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Volcanic Rocks as Building Material courtesy of Designer Nicolas-Patience Basabose @MrBasabose

Sat, 06/15/2019 - 6:00am  |  Timbuktu Chronicles
Design Indaba reports:
Nicolas-Patience Basabose,is using the leftover volcanic stones, for building projectsvia
...Basabose and his team are using local Portland cement which is a mixture of Nyiragongo stones, dust and ashes. The wood is also sourced from trees in the area. He says the home is their greenest to date, as 95 per cent of materials were sourced from within a 5km radius...[more]

Baobab Circle - an AI-powered platform to deliver personalised management of diabetes and hypertension across Africa.

Sat, 06/15/2019 - 6:00am  |  Timbuktu Chronicles
Co-Founded by Precious Lunga:
At Baobab Circle, we understand that individuals with chronic illnesses each have their own personal challenges. Afya Pap uses Al and behavioural science to help our users change their habits, reduce the financial burden of managing their conditions, and improve their health.

Here's why this Amazon executive says shopping with Alexa is 'going to be even more exciting than the launch of the iPhone'

Sat, 06/15/2019 - 5:00am  |  Clusterstock

  • Amazon is betting its knowledge of its customers, combined with the booming adoption of smart speakers and voice assistants, is the future of transactions.
  • "Trust takes decades to build and an instant to lose, and we're paranoid about that," says Amazon Pay's Patrick Gauthier.
  • Visit Business Insider Prime for more stories.

"Alexa, are you the future?" Amazon certainly seems to think so.

As the future of financial services becomes increasingly democratized, Amazon is betting its knowledge of its customers, combined with the booming adoption of smart speakers and voice assistants, is the future of transactions.

Amazon Pay, launched in 2007, allows customers to purchase goods and services from websites and mobile apps using the addresses and payment methods stored in their Amazon account. 

"In 10 years, we'll say what happened in this decade with voice and smart assistants is even more exciting than what happened between 2008 and 2018 with the launch of the iPhone," Patrick Gauthier, VP at Amazon Pay, said in an interview with Business Insider. "In those 10 years, we saw mobile commerce and banking come of age. Well, mark my words we will see a more exciting transition to smart assistant enabled moments that will make people's lives easier."

Read more: 'Alexa, what ETF should I buy?' Asset managers like BlackRock and Invesco are testing out voice assistants — but some are sounding the alarm on privacy concerns

Trust issues

The biggest issue within the smart assistant ecosystem is getting users to accept making payments with their voice, particularly with no screen to provide product and transaction details. Gauthier notes that this is "trust issue" and says the company is wary of making mistakes in this area. 

"Our key question is, how do we make sure we nurture trust with Alexa? Trust takes decades to build and an instant to lose and we're paranoid about that," he said.

However, Gauthier is bullish on the prospect of moving from a one-device world of mobile phones for payments to having smart assistants on multiple devices such as cars, phones, tablets, and even fridges, as potentially removing friction from a customer's experience. 

Big market for voice shopping 

Smart speakers or voice assistants are the fastest growing part of the consumer technology market, according to research firm eMarketer. While earlier this year OC&C Strategy Consultants indicated that the market for voice shopping could rise to be $40 billion-plus in 2022, up from about $2 billion across the US and UK.

Gauthier also said that Amazon's own research indicated 40% of customers believed a smart assistant would be part of their payments or shopping process in the next three years, as the popularity of Alexa, Google Home, and Apple's HomePod become more ubiquitous. 

It's part of a transition from thinking of a commerce experience as purely payment and moving towards a more integrated model for customers. For example, the company's Amazon Go stores are checkout-free. 

Amazon surveyed around 10,000 customers and found that almost half felt that the security of their payments information was their main concern, while another 34% indicated that they were worried smart assistants may not select the correct product. 

And the biggest issue?

"With smart assistants, it's not all about the purchase," Gauthier said. "The No. 1 thing people want to know is: 'Where is my stuff?'"

SEE ALSO: The SoftBank Vision Fund has taken Silicon Valley by storm by writing monster checks. Here are the power players there that every startup founder should know.

Join the conversation about this story »

Inside chat app Symphony's battle to break into a $28 billion Wall Street market — and avoid becoming Bloomberg roadkill

Fri, 06/14/2019 - 11:54pm  |  Clusterstock

  • Symphony said this week that it's raised an additional funding, so we are republishing our investigation into the company. This story was first published in August 2018.
  • Major Wall Street banks like Goldman Sachs and JPMorgan have invested over $460 million in Symphony, a startup building encrypted, cloud-based communication tools. Google is also an investor.
  • The banks want to build a platform they can all communicate on to help them cut down on expensive Bloomberg terminals.
  • Almost four years into the project, Symphony has over 300,000 users.
  • But there are questions around usage, partnerships, and whether it's really having an effect on Bloomberg.
  • This story, based on conversations with 35 sources, looks at how Wall Street's audacious bet has gone so far and the challenges the startup still faces.

"Thank you David Gurle," French President Emmanuel Macron tweeted in June. "Your trust and your enthusiasm show, once again, that France is back."

Macron, one of the most powerful men in European politics, was praising Gurle's decision to set up a new French research and development center for his company Symphony, a secure messaging platform.

For those who know Gurle, the French president's praise will not have been a surprise. The son of two former diplomats and a veteran Silicon Valley executive for almost two decades, Gurle is known as the consummate salesman who could "charm the birds from the trees," according to a former employee.

This charm has come in handy. Banks, asset managers, and even Google have invested over $460 million into Symphony, a secure, cloud-based chat platform conceived as a hub for any and all financial work. Banks hope Symphony can engineer a new, super-secure communication superhighway that help them cut down on Bloomberg terminals, the crucial but expensive trading and data tool that has dominated finance for decades.

It's easy to see why banks want competition. A single Bloomberg terminal costs $24,000 a year and the company controls around a third of the $28 billion global information market for financial markets data, analysis and news, according to estimates from Burton-Taylor International Consulting, a TP ICAP company. Around two-thirds of its estimated $9 billion in annual revenues comes from its terminals. Founder Mike Bloomberg is one of the richest men in the world.

Almost four years into the Symphony project, Gurle and his team have made some headway. The Symphony platform now offers apps, bots, and integrations from the likes of Dow Jones, Factset, Eikon by Thomson Reuters, and S&P Global Markets Intelligence. It's grown to have hundreds of thousands of users across Wall Street who send millions of messages each week and has been privately valued at over $1 billion.

But behind the numbers, the picture is more complicated. The majority of Symphony customers use it to communicate internally which offers efficiency savings but doesn't tend to generate revenue. That's compared to the more valuable cross-industry communication that takes place on Bloomberg, in which traders strike multi-million dollar deals with big hedge funds and asset managers. 

The rump of customers are also drawn from the firms that have invested in the project and have a vested interest in its success. Many are compelled by management to use the platform and privately express reluctance.

And there are rumblings that some partners are unhappy. The data feeds they provide through Symphony have not rolled over into paid-for subscriptions at the rate they hoped for. It highlights the difficult task Gurle faces in keeping not just Symphony's 28 investors happy, but also its broad galaxy of partners and customers.

Symphony's investors and leadership insist the company is simply at the beginning of a long mission to transform the way Wall Street communicates and point to growing messaging numbers.

Still, plenty of companies have tried to disrupt Bloomberg in the past. Almost all have failed. The big question is: can David Gurle make Symphony the exception?

This story is based on conversations with over 35 people, spanning current and former Symphony employees, board members, investors, customers, analysts, and partners. It charts the growing pains of a hotly backed startup that has rubbed up against a Goliath and lays out the challenges it still faces.

'It was born out of anger'

Five years ago, Wall Street banks were privately furious after discovering that Bloomberg reporters could see limited information about what terminal users were doing.

Bloomberg quickly closed this loophole but the incident spurred a coalition of banks, led by Goldman Sachs, to push forward on a long-held ambition to try and build an industry-owned challenger to Bloomberg's ubiquitous $24,000-a-year terminals.

"It was born, I think, out of anger," Douglas B. Taylor, a managing director at Burton-Taylor International, said of Symphony. Burton-Taylor International is a consultancy that monitors the information industry, following companies like Bloomberg, Dow Jones, and Reuters.

The snooping incident came as Goldman Sachs was already working on its own internal project, dubbed "Babel", that aimed to create a platform unifying the dozens of communication tools the bank used internally.

Goldman began looking at a spin-out of Babel in 2014. When the news leaked, Goldman received a flurry of inbound calls from other banks keen to get involved, according to a source close to the deal.

In the end, a consortium of 14 banks and financial firms bought Perzo, a Silicon Valley encrypted messaging startup. Much of Goldman's Babel project was transferred into the startup. The firms in on the deal included Morgan Stanley, JPMorgan, Bank of America, Deutsche Bank, HSBC, and BlackRock. Collectively, the 14 firms invested $66 million.

