, defined as 25% or more of the taxpayer's gross income on the return.

Most audits cover returns filed over the past two years, but the IRS can go back further if the situation calls for it. But audits shouldn't be cause for worry for most taxpayers. Fewer than 1% of tax returns are audited by the IRS.

When you dispose of old tax returns, make sure to properly shred the documents to protect against identity theft.

What to do if you've been a victim of tax fraud

Tax season presents plenty of opportunity for would-be identity thieves. A stolen Social Security number can be used to file a fraudulent tax return and refund request, but it's not the only tax scam out there. The IRS keeps track of the most common tax-related crimes, and the list is long and varied.

The best way to protect against tax scams — especially potential identity theft — is to file your tax return as soon as possible.

If you think you are a victim of identity theft or tax fraud, you should report it to the Treasury Inspector General for Tax Administration. The IRS also has detailed instructions on what to do if you are a victim of tax fraud.

The US Department of Justice says the IRS never discusses personal tax issues through unsolicited emails or texts, or over social media. Be wary if you are contacted — by phone or email — by someone claiming to be from the IRS who says you owe money. When the IRS needs to get in touch with a taxpayer, standard practice is to send a letter via the US Postal Service. If you receive an unexpected and suspicious email from the IRS, forward it to phishing@irs.gov.

Join the conversation about this story »

NOW WATCH: How to find water when you're stuck in the desert

The Death of Cash

Thu, 01/16/2020 - 2:00pm

Both globally and in the US, the payments ecosystem is evolving.

Two related trends: the slow death of cash and the fast rise of digital payments, are transforming how consumers, businesses, governments, and even criminals move money.

Annual global non-cash transactions are expected to pass the 1 trillion milestone by 2024. This major transformation is being propelled by several factors, including increased usage of digital wallets, more small vendors adapting to accept credit cards, and the explosive growth of mobile commerce.

In The Death of Cash slide deck, Business Insider Intelligence projects what the payments ecosystem will look like through 2024 by examining the driving forces powering digital payment proliferation.

This exclusive report can be yours for FREE today.

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The US and China's tech cold war is far from over, even with Trump's trade deal. Here's why tech companies will remain on the front lines of the trans-Pacific rivalry.

Wed, 01/15/2020 - 8:45pm

  • The US and China took the first steps toward halting a near-two-year-long trade war raging between the two countries, as President Trump signed an interim trade deal with China on Wednesday
  • But although the first phase of the deal addressed intellectual property issues that American tech companies have complained about for years, the broader issues surrounding tech supremacy - which have fueled tensions between the two countries - remain largely unaddressed, according to some experts. 
  • Issues like China's emerging dominance in AI and concerns over its human rights record - that was used as justification for some sanctions - were left unaddressed, one expert said. 
  • We should also expect to see the US push for stricter controls on tech trade with Huawei and China in the future, another expert said. 
  • In the meantime, expect to see the two nation's tech industries to continue decoupling, they said. 
  • Visit Business Insider's homepage for more stories.

President Trump's interim trade deal with China — announced on Wednesday with great fanfare — raised the prospect of a return to normalcy for technology companies rattled by an 18-month trade war.

But while the pact eases some immediate hostilities, particularly in industries like agriculture and financials, it does little to resolve the underlying tensions around technology that have pitted the two countries against each other, according to some experts Business Insider spoke to.

American tech companies have long complained over the lack of intellectual property rights protections in China. But as technologies like AI and wireless communications have become increasingly vital to everything from national security to economic growth, the rivalry between the US and China has erupted into a full-fledged tech cold war.

Graham Webster, who leads a joint initiative between Stanford university and the think tank New America, focused on China's digital policy, said that Wednesday's deal brought good news regarding intellectual property protection. The pact commits China to crack down on the theft of American technology and corporate secrets by Chinese firms and state-owned organizations.

But this was a small concession for China, and in its own self-interest, Webster said. "The Chinese government was already on a trajectory of becoming more rule-based, and [implementing intellectual property rights] has become a matter of self-interest for the Chinese economy as its companies have become more advanced," he said. 

All the missing pieces

More importantly, the deal did not touch on the biggest issues fueling the tech cold war. "Phase 1 just didn't get to most of the tech issues on the future of supply chain security and the ethical use of advanced security," Webster said. 

Adam Segal, a cybersecurity expert in the Council of Foreign relations, said that little change was coming to the tensions that have fueled the tech cold war.

"The trade deal doesn't have much of an impact on tensions over AI or Huawei and the race to 5G," Segal said. "There are still part of the White House that want to slow China's tech development down and hobble Huawei, and we will continue to see US push for stricter controls on tech trade with Huawei and China more generally." 

Webster agreed with this assessment, and said that the Chinese government's need to develop independent technology is only going to increase. "None of this is going away," he said. 

Here's a look at the major battle lines in the China-US tech cold war that are still unresolved: 

Huawei and the 5G battle

Last May, the US added China's Huawei to a so-called entity list, in an effort to block American companies from selling components to it. Huawei is the second-biggest smartphone maker in the world and is dominant in mobile network equipment, so the implications of the blacklist were huge. 

Huawei was accused of theft, wire fraud, and threatening to American national security, due to its close links with the Chinese government. 

And as American companies like Google cut ties with the world's second-largest phone maker — blocking its access to Android, for instance — some wondered whether the US had dealt Huawei a fatal blow. 

More recently, the US has been pressuring its allies, like the UK, to toe the same line and freeze Huawei out of its 5G infrastructure projects. 

 



The race to dominate artificial intelligence

The US continued to hit Chinese tech companies later into 2019, adding 28 more Chinese companies to its 'entity list' in October. Among these 28 were eight major tech companies, including three AI startups valued at over $1 billion (One of the companies, SenseTime was at one time the world's most valuable AI startup at over $4.5 billion, per TechCrunch). 

The Department of Commerce said the companies named were implicated in human rights violations, as their surveillance operations had aided in the oppression of Uighur Muslims and other minorities in China. 

But the ban was also linked to a race to dominate the field of artificial intelligence. China accounted for 17 out of the top 20 academic institutions involved in patenting AI, Reuters reported last January. The next month, President Trump had issued an executive order to call on the US to prioritize advancements in artificial intelligence, Axios reported

 

 



China refused to pledge that it would not hack American companies, arguing that the issue was not trade related.

Chinese officials declined to pledge to refrain from hacking US companies and stealing intellectual property, arguing that it wasn't a trade issue, the New York Times reported

The issue of hacking and corporate cyber espionage has been a long-running point of friction between the two countries. In 2018, the Trump administration accused the Chinese government of breaking a promise struck with the Obama administration to stop hacking US businesses.



And China's push to be less dependent on the US technology, potentially disrupting supply chains, seems more likely than ever.

China's central government told its departments and public institutions to replace existing computers and software with domestic versions, the Financial Times reported December.

Webster says that this is a natural outcome of China's push to become more independent. 

"This is national strategic logic to avoid more dependence on sometimes unfriendly countries," Webster explained. "What happened with the trade war, especially with the tariffs that threatened to disrupt trade, has only strengthened the Chinese government's instinct to become more independent." 

A director at the China Computer Federation had similar reasoning, telling the Financial Times that "three years ago, there may have been more people thinking that we could rely on some US technologies ... Now if someone is still saying that, I suppose they have just been sleeping for the past three years." 



The 15 best states to retire for a low cost of living in your golden years

Wed, 01/15/2020 - 5:53pm

Choosing a state for retirement can be a big challenge. 

Financial management firm Blacktower gathered data on property prices, population demographics, and more to put together a list of US states where retirees will get the most from their retirement savings. Blacktower also looked at the cost of living index created by the Missouri Economic Research and Information Center, which includes costs of housing, groceries, utilities, transportation, and healthcare in relation to the median cost, calculated as 100. The lower the index number, the lower the cost of living. 

