posted about 2 hours ago on re/code
From rising sea levels to an increase in wildfires. A new website, EarthTime, aims to shows how humans have dramatically changed the planet — such as how glaciers are melting and where refugees are migrating — through time-lapse satellite photos. The site’s interactive maps use images taken by NASA satellites from 1984 to 2016, overlaid with over 300 geospatial data sets from the World Bank, Berkeley Earth and WWF, among others. Some are projections. For example, this timelapse shows how a good chunk of Florida could be lost to rising sea levels if the average global temperature keeps rising at its current rate, according to scientists’ predictions. Another one shows the increase of coral bleaching, which is when coral reefs turn white due to warmer water temperatures and become susceptible to disease. The areas where this has happened are highlighted in pink and yellow. The maps also illustrate sociological patterns — like what countries refugees are fleeing to. The site was created out of Carnegie Mellon’s CREATE Labs, in partnership with the World Economic Forum and other organizations.

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posted about 6 hours ago on re/code
Whether you love the old Kanye, new Kanye, set-on-the-goals Kanye or chop-up-the-soul Kanye, it’s all in there. Kanye West returned to Twitter last Friday (Apr. 13) after a nearly one year hiatus, and since then the rapper and fashion mogul has been tweeting at a rate of nearly ten tweets a day, dishing out philosophical advice about the struggle for authenticity alongside his own shameless self-promotion. After being welcomed back on the platform by Twitter CEO Jack Dorsey, he started building up his own hype in true Kanye fashion, tweeting glimpses of new clothing and teasers about new music to his 12 million followers. His most retweeted post so far, with more than 245,000 retweets and 514,000 likes, was when he revealed a date for an album drop — June 8 with rapper Kid Cudi. But peppered into the business announcements, Kanye started dishing out philosophical truisms like this one about the performative nature of human experience. in life, we are all trained actors. When we're born we're ourselves and then one of the first things we're thought is how to act. If you see a kid screaming at a restaurant because he feels something and can't express himself in a conventional manner— KANYE WEST (@kanyewest) April 18, 2018 He then announced that he’s actually writing a book “in real time” when he feels like it and that he’s going to be free from the pressures of any publisher: oh by the way this is my book that I'm writing in real time. No publisher or publicist will tell me what to put where or how many pages to write. This is not a financial opportunity this is an innate need to be expressive.— KANYE WEST (@kanyewest) April 18, 2018 And advice on how to retain your sense of self amidst pressure to conform to societal norms: don't trade your authenticity for approval— KANYE WEST (@kanyewest) April 18, 2018 Don't follow crowds. Follow the innate feelings inside of you. Do what you feel not what you think. Thoughts have been placed in our heads to make everyone assimilate. Follow what you feel.— KANYE WEST (@kanyewest) April 18, 2018 In other tweets, he sounds like a new-wave guru, extolling the virtue of those who can “shift the consciousness” to be in touch with their inner selves, and critiquing those who become “hard-core capitalist” valuing money over all. Some people have to work within the existing consciousness while some people can shift the consciousness— KANYE WEST (@kanyewest) April 16, 2018 often people working with the existing consciousness are jealous of those who are more in touch and they become hard-core capitalist in hopes of creating the illusion that the value of money is worth more than the value of time and friends— KANYE WEST (@kanyewest) April 16, 2018 Ironically though, while Kanye is tweeting about following crowds and critiquing capitalistic ambition, he is the smartest capitalist of all — satiating the public appetite for his musings after two years of living in relative obscurity following his very public breakdown, and drawing even more attention to his new business projects. Well played, Kanye.

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posted about 11 hours ago on re/code
Adecco Group bought the NYC-based company for $412.5 million this week. General Assembly is widely known as the first — or at least one of the first — premier coding schools of this tech boom cycle. After launching in New York seven years ago, the company grew to 20 campuses and around $100 million in revenue before being acquired this week by Swiss staffing firm Adecco for $412.5 million. One of the more interesting things about the company’s trajectory, according to a blog post by early General Assembly investor Jason Stoffer, a partner at Maveron, is that its premium brand as a coding school wasn’t actually enough to build a defensible “moat” in its business. Local and national rivals soon followed — WeWork bought one, Flatiron School, last year — and General Assembly actually had to compete. As Stoffer writes: General Assembly built the first real consumer-facing education brand in decades. Jake and team boldly said they would be an alternative to grad school and they quickly expanded across the US and the globe. But it turns out it’s not that hard to hang a shingle and launch a “coding class.” GA’s programs were higher quality but local competitors just kept nipping at our heels and driving up the cost of customer acquisition. It turned out there were no moats at all in the coding school market — that made driving significant sustainable economic profit in the coding boot camp market difficult. Instead, Stoffer writes, it was General Assembly’s pivot to training services for big companies that wound up being its more lucrative business, which ultimately led to its big acquisition. (And even that wasn’t obvious — the company’s board “constantly asked why it existed,” he writes, before General Assembly CEO Jake Schwartz eventually grew it into half of the company’s revenue.) It turned out that the premier coding-school brand was actually essential to that part: When General Assembly started focusing on selling next-gen skills training to enterprises, it was clear none of its smaller competitors could compete with General Assembly’s brand and global footprint across N America, Asia and Europe. Big corporate clients like L’Oreal and Booz Allen wanted GA, as the market leader, to train their employees. So, ironically, the consumer business turned out to be hard economically and competitively intensive, but opened the door to build an incredibly lucrative and defensible enterprise business. Stoffer’s entire post is worth a read. Adecco says General Assembly will be “modestly dilutive” to its earnings this year but “modestly accretive” starting next year.

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posted 1 day ago on re/code
It won’t be easy. Flickr, the pioneering online photo-sharing community — whose rise and purchase by Yahoo in 2005 was a key storyline in the “Web 2.0” era — has a surprise new owner. Verizon, its current owner via its Oath subsidiary, has sold Flickr to SmugMug, an even older, subscription-based photo sharing service, as reported first by USA Today’s Jessica Guynn. SmugMug’s founder and CEO Don MacAskill has taken to Twitter to talk up his hopes for the deal. “We will move heaven and earth to thrill you and photographers everywhere,” he told one Flickr Pro user. If MacAskill can engage the most serious of remaining Flickr users — the site reportedly has “more than 100 million unique users who post tens of billions of photos” — it’s easy to see how the deal could be lucrative for SmugMug, which has long successfully operated in the small-but-profitable model. And long-time Flickr fans sound excited at the news. Yahoo, to be sure, was a mostly bad owner; it’s sort of a miracle Flickr still exists. ( I am excited to see an independent company that cares about photography and has a long-term sustainable business model become a steward for Flickr. We need open, indie social platforms more than ever on the web right now.)— Anil Dash Dot Com (@anildash) April 20, 2018 But can Flickr start growing and really matter again? That’s a different proposition that will be much harder. A lot, obviously, has changed since Flickr’s heyday — Facebook, Instagram, Snapchat, squares, vertical, etc. More than anything, mobile has taken over, and photo sharing has evolved from albums to streams to Stories. Photo sharing isn’t just a thing anymore — it’s part of many things. Google and Amazon Prime now offer effectively unlimited photo libraries and backup for free. Apple has made photography a core part of its operating system and messaging service. Instagram has become the culturally dominant visual community of the day. And while Flickr has an app, it hasn’t cracked the top 150 iPhone photo apps in the past month, according to App Annie. Perhaps that isn’t the point. If SmugMug can stabilize Flickr, please its enthusiast users with an excellent service, and build things on over time, that will likely be a better future than Verizon could have offered. But unless something significant changes, it’s hard to imagine a major Flickr comeback.