Perzo was the brainchild of former Thomson Reuters executive and entrepreneur David Gurle. He was a key draw in the deal. A graduate of an elite Parisian engineering school, Gurle ran Microsoft's real-time communications business for three years, helping to build the communication tool Lync while there in the early 2000s. He went on to stints at Reuters and Skype, where he worked on Skype for Business.

"He is a visionary in the sense that he really has something in his mind that he's been thinking about for years," a former long-time Symphony employee said.

Symphony signed early data deals with financial data giants Dow Jones and McGraw Hill Financial, the owner of ratings agency Standard & Poor's. It officially launched in September 2015, with press parties on the rooftop of a New York City Midtown hotel and London's plush Lanesborough Hotel.

A month later, more big-name investors backed the project. Symphony raised $100 million from Google, Natixis, Societe Generale, and UBS, among others. One former staffer and a source close to the board said there were "loose" chats with Google about a potential sale at the time.

Gurle touted over 100,000 users a year after launch and was ranked 97 on Vanity Fair's 2016 "New Establishment" list for his efforts to help banks "rely a little less on the ubiquitous (and costly) tool known simply as the Terminal."

'I don't think he will be loved by everybody'

As with any startup, there were early teething problems. Customers reported a clunky user experience and issues with the platform quitting unexpectedly.

"Sometimes it would go out for a day, half a day," a former Goldman Sachs employee recalled. By contrast, "I can remember two times during my time at GS that Bloomberg went down in three years," he said.

"I would be lying if I said in the first instance [the feedback] was all positive — it wasn't," a Symphony investor told BI. "It was positive in the sense that, yes, it is getting rolled out and the product has support from multiple levels within the company but the people using the product a couple of years ago didn't like it that much and to be honest we didn't like it that much."

Gurle devoted all his energy to fixing these problems. A former staffer said: "He works extremely hard and he expects the same kind of performance from people around him."

Gurle acknowledged in a memo to staff in 2017 that he drove many people "crazy" with his "relentless push for improvement and adaptation to our ever-changing ecosystem."

One Symphony employee had a different take, saying that some in the company lived in fear of Gurle's demanding nature.

The employee also complained that Gurle surrounded himself with "yes men," a criticism echoed by several other former employees. Two separately used the term "untouchable" to describe the group of people close to Gurle.

"I don't think he will be loved by everybody," said one investor. "I think he's someone who's very harsh and when something doesn't work to his liking then he will let people know. But then so did [Spotify founder] Daniel Ek, so did [Apple founder] Steve Jobs."

Symphony vs. Bloomberg

Early on, Symphony brushed up against regulators. New York's Department of Financial Services forced rule changes around data storage before it even launched and the EU took an interest in Symphony, scrutinizing its data capture and retention policies. It later emerged that Bloomberg had been lobbying EU officials to get them to take a harder line on the platform.

Those close to Symphony have downplayed the company's antagonistic relationship with Bloomberg.

One of Symphony's original investors said: "Maybe Bloomberg touches 5% of [our] workforce. What we were dealing with is a much bigger opportunity, which was to have everyone — the front office, the back office, our clients — on the same platform."

Gurle denied Symphony was a Bloomberg rival in a 2015 interview with Business Insider, saying: "If there's anything we're going to disrupt it's going to be the different messaging tools across enterprises." In a memo to staff in 2017, Gurle said that the company's real rivals are the likes of Slack, Skype for Business, and Microsoft's Teams.

But the lobbying efforts show Bloomberg saw the startup as a threat. The financial data giant also launched a messaging service in October 2017 that was pitched at back office staff, allowing them to communicate with front office staff who had terminals over the same platform. Analysts BI spoke to said saw it as a clear response to Symphony. Bloomberg's new chat-only service costs just $10 a month — $10 cheaper than Symphony. Bloomberg declined to comment for this story.

Many banks also view Symphony through the lens of Bloomberg. Several have cost-saving targets associated with using Symphony to cut down on Bloomberg terminals, according to a former relationship manager who worked at Symphony. One US bank aimed to initially save around $4 million by shifting over 100 people off Bloomberg terminals in the first year, the source said, with the figure rising in subsequent years. Another European bank had a similar target.

'Doesn't have quite enough critical mass'

Today, Symphony has around 325 enterprise clients and close to 350,000 ultimate users. Customers pay $20 per month per seat. Symphony told Business Insider it had $35 million of recurring annual revenues at the end of 2017 and that rate is growing by 50% each year.

A lot of the adoption has come from the banks and asset managers that invested in the product. Support came not just in the form of cash but also pushes to get employees to use the system. Staff at BlackRock and Credit Suisse told BI that Symphony automatically boots up when they log on to their computers, while others at Deutsche Bank, JPMorgan, and Goldman Sachs said senior managers at these banks have emailed teams to encourage them to use the platform.

But Symphony has a problem: not enough people are using it for doing deals.

The real value of Bloomberg's chat function is it allows traders to pitch deals to buy-side clients. It's this revenue generating feature of Bloomberg that convinces banks to begrudgingly fork over the tens of millions they spend on the terminals each year.

Although Symphony says over 200,000 users are able to communicate across organizations, conversations with multiple customers and users suggest usage of this feature is far from mainstream. Multiple sources across the industry gave the example of posting company newsletters or even lunch menus on Symphony, using it as a kind of modern intranet.

Why aren't companies using Symphony to do business with each other? Users told Business Insider that not enough buy-side clients are on the platform to create a so-called "network effect." Simply put, the salespeople are there but the customers aren't.

A Goldman banker told Business Insider that Symphony "doesn't have quite enough critical mass with our clients for everyone to be on it."

To be sure, there are buy-side firms on the platform. BlackRock and AB, who together have almost $7 trillion in assets under management, are both major supporters on the platform. But the majority of usage is still internal.

A source close to Symphony's board said that they need about 10 large asset managers fully on board to "get over the hump." Another stressed that long internal authorization process at finance firms means progress made with the buy-side is slow to filter through — even if a firm has signed on to Symphony, it could take staff as long as a year to get fully authorized to talk to people at external firms.

The tide may be turning somewhat. Deutsche Bank's asset management arm, for example, has asked many of the brokers it deals with to only communicate with staff over Symphony. The platform allows the buy-side some degree of control compared to the information overload the usually face from the sell-side.

A spokesperson for Symphony said: "The number of customers who use Symphony to communicate externally grew 50% in the first half of 2018 alone. 70% of our largest clients' top 150 trading partners are on Symphony (globally, based on communication frequency)."

'We're old dogs and it is hard to learn new tricks'

Still, Symphony faces hurdles when it comes to convincing traders at banks to adopt the platform.

Taylor-Burton International's Taylor summarized the typical trader mindset: "If you tell me you want to change something, even if you can show me where it's going to be better, I'm probably going to be resistant to it because I know I can win doing what I'm going today and all it takes is for me to make one mistake because I didn't know what button to press or I misread something and it would cost me."

Several traders at major banks BI spoke to said they have limited desktop space, and it's difficult for them to justify adding another platform such as Symphony.

A trader at Credit Suisse said: "At some point, they'll compel us to use it. But we're old dogs, and it is hard to learn new tricks. Symphony is solving a problem I don't have."

"No one's giving up their Thomson Reuters Eikon messenger service, they're not giving up their Slack, they're not giving up their Bloomberg terminals — they're adding," William Jan, an analyst at Outsell who wrote a recent note on Symphony, told BI.

A source close to the company insisted that Symphony has helped banks to realize cost savings by removing Bloomberg terminals. But the former relationship manager BI spoke with said at least some were frustrated that the savings they had forecast have not yet been fully realized. After a slight dip in terminal sales in 2016, Bloomberg sales rose by 0.6% in 2017 according to Burton-Taylor International.

Jan warned in his note that partners may also be growing unhappy with the platform. Data partners offer "lite" services through Symphony in the hopes that customers end up subscribing to get richer feeds. This has not happened in the volume partners wanted, according to Jan.

"The conversion rates that they're seeing is pretty dismal," he said. The risk that some may quit the platform led Jan to give Symphony a negative outlook rating in his note.

A Symphony spokesperson said: "As our community has grown and business has matured, we've seen new patterns emerge and initial assumptions challenged. That's one of the primary benefits of open APIs — we've been learning alongside our partners. It is still "early days" for open collaboration platforms and we are all learning together."

'Bots are one of our key differentiators'

Today, Symphony's main focus is on driving "engagement": getting people to collaborate on the platform.

At the end of last year, an average of just over 3 million messages were being sent over the platform per week, according to a source close to the board. Symphony told Business Insider that it is now "trending toward 9 million messages sent by Symphony users per week."

Part of the bump has been driven by "bots": automated programs that can navigate the platform, doing everything from notifying people about trade fails, to serving up the latest bits of research, helping with room bookings, or even client on-boarding.

There are currently around 500 bots on the platform and around 10% of all messages sent on the platform are already generated by bots, according to Symphony.

"Bots are one of our key differentiators from the legacy tools used in financial services," a spokesperson for Symphony said. "We hear our customers say that Symphony is now positioned well beyond a chat application, to become a full workflow collaboration platform."

