Tuesday, December 27, 2016

Why Brands Should Think Small (Agency)

By Chris Mollo, Co-Founder & COO, Drumroll

Over the last few years, there’s been a lot of talk about the influx of small agencies within our industry. These companies – in 50-or-less team member range – are winning Lions at Cannes, closing million dollar deals, and are giving the likes of McCann, Ogilvy, and Grey a run for their money.

While the legacy agencies exude gravitas and make for great bragging rights while you’re sipping champagne in the South of France, they aren’t always necessarily what’s best for your brand.

With the impeding New Year, what better time to begin thinking differently – smaller, even. Clients can benefit greatly from utilizing a more modest agency’s services. Here are a few reasons to hire – and think – smaller.

Big Fish Mentality: To a big agency, sometimes a new client is just another account – yet another company to highlight on its website. But, a big brand means everything to a small agency. You’ll be paired with a specialized and senior-level team dedicated to delivering high-touch attention and high-quality work. The pitch team is usually “the team” doing the work, so you’ll be getting the thought leadership that won the pitch in the day-to-day trenches.

Lean and Mean: Small agencies are simply nimbler. With less employees, fewer meetings to schedule, and limited politics, independent agencies are typically faster to react to client calls or campaign snafus. With less internal process and little red-tape to get around, it’s easier to get to the heart of what makes brands tick and, ultimately, to the great ideas that propel them forward.

Risky Business: The big guys can sometimes follow antiquated processes – it’s how their companies were built. Younger, learner agencies, on the other hand, usually have more modern systems and workflow designed to more easily get to where true innovation stems. They are willing to take more risks. Maybe it’s because they’ll always have something to prove – a chip on their metaphorical shoulder that they’ll never be able to shake? Regardless, high-motivation is the driver, and it’s resulted in some of the most groundbreaking ads this year if you have paid attention to the awards shows and trade publications.

No Baggage to Claim: Small agencies often don't bring baggage to the table. They don't have history trying everything in the book and talking themselves out of what has been done. As such, they are more willing to think outside the box to get to the promised land with an “there’s always a way “attitude. With anything being possible, your brand won’t be confined to or pigeonholed into running a campaign that’s been tried, tested, and “just fine.”

Culturally Connected: Independent agencies possess stronger cultures that their employees believe in. Why do you think there’s so much more turn-over at the legacy agencies? The culture is either lacking, or the team member wasn’t a culture fit in the first place, merely a body hired to fill a seat. Small agencies typically evoke a feeling of family, which undoubtedly permeates into the work and helps to inspire people working on your account.

With 2017 upon us, go ahead and consider a smaller shop. You might be really surprised by their innovation and expertise.  It could be the kick in the butt your brand needs.  


Sunday, December 25, 2016

American Cities Losing The Most Jobs This Year

 

The U.S. economy added roughly 2.4 million workers over the past year. Over the same period, the unemployment rate fell from 5.0% to 4.9%, close to the lowest it has been in nearly a decade. The 1.7% employment growth nationwide was not uniform, and some areas lost a substantial share of workers.

To determine the cities that lost the most jobs, 24/7 Wall St. analyzed employment data from the Bureau of Labor Statistics. Most cities added jobs in past 12 months, and most have posted unemployment declines. In 75 metro areas, however, there was a net loss in total employment. The Lafayette, Louisiana metro area had the greatest loss workers, with total employment falling by 4.5% since October 2015.

One major factor driving employment changes across the United States is industrial composition. Continued outsourcing and automation has lowered international demand for American manufacturing, and the downturn in the price of petroleum has hurt the oil and gas sector. Nationwide, the worst performing sectors were manufacturing, information, and mining, logging, and construction.

Click here to see the American cities losing the most jobs this year.

Cities with economies that heavily depend on these industries tended to have the most job loss. In an interview with 24/7 Wall St., Martin Kohli, chief regional economist at the BLS, explained that a “large concentration of employment in energy and construction-related industries has definitely been negative in the last few years for communities.” In many cases, a major round of layoffs or plant shutdowns contributed to employment declines in the past year.

People are not likely to move to a city without a job or some other opportunity available. As a result, the distribution of employment growth across the country mirrors today’s domestic migration patterns. Kohli added that residents of the Northeast and Midwest, where a majority of the metro areas are losing workers, have been relocating to major cities in the Sun Belt, which is gaining the most workers.

Employment tends to increase as unemployment declines. In metropolitan areas losing the most workers, employment declines contributed to labor force declines and a rise in unemployment. In Oklahoma City, Oklahoma, for example, the 14,200 workers lost in Oklahoma City was among the most of any metro area. At the same time, the labor force shrank by a total of 9,000 workers, while area unemployment rate rose from 3.6% to 4.4%.