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posted 1 day ago on re/code
Silicon Valley is still important, but don’t underestimate LA Tech. On this episode of Recode Decode, hosted by Kara Swisher, Upfront Ventures Managing Partner Mark Suster talks about leading the oldest and largest venture capital firm in Los Angeles. You can read a write-up of the interview here or listen to the whole thing in the audio player above. Below, we’ve also provided a lightly edited complete transcript of their conversation. If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as the new CEO of Cambridge Analytica, but in my spare time I talk tech, and you’re listening to Recode Decode from the Vox Media podcast network. Today in the red chair is Mark Suster, a managing partner at Upfront Ventures. He joined the venture capital firm in 2007, but before then founded two companies, Build Online and then Coral, which was acquired by Salesforce. Mark, welcome to Recode Decode. Mark Suster: Thank you for having me, but the red chair looks black to me. I know, we have a red chair. We could bring it in for you if you need to. That’s all right. I would feel more comfortable if you had a red chair. Well, we’ll try. You can go sit in it later after we’re done with the interview. Okay. Thank you. He’s here in our offices in San Francisco, but Mark is from Los Angeles where Upfront Ventures is. We want to talk about a wide range of things including LA and everything else, and also your recent sale of Ring, which was one of your companies, to Amazon, which was a big deal. I have Ring at my house, now Amazon runs everything in my house. Do you like it? I love it, but I was trying to get Amazon and Google out of my house because they do everything, and now Amazon’s ... Well, the nice thing about Ring is that it is outside your house. The camera’s facing out rather than in, which is ... I know. Well, it’s an important point because it was important to Jamie that the camera was facing out. You know what, I love Ring. They’ve been a sponsor on this podcast, but I actually used the product before that. It’s a great product. We’ll talk about that in a little bit, but I wanted to talk about a whole bunch of things including being in LA and things like that. Why don’t we go over your history? I like to go through peoples resume, essentially. Why don’t you tell me a little bit about how you got started in the business, and then we’ll get into LA and investing and where you think trends are going. You’re pretty much the leading LA venture capitalist, right? Would you say that? Let me say this. You worded it that I’m from LA. I’m actually not from LA. I grew up in Northern California, and I grew up a software developer. I started my career as a programmer. Talk about that. I point that out because having a perspective of Silicon Valley where I built one of my startups, sold one of my startups. My wife used to work at Google. We really understand, I think, the culture here. I’ve been in LA for 10 years. I don’t mean to diminish LA. I’m not a diminisher. Oh no, I want anyone listening, I want them to understand that I view the lens of the world through having grown up in Northern California. I lived abroad for 11 years. I’ve worked in nine countries. I came back to the U.S., settled into Silicon Valley and assumed that I was going to raise a family here. And be a software developer or entrepreneur. Yeah. In 2007, I moved to LA for two years. Why did you move? What was the thing? Wait, talk about your software development first. Okay. You were doing software development. I started my career as not packaged software, as custom software, so I worked for what’s now Accenture, it’s now Anderson Consulting, as a programmer working on large corporate billing systems and security systems and stuff like that. I left in 1999 to build a startup. I raised capital. I built that company in London. We were in five countries. We sold software. Back then, it was called ASP. I don’t know if you remember when it was called Application Service Providers, and then we called it on demand. Yes, I do. Then SaaS, and then cloud. It’s all the same shit. We were building centralized services for large European companies back in the late ’90s. I sold that company to a French publicly traded company called The Sword Group and I moved back home. When I moved here, I moved to Palo Alto and I started building my second company. The timing for talking about this is interesting because we were building what Dropbox built before Dropbox existed. I sold that company to Salesforce, and we became Salesforce Content Management System. You didn’t stay at Salesforce? I decided not to stay at Salesforce. You just didn’t want to be part of a big company? Yeah, I think at that point I was 39 and I had been running companies for 10 years. I think I felt like I was my own boss. Salesforce is a wonderful company. I have very close friends who are still there and have been there through all the years, but is very much Mark’s company, Mark and Parker, and I was looking to do my own thing again. Right. Talk about moving to LA. You thought you’d have this serial entrepreneur kind of ... The fund that I’m with is Upfront Ventures. I actually run the fund. I’ve been running it since 2011. The founder, Yves Sisteron, was on my board. Oh. They had invested in me. Yves said to me, “Why don’t you come to LA, learn the business, stay for two years and then go open our Silicon Valley office,” and that was the plan. Why did you want to go into venture from doing ... I wasn’t sure if I wanted to go into venture. I actually called them and said I wanted to do another startup. I thought I was going to do my third. He was looking for an operator because I think he recognized that, increasingly, capital was just capital. Anybody has money, right? Entrepreneurs were looking for people who had actually walked in their footsteps and done their job before. Honestly, my thought at the time was, “It’s worth a try.” I was 39. If this works, this could be my career, and if it doesn’t work, I can always go back to being an entrepreneur. Right. You moved to LA, and had you spent time down there? Did you know much about the tech? I had lived in LA from ’91 to ’94. I did my undergraduate at UC San Diego. There were no jobs when I graduated college in ’91. It was a recession. Plus it really wasn’t a tech center. Aerospace, right? I wanted to live in San Francisco. That was my goal was to live in San Francisco because I wanted to work in the tech center, but there were no jobs in 1991 so I took the job I could get because I really wanted to be a programmer, and I got a job in LA and my first client was JPL, Jet Propulsion Laboratory, where ... Yeah, it’s all aerospace, right? ... they design rockets that put a man on the moon. I traveled all over the country working for large corporate clients. I worked in LA for Southern California Gas Company. I went out to Miami and worked for Florida Power and Light. My area of specialty was distributed computing. This is pre-World Wide Web. We were working on how to take servers and connect them with clients and dealing with the network in between. It’s called middleware and what happens when a transaction doesn’t complete and you have to roll it back, and so on and so forth. I moved with Anderson at the end of ’94, early ’95, to set up an internet practice in Europe. I spent all my time with telcos helping them figure out how to launch a ... I remember that era. When you got back to LA, were you worried about that idea? We’re going to talk more about the LA market, but it hadn’t been the center. They had all these sort of flame-outs, essentially. They had MySpace and then Demand Media. If I take you back even further, in the emergence of the internet, what LA was really good at was monetization. You know the saying that necessity is the mother of all invention; because they couldn’t raise capital, they didn’t have big funds, so they had to find a way to monetize. Google’s model was actually borrowed from Overture, which built GoTo.com. You probably remember that, Bill Gross. When Bill Gross went to TED and talked about a pay-per-click model, he stood onstage at TED and was booed. He was booed for talking about pay-per-click. Right, I remember that. He was walking to the elevator and a gentleman came up behind him and tapped him on the shoulder and introduced himself and said, “I think that’s a really amazing model. Could I be your first customer?” It’s a true story, Bill will tell you if you ask him, and his name was Jeff Bezos. He became the first big client of GoTo.com, and he was doing pay-per-click and driving people to buy books. It turned out that model worked so well ... I was at that TED talk. Oh you were. It was ... Richard Saul Wurman was running it at the time. Jeff used to show up on whatever the heck gadget he had, but he was little. Jeff was little then. The company, people didn’t really know it. This is mid to late ’90s and our firm was an investor in Overture, so that’s how I know a lot of the story. Right, which then sold to Google eventually. No, we sold to Yahoo. Yahoo, that’s right. That’s right. I’m sorry, Overture went to Yahoo. That was their big ... and then Google bought the technology. $1.6 billion. What Google bought is another LA company. I want to point this out. First of all, we created the category. Google won, and they won for reasons where I could tell you if you’re interested, but Google won. We still built a company that sold for $1.6 billion. Bill Gross graduated from Caltech. Another Caltech alumni was named ... Started his group in Pasadena. Idealab started in Pasadena as a result. Another Caltech graduate named Gil Elbaz created a company called Applied Semantics. What Applied Semantics did is they didn’t do search the way that Overture was doing. They would read what was on your webpage. They would look at semantic analysis and they would serve ads based on keyword density and also based on clickstream of what clicks you took before you got to the page. Well, that became Google AdSense. Both Google AdWords and Google AdSense, the two most profitable businesses ever created, were initiated in Los Angeles. Absolutely. We didn’t win. No. When you’re saying it was a place where people thought about monetization, was that a problem? They didn’t think about just spending whatever to get to ... Necessity’s the mother of all invention. But all the companies that succeeded were like the Amazons, which, you didn’t think of that at all. They were initially ... When you think about Silicon Valley where people will hand you $30 million and tell you to go generate the next amazing internet service and try not to monetize because let’s try to build really big and capture the market, you have the luxury of not monetizing. When someone says, “I’ll give you $3 million and that’s all you’re getting,” you got to make money. Let’s look at who came out of ... It’s only 400 miles, or whatever, 300 miles. You know, especially back then, Silicon Valley VCs, most of the funds were like $150 million. They weren’t like $10 billion that they are today. They were $150 million, and they literally didn’t want to travel more than 25 miles. Right. Marc Andreessen wouldn’t go past Hobee’s, I remember. “I have to meet you at Buck’s. I’m not going to go past Buck’s.” Those were the days. If you look at Commission Junction and you look at Price Grabber and Shopzilla and a whole bunch of these, Lower My Bills, they were all finding ways to arbitrage money and to drive eyeballs to websites, and they were all monetization techniques. Right, techniques. Why was that? Why? Again, I think LA’s the place where people have to make money. Make money, right. Look at Myspace. Myspace actually came out of a direct marketing initiative. They started by direct marketing face creams and stuff like that. It wasn’t working, and the internet had crashed and they realized that they could go buy a bunch of email lists from all these VC-backed companies that didn’t succeed, so they bought all the email lists and they started emailing everybody and driving them to a social network called Myspace. That’s how Myspace was born. A lot of people don’t know that either. Yeah. Data portability. It was born out of selling face creams initially. Yeah, there was some controversial face creams in there, by the way. Yes, I agree with you. I think they burned peoples face off. As I recall, it was a sketchy group of people. I was not an investor. I was not around. It made the bitcoin people seem ethical. There were some good people, there was some less-good people, as is always the case. Not my recollection. I know some of the good people. In any event, if you look at, we had a failed start with Overture. We didn’t become Google. We had a failed start with Myspace. It didn’t become Facebook. It was inevitable that it would start to happen. What I think is unique about LA, at least in consumer web — we can talk about hard tech in a minute — but in consumer web, we really understand the sensibility of brands, of consumers, of marketing, of how they make decisions, but also of design. Look at Gen Z, two of the leading products created in the last five years in the consumer space.:Snapchat, LA based, and Tinder, LA based. I don’t think that’s by accident. You look at other companies people tend not to associate with LA, but Riot Games, League of Legends, bought for $10 billion ultimately. They all were created ... Created in LA. Right. We’ll get to that, why that is, what’s different. When you went down there, did you consider yourself an LA venture capitalist or was that going to be your focus? You are kind of the center of LA tech, essentially. I went for two years and my wife worked at Google. I promised her we would come back. She did not want to live in LA I actually promised her we would never live in LA, so I broke that promise. She saw the film “Training Day,” Ethan Hawke in the bathtub with the gun in his mouth, and she’s like, “I’m not living there.” After nine months, no joke, she said, “I’m not leaving.” Oh wow. LA’s a wonderful place. It’s 19 million people. It’s very diverse. It’s not monocultural. Anyways, I was there. What I said to her, aside from the fact that she fell in love with it, what I said to her is there’s very few VCs here that have any amount of software skills, technology background, operating experience, and I think, okay, it’s a smaller pond, but I can be a much bigger fish. Yeah, what was the guy who was talking, very famous film writer, and I think he telegrammed his brother, “Millions to be made out here and everyone’s an idiot.” You know what I mean? Something like that. It was a very famous Hollywood telegram. All of the VCs that existed in the ’80s and ’90s, they all went away, from LA down to San Diego. The emergence of Dana Settle with Greycroft, what’s now Upfront Ventures ... It’s small. It’s a small group. There’s a small number of us, but Dana was new to LA back then. There were a number of these newer funds that have been created in the last 10 years. Do you consider yourself an LA venture capitalist? Explain Upfront. It was started ... Upfront is a national firm. We’ve been around for 21 years, so we’re the oldest VC in LA. We’re also the largest. You do have the coolest offices, too. We have a pretty cool office, as you know. The VC offices in LA are better than here. The idea for us is we’re not a regional fund. We do 40 percent of our investments in LA, 50 percent are outside of LA. It’s still a lot, 40 percent. 40 percent is a lot, but think of it this way. A city of 19 million people, it is obviously the second-largest city in the United States. It is the third-largest venture market. It’s the fastest growing. Why wouldn’t we use our advantage to look at the top end of the funnel of every deal created locally and then just be more selective? What I don’t want to do is have concentration risk where every deal we have is in Southern California. We do 25 percent Bay Area, about 15 percent New York City, but we have deals internationally. Two of us are dual citizen. I’m a dual citizen of the U.S. and U.K. I’ve done two deals there. My partner Yves, who founded the fund, he’s got I think three deals based out of France. We’re not afraid to get on airplanes and go do deals elsewhere. Talk about the LA scene. How do you look at it, though, because you are the most prominent venture capitalist in Los Angeles, probably? The way that I look at Los Angeles is this. First of all, we have incredible tech talent. We have more top-25 engineering universities in greater Los Angeles than anywhere else in the country, and again, that shouldn’t be a surprise because we’re the second-largest city behind New York. There’s 19 million people in greater LA, there’s seven to seven and a half million in greater Bay Area. We have this incredible pool of talent, and you mentioned it before. If you’re a talented engineer, you either went into aerospace and defense, you went into Hollywood or you moved up north to join a startup, but they didn’t want to move up here. There’s better weather, better lifestyle, more diversity, lower cost of living, a lot more going on, and especially when you think about so many of these people being like 23 to 35, they prefer to be in LA, but the jobs weren’t there. That’s something that changed. Because that’s changed, it’s not just that those people, if you go to UCLA or USC or Caltech or Harvey Mudd or Cal Poly, Pomona or any of these colleges, you wanted to stay, but now you’re getting people moving down from the Bay Area, and it’s not just entrepreneurs. A lot of VCs are moving down. You have David Lee, you have Chris Sacca, Fred Wilson spends every winter there now. You have a lot more people who are coming to LA. When you create that cohesion of a group of people — because one of the things that has been powerful about Silicon Valley has been you have the VCs, the schools, Stanford especially, and then you have the entrepreneurs and a sort of iron triangle of a situation. Talk about what the atmosphere in LA is, then, for that. You have Harvey Mudd, you’ve got a lot of schools, but it’s still not quite the same thing. It doesn’t feel quite as tight when I’m down there. You guys have tried. Well listen, let me say this, we’re not going to replace Silicon Valley and that’s not even the objective. I think we can build a dynamic, valuable ecosystem. It’s like, would Chicago really replace New York as the financial capital? Would Seattle replace LA as the creative video capital of the world? That’s just not going to happen. There’s just 40 years of developing those communities in the Bay Area, so we’re not trying to do that. I would tell you that what I used to complain about was what I call the invisible startup. The invisible startup is someone really talented. There was a team out of USC that were security experts, and they created a company, they raised $5 million from Coastal Ventures. This is right when I arrived. Then Coastal Ventures moved them up north, which I don’t blame Coastal Ventures and I don’t blame this company, but that company’s called Lookout and it’s now north of a $1 billion valuation. It’s a very prominent mobile security company. They were Angelenos. They should have stayed. I think there’s a million invisible deaths that we died of people who relocated, and I think the reason I’m so passionate about more capital being in LA is I think those people didn’t want to leave LA and I think we can retain them now. With the capital there, that they don’t have to or they aren’t forced to move, to come up here so we can be close. If people write the first check, the first $3 million to $5 million in LA and you establish your team, you’re not likely to move. Before we move on, because I do want to talk about some of the companies there, and why they went up and down. You hate the term Silicon Beach. I do. Explain that. You and I had a terrible Twitter fight over it. I try not to get in too many Twitter fights these days. Don’t get in one with me. That I know for sure. Listen, first of all, I think “beach” emphasizes the worst perception that people have of Los Angeles, that we’re not serious. The vast majority of high-quality companies are east of the 405, anywhere but the beach, and I don’t want to first of all be derivative to Silicon Valley. Can you explain east of 405 to people? Oh yeah, sorry. That’s okay. From the beach to the 405, which is the north/south freeway. Santa Monica. You just have to watch “The Californians” on “Saturday Night Light.” “You take the 405 to the 110.” It’s about four miles from the beach to the 405, and that’s called the west side. The west side of LA, it’s very expensive. Bel Air. Santa Monica. No, Bel Air’s actually east of the 405. Oh it is? Okay. You’ve got Brentwood, Santa Monica and Venice and Malibu. Those are all beach communities, and they’re beautiful. That’s where I live. There’s a lot of startups there. There’s a lot of startups. You tend to see a lot of people starting there and then you migrate elsewhere because it’s just too expensive. You wouldn’t build a startup on Fisherman’s Wharf in San Francisco. It’s not the right environment. I might, Mark. You might, you might. Actually, it’s probable these days. And delicious crab. Yeah, and the clam chowder bowls. Sea lions, things like that. There you go. It smells there. Yeah, it does. What I don’t want to do is emphasize the beach, and I don’t want to be derivative to Silicon Valley because I don’t think we need to. I think we can be proud of what we have. I like to call it LA Tech. LA Tech, yeah. I know it’s not some glamorous name, but neither is Silicon Beach. It’s just derivative. That’s true. Okay. Do you like the beach, Mark? I do like the beach. I do. I’m not a surfer. I’m not a quintessential ... I’m not a 6-foot-3 blonde, six pack ... I’m a nebbishy Jewish computer programmer. Yeah, you don’t look like you’d be on “Laguna Beach.” No. Neither could I, but in any case, when we get back, we’re going to talk more about some of the investments Mark has done at Upfront and about some of the big LA companies, because even though it isn’t regional, there is a region-ness about things like that. We’re here with Mark Suster. He is a managing partner at Upfront Ventures, and we’re going to talk more about Los Angeles. [ad] We’re back with Mark Suster from Upfront Ventures in Los Angeles. We’ve been talking about the LA tech scene, which Mark refuses to call Silicon Beach. I agree with him, actually, but he wants to call it LA Tech. Let’s talk a little bit about LA Tech. Again, you have investments all over the world, but you have 40 percent of them in Los Angeles. Talk to me a little bit about the LA scene, because what seems to have happened, one of the things that helped Silicon Valley is there’s so many successes in one place. There’s more than one, essentially. In LA, the experience has been one at a time, and then many of them have flamed out. Myspace, big and hot, then not. Demand Media was the next one, and now Snapchat is struggling even though I think it’s a really cool company. It’s never had that ... do you need to have that big group of companies there or is that not necessary? Well, I’ll say a couple things. When a company succeeds, you end up with a lot of important things. One is what we call recycled capital, so people make a lot of money and reinvest it in younger entrepreneurs. You end up with mentors, but you end up ... what Silicon Valley has an advantage of is people who have seen scale. That’s a really good point. Because you can have a great engineer from Indiana or St. Louis or Florida, and that engineer is no less qualified than someone who’s from Silicon Valley, but if they worked at LinkedIn and saw scale or Salesforce or Facebook, they have an advantage. They understand both not only how to scale, but they understand consumer behavior in a way you don’t if you haven’t seen scale. An example, when I moved to LA I funded a company I know you’re aware of called Maker Studios. Sold to Disney. We sold to Disney. The first thing I did is I recruited a former colleague of mine from Salesforce to move down to LA to be the CTO. He had seen scale at Salesforce. He stayed for five years after we were acquired, and I really wanted to build a company that could scale. He hired 55 engineers. We built a real engineering team at Maker Studios, and so we ended up selling. He stayed for his lockup period and he’s got another startup now. That rinse and repeat process is happening more in LA than it ever has in the past. Right, but there has to be a few companies, like Google ... Now people have seen scale at Tinder, they’ve seen scale at Riot Games, they’ve seen scale at Snapchat, and actually you’re seeing people break out of SpaceX. People forget that SpaceX is an LA-based company, they forget that Elon lives in Bel Air. He lives in LA. Nobody forgets that. Elon’s his own little planet. He is. I don’t think he mixes a whole lot. I think he’s not even on the planet. He’s stratospheric. He’s the greatest entrepreneur of our times. I have seen him out at dinner. I’ve sat next to him at a dinner party, and it does happen because he lives in LA. Yeah, absolutely. He used to live up here, actually, if I recall. Yeah. I remember at X.com. That’s when I met him. Yes, which became PayPal. PayPal. Well, no, he merged with them. He merged with them in a combined company. When you have one, it does create, if there’s problems like Snapchat right now. Let’s actually go back. What happened from your perspective to the Myspace and Demand? Those are all individual problems that they each had. Myspace in particular, I think, didn’t architect its technology right for scale, so I think that was one of the problems. No. 2 is I think they made a mistake, which is Rupert Murdoch when it was ... YouTube was bought by Google and it really pissed him off because they wanted to buy YouTube because YouTube became successful on Myspace. Video became popular in the era of social media, photos became popular. What he didn’t have was he didn’t have the currency the way that Google did because it had this stratosphere of public market valuation that it could pay $1.65 billion to buy YouTube. He was really pissed off, he went off and bought the trophy prize, which was Photobucket, because he thought, “Oh I’ll buy the photo one,” and then he shut down the API. He didn’t allow developers to build on Myspace. No, that’s the thinking. That’s right when Facebook opened up. You had Zynga and you had Slide and you had RockYou. It was a mentality. They had opened up, and they opened up the platform community at exactly the time Myspace shut it down. I think that’s really what happened, and Rupert just thought he could innovate internally. Facebook eventually, as you know, shut down their platform as well, but they were open at the right time. Sure. Well, right now it’s coming home to roost at this very moment. It was architected better, and that’s a story I’m happy to take on if you’d like to. Please. I will tell you, the example is Amit Kapur, who is the COO, Stanford graduate, COO of Myspace, then went and created Gravity, another LA-based company which we backed and we sold that to AOL. Amit now has a venture fund and is funding companies ... There creates that seed. Yeah, that kind of rinse and repeat. I’ve got capital to spend. I’ve seen scale. I’m going to create my next generation. Is geography an issue, because it’s so spread out? That’s another, the concentration. I always think of Los Angeles as New York, if you slapped everything down, it just spreads out. I know you’ll think that I’m spinning this, but I’m trying not to. I think that’s mythology, I really do. If you look at the Bay Area, you’ve got the crowd who lives north of the bridge and they’ll never go to San Jose. They’ll never go to Palo Alto. They only will take the boat over to San Francisco. You have the San Francisco community, you have the East Bay community. You have the Palo Alto / Menlo Park community. You have the San Jose community. People don’t do that in the Bay Area. You’d sooner get on a plane and fly to LA than you would go to San Jose. The same is true in LA. You have pockets. Our main pockets now are Santa Monica / Venice, which is the west side. Where Google has been big and Snapchat. They’re moving. They’re all moving. Well, so they’ve all moved down to the second pocket, which is going to be, 20 years from now, the big thing in LA, which is Playa. Explain where that is. That’s near the airport. That’s just north of the airport. It’s about 20 minutes south of Santa Monica, but the important thing is it draws from Redondo Beach, Manhattan Beach and Hermosa Beach south of the airport, and the reason that’s important is you can draw all the young people because the young people want to live down there and it’s more affordable. It’s also by freeways, so you can take the 405, which we talked about earlier, you can easily get in there. It was undeveloped land, and you’ll see a lot of development down there. Yeah, but it’s controversial development initially. It was. What I think you’ll see over time is actually the growth of downtown Los Angeles, because there’s tons of industrial space, it’s much cheaper, and you can actually get there from North LA, from over in the Valley, but you can also get there from east. It’s a lot more affordable and it draws from many more parts of Los Angeles, and you probably know this, we actually have public transportation now. You can take a train, a light rail from Santa Monica to downtown. You can go from North Hollywood to downtown. As the rail system has been built up, I think it becomes a lot more commutable. Right. Then you have that area, the downtown, Nasty Gal, there’s a whole bunch that were down there. A lot of people that are in e-commerce are downtown LA. Media and e-commerce has really been downtown LA. Been in downtown LA. Then not much in Beverly Hills, in that area, right? No, because Beverly Hills is too expensive. It’s like building a startup in Atherton. Tinder’s around there, right? It was in Beverly Hills. Yeah, but that’s because of IAC. Yeah. It was started at IAC. You have West Hollywood, and there’s a lot of stuff. You have West Hollywood, you have North Hollywood, you have downtown LA, you have the west side, but there’s air pockets. Then the types of companies, you’re saying there’s a lot of creative stuff, because I considered Snapchat a creative company more than an emotional company. I don’t know how else to put it. It has more creativity. I’m going to give you a metaphor for how I think about consumer businesses. We’ll talk about B2B in a minute. Consumer businesses, you have infrastructure. In order to build, let’s say, an era of shipping and an era of airplanes, you needed airports, you needed deep-water ports for shipping. Then once you did, valuable stuff happened on top of that infrastructure. The infrastructure of the internet had to be built first, so it was routers and switches and databases and browsers and caching software, and all of that happened in Silicon Valley, or most of that happened in Silicon Valley. Once that was built, I would argue that everything you do as a consumer on the internet falls into three categories. I call them the three Cs: Content, commerce and communications. When you think of it, you are spending time because you want to buy shit, so those are done from e-commerce companies. You want to communicate with other people. You’re lonely, you’re bored and you want to consume media and information. I think not just LA but LA and New York are really well positioned for the three Cs. Because they’re media oriented. We also understand consumer brands and we understand how to create products and we understand international trade. I mean, 43 percent of all products that come into America come through LA. It comes through either Long Beach or the LA Port. We’re a great import/exporter. I think we’re really the entry point for Asia into the United States. Really you are, yeah. We also are the northern capital of South America. There’s five million Mexican people in Los Angeles, and unlike what Trump would try to get you to believe, the vast majority of them are hardworking. They’re not first-generation immigrants. They’re professional. They’re not all educated. A lot of them are educated, and they’re productive. We have a large population of South Koreans, the largest population outside of South Korea. We have the largest population of Persians outside of Iran. It’s this great melange of people that are building those three Cs. And we also have the celebrities that can endorse products. Back to Ring, you may know that Shaquille O’Neal was our spokesperson. Right. If you go into a Best Buy and you look at 12 products, and they’re all announcing their different video specs and this has this much storage and this much RAM and this Wi-Fi, consumers don’t want to buy products like that. Marketing, media. We have the ability to brand, market, have endorsements, have consumers be able to figure out how to buy products. I think we do well in the three Cs. Then you look at the hard sciences. There’s a reason SpaceX is there. It’s because we have JPL and Northrop Grumman and we’re the place where there was the birth of the aerospace industry. Howard Hughes. All of that talent is still in LA, it’s just never been in the startup community. Right. What’s the negatives? Is it just the hard computing or the geekishness? I think of it in a similar way. I find LA companies more emotional — I don’t mean that in the negative term — and the ones in Silicon Valley very cold. It’s very different. There’s not a lot of storytelling, except for Apple, obviously. Apple’s certainly an exception. I will tell you this, is that there are categories I don’t think LA will be good at, and one of them is SaaS, software as a service, because to be a product manager, to be a sales rep, to be pre-sales or post-sales support, there’s just such a concentration of those people because of historically Oracle, PeopleSoft, Siebel, Salesforce now, Workday and all those people are aggregated here. It’s really hard to find experienced people in LA who have done that. I think we’ll create some of those, but I don’t think we do as well on that. But we do really well on trade, transportation, logistics. We do really well, I think, on hard sciences. There’s a great robotics program at USC. Yeah, there is. We’re starting to see a lot more robotics come from LA. Is there more cooperation from the universities there? You’ve got USC, UCLA, Harvey Mudd. Caltech. I don’t think so. I would love to tell you that there is, but I don’t think so. Why is that? Stanford’s been such a critical element to Silicon Valley. I think Stanford is really unique. I think the UC system overall hasn’t done a great job at trying to figure out how to support entrepreneurs or how to spin out companies, because they had a royalty system and they didn’t think about the equity culture. I think Stanford’s really led the country in that. Why not? Harvey Mudd, come on, or Caltech. I don’t know why it is. I can tell you at Caltech, my perception — even though we have incredibly successful alumni from there — is that it’s more a theoretical school. It’s less practical applications. So MIT, I think, has done a better job in the startup world at creating startups and breeding that culture. The places I love, I love Carnegie Mellon for startups. Yeah. I like ... actually Wharton is doing a fantastic job of creating startups. They have these combined programs that are management and computer science together. I don’t think we’ve done a tremendous job in LA. What could happen? How could that be done? People have been trying ever since I’ve been there. I wish I had a good answer. They set up tech transfer offices. We went and spent a bunch of time on universities. I think there’s a lot that could happen. I don’t know what the winning formula is. I’ve tried. Do you know what ...? No, but outside of Stanford where else does it happen? You’re right. MIT doesn’t translate it as well. Cal. Cal’s a wonderful place. I haven’t seen the same level of startups from out of Cal. No. It’s right across the Bay. Exactly. You’re right. When you’re thinking about those companies, obviously Snapchat’s been the latest big name, can you diagnose ...? Were you an investor in Snapchat? I was not. Why? Were you offered it? You had to have been. Listen, here’s what I tell people about Snapchat, and I authentically believe this even though it sounds like post hoc rationalization. When they went out to raise, there were a million photo-sharing companies. There were. I didn’t think that it would be exceptional relative to all the other ones I was seeing. I was looking at a company called Scout, and Scout was like location-based networking. I remember. A lot of young kids. I was really nervous, honestly, as a parent, about protecting children and what would happen if children were groomed on a website like that. I was super close to investing and the founder is a wonderful guy. I think he’s Finnish, if I remember correctly. I remember him, yeah. Maybe Swedish. He spent so much time, energy and effort in building systems to protect the children, but still, three children were raped through this system that were groomed, and you can’t control everything, right? Right. I just had so much nervousness over investing in something. At the time, Snapchat was inappropriate pictures being shared. I felt like that ... they hadn’t built Stories, it hadn’t been the same kind of app that its become. That was that. Then all of a sudden, it took off and it became massive and Mark [Zuckerberg] famously tried to buy it and then created an app called was it Poke or something to compete with it? Poke. Doomed from the start. That actually just gave it more oxygen. By the time it just really had taken off, I don’t think I could have competed and won because Benchmark came in and they offered him, I don’t know the exact numbers, but I think order of magnitude, like $12 million at a 60 pre. Back then, we were a smaller fund. I’m not saying we would have won it if we would have competed, but Benchmark had the success across their portfolio to take a bet like that, and then again, this is many years ago. These days a lot bigger checks are being written. I just think even if I wanted to compete, I don’t think I would have won it by then. So it’s a rare exception of one that went from super early stage, Jeremy Liew giving him $500k because he was spreading around a lot of bets on talented teams, and he got a few of them very right, and then just immediately stratospheric success, where I couldn’t have won it. What about now? What do they do? It was an IPO, and you take them where you get them in LA. It’s a big IPO. Tinder was owned by someone else. I’m sorry, what’s the question you’re asking? What do you imagine has happened now with them? Obviously Facebook came right back and managed to do Instagram Story. There’s a few things that I think Silicon Valley reporting gets wrong about Snapchat, and there’s a few things that maybe I could elaborate on. Sure, please. I think the narrative in Silicon Valley, because so many of the people that comment on Snapchat are not avid young users of the product, and they compare it to Instagram. I think Snapchat really is more like WhatsApp than Instagram. I agree. It has a network effect, where once people are communicating with all their friends on it, it’s very hard to disrupt that. I’m not saying it can’t happen, but it’s very hard to disrupt. I think it’s a lot more sustainable than people think. No. 2 is they went from brand advertising — which helped them grow very fast because you didn’t have to prove it to go sell a $2 million campaign, you didn’t have to prove efficacy — and they shifted it towards a direct marketing or a CPA model where people now are doing a lot more DR. That’s more sustainable because it’s direct bidding and they have a bidding platform, and they’ve shifted all that revenue without falling off a cliff, which I think is a monumental achievement that people don’t talk about. The things that I think they didn’t get right were two-fold. No. 1 is I don’t think they understood the world of influences well enough, and I think Evan really was reluctant to serve them. That’s his personality. It’s his personality. Though he did marry a supermodel, too. They chose not to lean into that, and a lot of those people ended up at Instagram and I think you could have sucked the oxygen out of the room and enabled them to stay on Snapchat, and it would have been harder to get Instagram to bring them over. No. 2 is I believe that you had to build a management infrastructure that over time learns how to decentralize power and to hand off power and build a hierarchy and a campus and a company culture that can withstand the trauma and the changes, and I don’t think they’ve done that. That’ll be their big challenge going forward. Do you think they can do it? I mean, look at Facebook with Mark. I don’t know. It’s hard. I don’t know. At least Facebook has a campus and a culture. Yeah. You have Sheryl that at least has had enough power to build organizational structure that I don’t think Snapchat really invested in. Right, and they need to do that. That’s what I believe. What do you imagine they need, those two things? I agree with you on the communications part. I think they’re much more robust. They’re also much more innovative. Facebook just borrows and borrows and doesn’t come up with anything fresh. It’s the funniest thing to me because if the situations were reversed and Snapchat was a Northern California company and Instagram was an LA-based company, everybody up here would be screaming bloody murder about how we’re stealing IP. Nobody seems to care. I asked someone about this recently. I asked a VC. He said, “Well honestly, people do care but no one wants to complain about Facebook because they still buy all our companies.” That’s interesting. Actually I did an interview, a podcast with Kevin Systrom. He just flat out said, “Yeah, that’s what we did.” He said they built a radio. Shamelessly. Well he just said it. He didn’t even bother ... I appreciated that, actually. He said, “They built a radio and we built a better radio. So what? Do they have the thing on radios?” I was like, “Hmm, okay. All right, you’re going to defend your behavior, that’s fine.” Instagram has reached a point where some of the product is better, and I think Snapchat’s paying attention. I think Snapchat also has an innovation engine of things that are in the pipeline that are coming. I agree. They’re more innovative. They’re 100 percent more creative. It’s not innovative, they’re more creative. That’s the difference. Look at even Bitmoji. Look at the success of Bitmoji and bringing in characters into your Stories. What we talk about, augmented reality, but really they kind of led in augmented reality. They did, 100 percent. The question is can they keep that innovation engine coming? I don’t know. It’s hard. We’re here with Mark Suster. He is a venture capitalist at Upfront Ventures in Los Angeles, talking about LA. We’re going to talk about the broader stories, but I do want to get to Ring in our next section, and more about where he thinks venture capital is going, especially with the huge amounts of money from SoftBank and others and how its changing. [ad] We’re here with Mark Suster. He is a venture capitalist in Los Angeles at Upfront Ventures. He runs the firm, which is a really cool firm down there. You just recently had a big hit with Ring. Explain how that happened. You sold it to Amazon, but pre that. Jamie Siminoff is a longtime entrepreneur in LA. I try to explain this to people who invest in venture funds, because they all say, “Well can’t the Silicon Valley funds just fly down and do all the best deals?” The reality is a lot of the people we back we’ve known for 10 years. Jamie created a company called Phone Tag. I don’t know if you ever used that, but it was a great product. I did. In the early days of voicemail where most of us didn’t want to sit and listen to voicemail all day, it created transcriptions for you. I think the company name was called SimulScribe, the product was Phone Tag. I knew Jamie through that. He then created a second company. It was called Unsubscribe. It wasn’t for me, but he was creating products, innovating. Then he created something called Edison Labs, and Edison Labs was going to start spinning out a lot of companies. They came up with this idea they called DoorBot. I was hanging out with Jamie at a local conference and he was telling me about DoorBot. He said it was security doorbells. I thought, “That’s a clever idea.” I’ve got ADT as an alarm system, but it’s kind of a crappy system. They kind of provide crappy service. There’s no video, and I believe in computer vision and I think there’s a huge trend towards not just video but video and laser and infrared and other ways to interpret the physical world with computing devices. That’s what Jamie was building. I didn’t know would people care or not, but I knew he was a great entrepreneur. We brought him in, and my partner Greg Bettinelli was new to the fund. It was, I think, his first. The first deal he took over became Goat, which is another company we haven’t talked about doing hundreds of millions in sales, LA-based. Greg really was a large part of the reason why Goat was created, but this was his first de novo deal, was Ring. We knew Jamie and we just wanted to back his vision. It struggled for a little bit, with complaints. We co-led the seed round, and they launched the product. Which was how much? What did you put in there? I think in total the round was like $1.5 million, something like that. He sold $3.1 million of product like that. It was amazing. They sent him out ... And this is the thing about hardware. If you have problems in hardware, you can’t just do an update. Yeah, we struggled somewhat with product quality early days, but for a company that was so new, so innovative, so ahead of its market, I think they did a fantastic job. Jamie’s the consummate service professional. We raised the next round with True Ventures. We participated also in the A round, and then he had enough capital where he replaced a lot of the malfunctioning products and he built a better version and then a better version and then a better version. Then they had Shaquille O’Neal. Well, Shaq came in later, but where we really struggled was the next round of capital, because there was a Silicon Valley narrative. They had spent a lot of money on hardware. The narrative was Nest would be us. Oh Nest, yeah. Yeah. They just kept saying, “Well, Nest is eventually going to do this and Dropcam’s going to do this,” and they never did. They never. Well, they just did. Look at their product, they basically copied Ring verbatim. They did. They have very nice commercials, I have to say. For years, though, they really struggled to innovate, where Ring has outpaced them at every step. Actually, it was a venture fund set up by a home builder who understood the market, which was Shea Ventures. I think they’re called Calibrate now, that stepped in and led that round, and then Kleiner Perkins came in and Richard Branson came in, and then Shaq. Right. The idea was that they couldn’t do it. Also hardware was hard. They had struggled here with not Fitbit. A bunch of them like that. There was sort of an anti-hardware thing after they poured lots of money into it. Who’s they? Venture capitalists here had the narrative that hardware was too hard, essentially. The difference — I’m not a Fitbit-negative person, so I’m not trying to say negative things about them — but here’s the difference with Ring. With Ring, if you buy a security doorbell, you use it every month and you get utility out of it every single day. With Fitbit, a certain number of people get a huge value out of it forever, and a certain number of people it goes on the desk, right? Yeah, absolutely. With Ring, that doesn’t happen. We have a huge, huge attach rate of people who do not just buy the Ring, but they buy the subscription product. Subscription, yeah, which I did. He started with the doorbell. Then he did a flood lamp, which you can just literally unscrew your flood lamp and screw it in. Then he had a stickup cam and then he sold a solar charging unit, and then he sold a sign that went outside your house. Because he delighted customers, they kept coming back and buying more product. Sure. Why sell to Amazon? This is a huge market. Nest was coming. I think it’s not just Nest coming. It’s also Amazon wanted to be serious in the category, and I think Jamie took a view that, “Here’s a chance for me to not only get a great financial return for investors and employees,” and himself as founder, but to join arguably the best-run company, maybe in the world now, and to be a large important part of that. I think Jamie found that attractive. Right, and you didn’t want to hinder him. Did you see a bigger market for that? It is tough. Nest was coming at you, though. Our job is to support founders, and when they decide they want to sell, we never fight against them. If I had my choice, I would have rather taken more risk and tried to go long, but I’m a VC and that’s what my job is, to go long. Yeah. Exactly. It’s kind of hard to turn down. I didn’t want to sell Maker Studios to Disney either. My goal is to build long-term, lasting, successful companies that can IPO and create communities around them. Well, not selling does have its appeal. Mark Zuckerberg didn’t sell. Google didn’t sell. Myspace sold. The road is lined with people who didn’t sell and eventually didn’t success also. Those stories just don’t get told. Yes, agreed. Agreed. We have collective amnesia and memory. Honestly, I am super proud of Jamie for getting to the finish line. I think it’s the largest tech acquisition that Amazon ever made. Yeah, it is. I know they paid more for Whole Foods, but the largest tech acquisition, and I am super proud of him. He’s staying in LA. The team’s staying in LA. Amazon’s investing in LA. Smart to do that. I was sort of like, “Oh the one thing that Amazon doesn’t own, or Google.” Now they do. Now they do. What can I do? I can’t resist Jeff Bezos, apparently. He also has created a juggernaut in Seattle in that regard. They’ve had Microsoft and they’ve had a bunch of companies. Talk about where you think trends are going. SoftBank has this enormous amount of money. I just interviewed the DoorDash CEO last night in Las Vegas at Shoptalk at our Code Commerce event. I think it was $535 million and half of that was from SoftBank. They’re handing out checks of hundreds of millions of dollars. How are you all being impacted by them and what’s happened? At first it was Marc Andreessen doing that, handing out giant sums of money, but now he’s being Marc Andreessen, essentially. Well, let me say it this way. One thing I’m sure you’re aware of is the trend that companies are staying private longer. There’s a certain attractiveness to entrepreneurs to staying private and not being conditioned to the public markets. Because of that, capital is actually chasing the opportunity to still get investments because they can’t wait until it goes public. I think there’s an appeal also for entrepreneurs. I would also say with this large pool of capital, not just SoftBank, and there’s a lot more sovereign wealth funds out of Middle East doing direct investing, LPs are investing, hedge funds are investing, mutual funds are investing. Two things are happening. One is, founders are able to sell stock in the secondary so they can get some monetization and so they don’t feel the pressure to go public. Some of the seed in early funds are actually selling their stock in those transactions. Actually some VCs are. It’s actually being seen as a potential exit for some people. When large pools of capital come into companies at early stages, that distorts markets. There’s going to be some positive stories and there’s going to be a lot of negative stories too. It’s a lot of “Godfather,” like, “Take this money or else,” kind of thing. I’ve heard a couple where they say, “Take our money or we’ll walk over to your competitor.” Look, that’s life. Does that matter, all the money, or does it really? You remember the famous story, which is Steve Case running this little tiny company called AOL. I wrote the book. I remember. I probably read it. He went to see Bill Gates, and, “We can buy you or bury you. Which is it going to be?” That was the first line of my book. There you go. He must have read it. I must remember that line. You think that’s such common behavior, and I had that in my two startups. I had people saying, “I can buy you, I can buy your competitor,” and the first time I didn’t listen to them and I just kept building and the second time, I thought, “I’ll have what’s behind door No. 2.” Those are very personal decisions. Of course people feel that pressure, but then you look at companies like, I’m not so sure — again, I hate saying negative things because I don’t really know the company, but let’s just take as an example Magic Leap. The enormous amount of money going into a company pre-product launch, I think it just distorts so many things. To distort, what does it do? First of all, you take the pressure off of founders from launching products, because if you can ... If they’re not desperate ... I always say necessity is the mother of invention. If you give someone $2 million and they have to launch on $2 million and they have to wake up a little bit earlier and not have as big a team and not waste money on parties and all this other stuff, sometimes it produces more innovation. The scene I have in my head is “Apollo 13,” when they’re trying to get the spaceship back and they have ... Yeah, “it’s all we have.” ... these 11 materials and you got to sit around and come up with some way to get the spaceship back. That’s the mentality I have, is I think the creative pressure of not being over-capitalized actually helps with the innovation. Here they are. What’s going to happen with this? Is this going to be a lot of failures, a lot of money? Look at the dot-com era. There’s not enough rat holes to shove all the money in. Look at the dot-com era. We over-capitalize all the companies. It distorts markets, because if you can create a company that doesn’t have to monetize and you have eight companies that don’t have to monetize, the three that try to build successful business models can’t because why would you pay for product if I can get everything for free? It does distort markets in the short term. I think when the markets eventually crash, I don’t know when that’s going to come. I thought it was going to be three years ago, so don’t listen to me, but eventually markets go through cycles and that capital sum of it will be pulled back out and put into other uses. Yeah. I love it’s the guy from LA that’s prudent on spending. What about the big companies? One of the things a lot of startups here are saying is it’s not the era of the startup, it’s the era of the big companies now. Well, I think most of the innovation is still coming from startups. If you look at the success of Facebook and Google and even Salesforce, a lot of their innovation now is coming through acquisition. Salesforce just bought MuleSoft for six billion plus dollars. They had bought two or three companies before that. They bought Quip. They bought a number of companies. If you look at Facebook buying WhatsApp, buying Instagram, buying Oculus, I think they’re buying innovation. And I think Google has done it too, and I don’t think anything’s wrong with that. I think that’s going to continue to happen. It’s just so hard to create the environment. When you’re at Google and you’re paid, I’m going to make it up, $300,000 a year, plus half a million dollar a year in stock grants and you can turn up when you want and it doesn’t really matter if you don’t win in your market, it produces a certain conservatism. Right, so they can’t ... they don’t think ... I think it creates the wrong environment for it, and then there are the rare unique breed of people who are just built to take the risk on to create next-generation products, to go out there every day against all the odds, like Jamie Siminoff with Ring when everyone said he couldn’t do it. Well, Amazon, too. You’d have to call them pretty innovative, for a big company. I think Amazon is really an outlier. I don’t understand, they’re freaks of nature, they’re so good. Well, he’s so hungry. He’s always been like that. It’s unbelievable to me because he can just sit the rest of his life on a beach and so could his great-great-grandchildren. We had the head of Nordstrom at our Code Commerce thing yesterday, and I told a story of going to, I worked for the Washington Post, Nordstrom was invading all the cities with their innovative stores, and I was out there in Seattle to meet the Nordstroms. I had extra time, so I went to see this little startup Amazon. He wasn’t little-little, but he was little and had five people. It was an afterthought. That was the ’90s. You may not know this, but our firm was created by ... Yves Sisteron was the head of North American investments for a retail company called Carrefour, if you know Carrefour. Yes of course, French company. French company. Which was very innovative. Very innovative, and Denis Defforey, the co-founder, decided he didn’t want to come to the U.S. because he didn’t want to compete with Walmart but he wanted to learn from U.S. consumers who are leading consumers. Carrefour ended up not just staying in Southern Europe. They were created in France, but they went to Eastern Europe, China, South America. Essentially the Costco, for people who don’t know. Well before Walmart did. He said, “Yves, why don’t you go invest in these companies in the U.S.?” He invested in a small company with three warehouses called Costco. Costco, yeah. They took 20 percent of Costco, 8 percent of Starbucks. They were investors in ... Very innovating. Very innovative retail. ... Dick’s Sporting Goods, PetSmart, Jamba Juice, PF Chang’s, Ulta Beauty and Cosmetics. They basically dominated the category. Yves met Amazon in the early days because all of the Costco team had seen the retail sales and the numbers were just up and to the right. Right, absolutely. I think Jeff had this outrageous price in mind, which was like $60 million valuation. Companies back there were funded at like $5 or $10 million valuation. Yeah. He had a lot of ambition. I want to finish up talking about where we are. Right now we’re in sort of a crisis around Facebook. Tech is disliked. There’s all these massive technologies coming, automation, robotics, that could be problematic for society. It’s not a good time for tech. Tell me where you think things are going from a venture perspective. I would say it’s not a good time for democracies. No. It’s like we all thought that all the trends were heading in positive directions, and you could very easily talk yourself into dystopian future. In general, I think technologies have been more good than bad. I just shared this on Twitter yesterday. In all the dystopia that we see every day, I saw a tweet from a guy, I think he was in India who was teaching poor inner city people, homeless people how to do design work using a product called Canva. It’s from Australia. Yeah, C-A-N-V-A. It’s led by a woman. I don’t know that company all that well. Led by a woman. They just raised earlier this year $40 million from Sequoia. Bridget. I did a podcast with her. Melanie. Melanie. At a $1 billion valuation. I don’t know her. Listen to my podcast with her. I was trying to learn more about the company and the space, and just interested in it. I see this tweet from this gentleman, and he’s using their product in a remote village in India to teach homeless people how to be better designers, to improve their lives. There’s a lot of that in the world. That’s the happy shiny tech feature story. And we can focus on our own little dramas. Right, but it’s pretty serious. I’m not saying it’s not serious. Robotics is serious. There’s both. There’s the positive consequences of everything that’s happening and there’s the negative consequences. Where are you looking? Are you looking at cryptocurrency? What is it that you are like, “Mm-hmm”? I’ll tell you, cryptocurrency, I’m not as big a believer in cryptocurrency, but the underlying technology, which you hear a lot, this blockchain. Blockchain. I think is transformative and so I am spending a lot of time trying to understand that. I just released a primer video on YouTube. If you search on YouTube for Upfront Ventures, you can find my primer video, and I release slides. I’m trying to educate myself, and a lot of times by educating other people it forces you to learn. Yeah, then you can have discussions. I’ll tell you, what I spend my time on is computer vision. I’m a really big believer in computing being able to interpret the physical world in better ways than we as humans can. I’ll just give you some examples. Give me examples. I invested in a baby monitor, it’s called Nanit. What we do is we help monitor the wellbeing of your child when they’re sleeping. The idea is monitor less, sleep more. Or sleep more and monitor less. Most of the people who had baby monitors, it was like, “Oh my god, is my baby dead? Are they alive?” or whatever. Our goal is to give you stats every day to help you be a better parent and not feel like you need to rush in all the time, but a byproduct of that is we believe we can predict autism younger than anyone else can because we believe from about six months on we can start to see signs that doctors can’t yet diagnose. I won’t bore the podcast with why, but we have a bunch of data out of Israel to suggest that. I believe cameras can also be used to predict Parkinson’s because you develop a twitch in your finger and a shuffle in your walk. Alzheimer’s, you develop both a change in your voice pattern and a shuffle in your feet. These things are observationally ... A doctor can’t pick up because they see you once or twice a year, a computer can pick up the changes. Yeah. The monitoring. There’s Cardia here. There’s a whole bunch of things. We also invest in a company here in the Bay area called Density. What they do is they hang a little device above doors that uses lasers to track the patterns of how people move around spaces. Mark Cuban was talking about a different one. Oh did he? Near shopping malls to watch peoples’ tracking patterns. Part of what we’re doing, we’re not in shopping malls. We’re used a lot in space planning, so working with large people who have real estate. You take a meeting room like this, is it used 80 percent of the time or 20 percent of the time? Of the 80 percent of the time it’s used, does it have six people in it or two people in it? It doesn’t matter if you’re a small building ... Oh I like this, Mark. ... but if you’re in a ... See, you bring a fresh idea. It’s sensors. I’m obsessed with sensors. It’s sensors. I talk about sensors a lot. There’s going to be sensors everywhere. Industrial-scale sensors. I’ve invested in six companies in the category and across all different applications. Other examples, insurance policies. If you can’t have too many people in a room, we’re doing line busting, so you can actually see how many people are in the line at certain places that you want to go. We’re helping businesses with things that sound mundane, like HVAC. When do you turn on your heating and electricity based on when employees come in? Sure. I think line mechanics are fascinating. I spent an hour talking to the Disney expert on this. If you’re ever interested, I will show you a demo from Density that we have a real-time monitor that shows you line patterns going into queuing up at restaurants. I love that. Literally, I spent an hour with the Disney person in charge. That person’s a genius because they know how to move people around. It’s important. Things they say in signage and how you signal crowds. It was riveting. The other thing that businesses don’t know a lot about is something called tailgating. When you go into a building and someone swipes their card, people follow them in even though they’re not supposed to. Oh yeah, we know that. Yeah. With Density, we can track tailgating and we can help you know when there’s a problem, but we do it with lasers, not cameras. The important thing about that is we’re building an anonymous service. I see. In a world where people increasingly don’t want to be monitored with cameras, we made a conscious choice to make it anonymous. Except we’re always monitored. You may be monitored by other people, but we’ve made a conscious choice for people to not be monitored. It’s fascinating. It’s interesting because right now this Facebook thing’s about that. What are you following around? Yes. Yeah, it’s really interesting. It’s computer vision. I like that, Mark. You’ve made me think there for a second. I’m going to come see all these companies. I want to finish up. You’ve run a big conference there, too, where you have everybody, and you had the mayor of Los Angeles who may be running for president, apparently. He said onstage with us that he is. That he is, okay. Does he have a good chance? I think he’s probably one of six or eight people who could really do it. I think he would make a great candidate. Yeah, it’s interesting, I just did an interview with Anthony Scaramucci and he thinks Trump will win if the Democrats put up a Communist, essentially. He thinks they’re going to put up a Communist, that’s why he’s going to win, instead of ... I said, he’s sort of in the middle, isn’t he? I mean, he’s definitely a Democrat. I think he’s done a great job at protecting immigrants. He’s done a great job at running the second-largest city in the country. I think he’s right on a lot of positions, but he’s very pro tech. He’s pro innovation. He’s pro trade. Is that important? You do that in LA. You do sort of serve. I’m a big believer that international trade is a net positive for everybody. I don’t think our ailment as a country is the fact that we’re trading with Asia. I think we get a lot more benefit from cheap products provided to everyone that give them more disposable income, but I believe that we need to take the gains that we have from being in a world economy, and invest them in education and infrastructure for people affected. I’m a Democrat, and I believe in taking those gains and reinvesting them. I’m not to the far left, so I don’t believe in, like, Elizabeth Warren’s view that we should not be part of TPP because I believe that China will just dominate trade in Asia, and that’s a lost opportunity for us. Lastly, tell me one thing that people don’t ... again, I don’t want to regionalize you, but you are the most prominent venture capitalist in Los Angeles now. What is something that you think is wrong that people get up here and elsewhere about LA tech? The No. 1 narrative that people have about LA tech is they perceive it as just the place where you’re building video and advertising and kind of lightweight tech. I think they misunderstand that we have phenomenal engineering talent, that we’re really building some big ambitious projects. Some of them are going to be very successful, maybe not at SpaceX level, but that’s a phenomenal success. I’ll just give you a couple examples. I will mention that they are Upfront companies so that I’m not sounding like I’m talking my playbook without disclosing that. uBeam, which is a wireless energy company. They’ve had some positive press and some skeptical press, but they really are innovative, and they’ve really pushed the boundaries. We have gotten direct feedback from the market that nobody has done the kind of wireless energy transfer that we’ve done. Great idea. We debuted them at AllThingsD. In fact, you’re right. I remember that. Meredith’s just fantastic. She’s really truly an entrepreneur, an innovator, and I think she’s going to build something very successful. You never know. Another is Rebecca Cantor, who has created a way to do cognitive assessment using computer games. You run simulations where you have, I’ll give you an example, a virtual world of fish, of coral and plant types, and you have to assemble the right fish, coral and plant types in an ocean environment with the right level of salinity and sunlight and depth to create a self-sustaining ecosystem. How you make the decisions tells something about how your brain processes information. She built that because she wants the SAT to go away because she wants to teach children differently. I have two kids that have to take it. They’re very nervous. We’re teaching rote memorization to children where rote memorization isn’t what’s required. No, we show them how to think. Her first client is McKinsey and they have used it to start to enhance their recruiting process, so they had under 1,000 people go through it and compared it against their own recruiting process. They like it so much that they’re now ... That sounds fantastic. ... embracing it as a technology. That’s being built in Los Angeles. It’s real true breakthrough technology. The concept. It’s the idea that it’s not this ... the latest ... It’s the right way. We’re building real technology. ... the latest Matt Damon startup, essentially. Correct. Although does he have one? I’m kidding. The Kardashians deserve a lot of credit. Oh, you know, I’m a big fan. You can’t insult a Kardashian to me. They deserve a lot of credit. Kidding. I had her onstage at Code Media. I think they’re wonderful. Everyone was shocked by it. I think they’ve done a lot of really interesting things. Whether you like them or not, or like their messaging, it’s still, they’re very fascinating. They’re amazing business people. They’re innovative people, they’re amazing. Anyway, Mark Suster, thank you so much for being here. Thank you for having me. I appreciate it. I’m sorry I fuck up your name all the time. That’s all right. It was great talking to you. Thanks for coming on the show. You’re one of my favorite VCs to talk to because you’re so smart. I don’t know if you know this, not all of them are. Thanks again for coming.