Here are the 15 most affordable states for retirees, including their cost of living index along with the average home price and the percentage of senior population from the Census Bureau

15. West Virginia

West Virginia has the lowest average property prices in the US according to this data, with the average home priced at $146,596. 

Cost of living index: 92.1

Percent of population aged 60 and older: 25.5%

Average property price: $146,596



14. Iowa

Iowa's low costs of living aren't the only thing that appeal to seniors. Low home prices and a quarter of the population over age 60 also make this state ideal. 

Cost of living index: 92.1

Percent of population aged 60 and older: 25.5%

Average property price: $173,561



13. Kentucky

Kentucky has slightly lower average property prices than Iowa, and other costs are slightly lower in the Bluegrass state as well. 

Cost of living index: 91.7

Percent of population aged 60 and older: 21.4%

Average property price: $168,902

 



12. Texas

Popular with retirees, Texas is also affordable. However, average property prices are higher here than many other places on this list. 

Cost of living index: 91.5

Percent of population aged 60 and older: 16.8%

Average property price: $211,441



11. New Mexico

New Mexico is ideal for retirees thanks to its relatively warm climate and affordable costs of living.

Cost of living index: 91.4

Percent of population aged 60 and older: 22.1%

Average property price: $213,491



10. Georgia

Georgia's relatively low cost of living and overall affordability makes it a pretty good place to retire, though the average home is more expensive than many of the other states on this list. 

Cost of living index: 91.4

Percent of population aged 60 and older: 22.1%

Average property price: $213,491



9. Indiana

Indiana can help your retirement dollars go further. With low average prices, buying a home is within reach in this state. 

Cost of living index: 90.5

Percent of population aged 60 and older: 20.7%

Average property price: $167,504



8. Kansas

With affordable living and homes, Kansas has lots of opportunities to make your retirement money last. 

Cost of living index: 89.6

Percent of population aged 60 and older: 20.7%

Average property price: $177,194



7. Michigan

Michigan is fairly affordable for anyone retiring soon. With a cost of living index below 90, fairly affordable home prices, and no shortage of summer activities, this state is ideal for retirement.

Cost of living index: 89.5

Percent of population aged 60 and older: 20.7%

Average property price: $178,219

 



6. Alabama

Alabama's affordable living costs and relatively cheap homes make it a more budget-friendly alternative to more-expensive Florida.

Cost of living index: 89.2

Percent of population aged 60 and older: 22%

Average property price: $175,256



5. Tennessee

Tennessee's affordability and natural beauty makes this state perfect for retirees who want mountains nearby, without the higher costs of living in western states like Colorado or Washington.

Cost of living index: 88.9

Percent of population aged 60 and older: 21.5%

Average property price: $203,449



4. Missouri

Missouri offers fairly affordable living, and a variety of environments from rural to urban. 

Cost of living index: 88.3

Percent of population aged 60 and older: 22%

Average property price: $187,682



3. Arkansas

Arkansas's costs of living are pretty low, and an index well below 90 helps this state take one of the top three spots. 

Cost of living index: 87.7

Percent of population aged 60 and older: 22%

Average property price: $157,514



2. Oklahoma

Oklahoma is the second-most affordable state for retirement according to this data, from home prices to overall costs of living.

Cost of living index: 87.2

Percent of population aged 60 and older: 20.5%

Average property price: $165,943



1. Mississippi

Mississippi takes the top spot for affordability, with the average home price under $150,000 and low costs of living all around. Retirees will see their money go much further here than it would in other states.

Cost of living index: 86.7

Percent of population aged 60 and older: 20.6%

Average property price: $147,408



How Tim Cook's Apple just became the accidental test case in a clash about capitalism

Wed, 01/15/2020 - 3:32pm

Hello readers, and welcome to this week's edition of Trending, the newsletter where we highlight BI Prime's biggest tech stories. I'm Alexei Oreskovic, Business Insider's West Coast bureau chief and global tech editor.

Before we dive in, a quick reminder that you can subscribe to Trending by clicking here. And if you neglected to give your boss a gift this holiday season, you can redeem yourself in her (or his) eyes by turning them on to this newsletter.

This week: Apple is the first test case in a clash of philosophies about capitalism

The showdown between Tim Cook and the FBI has been framed as a fight between privacy and security. But it's also a battle between two competing philosophies about capitalism.

That became clear after Donald Trump lashed out at Apple on Tuesday, demanding that Apple "step up to the plate" to help unlock the iPhones used by the Pensacola, Florida shooter and reminding Cook that Apple had been spared some of the most painful tariffs. In other words, do what we ask of you, or your business will suffer. 

In that sense, what's developing may be the first real test case of the universal stakeholder approach that is increasingly being talked up by companies (and is part of Elizabeth Warren's platform as well as that of other Democratic presidential candidates). Recall that Cook was among the 200 corporate chieftains who signed a commitment in August declaring that a corporation's purpose is not simply to maximize profits for the benefit of stockholders. Companies also have a responsibility to serve stakeholders that include employees, customers and society. 

Given that Cook has declared that privacy is a "fundamental human right," this would seem to be an occasion where its commitment to a key stakeholder (society) is being challenged. But if Apple digs in and fights, the pain Trump can inflict — whether through tariffs in the still unresolved China trade war, despite today's Phase One signing, or in some other form — will undoubtedly hurt the company's bottom line, and by consequence, its stockholders.

So who does Cook choose to fight for?

It's not an unpredictable predicament for a company that takes an oath to serve different stakeholders, each with different interests. But I doubt Apple is thrilled to be taking the lead in settling this emerging debate. The last time Apple was under pressure to unlock a mass shooter's iPhone, in 2016, the standoff was resolved by a third-party company whose tech got the job done. Tim Cook may not get so lucky this time and his, and the Apple board's conduct, will say a lot about how serious these pledges of corporate responsibility really are.

Time to monetize some Zs

If the future of capitalism is too weighty a topic for you this early in the year, perhaps you'd prefer the comfort of a cozy business like mattresses. Lucky for you, Casper filed its paperwork to go public last week, and hinted at a variety of future products for its slumbering customers.

But as Troy Wolverton writes, all is not well in the sleep economy. It turns out that selling mattresses online has one big drawback: Customers don't know if they like the feel of the mattress until it arrives at their doorstep. And for something as personal as a mattress (as Casper helpfully points out in its S-1, people spend more time sleeping than any other single activity in their lives), an uncomfortable product is a deal breaker. 

The situation is so serious that as of September Casper had a special reserve "cushion" of $11.6 million on hand for customer returns. For a company that only had $54.6 million of cash on its balance sheet at that point, that's not a trivial sum. 

That's not to say Casper's business is in trouble. A lot of people, particularly millennials (and my parents), are big fans of the company's buzzy bedding. As we get closer to the IPO, we'll be digging deeper into Casper's efforts to monetize your Zs. In the meantime, enjoy this amazing chart from Casper's IPO prospectus:

 

Read the full story here: Casper, the buzzy mattress seller adored by millennials, has a costly returns problem that could be a nightmare for its IPO It's a no code world after all...

In case you needed any more evidence of the popularity of low-code/no-code tools, Google's acquisition of AppSheet this week should make  it clear that this is one of the hottest areas in tech right now. 

Appsheet is among the new class of tools that allow companies to create apps without having to keep an engineering department on the payroll. We highlighted another standout in this field last year when we included the founders of Airtable among BI's 100 People Transforming Business.

As Paayal Zaveri writes, the trend to no-code/low-code is being driven by an increasingly automated world and a shortage of developers. Some industry estimates predict the market will be worth $52 billion by 2024.

Microsoft is well positioned for this landscape, thanks to its little known Power Platform product line, Paayal writes. So too are public companies like SmartSheet, and a slew of specialized startups which may find themselves fielding a lot inbound acquisition interest this year. 