To identify the cities losing the most workers, 24/7 Wall St. reviewed metropolitan statistical areas with the largest employment decline from October 2015 through October 2016. Unemployment rates, the size of the labor force, and employment levels are from the Bureau of Labor Statistics (BLS) and are seasonally adjusted. Industry-specific growth rates for the same period are from the Current Employment Survey (CES), a monthly BLS survey. Educational attainment is from the 2015 American Community Survey (ACS) of the U.S. Census Bureau.

These are the cities losing the most jobs.

5. Mansfield, OH

  • Employment change: -2.33%
  • No. of jobs Oct. 2015: 50,576
  • No. of jobs Oct. 2016: 49,399
  • Unemployment rate Oct. 2016: 5.6%

Cities without a talented, educated workforce often rely on one dominant, low-skilled industry and may be more vulnerable to changes in commodity prices and other market shifts than more diversified economies. Nearly one in five workers in Mansfield works in manufacturing, and just 14.4% of adults in the metro area have at least a bachelor’s degree. As demand for American manufacturing continues to decline, Mansfield’s reliance on the industry may have partially caused accelerated employment decline over the past year. The number of employed workers in the city decreased by 2.3% in 2016, more than nearly any other metro area.

4. Shreveport-Bossier City, LA

  • Employment change: -2.35%
  • No. of jobs Oct. 2015: 180,977
  • No. of jobs Oct. 2016: 176,731
  • Unemployment rate Oct. 2016: 6.8%

Employment in the Shreveport-Bossier City area decreased by over 4,200 workers in the past year. During the same period, nearly an equal amount of people left the labor force.

Following the statewide trend, the Shreveport area is losing workers in the oil and gas sector. Unlike other areas in Louisiana that are more dependent on the oil and gas industry, however, Shreveport has a more diverse economy, and employment losses in this industry have had a less dramatic effect on the area's overall employment. Still, due to falling oil prices and reduced natural gas production at the Haynesville Shale -- a rock formation rich in natural gas -- the industry's job losses accounted for a sizable share of the area's 2.3% employment decrease.

3. Houma-Thibodaux, LA

  • Employment change: -3.74%
  • No. of jobs Oct. 2015: 91,738
  • No. of jobs Oct. 2016: 88,311
  • Unemployment rate Oct. 2016: 6.7%

The number of employed workers in the Houma-Thibodaux area decreased by around 3,400 in the past year. While area employment declined by 3.7%, the number of workers increased by 1.7% nationwide. A large share of the area’s employment decline resulted from a shrinking oil and gas sector. Following a drop in oil prices and the first decrease in North American oil production in years, many oil workers nationwide have lost their jobs. The effects of these industry declines are exaggerated in Houma-Thibodaux, where a large share of residents are employed in the sector.

2. Casper, WY

  • Employment change: -3.77%
  • No. of jobs Oct. 2015: 40,156
  • No. of jobs Oct. 2016: 38,644
  • Unemployment rate Oct. 2016: 6.6%

The Casper metro area lost around 1,500 employed workers in the past year. This 3.8% decrease was largely caused by a declining coal mining industry in Wyoming. During the first quarter of 2016, coal production nationwide was the lowest it has been in 35 years, with Wyoming among the regions whose production has declined the most. The Casper metro area is around 100 miles from America’s two largest coal mines. Earlier this year, both of these mines announced large layoffs.

1. Lafayette, LA

  • Employment change: -4.46%
  • No. of jobs Oct. 2015: 210,224
  • No. of jobs Oct. 2016: 200,845
  • Unemployment rate Oct. 2016: 7.1%

The Lafayette metro area lost around 9,400 workers in the past year. Employment in the area fell by around 4.5%, even as nationwide employment increased by 1.7%. Following a trend of declining manufacturing employment nationwide, Lafayette’s manufacturing sector shed the most jobs of any industry. The employment declines likely led to a large share of residents giving up looking for work or leaving the area. The overall labor force decreased by nearly 8,500 in the past year. This 3.8% decline in labor force was the largest of any U.S. metro area.


Saturday, December 24, 2016

Deregulation That Will Make the Home Mortgage Market Work Better: Eliminating Rigid Income Documentation Rules

The incoming Trump administration has made very clear that eliminating regulations of all types was a major agenda item. The question is whether or not they can do that effectively, and the home mortgage market will be a good test case. New home construction today is running well below what would ordinarily be expected at the current phase of the business expansion, and a major cause may be some of the regulations imposed in the aftermath of the financial crisis.