Growing outside of financial services

While the bulk of the business focuses on engagement, Gurle has his eye on growth markets. He relocated to Singapore last year as part of efforts to win new business in Asia and now lives full-time in Hong Kong. Symphony signed 25 new clients in the year Gurle spent in Singapore, the company told BI, and user numbers in the region doubled.

Gurle has also talked extensively about Symphony's potential beyond finance. He said in a memo to staff last year that the company's emphasis on security and compliance means it can dominate in highly regulated industries such as medicine and law.

Critics say this expansion is necessitated by Symphony's billion dollar valuation. Symphony was reportedly valued at over $1 billion in a private funding round last year, a valuation that analysts BI spoke to said was ambitious and would require further growth to justify.

Symphony has identified governments as a potentially lucrative new market to tap into and talks are ongoing with the EU, according to a source. Another source said the company is also in talks with security services around the world. FBI director Christopher Wray highlighted Symphony as a "responsible" use on encryption in a speech in March.

Symphony said it "invested in a team of go-to-market professionals that are focused on growing Symphony's footprint outside of financial services," at the start of this year. The company said it has customers across professional services, legal, insurance, government, and aviation. The bulk are still in financial services.

'Most companies that confront Bloomberg end up dead'

Symphony is not the first to try and challenge the dominance of Bloomberg as the connecting tissue of Wall Street. Taylor, in fact, worked on a project in 1989 while at Reuters to try and build a Bloomberg killer.

Most companies that go up against Bloomberg have failed to dent its market share. Spencer Mindlin, an industry analyst at Aite Group, pointed to Communicator, an instant messaging platform that made in-roads into financial services in the early 2000s.

JPMorgan, Merrill Lynch, Credit Suisse, Goldman Sachs, Lehman Brothers, Morgan Stanley, and UBS all signed on to use the platform in 2002.

But Communicator didn't gain much traction and was sold to Markit in 2006 for an undisclosed sum. Markit acquired the business mainly for other products it had developed by then — notably a swaps trading feature and bond research portal — and ended up shutting down the instant messaging platform.

"The history is that most companies that confront Bloomberg with a new product end up dead on the side of the road," Taylor said.

Bloomberg LP is worth an estimated $54 billion according to Forbes and, as the aggressive pricing of its new chat-only offerings demonstrates, it is willing to use that financial firepower to crush opposition. Meanwhile, Slack is said to be currently raising $400 million. Skype and Lync can both rely on the financial might of Microsoft.

Symphony's backers and executives stress that the company is just at the beginning of what is likely a very long journey. Disrupting any industry is generally a tough task but Silicon Valley has shown time and time again that it is possible.

Investors stressed that if anyone can crack this Gordian knot, it is Gurle. One told BI: "It's clear that management action here has done a lot to turn all the metrics in the right direction and now they look very healthy to us."

If Symphony is successful, it must become a high-security, high-speed network connecting some of the most important corporations and institutions around the world.

"Think of us as a highway infrastructure," Gurle told Business Insider. "We're building a new set of roads every quarter and as new roads come and connect these other players, this highway system becomes more and more valuable."

The ultimate goal talked about internally is to exit through a multi-billion dollar IPO, the badge of honour for any successful tech company. Insiders say the company is still a way off being in shape for such a transaction, though, given the question marks around front office adoption and cross-company collaboration.

Internally, Symphony like to look on a business horizon of 2030, aiming to be well established in security-conscious industries such as government, healthcare, and finance by then. Cleary, there's more work to do and challenges to overcome. A staffer who left earlier this year said of Symphony: "They're going through a very pubescent phase — they're growing up."

Additional reporting by Frank Chaparro, Dakin Campbell, and Olivia Oran.

Join the conversation about this story »

NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

A mock-up of the redesigned $20 bill featuring Harriet Tubman leaked — after it was delayed by the Trump administration

Fri, 06/14/2019 - 10:37pm  |  Clusterstock

  • The New York Times published a leaked preliminary mock-up of a $20 bill featuring former slave and abolitionist Harriet Tubman, despite the Trump administration announcing a delay of the bill.
  • US Treasury Secretary Steven Mnuchin said the design of the $20 bill would be unveiled in 2026, and circulation would likely be postponed until 2028.
  • The delays were caused by the development of anti-counterfeiting security features, according to Mnuchin.
  • Visit Business Insider's homepage for more stories.

A leaked preliminary mock-up of a $20 bill featuring former slave and abolitionist Harriet Tubman was published by the New York Times on Friday, following a delay in its release by the Trump administration.

According to the report, the design of the bill was completed in 2016. Last month, US Treasury Secretary Steven Mnuchin said plans to unveil the new $20 bill would be pushed back until at least 2026, and the it would likely not be in circulation until 2028. It's unclear if Tubman would still be featured.

Changing the face of the $20 bill was an Obama administration initiative. Tubman would have been the first African-American on a bill, and per the Obama administration's deadline, the design would have been unveiled in 2020, the centennial of the ratification of the 19th amendment, a capstone event in women's rights.

President Donald Trump criticized the change during his run as a candidate in 2016, according to the New York Times report.

New York Times reporter Alan Rappeport tweeted a photo of the redesigned bill.

Here’s an early design of the Harriet Tubman $20 bill created by the Bureau of Engraving and Printing. Steven Mnuchin said designs would be delayed until 2026 and a future Treasury secretary will decide who’s on the face of the note.

— Alan Rappeport (@arappeport) June 14, 2019


During a congressional hearing, Mnuchin said his primary objective was to enhance security features of US currency to prevent counterfeit, specifically with the $10 and $50 bills. According to Reuters, the $20 bill is the most frequently counterfeited note in the United States.

"It is my responsibility now to focus on what is the issue of counterfeiting and the security features," Mnuchin said. "The ultimate decision on the redesign will most likely be another secretary down the road."

Read more: $20 bill featuring Harriet Tubman won't happen until after Trump has left office, Treasury Secretary says

In his testimony before Congress, Mnuchin said the development of new security features would make the 2020 deadline for the new design unfeasible.

Lydia Washington, a spokeswoman for the Bureau of Engraving and Printing, said preliminary designs for the $20 bill were created after Jacob J. Lew, President Barack Obama's final Treasury secretary, proposed the idea. A current BEP employee told The Times that the design appeared to be far along in the process after personally viewing a metal engraving plate and a digital image of the Tubman note back as early as May 2018.

Amid speculation that political interference could be involved in postponing the $20 note, Mnuchin said in an interview with The Times that the reasons for the delays were only technical.

Earlier this week, Maryland Gov. Larry Hogan, a Republican, wrote a letter to Mnuchin urging him to speed up the process of putting Tubman on the $20 bill. Tubman, a native of Maryland, was born into slavery. After her escape, she became a conductor on the "Underground Railroad" leading hundreds of slaves to freedom. Tubman also played a key role in the Civil War working as a nurse and spy for the Union army.

Hogan wrote, "She deserves this honor."

SEE ALSO: 8 amazing facts about Harriet Tubman

Join the conversation about this story »

NOW WATCH: YouTube is in dangerous territory after not removing a video that ridiculed a Vox producer for being gay

7 of the most common ways people die while in transit

Fri, 06/14/2019 - 7:11pm  |  Clusterstock

  • You have more choices than ever for traveling from one destination to another, and thanks to modern technology, mass transportation is the safest it's ever been.
  • Most modern passenger cars and trucks are equipped with active safety features like automatic emergency braking and intelligent cruise control, vastly reducing the likelihood of a crash, and giving you a greater chance of survival if a collision is unavoidable.
  • Despite this, your chances of dying while traveling in some type of vehicle — be it a boat, train, or a car — remains a nonzero probability. Moreso in some forms of transit than in others.
  • According to 2017 data from the Bureau of Transportation Statistics and the National Safety Council, the most-recent data available from the agencies, there were 37,133 highway deaths, 831 railroad deaths, and 658 people who died in recreational boating incidents. Zero passengers died on US air carriers that year.
  • Visit Business Insider's homepage for more stories.

Mass transportation has come a long way since the days of the horse and buggy. There are now more choices than ever for travelers looking to get from point A-to-B — from majestic double-decker commercial airliners, to the humble electric scooter. Even on-demand ride-hailing services like Uber and Lyft offer people who may not own any vehicle relatively easy access to quick transit.

Advances in technology have also made transportation safer. Most modern passenger cars and trucks are equipped with active safety features like automatic emergency braking, blind-spot monitors, parking sensors, and intelligent cruise control. Combined with passive safety features like airbags, these are all designed to help prevent crashes, or reduce the likelihood of injury in a collision.

But despite that progress, your chances of dying while traveling in some type of vehicle is a nonzero probability. Moreso in some forms of transit than in others.

Read more: The 10 nastiest cruise ships of all time

Using historic and publicly available data from several US federal agencies, including the Bureau of Transportation Statistics and the National Safety Council, we list the number of deaths that have occurred in various forms of transit in rrecent years.