Read the full story here: A shortage of developers is going to lead to a boom in tools that help make simple apps without coding, and Microsoft stands to benefit, analyst says Here are some other tech highlights:

What experts expect from Oracle in 2020: Leadership changes in the Safra Catz era and tougher challenges in the cloud

Here are all the companies Airbnb has acquired to help it grow into a $31 billion business

YouTube's big changes to ads on children's content is hitting creator revenue by as much as 50%, says a CEO who helps manage 4,300 channels

The COO of GitHub explains why it has no plans to ever move completely to Microsoft's cloud, over a year after the $7.5 billion acquisition

Amazon is testing a new shopping feature that shows customer reviews from other countries — but it ignores the big problem with user reviews

And more big stories from across the BI newsroom:

Jeffrey Epstein set Elon Musk's brother up with a girlfriend in effort to get close to the Tesla founder, sources say

These are the top 21 clean-tech startups to watch that are set to transform the energy industry

KPMG's new $450 million training center gives 800 employees access to free food from 8 different kitchens, a wine bar, and over 44 miles of bike paths. Here's an exclusive look inside.

We asked 9 of the most prominent VC investors in European tech to pick out fintech startups they think will blow up in 2020. Here are the 15 they chose.

Thanks for reading, and remember, if you like this newsletter, tell your friends and colleagues they can sign up here to receive it.

— Alexei

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NOW WATCH: Apple just revealed its AirPods Pro for $249, which feature noise cancellation. Here's everything that was wrong with the $159 pair of the wireless headphones.

Shopping on Instagram is going to be huge — but it's barely gotten started yet (FB)

Wed, 01/15/2020 - 3:02pm

  • Shopping on Instagram is going to be huge, but it has barely gotten started.
  • Just 12% of users use the Facebook-owned photo-sharing app for shopping for and finding products, according to new research from Cowen.
  • By 2021, Instagram is predicted to generate $10 billion a year in new revenue from shopping.
  • Click here for more BI Prime stories.

Shopping on Instagram promises to be the next big moneymaking hit for the Facebook-owned photo-sharing app — but it still has a long way to go.

New research from the financial-services firm Cowen showed just 12% of Instagram users use the app for shopping purposes — far behind better-established rivals in the space like Pinterest, with 45%.

The data illustrates the opportunity — and challenge — ahead of Facebook as it attempts to diversify away from its core advertising business and muscle in on the e-commerce space. 

Instagram has been adding a bevvy of new features dedicated to helping users shop, including tags that highlight product costs and link out to websites to buy the items, as well as an integrated checkout feature that allows users to buy goods without ever leaving the app. It has also become home to a new generation of direct-to-consumer brands that are sidestepping intermediary retailers and marketing directly to consumers via its traditional advertising tools. 

Despite this push, only a little more than one in 10 Instagram users surveyed by Cowen said that they used the platform for shopping for and finding products, with the overwhelming majority — unsurprisingly — highlighting the app's photo-sharing functionality. (Cowen surveyed 2,500 US consumers for its 2019 fourth-quarter survey.)

Nearly half (45%) of Pinterest users, meanwhile, highlighted that social network's potential for shopping for and finding products — demonstrating that large numbers of users can become interested in shopping via social platforms, an encouraging sign for Instagram.

Analysts are, by and large, extremely bullish on Facebook's e-commerce prospects. Deutsche Bank estimates that by 2021, shopping on Instagram could generate $10 billion a year in new revenue for the company. A survey it conducted in 2019 showed that "43% of survey respondents said they were either 'very likely' (18%) or 'somewhat likely' (25%) to purchase products on Instagram using the new checkout feature" — indicating a high level of general interest from users in shopping on Instagram.

Got a tip? Contact this reporter via encrypted messaging app Signal at (+1) 650-636-6268 using a nonwork device, email at rprice@businessinsider.com, Telegram or WeChat at robaeprice, or Twitter DM at @robaeprice. (PR pitches by email only, please.)

Read more:

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NOW WATCH: People are still debating the pink or grey sneaker, 2 years after it went viral. Here's the real color explained.

Beyond Meat tumbles the most since October after 'priced in' potential drives an analyst downgrade

Wed, 01/15/2020 - 2:50pm

  • Beyond Meat slumped as much as 9.4% in Wednesday trading after an analyst downgraded the stock, citing fading growth potential in the US.
  • The tumble is Beyond Meat's worst since October 29.
  • Bernstein analyst Alexia Howard downgraded the stock to "market-perform" from "outperform" while maintaining a $106-per-share price target.
  • The company could improve its growth prospects by expanding its partnership with McDonald's or pushing into international markets, Howard wrote in the Wednesday note.
  • Watch Beyond Meat trade live here.

Beyond Meat tanked as much as 9.4% Wednesday after an analyst downgraded the stock on concerns of fading growth opportunity in the US.

The plant-based-meat company's sales growth potential could be "largely priced in at this point," Bernstein analyst Alexia Howard wrote in a Wednesday note. The research firm cited a "less attractive" risk-return situation for the stock following an early January rally, and noted its "blue-sky scenario" includes an expanded US partnership with McDonald's.

The firm downgraded Beyond Meat to "market-perform" from "outperform" Wednesday. Bernstein maintained its target price of $106 per share, implying a 9% downside from Tuesday's closing price of $117.05.

The Wednesday stumble marks the worst decline in Beyond Meat stock since October 29, when it fell more than 20%. The stock initially soared following its May initial public offering, but the expiration of its post-IPO lockup and concern around competition from Impossible Foods pulled shares lower through the second half of 2019.

The company could also woo investors by expanding its footprint outside the US, Howard wrote. Growth abroad would significantly boost the company's available customer base and take attention away from looming competition in the US.

"We believe that BYND has significant growth potential in Europe, which could more than double its [total addressable market]," the analyst wrote, adding a move to China could "take advantage of the protein supply shortage led by the African Swine Fever."

Beyond Meat is just days off its best week since July, soaring 27% from January 6 to January 10. The stock soared following a January 7 Reuters report that Impossible Foods was ditching attempts to land a deal with McDonald's. Impossible Foods later disputed the report.

Beyond Meat jumped even higher on January 8 after McDonald's said it would expand tests of its PLT burger in Canada. The item stands for "plant, lettuce, and tomato" and uses a Beyond Meat patty.

Beyond Meat traded at $108.82 per share as of 2:25 p.m. ET Wednesday, up roughly 47% year-to-date.

The company has three "buy" ratings, 10 "hold" ratings, and four "sell" ratings from analysts, with a consensus price target of $100.45, according to Bloomberg data.

Now read more markets coverage from Markets Insider and Business Insider:

Bitcoin is on its best start-of-year streak since 2012

Treasury Secretary Mnuchin says a 'phase 2' US-China trade deal will reverse more tariffs

Amazon is launching a new marketplace in the Netherlands after seeing mixed results in its international business

Join the conversation about this story »

NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

Goldman Sachs dumped its Uber shares after the IPO lockup expired (UBER)

Wed, 01/15/2020 - 2:18pm

Goldman Sachs dumped Uber after its disappointing performance in 2019. 

On the bank's earnings call Wednesday, Chief Financial Officer Stephen Scherr told analysts that Goldman exited its position during the fourth quarter. 

Goldman Sachs was an early investor in Uber. In 2011, the bank contributed $5 million to the company's Series B funding round, according to Bloomberg.

When Uber listed on the public market in May 2019, Goldman owned about 10 million shares with a profit on its initial investment reaching in the hundreds of millions, Bloomberg reported. The potential windfall was something of a consolation prize as Goldman Sachs lost out to Morgan Stanley as the lead banker on Uber's IPO, which had gained a reputation as being one of the most important public listings in 2019. 