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posted 1 day ago on re/code
Facebook is going to put more pre-roll video ads in more places. Facebook resisted selling pre-roll video ads for years, the kind of ads that run before you get to watch the video you clicked to watch. The feeling was that people don’t actually like them, and they either ruin the experience or cause people to abandon the video altogether. The problem: Advertisers love pre-roll video ads — and they haven’t liked any of the other formats Facebook has proposed instead, like ads that run during the middle of videos or at the end. So Facebook finally decided to test pre-rolls in early 2018. Now Facebook says those tests are going well enough that the company will start running pre-roll video ads in more places — including videos that appear in search results or on publisher Pages. Facebook still isn’t putting pre-rolls in News Feed, but it might. If they work better than the company’s mid-roll ads — think commercials that pop up in the middle of a video — Facebook could certainly roll them out more broadly. Successful pre-roll video ads would be good news for Facebook’s business side (if not for Facebook’s product team, which has opposed them). The company is looking for ways to make money from its growing video business, which now includes Watch, a section of the app dedicated to repeat shows and series. The publishers and creators who make those shows need money for their work, and Facebook has long said that it expects that money to come from splitting advertising revenue. (Right now the company pays a lot of those creators directly.) Pre-roll ads, coupled with mid-roll ads, could end up becoming the way Facebook keeps creators happy — and from abandoning Facebook and heading to other platforms.