According to 2017 and 2018 data from the Bureau of Transportation Statistics, the National Safety Council, the Insurance Institute for Highway Safety, and the Governor's Highway Safety Association, the most-recent data available from the agencies, there were 37,133 highway deaths, 831 railroad deaths, and 658 people who died in recreational boating incidents. Zero passengers died on US air carriers that year.

There were zero passenger deaths on US air carriers in 2017, while in 2018, the number of pedestrian deaths reached a nearly three-decade high. Read on to see what else we found.

1.) Passenger vehicles (not including motorcycles): 24,436 deaths

The total number of deaths in motor vehicle incidents reached 40,000 in 2018, according to the National Safety Council, which was a 1% decrease from 2017.

Those numbers generally include all types of motor vehicles, including motorcycles and bicyclists. We've compiled data for those subsets separately in this post, so for the purposes of this dataset, we're only including deaths that occurred in incidents involving cars, trucks, and buses.

The Bureau of Transportation Statistics says 24,436 people died in incidents involving passenger vehicles (not including people on motorcycles or bikes) in 2017.

Source: Bureau of Transportation Statistics and the National Safety Council

2.) Pedestrians: 6,227 deaths (2018)

Statistics from the Governor's Highway Safety Association (GHSA) found there were 6,227 pedestrian deaths in the US in 2018, a nearly three-decade high. That's an increase from the 5,977 pedestrians killed in 2017, according the Bureau of Transportation Statistics.

The GHSA's report also notes that most pedestrian fatalities have happened "on local roads, at night, away from intersections," which it says is an indication that safer road crossings are needed.

Source: Governor's Highway Safety Association and the Bureau of Transportation Statistics

3.) Motorcycles: 5,172 deaths (2017)

There were 5,172 motorcycle deaths in 2017, according to the Bureau of Transportation Statistics. The Insurance Institute for Highway Safety notes that acute head injuries are most common in motorcycle crashes.

Helmets can help mitigate those types of injuries, but they are not required in all states.

Source: Bureau of Transportation Statistics and the Insurance Institute for Highway Safety

4.) Bicycling: 783 deaths (2017)

The National Highway Traffic Safety Administration notes that cyclists (or pedalcyclists as they're described in its data) account for the smallest number of known deaths occurring on non-motorized vehicles.

Source: National Highway Traffic Safety Administration

5.) Boats and other water vessels: 706 deaths (2017)

The Bureau of Transportation Statistics says there were 706 deaths on water vessels in 2017. Of those, the vast majority occurred during recreational boating, which the agency defines as travel on airboats, canoes, kayaks, motorboats, pontoon, rowboats, and sailboats.

Source: US Bureau of Transportation Statistics

6.) Aircraft: 346 deaths (2017)

The US Bureau of Transportation Statistics' data from 2017 says a total of 346 people died in incidents occurring in the air. Notably, the agency says none of those deaths occurred on US commercial airlines. Findings from the US National Safety Council also show zero such deaths in 2017.

Source: US Bureau of Transportation Statistics and the US National Safety Council

7.) Railroads: 831 deaths (2017)

According to the US National Safety Council, 831 people died in some form of railroad incident in 2017. That's a 9% increase from 2016, and the highest number of deaths since 2007, the agency said. A majority of those deaths (520) were attributed to "trespassers," commonly defined as people who wander onto the train line or try to hop freight trains.

Source: US National Safety Council

The automotive industry has not reached 'peak car' as some Wall Street analysts suggest. Here's what's really going on. (F, GM, FCAU)

Fri, 06/14/2019 - 6:55pm  |  Clusterstock

  • Auto sales, particularly in the US, have been booming for years. Automakers have been positing healthy profits, but now concern has developed about "peak car," the idea that worldwide auto sales growth has topped out.
  • The auto industry isn't meaningfully threatened by ride-hailing or new companies making electric vehicles. And although sales could decline in the future, historically high transaction prices should offset a slowdown.
  • A solid economy has led analysts to scour the globe for sources of worry, and because cars cost so much and the auto industry employs so many people, they've begun to attract attention as a recessionary indicator.
  • Even if a recession appears, automakers have ridden out downturns for a century and generally seen sales recover.

As worries about a US or even global recession have emerged over the past 12 months, Wall Street analysts and economic pundits have been looking for data that might suggest a downturn is coming.

That data is hard to come by. The US unemployment rate is at a 50-year low, 3.6% in May, a level at which economists would characterize the country as being at full employment and start fretting instead about inflation driven by a tight labor market increasing wages.

The S&P index is up 15% year-to-date, after enduring a swoon earlier in 2019. The stock market isn't the economy, but as a proxy for economic confidence, is pointing in a positive direction. Finance wonks have turned their attention to the legendary "inverted yield curve," often seen as a the harbinger of bad times, but there's no guarantee that the inversion of short- and long-term bond yields from their typical pattern is a signal of anything.

Read more: Here's what everyone is missing about US auto sales

Enter the auto market. After cratering in the US following the financial crisis, auto sales have run at record levels for the past four years. It was looking like 2019 might finally see a retreat below the 17-million mark, but then automakers reported their May numbers, and that came in well above 17 million.

That hasn't made the auto market any less attractive for recession prophets. Cars cost a lot of money, they're usually financed, and the big car companies employ — and lay off — lots of people. The industry mashes up plenty of juicy data points; when it really is tanking, it usually means the rest of the economy is in bad shape.

"peak car" is an oversold idea

I covered the car business during and after the financial crisis, but I was also around for a few recessions/business-cycle downturns. The Great Recession was scary: General Motors and Chrysler went bankrupt, Ford was on the verge of failing, and annual US sales fell to 10 million, the worst market most folks had ever seen.

The routine downturns, meanwhile, were absorbed. GM and Ford have each been around for over 100 years; they've ridden out many recessions, not to mention two world wars and the Great Recession.

A prerecessionary idea that's now gaining ground is "peak car." This is the notion that worldwide auto sales growth has topped out and will fall in the future. Flashy new Silicon Valley businesses, such as Uber and Lyft, are pointed to as evidence that fewer people will need to own cars in the future, and that this "de-ownership" trend will undermine if not destroy new-vehicle markets.

Some of the peak car discussion is founded in a misconception. When Wall Street talks about auto sales peaking, it means peaking in a cyclical sense (more on that in a minute). Auto sales are cyclical, rising and falling over time. Because the Great Recession's impact was so severe, US auto sales ran below the so-called "replacement rate" of 15 million for a time, then bounced back to a healthy range before an aging US vehicle fleet and and improving economy sent annual sales up to 17 million and above, starting in 2015.

Globally, regional markets have their own dynamics. The Chinese market has seen crazy sales growth, making it by far the world's biggest, with 28 million vehicles sold in 2018. Latin America, meanwhile, has been troubled, while Europe has been flat. Often, the sales patterns in, say, the US and Latin America are countercyclical, as the US credit cycle turns in opposition to commodities. That provides the GMs and Fords with a way to make money globally when they experience a downturn at home.

Sales ultimately matter less than profits

There's also some confusion around what lower sales and lower overall auto production means for car makers. In this respect, the only two markets that matter are the US and China. Europe is a big market, but it's also a weird one, full of small cars that auto companies don't make much money on.

In the US, it doesn't matter if you're selling fewer cars, as long as you're earning substantial profits on the ones you do sell. At the moment, the market is running hotand transaction prices are around $35,000 per vehicle, which is historically high. That combination has enabled Ford, GM, and Fiat Chrysler to build up war chests. Ford has enough cash to ride out a couple of Great Recessions and numerous run-of-the-mill downturns.

Mind you, if the US market fell below 15 million for an annual sales pace, that would be a problem. But that would also mean a true recession had kicked in. But nobody thinks that will happen. GM is actually organized to be profitable if sales fall to 11 million annually, but a more realistic scenario is a decline to the 16-16.5-million mark.

China is concerning because growth there has boosted Western car makers' profits, and that era of expansion could be ending. But a more affluent China long-term means a dynamic that looks more like the US, with volume being replaced by higher sticker prices — and the attendant higher profits.

In order to understand why "peak car" isn't happening, I generally point to one chart, taken from the St. Louis Federal Reserve's wealth of economic data and showing US auto sales since the 1970s. Let's walk through it:

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This is US auto sales since the mid-1970s. As you can see, since the mid-1980s, when the current competitive makeup of the US market took shape, yearly sales have hovered around a 15-to-17-million level.

The US market has tanked twice in the modern period: during the early 1990s, when the first Gulf War provoked an oil-price shock; and during the Great Recession, when the credit that fuels the auto market was obliterated.

The dot-com meltdown, unlike the oil shock of the early 1990s, didn't knock much off US GDP and was localized in the tech economy, so auto sales didn't dip by much.

After the recovery of the 2000s began, auto sales settled to a 16-17-million annual range that lasted for almost a decade.