But Uber disappointed hugely when it finally hit the public market in May 2019. During the company's first day of trading, shares plunged as much as 8%, wiping out more than $655 million of investor wealth. Uber's woes continued throughout the year as investors balked at the company's large quarterly losses and worried about its ability to turn a profit. At the end of 2019, Uber had shed 34%.

Goldman's investment experienced a loss in the third quarter after seeing headwinds on certain "large equity positions, including Avantor, Tradeweb, WeWork, and Uber," Scherr said. 

Like other early investors, Goldman Sachs was prohibited from selling its shares until six months after the offering. When Uber's post-IPO lockup expiration date arrived in November, the stock fell to a new low and brought the company's valuation to its lowest since 2015, when it was a private company. 

So far in 2020, Uber has rebounded slightly on renewed optimism following the company's plans to be profitable on an Ebitda basis in 2021. Shares are up 17% year-to-date through Tuesday's close.

Read more: A Silicon Valley tech leader turned real-estate mogul shares 5 'amazing and seminal' books that are 'fundamental to changing your perspectives on finances and wealth'

 

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

Visa's new investment in a startup backed by Goldman Sachs and a16z shows how financial firms are tackling the thorny issue of third-party data sharing

Wed, 01/15/2020 - 2:18pm

  • Just two days after announcing its intent to buy unicorn Plaid for $5.3 billion, Visa is putting resources into another fintech. 
  • Data-security startup Very Good Security (VGS) on Wednesday said it received a strategic investment from the payments giant.
  • VGS offers a platform to store sensitive user data like medical information and credit card numbers on behalf of its customers.
  • Customer data has already proven a hot topic for 2020. Earlier this month, the Financial Times reported JPMorgan plans to ban third-party apps from using customers' passwords to access its bank accounts. 
  • Click here for more BI Prime stories.

Just two days after revealing it plans to buy unicorn Plaid for $5.3 billion, Visa is putting resources into another fintech. 

Data-security startup Very Good Security (VGS) said on Wednesday that it received a strategic investment from the payments giant. VGS offers a platform to store sensitive user data like medical information and credit-card numbers on behalf of its customers, typically startups, thereby allowing companies to avoid handling the data themselves.

VGS counts buzzy fintech upstarts Brex, Petal, and Goldman-backed Deserve as customers, among others. 

Visa's investment is an extension of VGS's $35 million Series B in October, which was led by Goldman Sachs. The startup is no stranger to prestigious names on its cap table. Andreessen Horowitz led its $8.5 million Series A in 2018, which also included participation from Nyca Partners.

Data security

By storing customers' data with VGS instead of internally, startups reduce the risk of data leaks and hacks, and don't have to spend as much on cybersecurity. VGS was one of 30 cybersecurity startups to watch, a VC told Business Insider in early 2019

Customer data has already proven a hot topic in 2020. Earlier this month, the Financial Times reported JPMorgan plans to ban third-party apps from using customers' passwords to access its bank accounts. 

On Tuesday's fourth-quarter earnings call, JPMorgan CEO Jamie Dimon reiterated his concerns around outside parties collecting customers' data when linked to their bank accounts. 

Visa, too, briefly touched on the issue on a call announcing its intent to buy Plaid on Monday. Al Kelly, the company's CEO and chairman, acknowledged some financial firms "would prefer Plaid operate differently in some cases," and indicated the payments giant would take that into consideration.

VGS announced in a blog post in November a partnership with Plaid to offer mutual customers preferential pricing. 

"Joint customers of VGS and Plaid can enable their end-users to link their bank accounts from 15,000 financial institutions, without ever needing to store sensitive data on their servers," wrote Amanda Heinemann, business development and partnerships at VGS, in the post. 

Corporate venture capital is flooding Silicon Valley

VGS isn't the only startup attracting the eyes of corporates like Goldman and Visa. Corporate venture-capital arms invested a record $9.6 billion in startups as of mid-December last year, according to CB Insights.

Visa isn't the most active payments firm, making six venture investments since 2014, compared to Amex with 57 and PayPal with 28, according to CB Insights. But Visa's current portfolio includes buzzy fintech unicorns like PoS lender Klarna and card issuing platform Marqeta

In addition to Visa's investment in VGS, the fintech is a partner on the credit-card giant's Fintech Fast Track program, which lets startups tap into Visa's payments network as they go to market.

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David Solomon just revealed how Goldman Sachs plans to change the way it makes private-equity investments with its own money – and one analyst thinks it could be a big driver of its stock price

Wed, 01/15/2020 - 2:07pm

  • Goldman Sachs executives took a moment on the company's fourth-quarter earnings call to explain more about their strategy for transitioning the bank's private-investing platform to be more reliant on outside money. 
  • While execs have touted the plan for months, it was CEO David Solomon's description of a plank in that strategy that got analysts' attention on Wednesday. 
  • Solomon said as the firm makes future investments with its balance sheet, it will lean away from private-equity investments in favor of credit or infrastructure, as a way to free up precious capital from regulatory scrutiny that doesn't like private-equity investments. 
  • D.A. Davidson's David Konrad said he thought the strategy was one of two mentioned on Wednesday's earnings call that will a big driver of the stock going forward. 
  • Click here for more BI Prime stories.

Goldman Sachs executives took a moment on the company's fourth-quarter earnings call to explain more about their strategy for transitioning the bank's private investing platform to be more reliant on outside money. 

Execs including CEO David Solomon have touted the strategy in recent months, saying Goldman is ramping up a fundraising machine to pool billions of dollars in client money and place it into funds making investments in private equity, credit, real estate, and infrastructure.

Solomon has restructured the management of the business to bring disparate teams from across the bank under one umbrella, and tapped a new team to coordinate activities across the firm. 

But it was Solomon's description of a plank in that strategy that got analysts' attention on Wednesday.

The CEO said that as Goldman Sachs raises more outside money, it will also shift the types of investments it's making with its own money. And in doing so it will free up a scarce resource that has been weighing down its profitability metrics. 

Solomon said the bank will make fewer private-equity investments with its own money, bowing to regulators who require the bank to use more of its capital to support the investments. The bank currently manages $22 billion in public and private-equity investments, which get a dim view from authorities because they can often swing wildly from one quarter to the next.

Private-equity behemoth Blackstone, by comparison, holds just $1.8 billion in such investments, Oppenheimer & Co. analyst Chris Kotowski said on the call. 

"We will continue to use balance sheet, but we will remix that balance sheet," Solomon told analysts on Wednesday. That will include "shifting some out of equity into more credit- or infrastructure-type assets." 

The description and some other bits Solomon shared elicited a comment from Jim Mitchell, an analyst with Buckingham Research, that the explanation was "really helpful." David Konrad, an analyst who just initiated coverage on Goldman Sachs at D.A. Davidson, said in an interview he expected the change to be a "big driver of the stock" price in future months.

"The straight private-equity investments are so tough on RWA levels and also the stress test," Knorad said, referring to risk-weighted assets and semi-annual stress tests that dictate how much capital Goldman Sachs must use to support specific businesses. "It's a very low return on equity."

In the decade since the financial crisis, regulators have forced global banks to stockpile their capital. The efforts have made the industry safer, but also cut profitability metrics in half. It's forced banks to think more deeply about how they structure the business, and favored activities that get more favorable treatment from regulators. 

The strategy represents a significant departure for Goldman Sachs, whose merchant banking division has worked with the firm's investment bankers over the last 30 years scouring the globe looking for attractive investment opportunities. Many of those investments were made with Goldman Sachs money, as well as that of its employees. It hasn't historically had to maintain a massive fundraising apparatus to attract outside money. 

That's now changing. In the future, Solomon said, the bank won't increase the amount of balance sheet it devotes to those investments and will instead grow the business by raising more outside funds. 