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posted 1 day ago on re/code
There’s little you can do about it. One of the more interesting takeaways to come out of Facebook CEO Mark Zuckerberg’s multi-day congressional testimony last week was confirmation that the social giant collects data from people online even if they don’t have a Facebook account. Also interesting: There’s no way to avoid it. It was a big enough admission that Facebook even wrote and published a blog post on Monday aiming to explain why it does this. But the blog post didn’t include everything. It didn’t mention the term “shadow profiles,” for example, a phrase often used to describe the kind of faux profile that companies can have about people even if they haven’t signed up. It also didn’t mention how long this data is stored, or how Facebook collects data from non-users when their friends who do use Facebook upload their phone contacts. We’ve asked a few follow-up questions. Here’s what you need to know, courtesy of the blog and a company spokesperson. What does the term “shadow profile” mean? This is how the internet describes Facebook’s data trove of information on people who aren’t actually users — the idea for the name being that Facebook has enough data from people to create a version of their profile even if they aren’t around to use it. Facebook CEO Mark Zuckerberg claims he doesn’t know the term. And a Facebook spokesperson tells Recode, bluntly, “We don’t build shadow profiles of people.” The data is collected for other purposes, we’re told. What data is being collected about non-users? Facebook appears to collect data from non-users in two main ways: From their browsing history and from their friends. The browsing history data collection is what Facebook’s recent blog post described. When people navigate around the internet, sites that use Facebook’s advertising pixel or other social APIs linking back to Facebook (like the “Like” button) send data about those site visits back to the social giant. Facebook collects that data on everyone who visits these sites, whether they’re a registered user or not. If you’re not a Facebook user, though, the data is less valuable. That’s because Facebook doesn’t sell targeted ads based on that browsing history like it does if you’re a registered user. But Facebook can still use that information, which includes your IP address, to show you ads encouraging you to join Facebook. That means Facebook might not make money from your browsing history if you aren’t a user, but it might spend money trying to reach you with its own ads. The other main way Facebook gets info from non-users is from its contact upload feature. When people sign up for Facebook, many of them choose to upload their contacts to the service so that they can find other people to connect with. It’s likely, though, that some contacts in their phone aren’t on Facebook — but they’re still giving this info over to the company. Depending on how detailed people are with their contacts, this data could include a lot more than just a phone number. What does Facebook do with this data? As mentioned in Facebook’s recent blog post, some of the browsing data is used for analytics — that means that web and app developers pay Facebook to tell them how many people visit their site, etc. The company also claims it’s used for security purposes, like identifying bots. Here’s how Facebook explained that in its blog post: Receiving data about the sites a particular browser has visited can help us identify bad actors. If someone tries to log into your account using an IP address from a different country, we might ask some questions to verify it’s you. Or if a browser has visited hundreds of sites in the last five minutes, that’s a sign the device might be a bot. The contact book info is more interesting. Facebook can use the contact info for people who don’t use Facebook to help link two people who do use Facebook. Here’s how Kashmir Hill described the value of these connections in a great piece for Gizmodo late last year: With its vast, hidden black book, Facebook can go beyond simply matching you directly with someone else who has your contact information. The network can do contact chaining—if two different people both have an email address or phone number for you in their contact information, that indicates that they could possibly know each other, too. It doesn’t even have to be an address or phone number that you personally told Facebook about. Again, Facebook claims it’s not creating shadow profiles. “We don’t use that [contact book] information to build profiles about people who aren’t on Facebook,” a spokesperson said via email. She added, though, that “when new people join, we try to use existing contact data to help the uploader and the new person connect.” How long does Facebook save this data? Facebook says it won’t hold onto this data forever, but that’s slightly misleading. Facebook keeps browsing data from its users for up to 90 days, but deletes that data for non-users after 10 days, according to a company spokesperson. Here’s the catch, though: People don’t usually leave the internet for 10-day stretches. That means that while Facebook may delete browsing data of non-users, it’s also likely collecting it continuously. Even if they delete a user’s browsing data from 10 days ago, Facebook probably has more, similar data from nine days ago. And eight days ago. And seven ... Here’s the other catch: When users share their contacts with Facebook, that data “doesn’t time out” unless it’s manually deleted by the person who uploaded it, a spokesperson confirmed. Facebook’s website refers to contact uploads as happening “continuously,” so in all likelihood, the data of non-users never fully disappears from Facebook servers. Is there any way to stop Facebook from collecting my data if I don’t have an account? No. There is no way to opt out of this kind of data collection. You can avoid the internet (!), but even then, friends or family who share their contact list with Facebook may be giving the company your data. How do I find out if I am sharing my contacts with Facebook? Here’s a step-by-step guide for how to find out if you are uploading your contacts to Facebook, and how to stop sharing that info if you want to. Here’s how you can figure out if you’re uploading your contact info to Facebook Messenger.

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posted 1 day ago on re/code
Plus, Amazon’s other Jeff talks Trump threats and robots, Intel is shutting down its smart-glasses division, and a super-stony 420-song Spotify playlist. Jeff Bezos’ surprise unveiling of Amazon’s Prime membership number — 100 million-plus paying member worldwide — was a long, long time coming. What that milestone doesn’t reveal is Amazon’s battle to keep growing in the country where Prime is the most popular and the biggest money-maker —the United States. Meanwhile, business leaders say that Bezos’ annual letter to shareholders, which has been published every year since Amazon went public in 1997, is a must-read for its insights into his management principles and long-term thinking. And here’s how Amazon’s subscriber tally compares to other subscription services like HBO, Netflix and Tinder. [Jason Del Rey / Recode] Here’s an interview with Amazon’s other Jeff: Jeff Wilke, head of Amazon’s worldwide consumer division, who has been Bezos’ right-hand man for 18 years, talks about the customer-driven company’s AI ambitions, Trump threats, robots and new markets. [Brad Stone and Spencer Soper / Bloomberg] MoviePass’s finances show that it might be too good to be true. The parent company of upstart movie-theater subscription service, Helios and Matheson Analytics, is bleeding money, and shares plummeted more than 40 percent yesterday after it announced the pricing of a $30 million public share offering. Earlier this week, an independent auditor raised “substantial doubt” about MoviePass’s ability to continue operating as “a going concern.” [Todd Spangler / Variety] Google has made yet another new messaging service for Android, designed to replace all the other Android messaging services. It’s called Chat, which is a good name. [Dieter Bohn / The Verge] Wells Fargo is expected to be fined $1 billion by federal regulators for a variety of alleged misdeeds, including forcing customers to buy auto insurance policies they didn’t need, improperly charging mortgage customers and failing to maintain adequate risk management and compliance practices. The penalty is likely the largest ever levied by the Consumer Financial Protection Bureau and would be the toughest action the Trump administration has taken against a major bank, even as the president has advocated a rollback of regulations on the banking and other industries. [Emily Flitter and Glenn Thrush / The New York Times] Peter Thiel’s data-mining company Palantir is using War on Terror tools to track American citizens. The company’s software combs through data sources like financial documents, airline reservations, cellphone records and social media postings and searches for connections that human analysts might miss. [Peter Waldman, Lizette Chapman and Jordan Robertson / Bloomberg] Make sure to read the fine print behind an eye-opening website called Terms of Service; Didn’t Read, which crowdsources, summarizes and rates ToS agreements and privacy policies from various companies, including Facebook, YouTube and Netflix. Just last week, Facebook CEO Mark Zuckerberg was asked by senators whether Facebook users could understand what they’re agreeing to; Zuckerberg said, “I would imagine probably most people do not read the whole thing. But everyone has the opportunity and consents to it.” [Ariel Pardes / Wired] Recode Presents ... Code speaker announcement. Top stories from Recode Elon Musk still hasn’t decided what to do with Tesla and SpaceX board member Steve Jurvetson after allegations of misconduct. The venture capitalist sits in limbo even though DFJ’s investigation has concluded. McKinsey’s latest AI research predicts that it could create trillions of dollar’s worth of value … someday. Travel, transportation and high tech are among the industries where artificial intelligence could make the biggest relative impact. Reddit has hired a former Time Inc. executive to help build out an advertising business. As COO, Jen Wong will also be in charge of Reddit’s diversity efforts. When will regular people be able to go to space? On the latest Recode Decode, The Verge’s science reporter Loren Grush talks with Kara Swisher about SpaceX’s launch of TESS, a NASA satellite that will search for planets beyond our solar system. This is cool California is ready for an especially stony 4/20 — the first since marijuana was legalized in the state. Listen to this cannabis-infused 420-song Spotify playlist while reading about the surprisingly well-documented origins of the global weed holiday.

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posted 1 day ago on re/code
And, more urgently, why is Elon Musk tweeting about giant party balloons? By successfully launching the agency’s TESS satellite this week, SpaceX is now helping its longtime partner NASA search for planets beyond our solar system. As far as we know, the long game for Elon Musk’s space company is still helping Earthlings see what’s out there, too. However, in that regard, SpaceX might need to be patient, says The Verge’s science reporter Loren Grush — at least until next year. On the latest episode of Too Embarrassed to Ask, Grush told Recode’s Kara Swisher that the historically nimble company will have to ease on the brakes if it wants to launch more than just cargo and satellites; while it originally planned to take people up in 2017, it probably won’t be flying people to space in any capacity until 2019 at the earliest, she said. “NASA is very meticulous when it comes to how they iterate,” Grush said. “If you want to do a change [to a rocket], you have to run it by a person, who runs it by a person, who runs it by a person. With SpaceX, they were making new changes every day.” “Now they’re really being put to the test because they’re developing this new technology to take astronauts [into space],” she added. “Obviously, safety is a concern whenever you launch a rocket, but when you put people on it, that’s when the stakes are super-high.” You can listen to Too Embarrassed to Ask on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. On the new podcast, Grush also talked about the progress of SpaceX rival Blue Origin, which was founded by Amazon CEO Jeff Bezos. While Musk’s firm is looking to get people into orbit (and, eventually, to Mars), Blue Origin is preparing to start by selling tickets on “sub-orbital vehicles” — a short ride on a capsule attached to one of the company’s New Shepherd rockets that is expected to cost hundreds of thousands of dollars. “When you get to space, the capsule and the rocket break apart, and the people float inside for four minutes,” Grush said. “So, you can have that moment of ‘A, I’m in space; B, I’m floating; and C, I can see the curvature of the Earth,’ which only a couple hundred people have done. And then the capsule and rocket come back down in separate pieces.” Understanding the safety considerations of that re-entry process will also help you understand why SpaceX’s Musk was tweeting recently about bringing that company’s rockets back down to Earth “using a giant party balloon.” This silly-sounding imagery is “actually based in very solid science” and could prevent a vehicle’s components from breaking up in the sky, Grush said. “I’ve learned that his joke-tweets are never jokes,” she said of Musk. “Unless he’s talking about Tesla tequila.” “Whenever you re-enter the earth’s atmosphere, you come in really fast and hot,” Grush added. “That’s why the capsules are these teardrop designs, because you want to spread out the heat when you’re coming in towards the Earth. If you inflated this larger structure, you could have a bigger surface area which would make you slow down not as fast.” If you have questions about any topic in consumer tech or the week’s tech news, send them to us! You can tweet your questions with the hashtag #TooEmbarrassed or email them to [email protected] If you like this show, you should also check out our other podcasts: Recode Decode, hosted by Kara Swisher, is a weekly show featuring in-depth interviews with the movers and shakers in tech and media every Monday. You can subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. Recode Media with Peter Kafka features no-nonsense conversations with the smartest and most interesting people in the media world, with new episodes every Thursday. Use these links to subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. And finally, Recode Replay has all the audio from our live events, such as the Code Conference, Code Media and the Code Commerce Series. Subscribe today on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. If you like what we’re doing, please write a review on Apple Podcasts — and if you don’t, just tweet-strafe Kara. Tune in next Friday for another episode of Too Embarrassed to Ask!