Now, look at the Great Recession. Sales hadn't fallen that far in the US since the early 1980s. And back then, peak sales levels where lower.

Since 2015, US auto sales have been posting record or near-record annual totals above 17 million.

As we've seen from the previous period of sustained high annual sales in the 2000s, the US market can maintain a sales plateau for a long time. This is what the peak of the cycle actually looks like: high sales clustered around a standout year.

If you look at the tail-end of the US sales chart, you see the same clustering from 2015 on. You also see less volatility than in the 2000s pattern, suggesting a smoother market overall.

When all around you there are people saying the car business is being disrupted, that electric vehicles are coming to eat the gas-powered automobiles' lunch, and that Uber and Lyft will destroy traditional car ownership, it can be easy to overlook the basic fact that US auto sales are strong, have been strong, and should be relatively strong in the future.

Something like 85 million vehicles will have been sold in the US in the past five years by the end of 2019.

The consensus in the auto industry these days is that we're in something of a sales plateau, at historically high levels. Pretty reliably over the past two years, whenever it's looked as though US sales might slip below a 17-million pace, they've recovered.

It would be strange if this level holds up for several more years. My own view has been that 2019 should see the US market dip below 17 million, but I also think it's possible that through 2020, sales could settle into a mid-to-high-16-million range. The biggest wild cards are gas prices — currently low — and the impact of the used-car market.

The latter has been cited as a concern for new-car sales, but it's important to remember that automakers know that if they sell and lease a lot of new vehicles, they'll have to deal with a larger used-car fleet eventually. It's all part of the cycle, and used cars can actually be a boon to dealers as they have vehicles to sell when consumers become more price-sensitive.

What genuinely worries me more that a run-of-the-mill cyclical downturn is some of the catastrophic rhetoric around auto sales. Yes, the last downturn was a humdinger. But it was also an unusual event, and the Great Recession came at the end of a challenging business period for the auto industry, when the business had been managed away from return on investment and was saddled with legacy costs.

We've almost forgotten what a mild erosion in sales looks like, and the amnesia has been exacerbated by all the so-called "disruption" of transportation, which on closer examination is no disruption at all. New ideas about how to provide mobility are emerging, but they're far from overturning the familiar paradigm.

Amazon just laid off dozens of employees from its little-known video game studio

Fri, 06/14/2019 - 6:42pm  |  Clusterstock

  • Amazon Game Studios has reportedly laid off dozens of employees.
  • According to Kotaku, employees impacted by the layoffs have 60 days to find a new position within Amazon or accept a severance package.
  • Amazon Game Studios has released just a handful of games since its founding.
  • Visit Business Insider's homepage for more stories.

Amazon recently laid off dozens of employees of Amazon Game Studios, the company's internal video game development house.

According to a report from Kotaku's Jason Schreier, employees impacted by the layoffs were told they have 60 days to look for another job within Amazon. An Amazon employee affected by the layoffs told Kotaku that those who don't find a new position in the next two months will be given a severance package as they depart the company.

Kotaku reported that several upcoming titles from Amazon Game Studios were also cancelled as a result of the layoffs.

Amazon Game Studios was founded in 2012 but has released just a handful of games. So far all of the studio's releases have been designed for mobile devices with one exception — "The Grand Tour Game" on PlayStation 4 and Xbox One, based on the Amazon Prime original series of the same name.

Earlier this year Amazon Game Studios shared a preview build of an upcoming PC game called "New World," a massively multiplayer online roleplaying game that lets players establish their own colonies. "New World" was one of three PC games announced by Amazon Game Studios in 2016, along with "Crucible," a "Fortnite"-style battle royale game, and "Breakaway," an online battle arena game that has since been cancelled.

Read more: Amazon's first major video game is a massive online roleplaying game about colonization

An Amazon spokesperson confirmed the layoffs to Kotaku, and sent the following statement to Business Insider.

Amazon Game Studios is reorganizing some of our teams to allow us to prioritize development of New World, Crucible, and new unannounced projects we're excited to reveal in the future. These moves are the result of regular business planning cycles where we align resources to match evolving, long-range priorities. We're working closely with all employees affected by these changes to assist them in finding new roles within Amazon. Amazon is deeply committed to games and continues to invest heavily in Amazon Game Studios, Twitch, Twitch Prime, AWS, our retail businesses, and other areas within Amazon.

Read the original report over at Kotaku.

SEE ALSO: Amazon's first major video game is a massive online roleplaying game about colonization

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A California-based chip company just took a $2 billion hit following Trump's Huawei ban

Fri, 06/14/2019 - 6:40pm  |  Clusterstock

  • Chipmaker Broadcom slashed its annual revenue outlook by $2 billion, marking one of the first instances in which the financial impact of Huawei's blacklisting on a US company have been partly quantified.
  • In its earnings report, Broadcom CEO Hock Tan attributed the slowdown to "geopolitical uncertainties" and "the effects of export restrictions on one of our largest customers."
  • "With respect to semiconductors it is clear that the U.S.-China trade conflict, including the Huawei export ban, is creating economic and political uncertainty and reducing visibility for global [manufacturing] customers," Tan reportedly said in a call with analysts.
  • Broadcom shares were down over 6% in Friday morning trading.
  • Visit Business Insider's homepage for more stories.

Chipmaker Broadcom lowered its revenue outlook for the fiscal year 2019 to $22.5 billion, a decrease of $2 billion from its previous forecast of $24.5 billion, the company said in its second quarter earnings report on Thursday.

It marks one of the first instances in which the financial repercussions of President Trump's decision to blacklist Chinese smartphone giant Huawei have been partly quantified.

"We currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers," Hock Tan, President and CEO of Broadcom, said in a press release. "As a result, our customers are actively reducing their inventory levels, and we are taking a conservative stance for the rest of the year."

About 4.3% of the San Jose, California-based semiconductor firm's total revenue for its previous fiscal year came from Huawei, Tan said on an analyst call, according to The Wall Street Journal.

"With respect to semiconductors it is clear that the U.S.-China trade conflict, including the Huawei export ban, is creating economic and political uncertainty and reducing visibility for global [manufacturing] customers," Tan told analysts, according to the Journal.

Ever since Huawei was placed on the US Commerce Department's entity list last month, there have been mounting concerns over how US companies that work with the Chinese electronics maker would be impacted.

US chip companies have seen a major hit to their stock in recent weeks, with a number of exchange-traded funds that monitor semiconductor firms underperforming over the last month, as CNBC reported in early June. One ETF with top individual stock holdings that include Qualcomm and Texas Instruments was down 34% in the last month, while another that has Intel as a top holding was down by almost 25%. 

But Broadcom's $2 billion hit is one of the first times in which the financial impact of the ban and ongoing uncertainties around the escalating trade war has been spelled out.

Broadcom shares were down over 6% in trading on Friday morning, and shares of chipmaker Qualcomm also dropped by more than 2%.

It's unclear how and if Huawei's blacklisting will impact other US chipmakers such as Intel and Qualcomm, considering both companies are expected to report earnings in July. 

SEE ALSO: Huawei has reportedly cut orders to suppliers in a potential sign that it's already feeling the burn from being blacklisted in the US

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Uber and Lyft are trying to make an end-run around unionization (UBER, LYFT)

Fri, 06/14/2019 - 6:35pm  |  Clusterstock

  • Uber CEO Dara Khosrowshahi and Lyft cofounders Logan Green and John Zimmer have written an op-ed in which they maintain that flexible employment is essential for their drivers.
  • The argument follows the passage of a bill in California's state Assembly that could, if passed by the state Senate and signed into law, reclassify ride-hailing drivers as employees rather than independent contractors.
  • Uber and Lyft can't afford a unionized workforce and argue that employment law should be changed, and that drivers should form an association in partnership with Uber and Lyft.
  • This is a classic anti-union tactic.
  • Visit Business Insider's homepage for more stories.

Uber and Lyft are the dominant players in the ride-hailing business, but ever since their disappointing IPOs earlier this year, investors have been taking a much closer look at the incipient industry that both companies hope to carve up.

Uber shares have returned to their offering level, but Lyft is down over 20%. The markets are now effectively brushing aside the pre-IPO cant about the firms, valuing them in line with their actual operations and growth prospects.

The former is a significant source of anxiety. That's because Uber and Lyft, while ostensibly Silicon Valley companies, don't fit the Valley model. Instagram, for example, does: Less than 20 employees achieve rapid scale at essentially no cost beyond some laptops, server space, and cold-brew on tap — then a panicky Mark Zuckerberg shows up with a billion bucks.

Read more: Uber isn't screwed. There are a ton of ways it could become a profitable monster.

Uber and Lyft need cars, which are expensive, and drivers, who unlike algorithms won't work for free. Until truly functional self-driving vehicles arrive, this isn't going to change. And even when autonomous vehicles and robot drivers become widespread and real, they aren't going to be cheap.