"Historically we have managed some institutional money, but we've managed very significant private wealth money in addition to using our balance sheet," Solomon said. "The primary growth plan for the business is to over time raise a significantly increased amount of institutional capital." 

Even so, Solomon defended the firm's use of its balance sheet and explained why he thought that would be a differentiating factor for the bank as it competes with the likes of Blackstone or KKR or Carlyle in raising institutional money.  

"If maybe we were starting today from scratch with a white sheet of paper, you might develop the business differently," he said.

"We've built out a very, very broad, deep global network of investors all over the world and we think that's a real asset to capital allocators. We've done that because we've built up strength investing off our balance sheet and historically, candidly, one of the things investors have liked is they liked the fact that we partner with them and we have skin in the game," he added.

Having the ability to use the balance sheet will continue to be an asset, he said.

"As we grow new products and services in the space around the world and add to what we're doing, it is easier to fund the acceleration of that if you do have the capacity to use balance sheet to jump-start some of those businesses," the CEO said.  

Solomon directed analysts to the firm's first investor day, scheduled for Jan. 29, for more details about what they can expect from the strategy over the next five years. 

Join the conversation about this story »

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VC investing in cannabis surged above $2 billion in 2019, but a year-end slowdown raises questions about 2020

Wed, 01/15/2020 - 1:54pm

  • Business Insider looked at how much money VCs have put into cannabis, analyzing when investments surged, when they declined, and why.
  • Though investments declined steeply in the second half of 2019, the year's slowest quarter (Q4) drew almost as much as the first two quarters of 2018 combined, pointing to a still-growing industry
  • We also talked to some of the top VCs in the cannabis industry about how many deals they made last year and where they plan to put their money in 2020. Read about it here. 
  • Looking at these numbers, one VC told Business Insider that he predicts the first half of 2020 will see a good number of companies disappear, but that this will only allow for a "significant increase" in capital deployed into the industry by Q3
  • Click here for more BI Prime stories, and subscribe to our weekly cannabis newsletter, Cultivated.

VCs made big wagers on cannabis in 2019, but a slowdown toward the end of the year is leaving investors cautious about 2020.

Venture-capital investors in the US wagered $2.3 billion on the cannabis industry in 2019, a 57% increase from the previous year. But the highs and lows in investment throughout 2019 have prompted some VCs to predict a 2020 with more sensible valuations, in which some weaker companies get bought up.

"The first two quarters of 2020 will be a cautious period to see how things develop," said Michael Gruber, managing partner at the investment firm Salveo Capital. "But it is clear that there will be a lot of consolidation, and there will be a good number of companies that effectively disappear or got absorbed by others as they will not have access to capital."

Gruber said he expects there will be a return to more sensible valuations and a significant increase investments in the second half of 2020.

Read more: Here are the top 14 venture-capital firms making deals in the cannabis industry, and where they're looking to place their next bets

Investments in the cannabis industry remained relatively steady throughout the first three quarters of 2018, according to data from PitchBook. In the last three months of the year, investments jumped to $874.7 million. That was a period in which multiple states, such as Michigan, Utah, and Missouri, passed either recreational or medical cannabis legalization in the 2018 midterms, and nation-wide legalization came into effect in Canada.

Gruber's said that the "hype" over legal adult-use cannabis in Canada during this period helped both Canadian and US companies, with operations in Canada raise significant capital.

There was "a euphoria with significant valuations that were seen in the public markets," said Gruber.

VC investments stood at $463.6 million in the first three months of 2019, in part due to lower than expected sales in Canada, where the legal market has struggled to transition consumers away from the illicit market.

Joyce Cenali, COO of Big Rock, a California-based VC that has made 20 investments in the cannabis sector since 2016, told Business Insider that there has been a correlation between the state of the Canadian market and spending on the part of US investors since 2018, despite the fact that the two markets are very different.

Investment in the second quarter of 2019 surpassed the last quarter of 2018, at $968 million. Pax Labs alone raised $420 million in funding in one massive round in April 2019 that established the company's unicorn status with a valuation of $1.7 billion. By the second half of the year, however, the cannabis bubble burst and stock prices fell, giant mergers collapsed, and thousands of vaping-related illnesses in the US prompted some state-wide bans on the sale of vaping products.

Andrea Hippeau, principal of Lerer Hippeau, told Business Insider in January that though 2019 was a "boom and bust cycle for cannabis," she believes that 2020 "will be the year that the [cannabis] market starts to mature and legitimize as state regulation stabilizes."

Other VCs, such as Navy Capital, Altitude Investment Management, and Poseidon, told Business Insider that they share the same prediction, that 2020 will be the year that will determine the winners of the industry.

Read more: 5 top VCs told us where they plan to place their cannabis bets in 2020, from scooping up distressed assets to the rise of new markets in Germany and China

Join the conversation about this story »

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Pinterest just surpassed Snapchat in popularity. Here's how its unassuming CEO built the social media powerhouse by avoiding big speeches and personally meeting its first users.

Wed, 01/15/2020 - 1:37pm

  • Ben Silbermann is the cofounder and CEO of Pinterest, which, according to a new eMarketer report, passed Snapchat in users in 2019 and has a comfortable lead. Its stock soared on the news.
  • In fall of 2018, Silbermann appeared on Business Insider's podcast "This Is Success" to explain how he built the company and came into his own as a leader.
  • Silbermann built a community around his company by hiring people based on their passions, and by personally meeting Pinterest's earliest users.
  • Silbermann is naturally a quiet person and developed a meeting approach that kept the most outgoing employees from dominating the conversation.
  • Click here for more BI Prime stories

On Tuesday, Insider Inc.'s eMarketer published a report that proclaimed, "Pinterest surpassed Snapchat as the third-biggest social media platform in the US in 2019, and it will continue to stay ahead in the coming years." It now has 82.4 million monthly users in the US, compared to Snapchat's 80.2 million, and is behind Facebook and Instagram's lead. (Today, the company reports it has a total of 322 million monthly users worldwide.) The industry-redefining news caused the stock to jump as much as 12% the day it was published.

We spoke to Pinterest CEO Ben Silbermann for Business Insider's podcast back in October 2018. It was still six months away from going public, but Silbermann was able to tease some of its rapid growth.

Unlike most tech CEOs, Silbermann is a quiet, reserved guy not given to boasting or energetic motivational speeches. He explained how instead of forcing himself to become someone he wasn't, he used his personality to his advantage as he developed his own leadership style and built a solid foundation for his company out of the limelight.

We've kept the introduction and podcast transcript below as they originally appeared, when we published this in the fall of 2018.

Ben Silbermann is the cofounder and CEO of Pinterest, the image-search tool that lets users save and share their favorite photos, designs, and recipes.

Over the past eight years, Silbermann has quietly built Pinterest into a global brand with 250 million active users. And while the company is private and keeps financials to itself, CNBC reported in July that Pinterest could $1 billion in ad revenue this year. In September, The New York Times reported that number would be closer to $700 million and that the company has a valuation of $12.3 billion.

Silbermann's journey to Pinterest started when he was still working at Google, in 2007, and his friend Paul Sciarra asked if he wanted to explore making software for the newly released iPhone.

Listen to the full episode here:

Subscribe to "This is Success" on Apple Podcasts, Google Play, or your favorite podcast app. Check out previous episodes with:

Transcript edited for clarity.

Ben Silbermann: We just started brainstorming. What are the different things we could do on the phone that would be different than what you could do on the computer? We made a game with some friends. It was a trivia game, so anybody could write trivia on any topic, and anybody around the world could play it. So I was always playing with that idea of what could you do with technology and with the internet that would be fun and useful for lots and lots of people.

Richard Feloni: And how did this first company pan out?

Silbermann: It wasn't that great. Paul and I decided that we wanted to help put catalogs on the phone. Everyone was getting catalogs in the mail, and it felt so archaic. You'd get this big stack of paper catalogs.