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posted 2 days ago on re/code
Smaller than Netflix, bigger than Spotify. After years of waiting for Amazon to release an actual number, we finally learned yesterday that Amazon now has more than 100 million Prime members globally. That’s a nice, big, round number, but how does that number compare to those of other subscription services? HBO and Netflix both have more subscribers around the world at 142 million and 125 million, respectively. However, Amazon Prime dwarfs many other subscription businesses, including Spotify (71 million users), Hulu (17 million) and Tinder (three million). For some added context, note that there are more than one billion pay-TV subscribers worldwide across a variety of cable providers, according to data from IHS Markit. Of course, Amazon Prime subscriptions are only one of Amazon’s revenue sources. And each of these subscriptions have different prices. Prime memberships cost $100 a year in the U.S., whereas home delivery of The New York Times would run you $240 a year. Tinder Plus costs about $55, if you sign up for a whole year. if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["uao1J"]={},window.datawrapper["uao1J"].embedDeltas={"100":491,"200":477,"300":452,"400":452,"500":452,"700":452,"800":452,"900":452,"1000":452},window.datawrapper["uao1J"].iframe=document.getElementById("datawrapper-chart-uao1J"),window.datawrapper["uao1J"].iframe.style.height=window.datawrapper["uao1J"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["uao1J"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("uao1J"==b)window.datawrapper["uao1J"].iframe.style.height=a.data["datawrapper-height"][b]+"px"}); This data includes paid and trial subscribers — people who may soon become paid subscribers — when available.

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posted 2 days ago on re/code
Amazon has focused the last two years on courting lower-income households. Jeff Bezos’ surprise unveiling of the Amazon Prime membership number — 100 million-plus paying members worldwide — was a long, long time coming. So the attention it received was expected, if not deserved. But that figure only gives a surface-level view into the success and current challenges of Amazon’s loyalty program — chief among them, how to keep growing in the country where Prime is the most popular and the biggest money-maker: Right here in the U.S. Various Wall Street analysts have pegged Amazon Prime’s penetration at between 40 percent and 60 percent of all U.S. households over the past year. Those figures would suggest plenty of room to grow. But the shipping-and-entertainment membership service has skewed way more popular among higher-income households, meaning the onus has been on Amazon to make tweaks and changes to sell Prime’s value to those who don’t have as many disposable dollars to spare. As of August 2016, 60 percent of U.S. households with income of at least $150,000 had Prime memberships, according to research from Cowen and Company. Compare that with around 40 percent of households that made between $40,000 and $50,000 a year, and just 30 percent of those who earned less than $25,000. Amazon, of course, knew these disparities better than anyone, and started making moves that same year to close the gap. One of the first signs of the courtship of lower-income shoppers appeared in March of 2016, when Amazon introduced a monthly payment option alternative for potential Prime members who couldn’t, or didn’t want to, shell out the $99 annual fee in one shot. The catch at the time? You needed to be a Sprint wireless subscriber to get access to the $10.99 per month Prime payment option. Just a month later, though, Amazon opened up the $10.99 option to all shoppers; earlier this year, Amazon raised that monthly fee to $12.99, citing the additional value and perks it continues to add to the program. In 2017, Amazon unveiled Amazon Cash, a way for shoppers who don’t have credit or debit cards to load money into their Amazon accounts by handing over cash at partnering retail stores. In the process, one roadblock to shopping on Amazon for those without bank accounts was lowered. Two months later, Amazon introduced a 45 percent discount to the Amazon Prime monthly fee for those shoppers who receive certain forms of government assistance; the service cost them just $5.99 a month. And just this March, Amazon added Medicaid recipients to the group eligible for that discount. All the while, Amazon has continued to add selection to the massive catalog of goods available for free two-day shipping under Prime, and expanded the geographic areas that qualify for even faster delivery times. There are some signs that the moves have been working. By early last year, Amazon Prime membership growth was strongest in the U.S. for households making less than $50,000 a year, according to a study by Robert W. Baird & Co. And Bezos said in this week’s shareholder letter that the company added more paying Prime members in the U.S. in 2017 than in any year prior. Still, Prime’s overall growth rate in the U.S. is likely slowing, making it likely that Amazon will continue to introduce new options to make the service a no-brainer for everyone, and not just the well-off.

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posted 2 days ago on re/code
Travel, transportation and high tech are among the industries where AI could make the biggest relative impact. McKinsey Global Institute’s latest research on artificial intelligence focuses on how AI will affect business, analyzing 400 use cases — from airlines avoiding flight cancellations to online retailers recommending items — across 19 industries. In aggregate, McKinsey projects that AI could eventually drive between $3.5 trillion and $5.8 trillion of annual economic value in those industries — a wide range, and with no timeline on that forecast. Key points: In general, AI — once it is further integrated into business — has the potential to drive growth. In 69 percent of the use cases McKinsey studied, “deep neural networks can be used to improve performance beyond that provided by other analytic techniques,” according to the report. But it’s not a 10x change — at least for current lines of business. In the 19 industries McKinsey focused on for the report, it estimated the impact of AI somewhere between 1 percent and 12 percent of annual revenue. For context, the report focused on ways that AI can add value in industries providing existing products and services, rather than inventing new businesses — so, for example, how a car company can get better at making the cars it’s already making, rather than launching an entire new AI-driven business like a fleet of self-driving cars. (We’d add: Those new businesses seem to be where the biggest potential for growth lies, but it’s harder to predict.) Among business functions, AI could drive the most impact in marketing and sales and supply-chain management and manufacturing. For example, AI could improve personalized recommendations for an e-commerce company, or predict traffic patterns to reduce trucking costs. Among the industries McKinsey analyzed, the one where AI could create the most value — as a percentage of total revenue — is travel, where it could potentially drive around 7 percent to 12 percent of impact as a percentage of annual revenue, according to the report. Why travel? McKinsey Global Institute partner Michael Chui, the main author of the report, says that travel companies perform complex marketing, sales and operations, all areas where McKinsey sees AI creating the most value. Other industries where McKinsey projects AI to have the biggest relative impact: High tech, defined as software, online and hardware companies; transport and logistics; and pharmaceuticals. It’s projected to have a lower impact on the public and social sectors, oil and gas, and chemicals. Most companies are not already using AI. McKinsey cites its own research from last year, noting that “even among AI-aware firms, only about 20 percent are using one or more of the technologies in a core business process or at scale.” Key hurdles: Obtaining massive data sets for training, the threat of legislation and potential bias in data and algorithms. Read the full study here.

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posted 2 days ago on re/code
As COO, Jen Wong will also be in charge of Reddit’s diversity efforts. Reddit has hired Jen Wong, a media executive and former COO of Time Inc., to be its new COO; Reddit hopes she will help build the company into a legitimate digital advertising business. Wong has a lot of experience in the world of digital media. Before Time Inc., she worked at AOL and then digital lifestyle company PopSugar, where she was chief business officer. (When Wong left Time Inc. in January after the company’s $1.8 billion sale to Meredith, she received a nice golden parachute of almost $6.8 million.) Now she’ll be tasked with helping to grow Reddit’s advertising business — the company’s blog post says she’ll “oversee business strategy” — which is in its infancy. Reddit still manually approves all ads that run on its service, for example, so it has a long way to go. On top of that, Wong will be in charge of “diversity and inclusion” at Reddit, reporting directly to CEO Steve Huffman.

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posted 3 days ago on re/code
Plus, Uber whistleblower Susan Fowler gets behind ending forced arbitration, Uber Eats is the fastest-growing food delivery service in the U.S., and VR for cats! Amazon revealed one of its biggest, longest-kept secrets — the company has more than 100 million Prime members globally. In his annual letter to shareholders, CEO Jeff Bezos also said that the 13-year-old subscription service has shipped more than five billion items worldwide, and that the on-demand, ad-free Amazon Music streaming service has “tens of millions of paid customers” — compared to Spotify’s 71 million and Apple Music’s more than 40 million. [Dan Frommer / Recode] [Want to get the Recode Daily in your inbox? Subscribe here] In the latest pact between frenemies Amazon and Best Buy, the electronics retailer will be the exclusive brick-and-mortar sales channelfor a new line of TVs equipped with Amazon’s Fire TV streaming video capabilities and Alexa voice assistant technology. Amazon gets broad distribution for its technologies in a physical setting, and an outsourced group of sales associates to help shoppers learn new technologies. Best Buy shoppers will get access to exclusive products that might lure them inside its stores, even as Amazon introduces new services that compete with Best Buy. [Jason Del Rey / Recode] In a Washington, D.C., court, Time Warner CEO Jeff Bewkes defended his company’s planned merger with AT&T as necessary to compete with Google and Facebook. The trial, which began in mid-March, is expected to wrap up this month. [Diane Bartz / Reuters] Uber whistleblower Susan Fowler is using her platform to help end forced arbitration, which blocks workers from suing their employers. Fowler, the former Uber engineer who exposed the company’s toxic culture of harassment and sexism, is working with the California Labor Federation on a new bill that would prohibit companies from making it a condition of employment that employees agree to settle any issue in arbitration. [Johana Bhuiyan / Recode] Top stories from Recode Uber Eats is the fastest-growing meal delivery service in the U.S. But GrubHub is still by far the biggest food delivery company. Elon Musk still hasn’t decided what to do with board member Steve Jurvetson after allegations of misconduct The venture capitalist sits in limbo even though DFJ’s investigation has concluded. Verizon’s Oath has hired a COO from Alibaba, and its top media executive has left. Simon Khalaf is out; K. Guru Gowrappan is in. FuboTV, an online TV service, has raised $75 million from TV programmers and other investors. Fubo charges $45 a month for 70-plus channels and says it has more than 100,000 subscribers. Snap is putting ads that actually look like ads into the Snapchat camera. These new Snapchat ads won’t blend in as well as the old ones. Rex Sorgatz’s new book is a romp through lies, hoaxes and conspiracy theories — perfect for the internet in 2018. On the latest episode of Recode Media with Peter Kafka, Sorgatz says, “It’s as close as you can get to an interactive book.” This is cool Cyberpunk VR headsets. And VR for cats!

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posted 3 days ago on re/code
The venture capitalist sits in limbo even though DFJ’s investigation has concluded. It has been five months since Tesla and SpaceX placed board member Steve Jurvetson on leave, and Elon Musk’s companies have still not said whether or not he will remain on their boards of directors. After the venture capitalist was ousted from his firm, DFJ, in November following questions about his personal conduct, Tesla and SpaceX said Jurvetson would take a leave of absence from both boards “pending resolution of these allegations,” according to a statement at the time. But now DFJ’s investigation has concluded, according to people familiar with the process, and Musk, who counts Jurvetson as a close friend, still hasn’t offered a decision. Representatives for Tesla and SpaceX have been declining to comment beyond their original statement. Jurvetson and DFJ declined to comment for this story. Jurvetson was the target of a DFJ investigation into his personal conduct last fall. DFJ found, in part, a pattern of dishonesty with women, sources told Recode at the time, including extra-marital affairs that, in the eyes of some, crossed into the professional world. Jurvetson was eventually voted out of the firm in the middle of its investigation, and he has since sat in limbo in Musk’s orbit. Three different corporate governance experts told Recode that this long of a leave is rare for a board member except in the case of a serious health issue. “This is quite unusual,” said Espen Eckbo, the head of Lindenauer Center for Corporate Governance at Dartmouth. Some clarity could arrive in the next few weeks: Tesla will soon file its definitive proxy statement with the SEC. Jurvetson, who has been on the board since 2009, was nominated to a three-year term last year, and the proxy could offer an update on his status. As a public company, Tesla’s board is officially elected by Tesla’s shareholders. The situation at SpaceX is different as a private company: DFJ would traditionally have some right to nominate someone to the seat as a condition of its investment into SpaceX. But the relationship between SpaceX and DFJ, sources say, is very much a relationship between Musk and Jurvetson specifically. Musk also holds super-voting shares that, according to a copy of the company’s 2017 Certificate of Incorporation obtained by Recode, give him extra power in corporate decision-making, Some SpaceX investors have said they have detected little urgency from company leadership over the last few months to fill the slot, which isn’t critical to company operations. And for DFJ — even without Jurvetson — a different partner, Randy Glein, serves as a non-voting board observer at SpaceX, giving the firm and their limited partners some visibility into its most valuable portfolio company, which is now worth about $25 billion. The firm though, eager to protect its sensitive relationship with the serial founder and celebrity CEO, is giving wide deference on the SpaceX board seat to Musk, according to multiple people familiar with the firm’s thinking. Musk has yet to publicly say anything about how he feels about Jurvetson’s conduct over the last five months except to characterize his attendance at a controversial party hosted at Jurvetson’s house. Musk did not respond to a request for comment about whether he wanted Jurvetson to remain on the boards. DFJ though has stayed on Musk’s good side enough that the firm was able to invest in SpaceX’s new $500 million round and was even able to make sure that DFJ’s own investors, or limited partners, could directly finance the company as well, according to a person with knowledge of the round. It is always messy when an investor leaves a venture capital firm — but especially so given the acrimonious parting between DFJ and Jurvetson. Venture firms typically have to figure out how to handle management fees, firm governance and board seats for portfolio companies. Investors sometimes represent their old firms on boards even after they’ve left. DFJ was at first slow to permanently replace Jurvetson on his other, lower-profile board assignments, according to people familiar with the firm’s activity. But since then, DFJ partners have taken over all but three of Jurvetson’s board seats and apportioned the portfolio between them, according to DFJ’s website, with at least two of his seats going to Heidi Roizen, for instance. Yet as recently as late February, Jurvetson was named but still not signing Tesla documents filed with the SEC, suggesting that he has not yet been restored to a position of governance. Jurvetson is still listed as a director on Tesla’s website. Jurvetson remains an “active member” of the board of a third DFJ-backed startup, quantum computing company D-Wave, which confirmed to Recode that he is not on leave there. Despite the drama, Jurvetson has been marketing himself as a current member of the three company boards. He has attended SpaceX and Tesla events as a VIP, according to social media postings. The website for his new venture capital firm read two weeks ago that he “currently serves on the boards of SpaceX, Tesla and D-Wave.” But that sentence has since been deleted.

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posted 3 days ago on re/code
Sorgatz says, “It’s as close as you can get to an interactive book.” Rex Sorgatz says his new book “has a Wiki-hole quality to it.” The best way to read “The Encyclopedia of Misinformation,” he says, is to open it to a random page, read an article and then see where the footnotes at the bottom of the page tell you to go next. “I think of it as, ‘As close as you can get to an interactive book,’” Sorgatz said on the latest episode of Recode Media with Peter Kafka. Topics covered in the humorous-but-painfully-relevant encyclopedia include knockoff handbags, chemtrails and false-flag operations. Sorgatz said half of the entries were written before Donald Trump won the presidency, causing the other half to take a decidedly less playful tone. “I had a lot of discussions with my editor and my publisher about how ‘Trump’ this should be,” he said. “I erred on the side of not including him very much. I tend to think of him as a ‘Zelig’-like character. He pops up in weird places, especially in footnotes.” You can listen to Recode Media on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. On the new podcast, Sorgatz said he and his editors aren’t the only ones wrestling with the Trump question. “The big question” in the book industry at large, he explained, is how much to acknowledge the president’s relevance to topics that might have once seemed purely historical. For example, “The Encyclopedia of Misinformation” includes an entry on Huey Long, the notorious populist politician whose rise in 1930s Louisiana inspired the Robert Penn Warren novel “All the King’s Men.” Sorgatz was very aware that Long’s life was eerily similar to Trump’s, but decided to keep the T-word out of the entry. “I do that a lot in the book, where I don’t say his name,” Sorgatz said. “The reader has to come to the conclusion that this is very relevant to our time, and that history is rhyming.” If you like this show, you should also sample our other podcasts: Recode Decode, hosted by Kara Swisher, is a weekly show featuring in-depth interviews with the movers and shakers in tech and media every Monday. You can subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. Too Embarrassed to Ask, also hosted by Kara Swisher, answers all of the tech questions sent in by our readers and listeners. You can hear new episodes every Friday on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. And finally, Recode Replay has all the audio from our live events, such as the Code Conference, Code Media and the Code Commerce Series. Subscribe today on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. If you like what we’re doing, please write a review on Apple Podcasts — and if you don’t, just tweet-strafe Peter. Tune in next Thursday for another episode of Recode Media!