I underscore "some" because regulation is not a quantity - something that conservatives want less of and liberals want more of. Some regulations are good and some are bad, and the objective ought to be to get rid of the bad ones and retain or even strengthen the good ones as needed. A good regulation is one that makes the market work better, and a bad regulation is one that doesn't, which makes it worse than no regulation.

It often takes a great deal of knowledge and wisdom to fashion a good regulation, and here also you have a political split. Conservatives usually have less confidence than liberals that regulators have the competence necessary to fashion good regulations. But what we are going to see in the next year or so is how well a new batch of conservative regulators do in identifying the bad regulations that need to be axed. This article aims to give the new mortgage regulators a head-start by identifying a particularly bad regulation directed to mortgage documentation requirements.

In the decade prior to the financial crisis, documentation requirements evolved from full doc for every borrower to a range of requirements, from full doc to no doc, with 5 categories in-between. The less complete the documentation, the higher the price of the mortgage and the larger the required down payment and credit score. These three poles of the underwriting system were flexible in the sense that a good score on one could offset a poor score on another.

That sensible market-based system worked well until the housing bubble emerged in the early years of this century, when lenders and borrowers alike came to believe that house prices would rise forever. When house prices continually rise, it is very difficult to make a bad loan because borrowers unable to pay can sell their houses at a profit.

In that atmosphere, large numbers of borrowers elected less than full documentation so that they could exaggerate their incomes and purchase more costly houses, while many lenders accommodated them by relaxing their standards and reducing their surveillance. When the bubble burst in 2006, mortgage defaults and foreclosures rose to levels not seen since the 1930s.

The Federal Government in response imposed a range of new regulations, one of which was to eliminate all documentation options other than full documentation, and to make it an absolute requirement. No longer could inadequate documentation be offset by good credit or large down payment. That is when I began to receive letters from self-employed loan applicants whose applications were rejected because they could not document adequate income, notwithstanding that their credit was pristine and they were making a substantial down payment. Many of these rejected borrowers are small business owners who collectively are important contributors to economic growth.

In an important recent article in The Journal of Finance, Brent W. Ambrose, James Conklin and Jiro Yoshida show that the income exaggerations that played a major role in the boom and bust were concentrated among borrowers who could have documented their incomes with W-2s but chose not to so they could lie. Self-employed borrowers did not lie about their incomes.

The implications for regulatory reform are very clear. Full income documentation should be required only for those with incomes shown on W-2s. Self-employed applicants should have access to multiple documentation options, and underwriters should have discretionary power to balance the option selected against the applicant's credit score and down payment.

This is one small yet important example of a bad regulation that is easily fixable when there is a will to fix it. In the weeks to come, I plan to identify a number of others.

For more information on mortgages or to shop for a mortgage in an unbiased environment, visit my website The Mortgage Professor


Wednesday, December 21, 2016

With No Hope Under Trump, Gender Pay Gap Action Goes Local

The Republican capture of the Oval Office along with majorities House and Senate is bad news for women when it comes to closing the gender pay gap in the next four to eight years. Nothing new there -- we've already endured more than a half century with zero progress on gender pay equity in the U. S. Congress, and some not inconsequential losses in the courts since the Equal Pay Act passed way back in 1963. The gap in women's pay compared to that of men for full-time year-round work now at 79.6 cents on the dollar has been stuck for over a decade.

But there is some good news: The action is moving to states and cities. California amended its decades-old pay laws in 2015 to require equal pay for "substantially similar" work, prevent use of the ill-defined "factors other than sex" justification for pay differentials, and prohibit retaliation for disclosing pay to coworkers. Following California's lead on disclosure, in 2016 Maryland expanded its own law, going beyond pay disparities. The state now also prohibits employers from channeling workers into less favorable career tracks or limiting employment opportunities because of sex or gender identity. Missouri issued guidelines for employers to voluntarily conduct self - audits to identify and remedy gender-based pay disparities, and make salary ranges by title public to job applicants.

New state measures are without question good news, but the most innovative action is coming from cities. And it's bi-partisan. It started with Albuquerque in 2015, when Republican Mayor Richard Berry pushed through an ordinance with the help of democrats on the city council requiring gender pay equity reporting by contractors as a condition of bidding for city business. It was the first such city action in the nation, and has since been mimicked in one form or another by San Francisco, Oakland, Erie County New York, and several smaller jurisdictions.

In 2016, Mayor Martin Walsh, a Democrat, signed the Boston Women's Workforce Council 100% Talent Compact, a different first-of-its-kind initiative. Companies signing the Compact (over 180 so far) agree to provide the Council with anonymous payroll data broken down by sex, race, job category, and length of employment. The data will be used to provide an accurate measurement of the wage gap and to help employers develop solutions later on.