A familiar battle between management and workers

Dara Khosrowshahi, Logan Green, and John Zimmer are, respectively, the CEO of Uber and the co-founders of Lyft. In a co-bylined op-ed in the San Francisco Chronicle, published this week, they address the challenge. But the solution they propose should should be familiar to anyone who has ever studied a businesses where labor and management are structurally predisposed to conflict.

"We can make independent work better if we update century-old employment laws," they write, hitting on the core labor problem that ride-hailing firms face: drivers who would prefer job security to flexibility.

"Many drivers are offering ideas to improve their experience, and companies like ours have a responsibility to come to the table prepared to do our part," they add.

Earlier in the op-ed, they note: "Some have proposed turning independent workers into employees in the belief that this would solve their challenges. But reclassification misses two important points: First, most drivers prefer freedom and flexibility to the forced schedules and rigid hourly shifts of traditional employment; and second, many drivers are supplementing income from other work."

Then they show their hand: "It's also no secret that a change to the employment classification of ride-share drivers would pose a risk to our businesses."

Uber and Lyft can't afford higher operational costs

This severely understates the case. Uber and Lyft can't afford significantly higher labor costs, if they want to satisfy investors. More growth means more drivers, and that equation doesn't add up to future profits that would vindicate Uber and Lyft's market caps, now $71 billion and $16 billion.

Drivers might justifiably assume that Uber and Lyft are really just commodity businesses, and that if both collapse, the need for ride-sharing and drivers won't. If they establish an employment paradigm that guarantees them a wage level, they can take that anywhere.

The "century-old employment laws" Uber and Lyft's leadership decry are worker-friendly and were crafted with the understanding that companies want to drive down their labor costs to increase their profits (that's simply the way this system works — to expect for-profit companies to avoid making profits is completely irrational). The tactic here is false-consciousness defined: change the laws when the laws don't cut your way, and say that you're advocating the change because it's in the best interest of your unattached gig workforce.

Uber and Lyft are motivated by California's efforts to legislatively define ride-hailing drivers as employees rather than contractors. The bill now awaits passage by the state Senate.

Partnerships vs. negotiation

In response, Uber and Lyft are pulling a page from a familiar anti-union playbook. "We can start by forming a new driver association, in partnership with state lawmakers and labor groups, to represent drivers' interests and administer the sorts of benefits that meet their highly individual needs," Khosrowshahi, Green, and Zimmer write.

The whole point of driver-employees forming a bargaining unit would be toseparate Uber's and Lyft's drivers from the company's free-form contracted employment and give them the independent power that they currently lack. This unit would make representing drivers' interests a priority, and it would define them in terms of the what the drivers want. Uber and Lyft wouldn't be able to say much at all about what those interests are.

This is classic stuff, a well-worn path for anyone who has ever watched a major labor organization negotiate with an employer. It all boils down to one critical issue: power. Unorganized workforces in relative low-wage industries have essentially no power (non-union workers in high-wage industries are a different story). They organize not so much because they want to get rich but because they want to gather enough power to define their own destinies.

Uber and Lyft really can't allow that to happen. So expect a humdinger of a fight as this plays out. And even organized Uber and Lyft drivers might not be able to overcome the embedded flaws in the business. This is important: for-profit companies usually fail if the profits never appear.

Uber and Lyft drivers motivated to organize would do well to remember that.

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Slack just hinted at how many shares could be for sale in its direct listing next week

Fri, 06/14/2019 - 4:45pm  |  Clusterstock

  • A new filing from Slack gives insight into how many shares may be available for sale when the office chat company goes public in its direct listing next week.
  • 180 million company shares from executives, investors, and employees were converted from high-vote Class B stock into Class A stock since April 30, the company disclosed on Friday.
  • CEO Stewart Butterfield and Chief Financial Officer Allen Shim are among the Slack insiders who have converted their equity.
  • While these insiders aren't obligated to sell the shares in the direct listing, shares have to be converted to Class A before they can be sold to the public.
  • Click here for more BI Prime stories.

New information disclosed by Slack hints at just how many shares could be put up for sale when the office chat company goes public in a direct listing on Thursday.

As of June 13, there are 180,969,751 shares of Class A stock outstanding, and 323,542,383 shares of Class B common stock outstanding, Slack disclosed on Friday

That means that nearly 180 million Class B shares were converted by shareholders into Class A shares since Slack's last disclosure from April 30.

While Slack's shareholders don't have any obligation to sell the shares once they are converted, this number hints at the number of shares that could be sold to the public. Shares must be converted in order to be sold.

Each Class B share has 10 votes for every one vote held by a Class A share. This structure gives greater voting power and control to founders and early investors after the company goes public.

Slack is expected to start trading shares on the New York Stock Exchange on Thursday under the ticker symbol "WORK".

CEO, investors among those who converted stock

Direct listings differ from traditional IPOs in that a company doesn't issue new shares, and so it doesn't raise any money for itself. Rather, the process allows existing executives and investors to sell their shares to the public. Spotify was the first major company to use this technique when it went public in April 2018.

Among Slack executives who have converted their shares are CEO Stewart Butterfield, who converted 900,000 shares and Chief Financial Officer Allen Shim, who converted 100,000 shares. Venture firm Social Capital, also  converted 12.7 million shares, according to company disclosures.

Slack could go public with a valuation between $16 billion and $17 billion, up from its last private valuation of $7.1 billion, Bloomberg reported. However, the price it trades at is ultimately up to investors and market-makers since there are no underwriters to set the price per share in a direct listing.

Tech IPOs are on the rise in the last few weeks. Cybersecurity firm CrowdStrike sold 18 million shares in its IPO on Wednesday, where as the pet company Chewy sold 41.6 million shares in its IPO on Friday.


SEE ALSO: People laughed at startup guru Eric Ries' idea to reinvent Wall Street, so he started a new stock exchange to prove them wrong

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Peloton, the fitness startup with a cultlike following, could go public at an $8 billion valuation. Insiders reveal why its business seems set to explode.

Fri, 06/14/2019 - 3:57pm  |  Clusterstock

Michael Duda knew from the first time he met John Foley that he wanted to make a bet on Foley's fitness equipment startup, Peloton.

Duda liked Foley's idea of trying to make a stationary bike that looked like a piece of art and pairing it with a subscription service that would stream fitness classes and instructors straight to users' homes. He also thought Foley's timing was right: When they met in 2012, SoulCycle and Flywheel were both starting to make names for themselves in the fitness market with programs built around groups exercising together on stationary bikes.

But mostly what impressed Duda was Foley himself.

"He had a drive, had a passion, and what certainly has been shown to be an insatiable focus on disrupting a category," said Duda, a managing partner at Bullish, a startup accelerator and investment firm that has also backed the online mattress firm Casper and the eyeglass retailer Warby Parker.

Duda's bet is looking pretty smart these days. Peloton's valuation has skyrocketed from $17.5 million when it completed its first venture round that year to $4.2 billion when it got its most recent round of financing in August.

Read more: The inside story of Peloton, a fitness media company that was rejected over 5,000 times by investors but is now worth $4 billion

And the company's value could soon jump even higher, perhaps as high as $8 billion, if public investors are anywhere near as bullish on it as their private counterparts. Peloton last week confidentially filed for an initial public offering.

Peloton is trying to be a combination of Apple and Gillette

Peloton is technically a fitness-equipment manufacturer. It now makes a treadmill to go with its fitness bike. But from the beginning, Foley and his team have strived to offer more than just run-of-the-mill exercise equipment.

The company is trying to do something that had rarely been done in the fitness market before it came along. Like Apple or Tesla, it offers a complete package of goods and services. It not only makes its equipment, but it also provides the service that's streamed to its devices, and it sells its gadgets through its own chain of retail stores.

"I don't know anyone else who's come close to that, and he's done it," Duda said.

But it has also taken a page from the likes of Gillette — its business model is similar to the classic razor-blade model. Although it sells its equipment at high prices — its stationary bike starts at $2,245, including delivery charges, while its treadmill goes for $4,300 and up — its subscription service is what actually generates fat profits for the company.

The company charges customers $39 a month, but that service costs it only about $4 per user to provide, said Andrew Mitchell, a general partner at Brand Foundry Ventures, which was an early investor in Peloton but later sold its shares. Better yet, Peloton-equipment owners frequently stick with the service for the long term.

They "sell the bike into your house [at] barely any profit, but reap the benefit of a software ... margin and on retention," Mitchell said in an email.

The company's streaming service, which allows customers to participate in live workouts or stream recorded ones, has been one of the keys to its success, said David Minton, the founder of the Leisure Database Co., a market-research firm. Those programs have added an element of fun and interactivity to its equipment that rival gadgets typically haven't had, he said.

"Traditionally people have purchased gym equipment for the home that then becomes a clothes horse," Minton said. "The reason why Peloton has revolutionized that particular market is because you get so engrossed in the programs that you're streaming."

Business is booming

Peloton doesn't disclose detailed financial reports to the public, at least not yet. But the indications are that its business is booming.

Its sales went from $160 million in 2016 to $400 million in 2017, the company told The New York Times last year. It expected to bring in $700 million in sales in its most recent fiscal year, which ended in February, according to The Times.