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“I believe data — your own data — is yours.” On this episode of Recode Decode, hosted by Kara Swisher, BlackBerry CEO John Chen talks about how the once-pioneering mobile phone company has happily pivoted into a new business model, focusing on enterprise security and embedded technology for connected cars. You can read a write-up of the interview here or listen to the whole thing in the audio player above. Below, we’ve also provided a lightly edited complete transcript of their conversation. If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as someone who actually had a BlackBerry in my hand when I was having my son 16 years ago, which was a really problematic thing for the doctors, but in my spare time, I talk tech and you’re listening to Recode Decode from the Vox Media podcast network. Today in the red chair is John Chen, the CEO of BlackBerry. Before joining BlackBerry in 2013, he was the CEO of Sybase. He also serves on the boards of Disney, Wells Fargo and the National Committee on U.S. China Relations. We’ll have a lot to talk about there, John. John Chen: Okay. Welcome to Recode Decode. Thank you. So, we talked on the stage at the Code Conference — or All Things D, I guess, back then — when you got there, when you first got there. Let’s review your background really quickly for people who don’t know you. Then talk about what you’ve been doing at BlackBerry since. Okay, my background. Well, I was born in Hong Kong, grew up in Hong Kong. Came over to the United States for school, went to Brown University for an electrical engineering degree. Went to CalTech for my masters in electrical engineering. Pretty good places. Decent schools. I started working in the United States as an engineer, designing microchips, microelectronics, for a company called Burroughs. I remember Burroughs. Then it became Unisys. I then left and went to a company called Pyramid Technology. As you know, in those days, when the Unix box was supposed to replace all the IBM mainframes at the time. That was true. The downsizing, the rightsizing movement, the open systems and all that. So, I went there, and then they sold that company to Siemens, being part of the Siemens Nixdorf board. Stayed at Siemens for a couple of years and worked out of Munich most of the time. That’s where my office was. It was actually pretty ... I always like to tell people I have the longest commute, San Jose to Munich, which I did travel back and forth a lot of the time. Anyway, 1997, decided to return back to the Bay Area and ran into people at Sybase. And Sybase was troubled at the time and was a relational database company looking for the next chapter, so to speak. I like to call it the next chapter, I don’t like to call it a turnaround. I know. I can’t wait to get to BlackBerry. Anyway, so we did okay there, we were the first one that got into mobile and the mobile databases. Then sold it after 11 years later, sold it to SAP, a merger with SAP, at a pretty good return at the time. I stayed there for a couple years to help integrate it and then went to being an adviser for Silver Lake, the private equity firm. That’s how they dragged you in, okay. At Silver Lake, we look at all kinds of companies, including looking at BlackBerry ... It was Research in Motion, right? It was called Research in Motion. Yeah. I was looking at it as a potential tech private candidates. Like Dell. And it didn’t work. The same year I did Dell, by the way. It didn’t work. Why didn’t it work? Well, it was a company that was losing market share, burning a lot of cash, there was no stability on the revenue, and so this is not a PE model whatsoever. Right. I got interested in the company, got spoken to — or recruited — a number of times. What interested you? Obviously, BlackBerry was such an iconic company and it was Canada’s pride, of course, that it was up in Canada. Was it Waterloo? Waterloo. Waterloo, that’s right. Yeah, Waterloo. The CEO had been onstage at our events a number of times, the founders. One of the things that struck me was that they sort of were really far out front early on, and then lost the race really quickly. Right. Lots of technology. In the early 2000s, right? Yeah, lots of technology. I think 2009 was the best year ever, the company was like 80 billion in market cap, what today seems small but in those days were big. Right, yeah. 80 billion, and I think the revenue was about 20 billion, so things were going relatively well at the time. What interested me in the company ... Their messaging was way ahead of everybody else. Yeah, the BlackBerry Messenger was way ahead of everybody. What really attracted me to the company’s technology, yes, it’s an iconic company and it’s not only iconic in Canada, it’s iconic globally. Of course. On top of that, like everybody else, I grew up with BlackBerry, I had my ... I grew up with a pager, by the way, a RIM pager. Right, the RIM pagers, so did I. And then I grew up with BlackBerry. It was called the crackberry. They called it crackberry. Still in Washington, it remains the crackberry. Yeah, sorry. Exactly. I thought, in looking at technology and because I had an engineering background, I was really impressed with not only the technology know-how, but the patents, the way the innovation was being conducted, despite of the fact that the business fell apart ... It’s a consumer business. ... for good reasons, but it was really a great technological company. I thought the world deserved ... This company deserves to be around. All right. I always look at companies and say, why is this company around? Is it deserving to be around? Survivor. It has a meaning. Deserve to be around. So, you went there despite all ... You went there right in the face of a lot of headwinds at that point. I think it was close to the end. Yeah. There was a sale, it was all kinds of stuff. Yeah. It was the sale and the bad part of it, it was the sale and no buyer. I thought it was like, “Oh, okay.” Here’s the thing: After I’d run Sybase for so many years, a public company, I kind of took the “running a public company, being a public company CEO,” off my bucket list, because I wasn’t going to do this anymore. Right. So, there were a number of companies calling me after we sold to SAP, and I find it ego satisfying, maybe I should use that word, but it wasn’t really exciting. I thought a lot of good people around could run decent companies, I wasn’t thinking about doing it anymore. I actually thought about starting my own company or actually going into different areas, politics or writing a book or even teaching, for that matter. I wasn’t going to run another company, so to speak. When this case presented itself, I thought, A) it has a soft spot in my heart, being RIM, BlackBerry. B) the technology was very impressive, you still have a lot of impressive technology. C) I thought, “Hey, this is almost virtually impossible, maybe, and it’ll be fun to be able to do that.” At least I felt like ... Now downside for you. Yeah, the downside that my good friends tell me were, “If you stay there long enough and it failed, then it’s on you.” Right, but if it didn’t ... When you got there, what did you want to do right away to stabilize it? Because I think a lot of Silicon Valley stories is all about the success, but it’s how you deal with crisis, and I think Facebook’s in that position right now, there’s crisis now. How did you stabilize the situation? I did two things. The first very fundamental thing is that you have to stabilize the financials, but you take that as ... That’s survival, you take that aside. I think you need to have ... How many employees did they have at the time? About 8,000. Okay. You have to get the employees, I was just getting to the point, but you have to get the employees feeling that there is a future, that there is a level of confidence there. And you know you can’t run the same play because the same play is what got us here today, but that’s the most comfortable play. What was the play? Building more cellphones. Right, or consumer, aiming at the consumer? Aiming at the consumer. In fact, it’s really funny, BlackBerry never had a sales force aimed at the consumer. BlackBerry had a sales force that worked with all the telephone companies around the world. We do two things. A) we sell phones through them. B) we interconnect all the networks together, globally, around the world, and they’re done in a very secure fashion. Those are the two things that BlackBerry really does. There is not a sales force, there’s not a person calling on a bank, there’s not a person calling on an enterprise, it’s only that. Even when we sold to the government, the government buys ... They buy through telecom, or T-Mobile in this case, or Verizon, AT&T, and so forth. So the first thing was to not do what they were doing. So what did you imagine they were doing wrong at the time that you had to shift? Because people are comfortable doing the strategy. Right. Well, I think first of all, we were very late onto the application space. Absolutely. Very late. Yeah. Internet space. If you remember, you and I both used BlackBerry before, right? Right. We don’t have apps. Right. Then we were late on apps. Then we didn’t really embrace the whole world of web browsing as early as we should be. Right. The early days of BlackBerry, it takes a long time to load a page, for example. Remember that? Right, exactly. Yeah. Now, however, I have to defend the prior management a little bit. The reason of the lack of apps in the very beginning, it doesn’t mean it’s right, but it just happened to be, it’s really more focused on security and privacy. Right. Because they didn’t want to open the API to everybody. Right. We are used by the presidents of the world. It’s an interesting debate, maybe it’ll come back our way this time ... Now, right, yeah. Maybe. It’s an interesting debate, but we kind of shifted away from what the customer wants, even for, in our mind, for their own good. So, that’s No. 1. The No. 2 thing is interesting, too. You remember we talked about the web browsing being very slow? Yeah. Unsatisfying? Well, it was an attempt to save money for the customer like you and I. So you didn’t have to use as much data. What we do is, we do buffering. Instead of having a continuous connection, we do a buffer. That’s why, remember the days when half a page would load, and then you have to wait for a little bit, and then the other half of the page will load? Mm-hmm. It’s like the 2K buffers, in each of the buffering. Now the idea of that is because the data plans are very expensive ... They were. ... the roaming plan is outrageously expensive, and the network was kind of, a lot of times, doesn’t perform consistently. Right. This was designed ... To protect that. And then Apple changed everything. Right, and then Apple changed everything. Remember in the early days of Apple, it kills that battery, remember that? Yeah. And it costs outrageous. The costs were high. I remember being with a Google executive who had spent $10,000 in China, and he was complaining, said I should write a story. I said, “Nobody cares about a stupid Google executive who’s rich.” Yeah. Who’s dumb with his fun. It was interesting, I remember the costs being enormous. Enormous, yeah. It was directionally correct because Apple forced down the prices. Exactly. I think, again, there was a technological reasons, there was a customer reason and there’s a business reason that teaches us a lesson, that you can’t really emphasize any one of those three more than the other. Right. That causes disruption. Anyway, long story short, I came in, I look at the business, we’re still trying to make phones, and now we lost volume and we lost the BYOD world. We let Apple and Android get into the handset space. Things that I helped the company do was to go completely open systems. Instead of fighting iOS and fighting Android, we tried to embrace their community, so we’ve made our technology, security and software that could run across it, including a messaging BBM. In some cases, it’s still a little late, the market has kind of gone on, but at least in this way we have a much bigger available market. How hard was that to do that? Because it’s hard to shift a culture, because that was a very strong culture under its founders, as I recall. It’s very hard. Yeah. It’s very hard. So, what are the things you did? Well, first of all, we made a number of acquisitions. We have to change a number of managements, and a constant communication, we call it the Town Hall. We have a lot of Town Halls, by myself, by my direct reports, by their direct reports, and in fact, sometimes, in the past, I remember some employee will say, “I’m Town Hall fatigued. There’s so many Town Halls.” Too much information. Right, people keep saying that. So you kind of say, “This is the strategy.” We come up with one first and then we say, “This is the strategy,” and then you tell them the strategy, then you tell them again, and tell them again, until they say either, “I buy it,” or, “I’m moving on.” “Stop talking about it.” Right. “I’m moving on,” right. The strategy you were trying to embrace was this open ... Can you explain that just a little more? Then when we get into the next section, I want to hear what’s going on now there, because I think most people don’t have BlackBerry at the top of their mind. Okay. The strategy really is, we took everything that we’d done well in building a handset. If you think about BlackBerry handsets, the first thing that came to your mind is security, reliability. Right. Durability. Durability. Productivity. So, I remember people telling me they could write a script on a BlackBerry, and entire script of a movie on a BlackBerry. If you think about that, behind ... I kind of click one level down and say ... And they like the keyboard. The keyboard. And they love the keyboards. That’s productivity. Right. The keyboard gives you accuracy, gives you all that, and give you a look-ahead. So, our keyboard has the best learning, self-learning capability, and look-ahead and get you the right words. Right. Anyway, so we took all that, you click down one level and say, “What are the technology, what are the patterns that supported that? That enabled that to happen?” Then we took that and say, “Okay, let’s make that a business.” So we built a software version of a hardware, if that makes sense to you. Absolutely. We employ everything we do that is in security, reliability, productivity, durability area, we do everything we do there and make it a software platform for people to manage endpoints, which we could talk more about. Right. When you said security, I want to get to that in the next section. The idea of security now, as you said, has come back around, this idea of privacy, security and everything else. How do you look at that? You, obviously, that was pretty much BlackBerry’s ... The keyboard and security were pretty much its strongest ... Yeah, exactly. Yeah. That’s exactly what we did. We think about the best thing we do is to manage devices. If you think devices in a broader sense, it’s the endpoints. So we said, okay, we’re going to make the endpoints and we’re going to open up managing not only BlackBerry, but everybody’s endpoints, including phones, tablet, PCs, equipment, blah, blah, blah, blah, blah, medical devices and so forth. If you think about the world of endpoints, and we build a platform, software platform, to manage that endpoint and manage it securely. This is how we imported everything we know how to do in securing a phone into securing an endpoint management software. Right. This is where we are today. We’re going to take a quick break now for a word from our sponsors. We’ll be back in a minute with John Chen from BlackBerry. [ad] We’re here with John Chen, he’s the CEO of BlackBerry. He’s talked about taking over BlackBerry four years ago when it was in a lot of trouble. Talk about where it is now. How many employees do you have? You said you had 8,000. Yeah. We now have about half the size. Half the size. About 4,000. It’s located here? Well, still, our headquarters is still in Waterloo. In Waterloo. It’s still a Canadian company. A majority of our engineer [team] is in Waterloo, Mississauga and Ottawa. So you live in Canada? No, I live in the Bay Area. We have about 600 people still in the Bay Area. Through a number of acquisitions we made, we bought a company called Good Technology, we bought a company called Ad Hoc, and WatchDogs, so we bought a few companies. That’s part of the implementation, the strategy we talked about earlier, building it organically and building it inorganically. Talk about what you do now. How would people talk about and interface with BlackBerry now? Your main areas of business. Yeah. I have three businesses in it and they are interrelated. The most important business, or the biggest part of the business, is called endpoint management, we call it the unified endpoint management. This is the secure ... The security. This is to help enterprise to manage their devices, everything that connects to the internet or their own private network, to manage those devices and the application deployment of those devices. That’s the most important thing. These are the banks and the G7 governments and law firms and hospitals. Right. Okay, so those are that. The second one, which catch a lot of peoples’ fancy, was what I call the embedded technology. Embedded technology, we are actually in 60 million cars out there running around, automobiles, and we are very early in the connected space. I have to give you a little bit of a history back. Sure. Before my time, we bought a company called QNX which happens to provide ... From Harman, the people who built ... Yeah. Oh, okay. It’s part of Samsung now, but it used to be Harman. Bakers. They built components for cars, so they are called a tier one. Their customers would be like the Ford, the GM, the Mercedes ... Big spenders. Right, the auto vendor. So, we bought that company from them because they claimed to that company that they had the most secure microkernel technology, which is operating systems. The idea was to take this operating system, put it in things, happened to be cars in that case, and secure it. The reason why they, one of the founders, actually, was an engineer who bought this, the reason why they bought it was they were going to create a new operating system for the phone, the most secure phone, it’s called the BlackBerry 10. This actually came out as a product. When I came in, I thought the phone business had limited runway, I thought the car business had huge runway. Right. So, we decided to switch back into cars, to focus on cars. It has always been in cars, but to kind of add focus and add investment, and instead of only doing things like infotainment systems like maps and all that, audio equipment and so forth in the car, we branch out, we added to it like safety systems and virtual cockpit and over-the-air technology, hypervisor. A lot of things to do with safety and security of a car, and telematics. Now, instead of just doing infotainment, we now have 10 or 12 different modules in a car. This happened to be one of our highest growth areas. If you do a search on maybe the last six to 12 months’ worth of press releases, and the announcement wins, we partnered with Baidu and Qualcomm and Nvidia to build the connected cars and the future autonomous platform. Now, this week hasn’t been too kind to us ... No. ... because of a lot of happenings in the car area. Right. The accidents, you mean. The accidents, yeah. We could talk more about that. We actually have two cars being tested. Yeah. That’s the second part of the business. The third part of the business is, take a lot of the stuff that you talk about, like keyboards and all that, and building phones and the operating system behind it and security and all that, we license it to people. That’s our licensing business. What happened to that lawsuit with Ryan Seacrest? Ryan Seacrest? They lost, so they stopped making it. Yeah. It’s not because we agreed on a royalty base, it’s that their business wasn’t doing well. Right, right. People did like it. The people who loved it, liked it, but it was kind of funny that people were trying to mimic the BlackBerry. I remember him showing it to me, I’m like, “Do you have rights to this? What?” Good question. Yeah. I should call you as a witness. He kind of left that one. Who do you license that to? I license to a company, like one company in China called TCL, they’re building phones for obviously a lot of different markets around the world. I have a company in India called Optimus, it’s one of the top three cellphone companies over there, and we license the technology and they’re building a BlackBerry over there for the Indian market. The BlackBerry brand. Yes. Yes. How many BlackBerry phones are on the market now? That’s not part of your big business, right? No, it’s not part of my big business. Right now, we still have ... These are people making BlackBerry phones. We have a bunch of people making BlackBerry phones. Some of them are BlackBerry labeled because you can’t touch the operating system if you use the BlackBerry label because I manage the brand and the security, but you could also license the sub-component of ours underneath it. Under it, right. And then you ... Use your own brand. Yeah. Phones you make no longer, right? No, we don’t. We haven’t made phone for the last ... Yeah. Yeah. You just stopped. No, we had to make our own phones. Would you ever imagine getting back in the phone business, making it? I would never say never. Right. The interesting thing, some people are asking me ... Polaroid, right? Retro. Right. Yeah. You know, actually ... No, I could buy a BlackBerry. You’ll find it very interesting, I’m not suggesting we’re going to make phones. For the foreseeable future I think our strategy works pretty well right now and we will continue executing it. I think there might be a need in this world for a phone that is very simple and just focused on email, text, secure email, secure text, and a basic browser. Do you go to Washington a lot? Because everybody has a BlackBerry there, it’s very funny. It’s as if your company was the top company in the world. I go to Washington a lot, yeah. Yeah, it’s funny. You’ll go to a party and you’re like ... They all have BlackBerrys, yeah. Though it’s shifting, they’re definitely moving to iPhones. But they are still all using our software. Absolutely. We have about four million federal employees on the software. Wow. Right. I want to talk a little bit about that, but before that, you also have a thing called Jarvis, can you explain that? Jarvis is our latest cybersecurity two sets. Again, it comes from the collection of our technology in the company. It’s a binary co-scanning algorithm software. It’s cloud based, so you build up a set of rules and then those rules, you could modify, it could learn by itself, it could build up. It looks into complex coding, but I don’t need the binary, I don’t need your source code, so it never will violate your IP. It’s looking for certain patterns and then it will identify, say, “Here’s a piece of code that has too many loops in it, too many subroutines, too many branches,” so forth. You and the developer and the manager could decide whether this was something that they intended to do. There are a lot of scientifically proven algorithms that when you have codes that are more complex, you open up more vulnerability windows, people could come in and attack it. Our job is to find those windows and identify those. Right. Is it named after the Ironman Jarvis? Yeah. It happened to be the same. The Ironman Jarvis is the butler ... Right. That’s right. That’s right. ... is a computer butler for ... Robert Downey Jr’s character. Right, right. I’m trying to remember his name. Tony Stark. Tony Stark, yeah. Yeah. Larry Ellison, Elon Musk, whatever. That’s right. Yeah, exactly. Anyway, we have been calling it Jarvis ourselves, too, for a long, long time. This is, again, before my time. Right. It’s something that we used internally. We expanded it to be able to take the rules for our customers, like a car manufacturer, and then we were going through all this complexity of the code, and then we generate reports for them and identify areas that could be better managed, closing the vulnerability windows and so forth. It’s not only for cars, but we released it for automotive at this point, but we have plans to do it for other areas like the medical field. Which of these areas that you’re in right now do you imagine being your most important? We’ll get to the future in the next break, but what do you spend most of your time on? Because you do have, what, tens of thousands of patents, correct? About 40,000 patents, yeah. 37 to be exact, 37,000. How do you work that part of the business? Because that’s got to be a big part of your business. Yeah. I always like to tell people that we do go license our technology to other people and patents, we have some high-profile win cases and some cases on the dock, but we are not interested in just lawsuits or being a patent troll. Right. I call ourselves ... You could. We could, but that’s not ... Being an engineer for so long, I have much more respect on the other side of the equation. I like to focus ourselves on being innovators and patent creators than expensing ... You’re using your ... Right, using the patent. On the other hand, being a public company CEO, I have a responsibility to maximize the assets. What we like to do always is we like to approach companies and say, “Hey, we would like to license our technology to you, and some of them, by the way, you might be using already.” It depends on who they are, some of them will say, “Yeah, I agree. Let’s work out a business term.” Some will say, “No, over my dead body,” and then ... We’ve tried many different ways, some we just leave it alone, and some we will go after them. It’s part of your business, but not the focus. Again, it could be a bigger part, right? Yeah. Not my focus. Have people come to you, trying to buy your patents? A number of times. A number of times. Patents is also very important for us to defend our own business, so it’s not that I sell my patents. Right. Of course, you could always make an arrangement, but we’re not a patent company. Patent company, right. We are a technology company that creates patent, employ our patents, to create businesses. Itself is not a business. What is the biggest part of those three businesses that you have? Endpoint management. Right. The fastest growing is the embedded software, the cars. Right. The cars and stuff like that. All right, when we get back, we’re going to talk more about the future of cars and security because it seems like right now is your time, John, because these are the issues that are popping up in a popular sense with Facebook and Apple and others. I think you should do a BlackBerry phone, but we’ll talk about that when we get back. We’re going to take another break for a word from our sponsors. We’ll be back with BlackBerry CEO John Chen after this. [ad] We’re here with John Chen, who’s the CEO of BlackBerry. We’re talking about where their business is today, but I’d like to talk about the future. Let’s start with security. Really a big issue, hacking, Russians everywhere, how to protect things, emails. Looking at this election where the email’s stolen and everything sort of pulled off of every kind of place, largely mobile, I think. Talk about where that is right now and how you all fit in, in general, how you look at the security space right now. Okay. I do agree with one of the statements you just made. I think mobile security is probably now the biggest threat. I think that industry at large had a pretty good handle on network security blasted through the routers, or fixed-point security as in PCs and so forth. I think the mobile, it’s just the beginning of the ... I think we’re talking to two different things. One is about security of protecting ... security of the devices and the code that is inside. The other one is actually exploiting the code, and so those are the privacy issue. I’m going to focus on just security. I don’t really deal with the privacy issue because we never use people’s data. We have a lot of data going through our network, but we never ever use it. Why is that? Tim Cook talked about this in my interview with him last week, that it just wasn’t our business, and we could have made a lot of money doing it. You had a lot of names, why wasn’t that your business? Well, it opens up exactly what is being opened up today. Right. I personally believe that ... I will just take me as an example. I believe that my medical data is my medical data. My voting data is my voting data. My preferences is my preferences. If there’s anybody who’s going to monetize or benefit from it, it should be me. Right, right. You should be paid for it if you want to sell it, or whatever. At least I have a choice, whether you pay me, I want to sell it, I don’t want to sell it. You have the choice. I have the choice, but today, there seems to be an industry goes around that they eliminate that choice by providing something else. Free service. In exchange for that. Perhaps called Facebook. I don’t subscribe to that business model. I believe data, your own data, is yours. I wouldn’t say it’s a moral imperative, but it’s what you are. Tim talked about this, Steve Jobs talked about this, privacy is sacrosanct, you don’t trade on this, or you don’t make a business out of it, because it creates not just that it’s a thing you believe in, but it creates enormous problems later if you don’t have the correct security in place. Exactly. Also, the policy and guidelines are much more profound and involved than most people think. My job is to make sure you have a safe environment when you use my product, software or hardware. That you protect your own privacy and security. You have a choice over your own data and privacy security. That’s my job. My job is not to exploit what you put in there. Right. I think that’s, to me again, not my cup of tea, but that’s different people with different preferences. Right. What’s the problems when you take that job on? Because you have a lot more responsibilities, which most of them aggregate. Exactly. It’s like a bank taking people’s money, you have a lot more responsibility to make sure the money is safe. Right. It’s not as ... I only provided you the vault and making sure that your money is yours. Right. Having other people that could use your money, that’s ... Right, that’s a different responsibility. It’s a different ... It’s really interesting because a lot of the stuff about companies like Facebook is, “Well, we don’t want the responsibility of dealing with this, we don’t want to make the choices.” I was like, “You built the thing. You built it the way you built it, and then you don’t want to make the ... Then don’t build it that way.” Right. Exactly right. Exactly. Yeah. So, talk a little bit about mobile security. What happens now? From your perspective, you are making the vault, so what happens right now, or what’s the real pain points or the points that you’re worried about? Security is always a cat-and-mouse game. We’ll come up with algorithms that better secure both software and hardware, and the environment, and some people will hack into it. We’ll just make it difficult for them to hack in, and then when we identify the hack, we’ll cover that, that warning birdy, so to speak. We’re doing a ton of work with that in the automobile side of the equation. A big part of this whole environment, maybe I could call it, is analytics and identity management. That’s where most of, all of us — and I don’t mean all of us at BlackBerry, but all of us in the industry — are working on, which is a better analytics to trap potential vulnerabilities and threats, as well as have identity management so sophisticated that it’s going to make it harder and harder to crack. Right. Those are the two areas. What are the areas you worry about for consumers now, when you think about that? I think it’s attitudes. Still, we have a lot of people that minimize the importance of identity, privacy and security, data security. It’s, again, in exchange of maybe free services and application, or make their life more fun ... Games or ... Yeah, games, or even just sharing. A lot of the time, I wonder whether sharing your ... I don’t share my locations, and I wonder whether when I post the pictures and show you my family vacation, for example, everybody feels great about that, but that means at your home, it’s wide open. Right, right. Right. This might be too ridiculous an example. Not really. And your audience may say, “Hey, you know ...” “What’s the difference?” “What’s the difference?” and stuff. Or you tell the post office not to deliver mail, don’t you think the postman already knows then? Right. There’s always a give and take in that area, but I try to intend to be a little more private and more protective of my data. Does Silicon Valley have that mentality enough or does something have to change with these new crises? We are changing. It’s just the last two weeks ... Right, it seems like it’s the older people saying that, not the younger versions. Although, it’s interesting because the older people — not the middle ones, but the really young people — care. My kids are like, “Don’t take a picture of me.” They’re on Snapchat, so it disappears, or they have much more control over it. They won’t use Facebook because of the sharing. It’s really interesting, and my kids are in their teens. They are very much like, “Back off, Facebook. Back off, Google.” It’s an interesting ... That’s interesting. I don’t have teenagers anymore. You’re right, you’re absolutely right. My kids are still using it, so maybe through all these discussions going on, they might think twice about it, I don’t know, I haven’t discussed it with them yet. Like you said, the older folks, we’ve been wanting this. By the way, this is not that new of a discovery, it just happened to have a situation that caught the national attention. It’s always ... There was an election, yeah. Yeah, because of elections. It’s always been something of a concern to older folks, if I can use that word. Right. What do you imagine will happen to the ... I asked Tim this last week, what would you have done if you were Mark Zuckerberg? What would you do? After the ... Yeah, he said, “I wouldn’t get in the situation in the first place,” which was kind of a nice smack at [Mark Zuckerberg]1, but what would you do now? What would I do now? Well, I think he is, from what I read, he is trying to do the right thing. He has to do the audits of what actually have happened, and then close those windows. They’re out. The birds are out, the bird’s gone, that’s the problem, they can’t get the data back, correct? You can’t. The people said they deleted the data, but they never deleted the data or where at, and so that is unfortunate. Going forward — I’m sorry to say, there’s not much you could do for things already happened — but going forward, you’ll be able to build the system that restores that level of confidence. Does that go against the whole what has been happening in Silicon Valley over the last 10 years — which is sharing, sharing, open, open — does that go against that? Yes, it does. So what happens to the businesses? I don’t know enough to answer that question, but it does. Again, I don’t think you could have it both ways. Right. What about in the cars? Now, obviously, this week there’s been some accidents. Which, look, there was 10,000 regular car accidents in the same day with people driving, but that doesn’t matter, people are focused on these autonomous cars if there’s just one, which there’s going to be many, many, many over the years as they continue to iterate. Talk about the challenges there as you look at the single one. 1.3 million people die in car accidents every year. I don’t want to minimize the single one, it’s very tragic, but it’s a little bit of a wake-up call for all of us, that governments need to set a certain standard, safety standard, before even the tests should resume. I think, as a technologist, this is troublesome to me because without certain safeguards, we’re now signaling to the world that maybe these technologies aren’t ready for primetime and it’s not safe. Now, the funny thing, I had that discussion this morning with somebody. All these 1.3 million fatality and all the countless number of accidents that surrounded it that doesn’t have fatality, you and I are driving, and we feel it’s in our control, but when you and I get into a car, a vehicle that you and I aren’t driving, and decide to hit the center, you don’t think it’s in control. If you ever have that feeling, that technology will not take off. Right. I don’t care how I could show you ... It’s much safer and everything else, yeah. 90 percent safer. It doesn’t matter, it will happen. What happens to the industry? Where does it go next? Should it not be on the roads right now? Because at some point they have to be on the road. Absolutely, at some point. You can’t have a vehicle that is supposed to be on the road and you don’t test it on the road. I think the problem we have today is this. We’ve got states setting their own guidelines. Some of the states are quite flexible about these guidelines on testing. Arizona, for example. I think so. They want to attract that business. They want to attract that business, right. I think that needs to be looked at. I think the federal level, and even more globally, globally speaking level, every country’s trying to set their safety standard for what an AV car, autonomous vehicle, should adhere to, a safety standard. I really believe this is what the world ought to be, no cars that could leave the manufacturers without certain standards, and those standard will be set by a combination of private industry, self-regulated, and public policymakers, a national standards body, I think these should be a combination of both. Should it be national instead of states? Because cars have always been regulated by the states. Absolutely has to be national. Has to be national. Do you feel this administration has the wherewithal to do that? Well, I got involved a little bit with AV start programs and have been writing letters to the senators and the Congress people. That’s a very interesting question, I don’t know how to answer your question. I think Elaine Chao is the only non-controversial member of the Trump cabinet, right? Yes. Has she done anything bad? No, she’s quietly over there in the corner with her husband, Mitch McConnell. Yeah, Mitch McConnell. DOT has ... I have had several interactions with them, they have a proposal, but it pretty much gets stuck at the lawmaker right now. Right. I don’t think administration people are slowing it down, but they need to push it, too. They need to push it. They need to push it. What states are good in this area? California or ... California’s are reasonably good. Right. I think New York’s okay. Yeah. I think Arizona is kind of the outlier ... I don’t think this is state ... Right, so yeah, it has to be federal. It’s got to be a federal standard. Yeah. What’s the amount of time, do you think, before there’s going to be real autonomous vehicle use by consumers? Because it’s going to be a big business for you, isn’t it? Everybody thinks it’s going to be the 2021. I don’t think we have a prayer of 2021. I know there might be some autonomous vehicles being available that you and I could buy, but there’ll be very few you and I, in my mind. I think 2025, a hybrid model will work. Now, the one interesting thing is, we built our company based on connected cars, so that’s just the one step before being fully autonomous. Right. The reason why our business is growing right now is because of connected cars. So, I have time. I could afford to wait. You have time to wait, and the connected meaning fully ... Using them in ... We should just call it level four cars. Which is, they don’t drive itself, you could override. Tesla has ... I was test-riding a Tesla. A fully autonomous car I like better than a semi-autonomous car, because I always feel like I want to grab the ... I was in the Google one, I felt better, it feels like a ride. Oh really? Yeah. If everybody has them, as long as they can see pedestrians, I’m good. Interesting. Yeah. I almost got run over four times in Austin this weekend, and that was with regular people driving. Crazy people in pickup trucks. Yeah. Yes. Let me just say, there’s a lot of aggressive men in pickup trucks in Austin, Texas. Literally almost did and I thought, “Wow, I’d rather take my chances with an autonomous car.” The problem is that a car ... I don’t want to digress, but the car usually has a lifecycle of 10 years, plus. Right. Even if we started selling autonomous vehicle today, okay? Right. For it to be fully ... it’d be 10 years from today It’s not going to be until ... John, we’re going to be dead. Yeah. We’ll be dead. Right. Maybe they’ll ride us around in a car. Last two areas I want to get to before we finish. One is making BlackBerrys. This retro idea, what could you do? Would you ever get ... Why not do that? I think actually ... Because you have a secure phone, this is great. Actually, I think I should find a hardware partner to do this. Has anyone expressed interest? I haven’t explored it yet. Haven’t explored it. What would it look like? What would the BlackBerry phone look like? Huh? Would it look like the old one? Like make it real clunky. I would love ... Yes. Real clunky. I think I’m going to ... Remember the 9900? Yes. The boat? I remember, yeah. It fits right in your palm? Yeah. You could just two thumb ... Yeah. Yep. Okay. The little memo, the little ... It was like a pager, almost. It was a pager, right? It was a pager first, right, it was. But with messaging. Messaging, yeah. I think somebody should make that. A big one, like a ... I really do. Maybe Nokia. People will buy ... Here’s the thing, the reason why people will buy it, I think this whole BYOD, bring your own device, in some ways, all the businesses embrace it because they think this is cost ... They are cost advantaged and then they have choices to their employees, which are all great reasons behind it. The ability to manage it in a very secure world ... Is difficult. It’s difficult and almost nightmarish. I think they would love to say, “Hey, for certain people, use this phone. It’s secure, I have audit trail on all your texts or your web browsing or your email. I could recover, I could wipe it, I could do whatever I wanted to do with it, but it’s going to be a work thing.” Right. I think there are a lot of professional would say, “Okay, if I know that my stuff aren’t going to get leaked, I’ll take that.” I believe regulated industry like doctors and lawyers and people that make deals, for example, for investment bankers and government employees, I think they will love that. You don’t make it too fancy, but you don’t make it too expensive, either. I’m making this up as I go. Yeah. No fancy lines and gorilla glass for you, right? Exactly. Let’s say $199 a phone, $150 a phone, you can make a very nice phone if you have very limited functionality but is highly secure, and CIO would love to use it because they could really manage these things. Right. BlackBerry’s back, everybody, just wait. Since you’re an engineer, what do you think the most interesting technology coming forward is? Is it AI, is it robotics, automation, AR? What are you most intrigued by? Don’t know much about AR. Which Apple is obsessed with. I probably think that AI is probably the most interesting thing. Why is that? Well, if you’re talking about robotics, robotics without AI is kind of useless. Right. I think machines will have to have a much deeper algorithm and much smarter, and I think that will open up a lot of different applications in our world. I really believe the artificial intelligence is ... By the way, artificial intelligence has been around for ... Yes. I still remember, I went to graduate school, we were working on a computer program that will learn itself, that will learn through their experience. This was very early on artificial intelligence, and they were looking at ... That program was monitoring database transactions, so they would know that if you asked this question, they most likely will ask that question, and all that. Right. Right. Then they stopped building that experience on logic. Right. So, I still think that’s the most fascinating. The most fascinating. In my mind. In your mind. When you think about that, who do you think is critically ... Who will dominate that area? I know Google’s sort of far ahead. Yeah. I think they do. I don’t know all the details, but I believe IBM is one of the sleepers there. With Watson. Yeah, I would agree with that. John, what is the most hyped thing? This is my last, final question for you, what do you think you look at as an engineer and you’re like, “Oh, come on”? I am very involved in identity management, I think that’s the ... I wouldn’t use the word coolest thing, I think it’s the most necessary thing. Necessary thing, but what’s the thing that people talk about, you think, “That is not going to happen.” Oh, the hype-based things? Yeah. That’s interesting. I don’t know. I’ll give one. I had an argument with my kids this week, they were talking about robots taking over. I was going to say robotics. Yeah. Having said the robotics, I have seen many examples of robotics in medicine ... Surgery. ... robotics in industry, heavy industries. Right. Carrying things, yeah. Right. I’m talking about walking around, like the one Jeff Bezos was walking the other day. Yeah. No, no, I think ... You know what I think? I think- It’d be the most interesting thing, like robotic pets are ridiculous, right? Right. I think we’re going to have humans having robotic elements before we’re going to have robots that are like humans. Why not just add stuff to us and then we have to not worry about how to walk? From a medical point of view, Stanford is doing a lot of things about biomechanical stuff that I’m sure will help people address their ailment. Yeah, their arms and things like that. Yeah. That’s true. I think that’s a great thing. So, John, last question, are you regretful for having taken the job? Do you feel good about having taken this job? Oh no, I feel good. Yeah. I feel good about taking the job. I just re-upped myself for five years, partly because I really believe, on a serious note, I really believe there’s so much ... That BlackBerry is now a safe company, we’re stable and we’re making money. We’re doing what we think we should be doing. The future in front of us, like you said, securities, all the autonomous stuff we were talking about, and analytics and technology and reliability, privacy, are all in our wheelhouse. Right. So, properly executed, doesn’t mean guaranteed, but properly executed, I think there’s a lot of future in this. I’d like to see it get on its way before I move on to do something else. Okay. All right. John, it was great talking to you. Thank you for coming on the show.