There's no doubt that more ground-breaking city action is on the horizon. Since it's well known that when women start careers at a lower salaries than male counterparts the gap follows them throughout their working lives, New York City Mayor Bill de Blasio recently signed an Executive Order prohibiting city agencies from asking about prior salary history when interviewing job applicants. Advocates in New York, Philadelphia, and D.C. are pushing for bills with similar prohibitions for all city employers, inspired by a Massachusetts measure taking effect in 2018. Others are sure to follow suit.

With the federal government's most likely action on gender pay disparities in the coming administration being "none," women must look to local and state jurisdictions to move the needle on equal pay. Fortunately it looks like that's already happening.


Tuesday, December 20, 2016

Can Investments in "Green Infrastructure" Help Coastal Cities Survive Climate Change?

Will Tucker also contributed to this story, which is cross-posted on Ecosystem Marketplace

The city of Chicago is planting millions of trees and "greening" its alleys to mop up stormwater and reduce the urban "heat island" effect, while the City of Hoboken, New Jersey - which took the brunt of Hurricane Sandy's impact in 2012 - is restoring marshes and turning vacant land into a "resiliency park" that will mop up at least one million gallons of floodwater.

Both cities are featured in a working paper called Roadmap to Support Local Climate Resilience, which grew out of October's Rising Tides Summit in New Hampshire, where 36 mayors from cities in 18 of the 23 coastal US states gathered with federal disaster relief officials to chart a course towards resilience in the age of climate change.

The mayors came from across the political spectrum - nearly half, 17, were Republicans, while 16 were Democrats, and three were Independents - but all agreed that sea levels were rising because of man-made climate change, and that nature-based "green" infrastructure - such as mangroves for coastal protection and wetlands for flood management - is part of the solution.

Unfortunately, they also identified a massive funding gap, and this was before the election of Donald Trump as President opened a perceived leadership gap as well.

"We need either the state - which doesn't want to get involved because the governor doesn't believe in sea-level rise - or the federal government to come up with funds," said James C. Cason (R), Mayor of Coral Gables, Florida, during a media call arranged by the World Resources Institute (WRI), publisher of the Roadmap paper.

"As people come through our redevelopment process, we require them to consider green infrastructure," said Dawn Zimmer (D), Mayor of Hoboken, New Jersey, who tapped the federal Environmental Protection Agency to fund its resiliency park. "We're encouraging it as people go through our planning boards and our zoning boards, but we're also looking at ways that we can incentivize it and make it happen across the board."

"Several cities are embedding nature-based solutions into their resiliency planning," said C. Forbes Tompkins, who compiled the report for the World Resource Institute. "But they don't know where the funding is going to come from."

Some cities have begun tapping their water fees to develop green infrastructure. Philadelphia, for example, funnels sewage fees into programs that turn concrete "gray" infrastructure into absorbent systems that better handle water runoff, while Denver puts its water fees into forest conservation to keep the surrounding watershed healthy.

New research shows a growing willingness on the part of cities and even the private sector to invest in such initiatives worldwide, and may offer insight into challenges faced by coastal cities.

Alliances for Green Infrastructure: State of Watershed Investment 2016 Report Webinar

$25 Billion For Watershed Investment

In a separate report called Alliances for Green Infrastructure: State of Watershed Investment 2016, also released today, Forest Trends' Ecosystem Marketplace looks strictly at investments in watershed protection or enhancement which involve a clear transaction of payments in exchange for ecological services. Such programs appear to work best when a clear environmental benefit can be translated into a clear economic benefit.

The "buyers" and "sellers" vary from place to place, and can involve a government paying landholders a direct subsidy to reward good land stewardship practices, or it could be a beverage company paying local farmers near its water source to reduce their pesticide use, alleviating the need for costly on-site water treatment. Or it might look like multiple water users - for instance, a city government, the local water utility, and companies - paying into a "water fund" for greater impact.

Once considered obscure, such programs have now matured to the point that, when asked to identify the biggest barriers to "scaling up" watershed investments, only 11% of program administrators reported having a difficult time securing demand (e.g., finding willing "buyers").

"A lot of programs are telling us that capacity is an issue: things like managing funds and identifying project sites, demonstrating benefits to stakeholders and potential buyers," said Genevieve Bennett, lead author of the Ecosystem Marketplace report, during a launch webinar this week.

"In this space there's a common wisdom that the constraint is money - that people aren't willing to pay for green infrastructure," Bennett explained. "But one of the things we saw this year...is that there actually is quite a lot of finance waiting in the wings for green infrastructure. At minimum, it's hundreds of millions of dollars, and it might be much higher."