Meanwhile, the company's share of the US gym-equipment market is in the process of rising from basically 0% in 2014 to an expected 6.2% by the end of its fiscal year this coming February, according to IBISWorld, a market-research firm.

"Peloton has been a complete disrupter in the at-home fitness equipment space," Marisa Lifschutz, an analyst with IBISWorld, said.

Company representatives declined to comment, citing the company's IPO-related quiet period.

But its products could have limited mass-market appeal

As quickly as the company has grown, and as much success as it's had thus far, it could face challenges expanding its market in the future. It's largely focused on selling equipment to individual customers to use in their homes. That segment represents about 26% of the market for US-manufactured gym equipment, according to IBISWorld. But it leaves out another huge segment — gyms and health clubs, which represent another 24% of the market.

What's more, the relatively large size and limited selection of Peloton's equipment will likely rule out purchases by many consumers.

It's hard to fit a treadmill or even a stationary bike in many apartments or even houses. Treadmills and stationary bikes are two of the most popular categories of equipment made by US manufacturers, but they represent only about 41% of the total market. Peloton doesn't make a stair stepper, a category that's nearly as popular treadmills.

Peloton's market could be limited further by the cost of its equipment. Many consumers simply can't afford to spend $39 a month on an exercise subscription, much less $2,000 or even $4,000 on a piece of exercise equipment. Other manufacturers charge high prices for similar equipment, but they often get a large portion of their sales from gyms and fitness centers that can afford to pay those prices.

And while Peloton has had success selling home-based equipment, it's going against the prevailing trend in the market. People are increasingly exercising in gyms rather than at home, Lifschutz said in a report for IBISWorld in April. Consumers recognize that they get access to a more varied selection of equipment and classes in a gym or club than they could get at home, she said in the report.

"The increasing popularity of gyms and health clubs suggests a shrinking demand for home gym equipment among the broader population, the exception being affluent consumers, who are the primary market for home exercise equipment," Lifschutz said in the report.

Competition is increasing, but Peloton is responding

While Peloton helped pioneer the market for smart fitness equipment, it's seen increasing competition. Flywheel now sells a smart stationary bike of its own that allows owners to tune in live and prerecorded spinning classes.

Life Fitness and Amer Sports, two of the biggest fitness-equipment makers, offer their own lines of fitness equipment with tabletlike screens that allow users to stream classes or run apps. With some of these devices, owners can track their workouts using their Apple or Android smartwatches. Indeed, the fitness industry could go in the direction of the car industry, in which automakers have been able to upgrade their in-car entertainment systems by working with Google and Apple and linking them to owners' smartphones, Minton said.

If the same trend plays out in the fitness market, consumers may not see a need to pay up for a specialized stationary bike kitted out with proprietary equipment. 

"The big tech companies all have fitness teams," he said. "They've seen an industry that's ripe for disruption."

Peloton has been working to address some of these challenges. It now offers a financing program that allows customers to pay for its equipment in monthly installments, rather than up front. Under the plan for its entry-level stationary bike, consumers pay $59 a month for 39 months. Customers pay $179 a month for 24 months under its plan for its treadmill.

The company also offers customers a way to get into its ecosystem without having to shell out big bucks for one of its machines. People without a Peloton device can subscribe to a version of its streaming service for $20 a month.

While the company remains focused on the home market, it's been selling a commercial version of its bike to hotels, opening up a secondary market for the company and a way to introduce its service to new consumers. Customers can get on a Peloton bike and tune in to its exercise programs in dozens of hotels around the country.

And it may broaden its lineup. Peloton President William Lynch indicated that the company is interested in developing a rowing machine next, Medium reported earlier this year.

Duda is optimistic about the company's future. It has already far exceeded his expectations. It has benefited from being more than just a fitness-equipment maker and likely will continue to do so, he said.

"There's a lot of upside left in this company," he said.

SEE ALSO: This VC and his firm don't focus on particular technologies or sectors. Instead, they look for startups with a kind of network potential. Here's why.

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JPMorgan is investing billions in the tech arms' race. Here's everything you need to know.

Fri, 06/14/2019 - 3:54pm  |  Clusterstock

  • JPMorgan has been shaking up executive ranks in recent months as the race to see who might succeed CEO Jamie Dimon one day heats up. 
  • The country's biggest bank by assets is trying to find new ways to use its monster $10.8 billion annual tech budget to better serve clients and compete with rival financial firms. 
  • It's also investing heavily in digital to lure millennial investors. 
  • JPMorgan is closely watched as a bellwether for the entire financial industry. 
  • Business Insider reports regularly on the latest developments at JPMorgan. You can read our stories by subscribing to BI Prime.

Here's what we know about what's going on inside of JPMorgan right now, from who is leading the race to succeed CEO Jamie Dimon one day, to how the bank is deploying its $10.8 billion annual tech spend to better serve clients and compete with rival financial firms. 


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UBS puts its chief economist on leave following outrage over 'Chinese pig' comment (UBS)

Fri, 06/14/2019 - 3:08pm  |  Clusterstock

  • Paul Donovan, UBS's chief global economist, was placed on leave from his role on Thursday for a comment he made about Chinese pork.
  • Donovan is a British economist who has been with the Swiss bank for more than 26 years and regularly comments on macroeconomic trends.
  • UBS shares were down more than 1% Friday afternoon. 
  • Watch UBS trade live.

UBS placed Paul Donovan, its chief global economist, on leave Friday morning in attempt to resolve backlash stemming from a comment he made about Chinese pork.

Donovan was discussing Chinese pork prices, which are rising because of a deadly pig virus on his podcast earlier this week. 

"It matters if you are a Chinese pig," Donovan said. "It matters if you like eating pork in China."

"Pig" is considered a derogatory remark in China, and some thought Donovan's statement was referencing Chinese people as opposed to actual sick pigs. UBS and Donovan issued an apology, and his podcast was removed from circulation.

Donovan went on Bloomberg TV on Friday morning to apologize again. 

"I apologize for anyone who took any offense from my remarks, which were clearly not intended to offend," Donovan said. "I got it wrong. I made a mistake, and I unwittingly used hugely culturally insensitive language."

The Chinese Securities Association of Hong Kong also sent a letter to UBS calling for the firing of Donovan, The Wall Street Journal reported.

The controversy comes at a difficult time for UBS, which was an early entrant into the Chinese market. The firm has recently ramped up efforts to attract more money from wealthy Asians.

UBS is now down about 7% so far this year. 

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Latest fintech industry trends, technologies and research from our ecosystem report

Fri, 06/14/2019 - 3:03pm  |  Clusterstock

This is a preview of a research report from Business Insider Intelligence,  Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

In recent years, we've seen a ballooning of activity in fintech — an expansive term applied to technology-driven disruptions in financial services. And 2018 has been no different, with fintechs' staggering influence on the market evidenced by record funding levels for the industry — by Q3 2018, overall funding was already up 82% from 2017’s total figure, according to CB Insights.

Additionally, this year marked a watershed moment for the industry, with the once clear distinction between fintechs and financial services proper now blurred significantly. Virtually every incumbent financial institution (FI) is now looking inward and engaging in an innovation drive, spurred on by competition from fintechs. As such, incumbents are now actively investing in, acquiring, and collaborating with their fintech rivals.

In this report, Business Insider Intelligence details recent developments in fintech funding and regulation that are defining the environment these startups operate in. We also examine the business model changes being employed among different categories of fintechs as they strive to embed themselves further in mainstream finance and prove sustainability. Finally, we consider which elements of the fintech industry are rapidly rubbing off on incumbent financial services providers, and what the future of fintech will look like.

The companies mentioned in this report are: Funding Circle, GreenSky, Transferwise, Ant Financial, Nubank, Cellulant, Oscar Health, Stripe, One97, UiPath, LianLian Pay,, Gusto, Toast, PingPong, Flywire, Deposit Solutions, Root, Robinhood, Atom, N26, Revolut, OneConnect, PolicyBazaar, WeCash, Zurich, OneDegree, Dinghy, Vouch Insurance, Laka, Cleo, Ernit, Monzo, Moneybox, Bud, Tandem, Starling, Varo Money, Square, ING, Chase, AmEx, Amazon, Monese, Betterment, Tiller Investments, West Hill Capital, Square, Ameritrade, JPMorgan, eToro, Lendy, OnDeck, Ripple, Quorom, Chain, Coinbase, Fidelity, Samsung Pay, Google Pay, Apple Pay, Bank of America, TransferGo, Klarna, Western Union, Veriff, Royal Bank of Scotland, Royal Bank of Canada, Facebook, ThreatMetrix, Relx, Entersekt, BNP Paribas, Deutsche Bank, Gemalto, Lloyd's of London, Kingdom Trust, Aviva, Symbility LINK, eTrade, Allianz, AXA, Broadridge, TD Bank, First Republic Bank, BBVA Compass, Capital One, Silicon Valley Bank, Credit Suisse, Ally, Goldman Sachs.