Feloni: Like retail catalogs?

Silbermann: Yeah. Just everyone's mailbox was full of them. And we thought, "What if you could put that on the phone?" Then you'd save a lot of paper, and you could only look at the stuff that you wanted to look at. So we set out to build that, but it was bad timing. This was right after the financial crisis. And we needed to put together a little bit of money to support ourselves and to build the technology. And it was just the worst time to raise money. I remember we would visit investors, and they would be telling us, "We're putting all of our money into gold. We're not investing in technology startups." So we spent a long time trying to put together that very first round. And I remember at some point we became pretty desperate, because all of the traditional routes had been closed to us.

So I started reading about these college business-plan competitions that you could enter that had a cash prize. And I found one. It was at NYU. And the rules were written pretty loosely. It said you didn't have to go to NYU; you just had to know somebody that was a student at NYU. And we ended up entering that contest. We got second place, and second place had no cash prize, but you got a meeting with a venture capitalist. And so at the meeting, the venture capitalist — I don't know; maybe because he took pity on us — said, "We'll do half of your round if you can put together the other half of the round." And so when he said that, we then called up all the other people that we'd ever spoken to. This was random people out of college, alumni directories, people that we'd read about in the newspaper that were wealthy. We said, "Hey, we talked to you before. A venture capitalist from New York is going to fund us. If you want in the round, get in there. It's going to close in a few days." And that's how we put together our first little bundle of money.

Feloni: So what did this experience teach you, ahead of Pinterest?

Silbermann: It sounds really cheesy: It just taught us that persistence pays. We didn't feel like we really had anything to lose. Actually, we literally didn't have anything to lose. So we didn't feel bad about asking people. But the other thing I learned was that investors — they kind of want to hear that you're selling the future. You're selling a dream of what could be. And when I used to go in and pitch investors, I was very careful not to over-promise what we could do. So I would say, "Hey, you know, we don't have any money. We don't have any experience doing this. But we think this is a good idea. We're going to build this piece of software." And I couldn't understand why they weren't funding us, but it was probably the worst sales pitch they'd ever heard. And I think I learned that people don't expect you to have all their answers, but they want to see that you have confidence that you're going to figure it out in the future. That's the same with investors. It's the same with the employees you hire. They want to know that you're going to work through those twists and turns, and try to figure out the solution even if you don't know the answer right then.

Discovering a project is the right one to pursue

Feloni: So at what point did you decide that Pinterest was going to be something that you would work on?

Silbermann: We'd been working on this smartphone app. And it wasn't really taking off. Back then, every single app had to be approved by the Apple App Store, and sometimes it would take weeks or months to build it. And at that time, I had also become friends with a guy named Evan Sharp, who was a student in New York. Evan and I, kind of cut from the same cloth, both of us —

Feloni: How did you meet him?

Silbermann: I met him through a mutual friend. Actually, a pretty loose connection. It was a guy that neither of us knew that well in college. And he said, "Hey, you guys both love the internet. I think you should catch up when you're visiting New York." I remember meeting Evan, and yeah, we just hit it off. We started talking about how much we enjoyed the internet, all these great things we wanted to build. And we had one idea that we both shared, and it was a product that we wanted for ourselves. We wanted to be able to take all the cool things we found on the internet and just collect them in one place, so you could access them later, and you could browse the collections of other people. I used to collect things as a kid. I collected bugs and stamps. Evan collected baseball cards. And then he was in graduate school, so he was also collecting a lot of visual imagery while he was studying architecture. And so we just started building that on the side. And that was how Pinterest came to be.

Feloni: At one point did it turn out to be that, "OK, you know what, this little project that we're working on, this is actually going to be what we need to dedicate ourselves to?"

Silbermann: Well, when we first built Pinterest, the first thing we noticed about it was that we personally just loved the product. So we were using it all the time. And there weren't a lot of other users. But we were able to keep iterating on it and making it better every single day. Whereas the phone app, we had this really long cycle between when we would make changes, and then submit it into the store, and then they would get approved over time. And so the natural momentum was with Pinterest, because we could work on it every day. And then slowly, we started sending it out to just our friends, our family. They started telling their friends about it. And pretty soon, people started telling us they really liked it. It wasn't a lot of people. But we would get notes from them and say, "Hey, I love this project." When it would go down, because sometimes it would go down, people would write to us and they would say, "Hey, Pinterest is down. I'm really depending on this to redecorate my home or to plan out my wedding." And so we decided to double down on Pinterest.

Feloni: And as you were building up this initial audience, who were these people?

Silbermann: A lot of them were folks like the people I grew up with. So a lot of people from the Midwest. I grew up in Iowa. A lot of people where Evan was from, in York, Pennsylvania. And they were using it not because they were tech early adopters. They weren't the kind of people that had the newest phone or downloaded everything. They were using it because it was really useful in their everyday life. And the most common way that people would hear about Pinterest, and the most common way they hear about it today, is somebody would do something. They would throw a party, or they'd redecorate their home, or they'd cook a special meal. And their friends would say, "Hey, where'd you get the idea?" And they'd say, "Oh, I got that idea on Pinterest." Then they'd say, "Oh, what's Pinterest?" And they'd try it out and download the app.

Feloni: So that word-of-mouth approach was something that you still use today?

Silbermann: Yeah. I mean, I wouldn't say that we use it as much, as it just happens.

Feloni: It just happens.

Silbermann: You know, we live in a time where everyone's carrying around these really sophisticated devices. And so you don't have to be a technology early adopter in order to hear about something and then try it just a few moments later.

How to build a community

Feloni: How did you build up a team around Pinterest?

Silbermann: Well, the first thing that we really looked for were people that started with what the product would do for a customer. They were extremely focused on how to make the experience of using it better, and then they worked backwards into the technology. And that turned out to be super important, especially in the early days when the team was just four or five people. Because the thing that kept us working really hard was we really wanted to make the folks that were using the product have an amazing experience. I remember I used to put my cellphone number on every outbound email. Because I wanted to make sure that if Pinterest wasn't working, you had somebody to call. And so I would get calls at all times of the night, all through the day.

Feloni: So every user would have your number?

Silbermann: Every user had my cellphone number. And you'd get calls from people that just wanted general technology support, like not even to do with Pinterest. They're like, "My computer's really slow." So eventually I had to get rid of that cellphone number because it was going off all the time. But it was more the ethos that every early user would feel like they were part of a special community, and we were really dedicated to giving them a great experience. So that was one thing that we looked for in all of our early employees.

Feloni: I mean, just starting out, you have a small team. And when you have those intimate relationships with your founders and the first team, was there something that you would ask, to be like, "All right. This person passes the test?" Was there a question or an insight that you could have?

Silbermann: I don't think we had a secret interview question. But we spent a lot of time as a team together. I mean, we were there every weekend, all night. We all knew each other's families. We'd go out to dinner with each other's kids. And so it really felt, in those very, very early days, like a club or a family of people, because we knew each other so well. In fact, the very first office was in an apartment, like a lot of companies. It was a two-bedroom apartment. There was actually another guy living in one of the bedrooms who wasn't working with the company. We all worked in the living room. Every Friday, we would have a barbecue because we had a grill. It was bring your own food. People from the neighborhood would come. We ended up actually recruiting a lot of people from those barbecues. They'd come three, or four, or five weeks in a row. They'd say, "It looks like all of you are having a really good time. We love the product. Let us know when you have any openings." That was the feel really early on at the company. Of course, as we grew in scale, you can't recruit hundreds of people through barbecues. That's not a long-term strategy, but I did think it set the right tone in those really early days.