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That’s the first time Amazon has disclosed that stat. Amazon just revealed one of its biggest, longest-kept secrets: The company has more than 100 million Prime members, CEO Jeff Bezos includes in his annual letter to shareholders. “13 years post-launch, we have exceeded 100 million paid Prime members globally,” he wrote. “In 2017 Amazon shipped more than five billion items with Prime worldwide, and more new members joined Prime than in any previous year — both worldwide and in the U.S.” The size of Amazon’s Prime subscriber base has long been a topic of speculation and prediction; last year, for example, BI Intelligence pegged it around 80 million members in the U.S. Going back many years, Amazon has disclosed “tens of millions” of Prime members, but Bezos and the company famously obfuscate many stats. Ah, yes, the famous ‘Bezos Chart With No Numbers’ makes an appearance at the Amazon event. pic.twitter.com/ddHpfS70Vb— Matthew Panzarino (@panzer) June 18, 2014 The membership — $99 annually in the U.S. — generally represents Amazon’s best, highest-spending customers, who receive benefits like fast, free shipping, unlimited access to Prime streaming videos, preferred pricing in Amazon’s retail book stores and more. The letter also disclosed that Amazon Music has “tens of millions of paid customers” — compared to Spotify’s 71 million and Apple Music’s more than 40 million. “Amazon Music Unlimited, our on-demand, ad-free offering, expanded to more than 30 new countries in 2017, and membership has more than doubled over the past six months,” Bezos wrote.