Bennett said there's a clear need for more "shovel-ready projects" that are prepared to accept that funding.

Speaking at the same event, Daniel Shemie, Director of Strategy for Water Funds within The Nature Conservancy's Global Water team, agreed that while it's tempting to diagnose a lack of finance as the biggest constraint for programs, the real bottleneck is capacity.

"It's a little counterintuitive," he said. "You would think that at the very top of operating programs you'd say 'money, money, money.' But once you're in a program, your challenge is much more around implementation. It's always a temptation to think that, 'well, if we only had money,' but there are major challenges in implementing large, landscape-scale investment."

Steve Zwick is Ecosystem Marketplace's Managing Editor. He can be reached at szwick@ecosystemmarketplace.com. Will Tucker is Senior Communications Associate at Ecosystem Marketplace's publisher Forest Trends. He can be reached at wtucker@forest-trends.org. 


Monday, December 19, 2016

Sean Talks Money: What the Fed Rate Hike Means for Savers, Borrowers

By Sean McQuay

I

f you're a saver, congratulations. Your money may soon be more valuable. If you're indebted, I'm sorry to say that your debt is only getting more expensive.

Either way, the Federal Reserve's decision to boost interest rates by 25 basis points, a 0.25-percentage-point increase, will likely affect you soon. The Fed's decision affects the prime rate, which is generally the best lending rate offered by banks.

Banks are expected to increase the prime rate from 3.5% to 3.75% in the coming weeks. In turn, the annual percentage yields on your savings and the annual percentage rates on your outstanding credit card balances and future transactions can be expected to rise. In fact, your credit card APR will probably see a 0.25-percentage-point increase in the next couple of months. Your issuer might not even tell you the change is coming: Under the Credit Card Act of 2009, issuers don't have to notify you when your card's rate rises with the prime rate. But it can sure cost you.

How credit card interest works

The rate hike affects your credit cards because their rates are variable, not fixed. But the effect is a little different from other types of credit card APR increases.

If your issuer raised rates to make more money, for example, the Card Act would prevent the issuer from applying those higher rates to your existing balances; the new rates would apply only to transactions made after the increase. But when the prime rate rises, the Card Act allows issuers to raise the rates on your outstanding balances in addition to your new transactions.

Consider the average credit card APR of 18.76%, and that the average indebted household pays a total of $1,292 in credit card interest per year. If you add a Fed rate increase of 0.25 percentage point to that average APR, the interest total rises to $1,309 per year.

Spending $17 more on interest per year may not sound like a big deal. But when you consider that more rate hikes are expected as the economy improves, it's easy to see how this could slowly add up. The sooner you pay down your debt, or transfer it to a card with a lower rate, the better.

The golden goose for dealing with debt: 0% APR

If you want to avoid those increased interest rates, I recommend moving your debt to a card with a 0% APR promotion. The prime rate increase affects just about every credit card's ongoing interest rate, but those 0% promotions are relatively immune to changes like these.

Though issuers could bump up introductory interest rates on 0% APR offers, they probably won't. Credit card issuers have continued to offer these promotions since last year's rate hike, which was the first increase in nine years, and they offered them before 2006, when interest rates were much higher. Given the fierce competition among issuers, this probably won't change. For consumers tackling credit card debt, this means you can still pay down your debt interest-free, after moving your balance to another card.

There's a catch: Not everyone can qualify for a 0% APR offer. Generally, you need good or excellent credit. But if you're able to get one of these cards, you can potentially save a lot of money by transferring your balances -- or even just part of a large balance. After the promotional period ends, your interest rates will go up, so it's a good idea to pay down your debt during the 0% period, if you're able.

» MORE: NerdWallet's best balance transfer and 0% APR credit cards

Chase the upside: Boost your savings

If you're debt-free, congratulations. Now you have more incentive to save your money for the future. Fed rate changes don't guarantee a point-for-point improvement in your APYs, but they can encourage banks to give more back to their consumers.

If there's an increase to savings rates, it will be small -- but any improvement is welcome. The best savings accounts on the market are offering around 1% APY, a far cry from the 5% offered in the early 2000s. Consider this a good opportunity to make the switch to a higher-yield savings account, to ensure your savings grow as much as possible over time.

And if your savings account resembles a mattress, piggy bank or sock drawer, now's a great time to open a proper account. Cash stashed around your house only loses value over time, thanks to inflation, and interest yields at banks help lessen that loss. Opening a bank account may also save you a ton of money in fees: The average annual cost of being unbanked can be as high as $497.33, according to a recent NerdWallet study. Boost your savings by cutting those losses, and take advantage of the potential for rising interest yields.