I remember when we were recruiting early on. There were these people that were at great jobs, and I would almost feel guilty pulling them out of this great job. We didn't have a cool office. It was bring your own computer. There were going to take these massive salary cuts. I would almost feel guilty about saying you should leave this amazing at a Google or a Facebook and come work for us. What I realized was they're really great people, that challenge, all that constraint, the fact that you do need them to fulfill the mission, that is what's motivating. They're not looking for you to guarantee that everything is going to be the same. In fact, part of the reason they talking to you is they want a new challenge. If you just embrace that, if you don't try to cover up all of the company's warts and challenges and say, "Here are the big challenges we have. It's going to be risky, but it's going to be a big adventure." The best people will self-select into that. The wrong kind of people, people that they just want all of their perks poured into a smaller company, will self-select out. When I understood that, it made the price of recruiting feel extremely honest and extremely transparent and actually really fun because you're looking for that special breed of person that sees their career as an adventure and a chance to do something that has a lot impact, rather than just as a job to make money and to have something to do during the day.

Feloni: As far as your approach to your job, are you still able to speak with users of the company and get their ideas?

Silbermann: Yeah. Both Evan and I try to make a very deliberate effort to reach out to the community and spend time with users. Sometimes that means leaving the office. We'll go on trips to different cities around the world. The purpose isn't PR; it's just to meet people who are using the product, understand what's working, what's not working, what's annoying, and then bring that back to the team and try to set the example that everybody should have a very firsthand feeling for how to make the product better and for who's using the product. Obviously, everyone can't be out of the office visiting people all day so we have a lot of other tools as well. We have research teams that bring users in and publish reports inside the company. We obviously have a lot of data and analytics where we look at how people are using it objectively. The trick is to put all those things together and form a picture of what your customers are looking for and then prioritize the things that will have the biggest impact that you can execute really, really well.

How to become a leader

Feloni: In terms of being the CEO and the leader of the company, how did it feel when the company started to get a lot more attraction and public attention?

Silbermann: Well, honestly, it was a little bit surprising to us that this tool that we started to build for ourselves, and then was used by our friends, and then our friends of friends, could be something that was useful to so many people. That was a great feeling. We were incredibly excited. Right after that, we felt this huge sense of responsibility to make sure that we could scale the quality of that product out to more and more and more people. I remember, at some point, we had millions of users but the team was still only 12 or 13 people. I sat down with Evan and we both realized that we needed to make recruiting an amazing team core to what we do every day. We had been spending time with the product, very, very hands on. We realized that unless we invested in building a team around us of people that had different skills and different backgrounds, and could help scale this thing, the whole operation might collapse under its own popularity. I think that was an important turning point from just thinking about ours jobs as building a product to thinking about jobs as building a team, and a culture, and a group of people, that could, together, build a product that would fulfill a mission over time. That was a big light bulb for both of us that happened pretty early on.

Feloni: What do you follow on Pinterest?

Silbermann: Geez, all sorts of things. Some of it's really practical. I've got two little kids. They're 3 and 6. We're always looking for things to do on the weekend with them, activities to help them out in school, really easy recipes that don't take long to make that our kids will eat. Some of them are more about my hobbies. I love nature. I love photography. I love reading pretty eclectic articles and I use Pinterest to save all of those things. I have secret boards for Christmas gifts I'm planning to buy people, vacations that I want to take someday. It really runs the gamut.

Feloni: In some profiles of you they describe you as a quiet, humble guy. First of all, is that accurate?

Silbermann: I think maybe everyone else is loud! Yeah, I think, on average, I'm a little bit quiet.

Feloni: Was that ever a difficulty in terms of being the CEO of a scaling company when they're asking you to make public appearances or just even talking to an ever-growing crowd?

Silbermann: That's been a work in progress, for sure. We've always wanted for our product to speak for itself. That when people think of Pinterest, they don't first think of a face or a personality, they think of a product that helps them do something really fulfilling in their life. But at the same time, there's a reality to running a company, which is people want a spokesperson to explain what you stand for and what you do so that's been something every year I have to work on. I have a team and their whole job is to help me work on that. Hopefully, I'll get better at it, year on year.

Feloni: How do you think that your leadership style evolved as the company kept growing?

Silbermann: Well, there are some things that haven't changed. We've always tried to keep a very, very sharp focus on what are the needs of the user? Everything else should follow that. But in terms of how it's implemented, it's just different at 10 people, and then 20 people, and then 100 people. Today there are more than 1,000 people. I would say there are two differences. One is, very quickly you realize you can't do everything yourself, so you really have to empower all these great people to be able to lead their own teams. Really great people, they want direction, but they don't want to be told how to do their job. That balance between when you start controlling every pixel and letting go of that a little bit and letting people own large pieces is one transition. The second is communication. When we were really small, everyone was in one room. You don't have to think about communication or meetings. Everyone just knows what's going on because there's only a handful of you. As the company gets bigger, it becomes important to communicate across a bunch of different channels and actually to repeat the same things again and again because an individual in your company, that may be the only time they're going to interact with you in a week, or in a month. You need to keep repeating the same message to make sure that it's consistently heard across the whole company.

Feloni: When you're saying, in terms of things that you're working on as a leader, would it be on the communication front, both internally and externally?

Silbermann: That's certainly one thing. I have a whole list of self-improvement projects.

Feloni: Is it an actual list you have?

Silbermann: There's a list and then I have a pinboard, of course —

Feloni: Of course.

Silbermann: — of interesting things that I read about. But every CEO, and actually most professionals I know that are successful, are pretty focused on constantly getting better and improving in the areas where they see gaps. I don't think I'm an exception to that.

Feloni: How would you define the culture that you built around Pinterest?

Silbermann: I would say that the culture really values diversity of all forms. Diversity certainly of skillsets. We have people that went to college and people that didn't go to college. People that studied engineering and people that studied design. It's one thing to recruit people from lots of different backgrounds; it's another thing to create a culture where all of those different skillsets can actually be knit together and can work towards a common good. We try to create an environment where you don't have to be the loudest to make a decision. If you're not the best verbal communicator, you can communicate through design or through data.

Feloni: How do you mean? Through presentations?

Silbermann: Yeah. One thing I noticed when I was working at other companies is that there's almost this tyranny of articulate people. That if you're really [good] at making an argument in a group setting, you can run the place. But the problem is the skill of making an argument in a group setting isn't the same as the skill of building really great products for users. In fact, sometimes the reason that people are great engineers, are great designers, is precisely because that's the medium that they best express themselves. We try to create an environment where you can speak through the work that you do rather than always having to make a verbal argument or debate about why something should or shouldn't be the case.

Feloni: How do you balance that in meetings when you're saying, "Oh, someone could just be the loudest in the room, they'll get their idea heard"?

Silbermann: Well, it depends on the meeting. My favorite meetings are ones that start with a very clear understanding of what problem are we trying to solve for our users. I'm a visual person. It's not a coincidence that I confounded Pinterest. I love it when people show the work rather than tell. They show the prototype or they show the design. They explain this is how I would use it personally. I find those are ones where it's much easier to make a decision on which direction we should take.

Feloni: Even though Pinterest isn't in the same social sphere as Facebook or a Twitter, it's still an app that people incorporate into their daily lives. There're nonstop discussions around just privacy concerns or how is my data being collected. Pinterest, though, hasn't really ... I haven't seen scandals around that. How have you maintained that trust of a user base?

Silbermann: Well, we think privacy is incredibly important, and we think it's also very important to be clear with a consumer about what's going on. There are two kinds of boards. There are boards that anybody can look at and browse and there are boards that are secret. In that sense, I think it's quite simple service. The other thing about Pinterest that's really helpful for us is we make money through advertising. Unlike a lot of services where advertising is kind of bolted on, on Pinterest there is a very, very close alignment between what people are there to do, which is get ideas, and what the advertisers are there to help them do, which is to get ideas. That basic alignment is really important. If I'm using Pinterest to redecorate my home, I actually want advertisements from furniture providers or from a paint provider because I can use those to make my home better. That alignment, I think, makes a lot of the conversation and expectation setting with users a lot easier because people can see why there's an exchange in value between advertisers and Pinterest and between the users and the advertisers. That's something that's important for us to preserve over time.