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posted 3 days ago on re/code
But GrubHub is still by far the biggest food delivery company. Uber Eats is the fastest-growing meal delivery service in the U.S., bringing in nearly as much new customer revenue as GrubHub. People are now spending more on Uber Eats than on any other food delivery service in nine of the 22 most-populous U.S. cities, according to data from Second Measure, a company that analyzes billions of dollars worth of anonymized debit and credit card purchases. Six months ago, Uber Eats dominated in just three Texas cities: Houston, Austin and Dallas. In the time since, it’s beaten out GrubHub in El Paso, DoorDash in Fort Worth and Postmates in Phoenix, and even Amazon Restaurants in Amazon’s home city of Seattle. if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["UUqBD"]={},window.datawrapper["UUqBD"].embedDeltas={"100":659,"200":539,"300":500,"400":461,"500":461,"700":461,"800":447,"900":447,"1000":447},window.datawrapper["UUqBD"].iframe=document.getElementById("datawrapper-chart-UUqBD"),window.datawrapper["UUqBD"].iframe.style.height=window.datawrapper["UUqBD"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["UUqBD"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("UUqBD"==b)window.datawrapper["UUqBD"].iframe.style.height=a.data["datawrapper-height"][b]+"px"}); However, this isn’t necessarily an example of Uber Eats eating GrubHub’s lunch (or that of other services). Rather, the market for food delivery is growing fast enough that the competitors have plenty of business to gain — and not just from each other. Overall food delivery sales grew 51 percent from August to March, according to Second Measure. Recently, Postmates and DoorDash discussed a merger as a way to fight back against GrubHub (which includes Seamless and Eat24) and Uber Eats, which dwarf them in market share. Combined, they’d have a 24 percent market share — bigger than Uber Eats. Here’s how the market share looks by city: if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["oUFgK"]={},window.datawrapper["oUFgK"].embedDeltas={"100":1059,"200":928,"300":864,"400":864,"500":864,"700":825,"800":825,"900":825,"1000":825},window.datawrapper["oUFgK"].iframe=document.getElementById("datawrapper-chart-oUFgK"),window.datawrapper["oUFgK"].iframe.style.height=window.datawrapper["oUFgK"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["oUFgK"].iframe.offsetWidth/100),100))]+"px",window.addEventListener("message",function(a){if("undefined"!=typeof a.data["datawrapper-height"])for(var b in a.data["datawrapper-height"])if("oUFgK"==b)window.datawrapper["oUFgK"].iframe.style.height=a.data["datawrapper-height"][b]+"px"});

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posted 3 days ago on re/code
Fubo charges $45 a month for 70-plus channels and says it has more than 100,000 subscribers. Here comes more money to help you watch TV on the internet. And some of the money is coming from the TV guys. FuboTV, a startup that sells a cable-TV-like “bundle” of live TV you can stream to your laptop, phone or TV, has raised $75 million from a group of investors that includes AMC Networks, 21st Century Fox and Discovery. Traditional VC investors Northzone and Luminari Capital are also in this round. FuboTV, which had previously raised a total of $75 million, started out as a relatively “skinny” bundle of channels primarily pitched to sports fans (and particularly to soccer fans). It has since transformed into a much less skinny bundle of more than 70 channels, which sells for $45 a month. That puts it in competition with similar packages from the likes of Hulu, YouTube and AT&T; CEO David Gandler says the company passed the 100,000 subscriber mark last fall, but won’t provide a new number. The new round is one of many examples of TV programmers showing interest in owning at least some of the distribution companies that will deliver their shows over the internet. Hulu, famously, is owned by four big entertainment companies; Philo, another web TV startup, is partly backed by A&E, Scripps, Discovery, AMC and Viacom. Then there’s Disney, which just launched an ESPN-branded sports streaming service it owns itself, and has a Disney-branded movie-and-TV service scheduled for 2019. !function(){if("undefined"==typeof powerbiresize){powerbiresize=1;var e=function(){for(var e=document.querySelectorAll("[pbi-resize=powerbi]"),i=0;i

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posted 3 days ago on re/code
The latest pact between the frenemies involves the sale of Fire TV-enhanced televisions. After Amazon’s surprise acquisition of Whole Foods, the retail world has been speculating about who might be next: Nordstrom? Costco? Kohl’s? Maybe Best Buy? You might be able to scratch that last one off the list. As the latest Amazon-Best Buy press announcement shows, Best Buy is willing to get closer and closer with Amazon — no acquisition needed. Amazon and Best Buy announced on Wednesday that the electronics retailer would be the exclusive brick-and-mortar sales channel for a new line of TVs equipped with Amazon’s Fire TV streaming video capabilities as well as the Alexa voice assistant technology. Amazon CEO Jeff Bezos and Best Buy CEO Hubert Joly appeared at a Best Buy store in Bellevue, Wash., to announce the partnership. The pact gives Amazon broad distribution for its technologies in a physical setting where the majority of shopping still takes place. It also provides the online retailer with what is essentially an outsourced group of sales associates to provide shoppers with tutorials for new technologies like Alexa that still call for some education. For Best Buy, the retailer gives its shoppers access to exclusive products that could serve as a new way to lure them inside its stores, even as Amazon introduces new services that compete with Best Buy. Despite that competition, the companies have previously partnered in 2017 to place specialized Amazon Echo and Alexa showcases — dedicated areas to highlight the devices and educate customers — inside 700 Best Buy stores. This showcase model is one of the top reasons Best Buy has experienced such a turnaround in recent years, in addition to new initiatives such as price-matching and some luck from the shutdowns of competitor stores. “I’ve watched Best Buy for a long time, and the last five years, since Hubert [Joly] came to Best Buy, have been remarkable,” Amazon CEO Jeff Bezos said to a group of assembled reporters at the press event, according to Best Buy. “I mean, the turnaround that got done there, from just a business case study point of view, is going be written about and talked about for a long time.” What do we have here? The rare Bezos photo op/smooch of a quote combo alongside a competitor! Would the Best Buy turnaround story have a better ending with an Amazon acquisition? Of course, the rationale for an actual acquisition would have to be about way more than selling Alexa devices in Best Buy stores. Amazon would have to see real, long-term value in brick-and-mortar electronics retail. Plus, even if both sides had interest in M&A, regulators might have something to say about it: Together, Amazon and Best Buy would own between 40 percent and 50 percent of the consumer electronics market in the U.S. In the meantime, this frenemy relationship continues to get closer.

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posted 3 days ago on re/code
The Uber whistleblower is working with the California Labor Federation to help bring awareness to a new bill. In the months after former Uber engineer Susan Fowler published her viral account of the harassment and sexism she faced at the company — which led to a massive executive shake-up at Uber and a Time magazine “Person of the Year” cover for Fowler — she struggled with what she wanted to do next with her newfound platform. But now, Fowler says she has found her calling. The young mother of a newborn daughter wants to end forced arbitration for all workers — a legal agreement that requires any employee issue to be litigated outside of a formal court system. And she’s starting with California. “I know that if we got rid of forced arbitration and non-disparagement agreements, I know that this would not happen to future Susans,” Fowler told Recode. Today, alongside its author California State Assemblywoman Lorena Gonzalez Fletcher, Fowler is introducing a new bill that seeks to prohibit companies from making it a condition of employment that employees agree to settle any issue in arbitration. “Forced arbitration is kind of a legal loophole that these companies could use — companies like Uber — to cover up illegal behavior,” she said. Those agreements, often couched in difficult-to-understand legalese, make it hard for people like her to get justice for workplace harassment and other issues, Fowler said. “I started to realize what would actually end the kind of stuff I was seeing at Uber, what would make it impossible [for] this kind of thing to happen again — the biggest thing was ending the loopholes that exist right now to be able to cover up these issues legally,” she said. The introduction of the bill comes as the tech industry has seen a wave of harassment, sexism and other workplace issues come to light — only some of which have made it to court. Many tech companies currently employ arbitration clauses. If it passes, the bill could make it easier for women and other workers, like Fowler, to seek justice in a formal court system rather than settling issues behind closed doors. “It’s a good thing for companies, too,” Fowler said. “[Forced arbitration] ends up covering up all these underlying behaviors because they just get funneled through this very carefully crafted legal pipeline. You get pushed into this forced arbitration, you get an NDA, you can never talk about what happened to you. This covers up all these really bad instances of harassment that then becomes systemic. If you have more transparency you can catch the problems in your company way more quickly.” At the time of her employment at Uber, Fowler had indeed agreed to litigate any issues she had with the company in arbitration as a condition of her employment there. The company says that’s no longer the case and all employees have had the option to opt out of arbitration clauses as of 2016. Fowler has been vocal in her opposition of arbitration clauses and recently publicly asked Uber’s current CEO Dara Khosrowshahi not to push women who are alleging they were assaulted by their Uber drivers into arbitration. Khosrowshahi said that he would see what he could do and offered to have a dialogue with Fowler. Hi Susan! 1. I'm trying and our company is bought in! 2. I will take a look at your suggestion - I will take it seriously but we have to take all of our constituents into consideration. 3. Would love to meet and talk in person vs twitter. 4. Thank you for what you've done.— dara khosrowshahi (@dkhos) March 30, 2018 Fowler says they’ve yet to meet in person but the company has reached out and she hopes they will choose to do the right thing. In addition to the California bill, she also previously filed amicus briefs for three high court cases asking the Supreme Court to consider the ban on joining class action suits as a result of an arbitration clause as a violation of federal law. For the California assembly bill, AB 3080, Fowler is working alongside the bill’s sponsor, the California Labor Federation, an organization that represents 1,200 unions in the state to bring awareness to the many issues the bill seeks to address. But it is not the first bill of this kind that the organization has attempted to get passed. In 2015, California Governor Jerry Brown vetoed a previous version of this bill — AB 465 — because he said it was unclear whether arbitration was more or less fair for employees and thus did not want to enact a blanket ban on arbitration. The bill, the California Labor Federation said at the time, did not intend to do that but instead wanted to make it voluntary. The new version of the bill being introduced today makes one further concession: It would only apply to future employees. In other words, if AB 3080 is passed, it would not preempt any existing employment contracts in the state. It simply would make it illegal to make opting into an arbitration clause mandatory to get a job. Still, Fowler and sponsors of the bill are coming up against the same opponents that the first bill faced in 2015. The California Chamber of Commerce has once again listed this bill among its “job killers.” The Chamber of Commerce argues that prohibiting arbitration would open companies up to increased risk of litigation. In its opposition, the Chamber writes, “By banning arbitration, the only option left for employees to resolve many labor and employment claims is litigation. “Several studies support this notion that access to civil courts is not a realistic option for low wage employees,” the opposition reads. The Chamber of Commerce is joined by a slew of state trade associations including the California Manufacturers and Technology Association and the Civil Justice Association of California. Members of the boards of these organizations include automakers like Fiat Chrysler, General Motors, Ford, Hyundai and Toyota, as well as tech companies like Intel. When reached for comment, most of the companies referred Recode back to the trade organizations. Intel is a member of the boards of both associations, but has not yet taken a position one way or another on the bill as of yet. We’ve also asked if these companies require their employees to sign arbitration agreements. Intel does not. We will update when we hear back from the others.

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posted 4 days ago on re/code
These new Snapchat ads won’t blend in as well as the old ones. Snap likes to say that it’s a camera company — the camera is the first thing people see when they open the app, and it’s the feature used to create almost all Snap messages and Stories. Now Snap wants to turn that camera into a revenue driver, too. The company is rolling out a new type of ad inside the camera: Direct response ads, or ads that drive people to complete a specific action, like an app download or a product purchase. They’re the kind of ads that are huge on Facebook, and Snap already offers a version of these ads in other parts of the app, like alongside publisher content inside its Discover section. But now it’s putting them right smack dab in the camera. When users pull up a sponsored lens — the face masks that transform people’s selfies into things like a zombie or a taco — advertisers can add a “call to action” button right above the app’s record button. The ads will include prompts like “Shop Now” or “Install Now,” depending on the advertiser’s goal. Snapchat has been selling face filter ads for years, but they’ve always been geared toward big-brand advertisers. Adding these new direct response calls should make the ads more appealing to advertisers that want more specific outcomes. It’s also Snapchat’s most obvious effort yet to make money off users’ cameras. Most of the sponsored lens ads look and feel native — sometimes you can’t even tell you are using an ad for your selfie. These new buttons look like an ad right off the bat. Snap is still in the early stages of its business. The company reported its best quarter as a public company in Q4 and is trying to create more competition from advertisers for its ad products. These kinds of ads could help.

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posted 4 days ago on re/code
Plus, tech companies sign a “Digital Geneva Accord” against cyberattacks, a “professional obituary” of WPP founder Martin Sorrell, and have algorithms destroyed personal taste? The IRS online tax-payment website went down early yesterday morning — Tax Day. About five million people were expected to file their returns last-minute on deadline day; the agency was struggling to accept returns from the widely used tax software program TurboTax and the massive tax preparation company H&R Block. The government’s Direct Pay site was working again by last night; the new filing deadline is tonight at midnight. President Trump filed for an extension, btw. [Jeffrey Stein and Mike DeBonis / The Washington Post] Facebook is taking its first formal steps toward complying with the European Union’s new data privacy regulations, known as the GDPR.The big idea: Get users to opt in to policies that generate personal data. In the absence of new rules from U.S. lawmakers, this will eventually became standard operating procedure for Facebook. [Kurt Wagner / Recode] Led by Facebook and Microsoft, more than 30 tech companies signed a “Digital Geneva Accord,” pledging not to aid governments who mount cyberattacks against “innocent civilians and enterprises.” Apple, Google and Amazon declined to join. The list of principles also commit the companies to come to the aid of any nation on the receiving end of such attacks, whether the motive for the attack is “criminal or geopolitical.” [David E. Sanger / The New York Times] Democratic Federal Communications Commissioner Mignon Clyburn announced that she is resigning after more than eight years at the agency. An Obama nominee, Clyburn was a strong supporter of net neutrality, media ownership reform and lowering prison phone rates; she often clashed with current chairman Ajit Pai over policy decisions. Clyburn’s announcement came a day after Terrell McSweeny, also an Obama nominee, announced that she is retiring from the Federal Trade Commission at the end of the month. [Kim Hart / Axios] Apple plans to integrate the recently acquired Texture magazine app into Apple News. The company will debut its own premium news subscription service next year. The move is part of a broader push by Apple to generate more revenue from online content and services.[Mark Gurman and Gerry Smith / Bloomberg] Ken Auletta provides a lengthy and detailed “professional obituary” of Martin Sorrell, the founder and CEO of WPP, the world’s largest advertising and marketing holding company. Sorrell resigned on Saturday, after an outside law firm hired by the board investigated his alleged and still-unspecified “personal misconduct.” Parts of the piece are excerpted from Auletta’s forthcoming book, “Frenemies: The Epic Disruption of the Ad Business (and Everything Else).” [Ken Auletta / The New Yorker] Statistics guru Nate Silver is moving his FiveThirtyEight politics and news site to Disney-owned ABC News after five years with Disney’s ESPN. [Benjamin Mullin / The Wall Street Journal] Top stories from Recode Tesla is struggling to produce Model 3s on schedule. So Elon Musk is having the company work around the clock. Musk also wants to personally approve any Tesla expenditure of more than $1 million. Home Depot is launching its biggest tech hiring spree ever to protect its lead over Amazon. The home improvement retailer will add more than 1,000 technology hires this year. Coinbase has hired a CFO, Alesia Haas. What it means and doesn’t mean. E-commerce companies don’t pay local sales tax. They need to get serious about fixing that. The U.S. has been trying to figure out how to tax out-of-state transactions since before the internet. What’s tech got to do with political activism? Everything. On March 2, 2018, we got a call from the students organizing the March for Our Lives. With a day, a team of tech volunteers was in full swing to support their movement. Two things people get wrong about Snapchat, and two things Snap got wrong building its business. Upfront Ventures managing partner Mark Suster analyzes the mobile-social upstart on Recode Decode. This is cool Have algorithms destroyed personal taste?

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posted 4 days ago on re/code
Simon Khalaf is out; K. Guru Gowrappan is in. Verizon is moving around top managers at Oath, its Yahoo-AOL tie-up that’s supposed to compete against Google and Facebook for digital ad dollars. Out: The executive who oversaw all of Oath’s media properties, including HuffPost, Yahoo News and TechCrunch. In: A new hire from Alibaba, who will be the company’s first president and chief operating officer. Longer version: Simon Khalaf, a former Yahoo executive who became head of Oath’s media brands when Verizon finally bought Yahoo last year, left last week. Oath CEO Tim Armstrong says Khalaf won’t be replaced. But the media bosses who formerly reported to Khalaf will now report to K. Guru Gowrappan, who Armstrong has brought in from Alibaba to become his No. 2 exec. Gowrappan’s duties will also include consumer and business-to-business marketing, which had been overseen by Oath CMO Allie Kline; Armstrong says Kline will advise on communications and other topics. Gowrappan has spent the last few years as a managing director at Alibaba, where he helped the Chinese e-commerce giant plot its growth strategies in India and Southeast Asia. Prior to that he worked at Quixey, a mobile app and ad startup that worked closely with Alibaba; his resume also includes stops at Yahoo and Zynga. Armstrong said he’s been looking for a COO for months — “someone who I could partner with to run the company.” He said he met Gowrappan on a trip to Taiwan a couple of years ago. “I think Guru is an exceptional person,” he said. Gowrappan says he won’t have to spend much time supervising the merger between AOL and Yahoo’s operations and cultures, since he says much of that work has already been done. Now the plan is to help the combined companies try to hit Armstrong’s aggressive growth goals: Among other milestones, Armstrong wants to double Oath’s consumer base from one billion to two billion by the end of 2020. Oath posted revenue of $2.2 billion in the last quarter of 2017, up 10 percent from Q3. Armstrong says he expects “strong growth” in the second half of this year. Verizon reports Q1 earnings next week. UPDATE: Here’s Armstrong’s notes to employees announcing Gowrappan’s hiring: Oath has one of the biggest opportunities in modern business to build a defining company based on trusted brands and the trusted brands of our partners. As the world starts to comprehend the important changes of the Internet and mobile revolution, Oath’s vision and strategy are becoming more important. Now is our time to turn the formation of Oath into the formation of one of the world’s best operating companies that paves a safe and exciting path forward for our billion consumers and the world’s most trusted brands. Oath is the size of a Fortune 400 company and our goal is to build it into a Fortune 50 company - one member and one customer at a time. To accomplish this goal, we need a combination of vision and execution - and we need a world class team of leaders who are aligned on our strategy. Great companies around the world are built from strong teamwork which starts at the top with leaders. Today, we are adding the most important puzzle piece to the leadership team to move our vision to a reality - and that puzzle piece is K. Guru Gowrappan. Guru is joining Oath this week as President & COO. Guru comes with extensive experience in the global mobile and tech ecosystem and joins us most recently from Alibaba where he was the Global Managing Director. As Global Managing Director, Guru was responsible for growing international markets and key consumer and enterprise products across commerce, entertainment and media, local services, payments, and the entire commerce enabling stack. Guru has 18 years of experience operating and leading teams working on the front end of the consumer and customer revolution and he cares deeply about members, brands, and technology. Guru graduated from Madras University with a degree in Information Technology, received his Masters in Computer Science from the University of Southern California, and completed the Business Bridge Program at Dartmouth’s Tuck School of Business. He brings a wealth of experience in operations, product management, and technology investment at a global scale. Guru is also a Yahoo Alum and someone that has a deep passion for seeing the future success of the company become a reality. Guru will run day to day operations of our member (consumer) and B2B businesses and will serve as a member of our global executive team helping to set company culture and strategy. Guru will also be an important part of the Verizon work that is helping both Oath and Verizon build out the future of global services and revenue. As more of my time is spread across strategic Oath opportunities and Verizon, I will be leading our global strategy, global executive team, and corporate operations. Guru will be leading our global operating teams including: Engineering & Tech Platforms including DMSComms Data and Research & Marketing Media Brands, Content Factory, and Media Products & MarketingSearch Partnerships Ad Platforms Global Sales & Customer Operations, & Ad Strategy, and & B2B Marketing Membership As part of Guru leading operations, we will be moving marketing from a corporate function to a B2C and B2B operating function within the operating groups. We will keep the internal and external communications group along with Brand, Events & Citizenship at the global executive level. Allie Kline will become an advisor to Oath based on these changes and we will be hiring a Chief Communication Officer (CCO) to manage company communications while marketing transitions into the operating groups. Guru is fully up to speed on our Major in the Majors strategy and he is coming into the company with a deep knowledge of our strategy and current operating process. We have planned for Guru coming into the company and we expect there to be a smooth continuation of our operating priorities and leadership agenda. Guru is a high energy and high impact leader and he will be a great addition to our culture. A huge Oath welcome to Guru and as you have seen from the recent talent coming into the company (like Vanessa Wittman - CFO), we are following through on our mission and OKRs - building a company talent loves. More talent is coming to Oath because we have a big mission and an even bigger opportunity that keeps growing - TA

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