Here are some of the key takeaways from the report:

  • Fintech funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.
  • Some new regions, including South America and Africa, are emerging on the fintech scene.
  • We've seen considerable scaling in older corners of the fintech ecosystem, including among neobanks and alt lenders.
  • Some fintechs, including a number of insurtechs, have dipped into new markets to escape heightened competition.
  • Emergent areas like blockchain and distributed ledger technology (DLT), as well as digital identity, are gaining traction.
  • Many incumbents are undertaking business transformations that aim to reimagine everything from products and services to front-end systems and back-end processes.

 In full, the report:

  • Details the funding and regulatory landscape in the US, Europe, and Asia.
  • Gives an overview into a number of fintech segments and how they've changed over the past year.
  • Discusses how incumbents are reacting to fintechs in order to stay relevant in the changing financial services sector.
  • Evaluates what the future of fintech will look like and what trends to look out for in the coming year.
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SEE ALSO: How the largest US financial institutions rank on offering the mobile banking features customers value most

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I've been an Airbnb host for a year, and while I'm glad we did it, I wouldn't tell just anyone to try

Fri, 06/14/2019 - 2:43pm  |  Clusterstock

A year ago my wife and I decided to turn a recently purchased rental property into an Airbnb. A few of our friends and acquaintances had highly recommended going the Airbnb route instead of turning our home into a traditional rental.

We knew nothing about how to be Airbnb hosts. In fact, we weren't even experienced Airbnb guests, having only used the service once before.

But with reckless abandon, we began to research what it would take to be successful Airbnb hosts. We read endless blog posts and interviewed current hosts for pointers and ideas.

We tried to apply everything that we had learned. And then we dove in head first and hoped for the best.

It's been a full year since we took the Airbnb plunge and we've learned a lot along the way. If you're considering turning a rental property into an Airbnb, here are my three biggest takeaways from the past year.

1. Your income potential may be higher

There's no doubt that we bring in more income per month with Airbnb than we would ever be able to bring in as traditional landlords.

During the winter months, the income is usually double. During the hottest summer months, income can be three to four times what a tenant would pay to rent our home year-round.

That sounds great, but there's one big caveat that I should note: We happen to live in Daytona Beach, Florida, which is a popular vacation spot.

In a different area, it's possible that we wouldn't be able to ask as much per night for our house. It's also possible that our house would be booked 50% of every month, as opposed to our average booking rate of 75%.

If you're considering starting an Airbnb, make sure you do some market research first. Check to see what the average listing price is in your area. And try to get in contact with a local host to find out what they're bringing in on average.

As we'll see below, Airbnbs take a lot of work. You don't want to commit to all the extra effort that an Airbnb will require of you until you're confident that it will be worth it financially.

2. Your hassle factor will be higher

I'm not going to sugarcoat this. Hosting an Airbnb is a lot of work.

On a daily basis, you need to communicate with potential guests and answer questions from those who have already booked. And the house has to be cleaned in between each stay.

Now you can either do this yourself or pay someone else to take care of these things for you. But either way, "running" an Airbnb is going to cost you time or money.

With a traditional rental, you don't need to "run" anything. You just collect the check each month. And possibly fix a broken toilet every six months.

But an Airbnb is truly a side job. It requires attention on a weekly (and often daily) basis. Additionally, you'll be in charge of buying furniture, supplies, and amenities.

And you'll need to replace things as they get worn down. It's only been one year and we've already had to replace the living room couch and area rug due to wear and tear and spills.

These are things that you'll want to be aware of and prepared for before you start your Airbnb hosting adventure.

3. Your income will be inconsistent

As a landlord, monthly income is consistent and dependable (as long as you have good tenants).

But with Airbnb, no month is the same. As I mentioned earlier, summer is great in our area, but fall can be rough.

Certain months you may absolutely kill it. And the very next month, you could be checking your phone each day just hoping that a booking will come through.

To prepare for this "up and down" income roller coaster, I recommend saving up part of your extra income during the busy months so that you have a buffer built up for the slow times.

Overall, I'm glad we did it

So do I think that turning our rental property into an Airbnb was a good decision? The short answer: Yes.

But the long answer is if I didn't live in a tourist area where we can make three times the monthly income of a traditional rental by choosing Airbnb, I'm not sure I would do it.

Hosting an Airbnb is a lot of work and it can take away a lot of your daily freedom.

However, for where we live the income has been fantastic. So much so that we're willing to live with the extra hassle that comes with it.

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Republican lawmakers are closing in on a bill that would challenge Trump’s tariff powers

Fri, 06/14/2019 - 2:37pm  |  Clusterstock

  • As President Donald Trump hails protectionist policies as a key way to gain leverage abroad, Republican lawmakers are moving toward legislation that would shift tariff powers to Capitol Hill. 
  • Sens. Pat Toomey of Pennsylvania and Rob Portman of Ohio put out competing bills this year that seek to rein in trade powers at the White House.
  • Toomey told Business Insider he hopes a markup will be ready "in the coming weeks."

As President Donald Trump hails protectionist policies as a key way to gain leverage abroad, Republican lawmakers are moving toward legislation that would shift tariff powers to Capitol Hill. 

Trump has upended a key GOP platform over the past year by igniting trade wars with multiple countries, including US allies. Now, senators appear to be closing in on a plan that seeks to limit presidential trade authority.

Sens. Pat Toomey of Pennsylvania and Rob Portman of Ohio put out competing bills this year that seek to reform Section 232 of the Trade Expansion Act, which lets the president unilaterally impose tariffs on the grounds of national security concerns. Toomey told Business Insider he hopes a markup will be ready "in the coming weeks."

Trump was met with sharp backlash from Republican lawmakers this month after holding the threat of tariffs over Mexico until the US ally agreed to take steps to stem the flow of migrants across the southern border. The president has separately drawn criticism from his party for invoking Section 232 to impose blanket duties on steel and aluminum imports.

"Misusing this trade tool not only hurts our exports and our manufacturers, but also our consumers, and I'm hopeful the Senate Finance Committee takes action on this legislation," said Portman.

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Both Toomey's Bicameral Congressional Trade Authority Act and Portman's Trade Security Act have bipartisan support and seek to rein in trade powers at the White House.

Toomey's plan is seen as the tougher of the two, requiring congressional approval for the president to declare an import a national security threat. It would also retroactively include all presidential orders up to four years prior to its passage.

Portman's bill would add administrative steps to the Section 232 process and allow congressional committees to issue a joint resolution of disapproval to tariff actions by the president. Proponents say that approach might be less likely to face opposition, while critics argue that it lacks binding language.

"The problem is that there's no guarantee that that bill would get time on the floor in the Senate or the House," said a Republican aide familiar with the legislation. "The Toomey legislation guarantees a vote."

Sen. Chuck Grassley, the chairman of the Senate Finance Committee, is leading efforts to forge a compromise on the dueling bills. In a call with reporters Tuesday, the Iowa Republican acknowledged Trump would likely not be fond of the legislation but avoided criticizing the president.

"This is not about Trump," he said during the call, according to POLITICO. "It's about the balancing of power."

Economists say protectionist policies distort trade flows while acting as a tax on businesses and consumers at home. That has put some Republican lawmakers in an uncomfortable spot, especially as Trump restricts trade to address issues like immigration.

"Trump is unusual in his fondness for tariffs as a bargaining chip, and his comfort in using emergency powers to justify it," said Donald Moynihan, the McCourt chair at the McCourt School of Public Policy at Georgetown University. "We have gotten to a point where some Republican members of the Senate have lost trust in Trump when it comes to tariffs."

The president argues that duties will ultimately benefit Americans, making any short-term pain at home worth it. He believes reshaping trade policies will bring jobs back to the US, a signature promise of his that dates back to the 2016 campaign trail.

"The President's tariffs have not come anywhere close to tanking this unprecedented level of economic and job growth but have instead brought our allies and adversaries to the table all for the benefit of the American worker," White House Deputy Press Secretary Judd Deere said when asked about the Section 232 reform bills.

While Democrats tend to support a tougher stance toward perceived trade policy imbalances, there is no shortage of disagreement with the president's approach. When asked about legislation that would limit presidential tariff authority, a spokesperson for House Speaker Nancy Pelosi referred Business Insider to a comment she had made earlier this year. 

"I really haven't seen that legislation, but I do support reclaiming some of Congress's – it is Congress's prerogative," Pelosi said in February.

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

Trump's trade war strikes again: Broadcom plummets after cutting its yearly sales forecast, dragging the entire chipmaker industry lower

GOLDMAN SACHS: Buy these 17 'superstar' stocks, which dominate sales in their industries and have been crushing the market

Beware a 'Trump recession': JPMorgan unloads on the president's role in erasing a full year of market progress — and lays out a scenario that could save the day

SEE ALSO: China says trade pressure from the US 'will absolutely not succeed' as Trump vows to slap tariffs on $300 billion worth of products

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