Nerd tip:
If you've had problems with ChexSystems in the past, now is a good time to start fresh. See whether your local bank or credit union offers a "second-chance" program.

» MORE: NerdWallet's best savings accounts

A sign of better economic times?

These rate increases, as confusing as they are, can ultimately be a good thing for your pocketbook. The near-zero interest rates we saw between 2008 and 2015 were meant to help the economy bounce back from the financial crisis. Keeping these rates low for too long could ultimately lead to inflation, which could hurt everyone's bottom line -- and it's these low rates that have kept your savings from growing more quickly.

So take a step back. If you're on top of your credit card debt, try saving a little extra. It'll go further. If not, remember that you don't have to start paying more in credit card interest just because the rates go up. Move your debt to a 0% balance transfer APR card, and put the money you might have otherwise spent on interest toward your debt. You'll end up paying less interest on your debt, not more.

Photo courtesy of NerdWallet.

Sean McQuay is a credit and banking expert at NerdWallet. A former strategist with Visa, McQuay now helps consumers use their credit cards and banking products more effectively. If you have a question, shoot him an email at asksean@nerdwallet.com. The answer might show up in a future column.


Self-Driving Uber Blows Through Red Light On First Day In San Francisco

Either driverless cars replicate humans a bit too well or they need more tweaking before they’re ready for prime time.

Just hours after Uber proudly rolled out a fleet of sleek self-driving Volvos in San Francisco on Wednesday morning, one of them barreled through a red light. Now California officials have called a halt to the pilot.

All of Uber’s self-driving cars in both San Francisco and Pittsburgh, the first city to see Uber’s autonomous tech, do have an engineer at the wheel, so this could technically be classified as human error. 

Notably, the car’s brake lights were on as it entered the intersection, indicating perhaps someone aboard the vehicle attempted to stop but did so too late.

Somewhat ironically, the incident was captured by a dash cam mounted aboard a taxi in the next lane, aka the thing Uber’s technology aims to one day replace. 

An operations manager at Luxor Cab, which operates the taxi in the video, confirmed its authenticity to the San Francisco Examiner, which first obtained the video.

Demanding that it first obtain a permit for operating the autonomous vehicle, California’s Department of Motor Vehicles ordered Uber to halt testing its self-driving cars on public streets in a letter sent to the company Wednesday.

“It is illegal for the company to operate its self-driving vehicles on public roads until it receives on autonomous vehicle testing permit,” the letter from state officials said. “If Uber does not confirm immediately that it will stop its launch and seek a testing permit, DMV will initiate legal action.”

Uber had hailed the novelty for its customers Wednesday: “Starting today, riders who request an uberX in San Francisco will be matched with a Self-Driving Uber if one is available. Expanding our self-driving pilot allows us to continue to improve our technology through real-world operations.”

In a statement to The Huffington Post, Uber said the incident was a human mistake, not a technical one.

“This incident was due to human error,” the spokesperson said. “This is why we believe so much in making the roads safer by building self-driving Ubers. This vehicle was ... not carrying customers. The driver involved has been suspended while we continue to investigate.”


Sunday, December 18, 2016

Branding from Why

Co-written by Gasper Patrico

The cultural context of business has changed and today, people believe their lives have an impact and hold their brands to this higher bar. Customers, employees and forward-thinking investors no longer see meaning as just nice to have, but now gravitate toward businesses and organizations that deliver it.

This shift in belief calls for a wide range of disciplines such as marketing, design, engineering and production, to collaborate in generating purposeful value. As Simon Sinek states: "People don't buy what you do; they buy why you do it. What you do simply proves what you believe."

According to a study conducted by Debbie Millman, of Sterling Brands, over the past one hundred and fifty years, customer expectations of brands have undergone a series of transitions. These transitions continually redefine the quality of relationship and dimensions of value delivery required for the success and sustainability of brands.

In the late eighteen hundreds, users wanted "quality, consistency and safety" (1876-1919) - "Just give me a product that actually works."

Then, in the early nineteen hundreds, increasing product choices challenged brands to "differentiate" their offerings via features and benefits and anthropomorphizing became important - think Betty Crocker, Dr. Pepper, Mercedes and Marlboro (1920 - 1964).

During the mid-to-late nineteen hundreds, Baby-Boomers demanded more from their brands and the act of purchasing also became a means of "self-expression" (1965-1984). Illustrated by Red Bull, LaCoste, Hushpuppies and Jeep.

Generation X began seeking brands as "experiences" (1965 - 1976) such as Urban Outfitter, Interrail, Starbucks and IKEA.