Feloni: It's like a look into the transparency of it?

Silbermann: Well, it just sort of makes sense. Advertising online gets a bad rap because a lot of times you're very clearly there to do something other than see ads. I want to watch this TV program or I want to communicate with my friends. Ads don't actually make the experience better in any way. But on Pinterest, you're there to get ideas to go do things in your life and lot of those things are enabled by the products and services that businesses provide, and so there's a logical connection between why you're using Pinterest as a user and why you're seeing ads as a user. That alignment, it's good for users, it's good for us a business, and it's good for the people that use our advertising products.

Feloni: Pinterest is still private. Are you considering taking it public, and do you have an idea of what an advantage would be and what maybe a disadvantage would be of that?

Silbermann: Well, long term, we want Pinterest to be an independent company. We don't comment on when or if we're going to public, but we tried to build it all along the way to be a company that can be self-sustaining. Self- sustaining financially, self-sustaining culturally, and that's because we think that the mission that we're on to try to bring everyone inspiration. It's a big mission. It's not a small functionally mission. It's one that we could realistically pursue for 10 or 20 years and still have a lot of work to do. We've always had big ambitions for the company because the mission that we've chosen to undertake is one that has a long time horizon to fulfill.

Feloni: What would be next for the company in terms of fulfilling that long-term vision?

Silbermann: We're working on a bunch of stuff that I am extremely excited about. One area is, how do we give you better and better personalized inspiration? At a very broad level, we want to take the best of human curation, so this ability for somebody to pick out the 10, 15, 20 items that are meaningful to her, and we want to combine that with cutting-edge machine learning and recommendation, so every time you open Pinterest you're greeted with almost a catalog that looks like and feels like it was handpicked for you. Then once you get that inspiration, we want to make sure that you can make it part of your life. For us, that means that everything that you see we can connect it to a place that you can buy it your price point. If there's a recipe, we can make sure that it's a good recipe and it's going to turn out well. If you want to add how something turned out, you're empowered with publishing tools to add this is how this project turned out. Those two things, I think, for a long time are going to keep us busy, technologically, in terms of design and community building. But if you fulfill those, they'll have a really transformative effect on people's lives.

Sharing his best advice

Feloni: We've talked about the span of your career. What would you say is the biggest challenge that you've overcome?

Silbermann: Well, I think the biggest challenge I've overcome is being able to recruit people to come and work with me that have very, very different skillsets. I feel like that's one of those superpowers in anything you do in life, that you don't have to be good at everything, what you have to be good at is finding people who are better than you in some area and convincing them that by joining up, the two of you can do more together than either of you can do separately. That took me a while to get my head around, how to do that well, but I honestly think it's one of the most rewarding parts of building a team and building a company. It's that all of you can together do something that no one of you could accomplish by yourselves.

Feloni: How do you define success?

Silbermann: For me, success is about building products and services that are useful. I think now that I have little kids, I realize that by the time they're my age, everything in the world is going to be different. I just think about my parents. When I was born, there were no personal computers in most people's houses, there was no internet, there was certainly no services on top of that internet, or mobile phone. There are like multiple degrees of innovation away. But my parents, who are doctors, many generations later can still say I spent my time making people's lives better by removing cataracts. I think for me, success would be that even as technology changes, we can look back and say that the products and services we built brought people joy and were useful in their lives, even if the way that they do that may have changed over the passing of a bunch of years.

Feloni: Is there a piece of advice that you would give to someone who maybe wants to have a career like yours or draw inspiration from it?

Silbermann: Yeah. My advice would be try to surround yourself with really great people, and also everything can be learned. I think some people kind of count themselves out. They feel like it's too late to pick up a new skill or to learn something. But the reality is that if you set your mind to it, I really do believe that you can learn anything and you can improve and what you can't learn fast enough, you can find great people to help you do those things along the way.

Feloni: It's the balance there.

Silbermann: Yeah.

Feloni: Well, thank you so much, Ben.

Silbermann: Thank you for having me.

This is an updated version of a story that originally ran on Oct. 26, 2018.

SEE ALSO: 'It's not like I had this well-oiled plan': Former GE and NBC exec Beth Comstock reached the C-Suite by taking things one day at a time

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IT'S OFFICIAL: Trump signs China trade deal, says tariffs could be lifted in phase 2

Wed, 01/15/2020 - 1:22pm

  • President Donald Trump signed an interim trade agreement with China on Wednesday.
  • The move was the first tangible sign of de-escalation in a trade dispute that has weighed on the world's largest economies for nearly two years.
  • Ahead of his 2020 reelection bid, Trump has portrayed his economic wars as major wins for American business.
  • Visit Business Insider's homepage here.

President Donald Trump signed an interim trade agreement with China on Wednesday, portraying it as a major win for American business ahead of his 2020 reelection bid. The move was the first tangible sign of de-escalation in a trade dispute that has rattled the world's largest economies for nearly two years.

"As a candidate for president, I vowed strong action — it's probably the biggest reason I ran for president," Trump said in a freewheeling speech alongside Chinese Vice Premier Liu He in the East Room of the White House. "I more than kept my promise. Now our efforts have yielded a transformative deal that will bring tremendous benefits to both countries."

The so-called phase-one deal has been widely welcomed by companies, investors, and policymakers who have warned that punitive tariffs have upended global supply chains through higher costs and cast deep uncertainty on business plans. But it is only the start of negotiations to defuse a broader economic standoff between the two sides.

As part of the phase-one agreement, which was announced late last year, the Trump administration agreed to reduce a portion of tariff rates for China if it adjusted some of the ways it manages its state-run economy.

The White House had said the 86-page text would include commitments from China on American agricultural purchases, tighter intellectual-property protections, increased scrutiny of currency movements, and a more open financial sector. More details of the agreement were set to be released on the day of the signing ceremony.

But critics were swift to question whether those concessions were enough to justify the costs that have piled up from tariffs, which researchers recently concluded fell almost entirely on Americans.

"By now we should recognize this as the usual Trump process: create chaos, end chaos, declare a great victory," said Jared Bernstein, who was a senior economist in the Obama administration. "In reality, there's no victory here, just some squishy, minor promises from China, unnecessarily disrupted trade flows, and assorted pain for no gain."

Read more: Goldman Sachs says these 15 stocks are poised to explode higher as the economy thrives, based on an exclusive metric it developed

Trump was also met with pushback from unlikely critics who said the phase-one deal left out economic aggressions at the center of a Section 301 investigation that ignited the dispute. A second round of negotiations could address those issues, including large-scale subsidies China provides to companies.

Meanwhile, tariffs are likely to remain on thousands of products. The Trump administration has agreed to lower tariffs on $110 billion worth of products targeted in September, but tariff rates of separate tranches with a total trade value of roughly $250 billion will remain.

Trump suggested on Wednesday that those tariffs would be lifted following a phase-two deal with China, which he has said is unlikely to be finalized until after the November election. However, it was unclear whether tariff rollbacks had been officially agreed upon.

"There is no agreement for future reduction in tariffs," Treasury Secretary Steve Mnuchin and US Trade Representative Robert Lighthizer said in a joint statement to Business Insider on Tuesday.

In a letter to Trump this week, Scott N. Paul, the president of Alliance for American Manufacturing, said that "nearly all the major structural issues" were unresolved. The factory group has supported tariffs and opposed a process designed to allow some companies to receive exemptions.

"For American manufacturing and its workers, the phase one agreement is completely inadequate," Paul said. "The agreement does not level the playing field for American workers in the US or global market."

SEE ALSO: Trump to keep $360 billion of China tariffs in place, despite phase-one deal

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