In the last transition of brand-value demand, the world is more interconnected, thus, change happens quicker and news travels faster. The outside world has moved closer and our world seems less predictable as a result. Millennials (1977 - 1995) and Centennials (1996 and later) are living with hyper-change as the metronome of their lives.

The forces of globalization and technology forged Millennials (now society's largest birth cohort). The Centennials are growing up in a post-9/11, climate-change-kind-of-world. Both generations are desperately seeking to make the world a better place, are driven to "make a difference" and associate their identities with brands that seek the same.

How does an organization develop its brand and deliver on promises that "Start with Why?"

When internal stakeholders ask, "Why are we doing this?" or when customers ask, "Why am I buying this?" it substantially heightens the critical relationship between strategy and brand. Brand is strategy in action and intentional brands have a higher purpose that frames the context of the products, services or experiences they create. Meeting business financial goals is a must, however is only table stakes in the challenge to attract and retain customers in today's cultural context.

Take for example a seeming commodity type business--green tea. Working the nexus of strategy and brand, could one build a business where "Why" is part of the sensory experience of the product?

Organic India does this beautifully. The company positions their tea as a "Vehicle of Consciousness." Is this just a clever and lofty claim? Hardly. The business strategy is built on this bedrock.

When one opens a box of Organic India tea, the first thing one sees is a small booklet that instantly shifts the perception and meaning of what's in the box. The booklet declares a Why for the business-- an ideology or belief, one that makes a difference and makes the user part of the story.

One might say that's all well and good for a tea business, but can one innovate technology businesses on the foundation of "Why?" Apple's purpose statement infuses everything they do--it's part of the sensory experience of the brand: "We want to make a contribution to the world by making tools for the mind that advance humankind." Mission continually accomplished.

In pursuit of Why, and the execution of your business - products, services or experiences - Inspirational Design Thinking may offer some refreshing insights and methods on how to make purpose one's guiding star.

Instead of uncritically guiding offerings by what customers say they want, Inspirational Design Thinking first explores breakthrough innovative opportunities via a taxonomy of Big Questions under the main heading: Love, Courage and Accomplishment.

Once a big enough "Why" has been identified that resonates with the organization's culture, business opportunities are conceptualized and customers' insights and opinions solicited, all followed by the established Design Thinking process. In this way the Why - How - What are connected and a comprehensive and a cohesive meaningful brand message is developed.

Branding from Why is a strong beginning, however if customers sense the organization is inauthentic, its business will not stand the test. Upcoming generations will continue to keep organizations feet to the fire with their focus on measurable actions.

Special thanks to Gasper Patrico for researching and co-writing this article


Saturday, December 17, 2016

Uber Said It Protects You From Spying. Security Sources Say Otherwise.

By Will Evans 

For anyone who’s snagged a ride with Uber, Ward Spangenberg has a warning: Your personal information is not safe.

Internal Uber employees helped ex-boyfriends stalk their ex-girlfriends and searched for the trip information of celebrities such as BeyoncĂ©, the company’s former forensic investigator said.

“Uber’s lack of security regarding its customer data was resulting in Uber employees being able to track high profile politicians, celebrities, and even personal acquaintances of Uber employees, including ex-boyfriends/girlfriends, and ex-spouses,” Spangenberg wrote in a court declaration, signed in October under penalty of perjury.

After news broke two years ago that executives were using the company’s “God View” feature to track customers in real time without their permission, Uber insisted it had strict policies that prohibited employees from accessing users’ trip information with limited exceptions.

But five former Uber security professionals told Reveal from The Center for Investigative Reporting that the company continued to allow broad access even after those assurances.

Thousands of employees throughout the company, they said, could get details of where and when each customer travels. Those revelations could be especially relevant now that Uber has begun collecting location information even after a trip ends.

Spangenberg is suing the San Francisco-based ride-hailing behemoth for age discrimination (he’s 45) and whistleblower retaliation. He has worked information security jobs for a variety of tech companies. Uber tasked him with helping develop security procedures and responding to problems from around the world.

In addition to the security vulnerabilities, Spangenberg said Uber deleted files it was legally obligated to keep. And during government raids of foreign Uber offices, he said the company remotely encrypted its computers to prevent authorities from gathering information.

After beginning in March 2015, Spangenberg said he frequently objected to what he believed were reckless and illegal practices, and Uber fired him 11 months later.

“I also reported that Uber’s lack of security, and allowing all employees to access this information (as opposed to a small security team) was resulting in a violation of governmental regulations regarding data protection and consumer privacy rights,” he stated in the declaration, referring to requirements that companies notify consumers of any breach of personal information.

Michael Sierchio, a tech industry veteran who was a senior security engineer at Uber from early 2015 until June of this year, agreed that Uber had particularly weak protections for private information.

“When I was at the company, you could stalk an ex or look up anyone’s ride with the flimsiest of justifications,” he said. “It didn’t require anyone’s approval.”

In a statement, Uber said it maintains strict policies to protect customer data and comply with legal proceedings. It acknowledged that it had fired employees for improper access, putting the number at “fewer than 10.”

“We have hundreds of security and privacy experts working around the clock to protect our data,” Uber said in a statement.

“This includes enforcing strict policies and technical controls to limit access to user data to authorized employees solely for purposes of their job responsibilities, and all potential violations are quickly and thoroughly investigated,” the company said.

Uber would not give more details on its technical controls. In practice, the security sources said, Uber’s policy basically relies on the honor system. Employees must agree not to abuse their access. But the company doesn’t actually prevent employees from getting and misusing the private information in the first place, the security sources said.

Uber has a history of data problems

As Uber has rapidly grown to more than 40 million users worldwide, the gig-economy giant has also been dogged by leaks, hacks and privacy scandals.

In 2014, BuzzFeed reported that an Uber official had tracked its reporter’s movements without her permission, around the same time another executive suggested digging up dirt on critical journalists. The controversy – and an entrepreneur’s claim that he was tracked as well – drew attention to the company’s internal God View tool, which provided a real-time aerial view of Uber cars in a city and details of who was inside of them.

It later came out that a data breach that year exposed the personal information of more than 100,000 drivers.

After the embarrassments of 2014, Uber hired chief security officer Joe Sullivan, a prominent tech figure who previously held that post at Facebook and used to be a federal prosecutor. His team drew heavily from Facebook, including chief information security officer John “Four” Flynn.

The Federal Trade Commission, the consumer protection agency, is investigating Uber’s information security practices and recently deposed Sullivan, according to security sources.

Spangenberg and Sierchio – as well as three other former Uber security professionals granted anonymity to confirm their accounts – describe a startup culture that pushed back against security protections in favor of unbridled growth.

“Early on, ‘growth at all costs’ was the mantra, so you can imagine that security was an afterthought,” said Sierchio, whose tech career includes designing video games for Atari in the early 1980s.

Even after Uber assembled a security team, the pushback continued when employees raised concerns, he said.

“One of the things I was told is, ‘It’s not a security company,’” Sierchio said. Spangenberg said he was told the same thing.

As disclosures about God View sizzled on the internet in 2014, the company posted a statement saying that, “Uber has a strict policy prohibiting all employees at every level from accessing a rider or driver’s data. The only exception to this policy is for a limited set of legitimate business purposes.”

Lawmakers, including Sen. Al Franken, D-Minnesota, demanded details about those “legitimate business purposes.” Franken later wrote he was “concerned about the surprising lack of detail in their response.”

Sierchio, who said he was pushed out in June, said the company’s policy limiting access was “never enforced.”

After an investigation by New York Attorney General Eric Schneiderman, Uber settled in January and promised to limit access to real-time trip data “to designated employees with a legitimate business purpose.”

Even after the attorney general settlement, Spangenberg and Sierchio said thousands of employees could still search Uber’s database to get real-time ride information. The company said it complies with the settlement.

Uber did adopt some reforms. There was a pop-up message warning employees that their activity was being monitored, but few took it seriously, Spangenberg said. Another change flagged searches for customers considered “MVPs.” But that didn’t protect anyone not labeled an MVP, Spangenberg said.

It also changed the name of God View to Heaven View, Spangenberg said.

An internal audit team searched for abnormalities in all the database activity to nab employees tracking customer data illicitly, said Spangenberg, who assisted the investigations. Those they caught were referred to HR to be fired, he said.

“If you knew what you were doing, you could get away with it forever,” Spangenberg said. “The access is always there, so it was a matter of whether you got caught in the noise.”

Many employees, Uber said, need access for reasons such as providing customer refunds and investigating traffic accidents. The company added that it blocks some teams of employees from getting the data without approval, though it did not specify which teams or how the approval process works.

Drivers’ personal details, including Social Security numbers, were also available to all Uber employees, Spangenberg said in his declaration.

Spangenberg said he argued for shutting off access to sensitive data for those who didn’t need it.

“I would say, ‘We can’t keep this information, you can’t allow this information to be stored like this, you can’t leave it all connected like this,’” he said.

Uber, in its statement, said, “We have made significant investment in tightening our access controls during the past several years. Allegations that simply acknowledging our policy in a pop-up window would provide access to customer data for unauthorized employees are not correct in our current environment.”

According to his lawsuit, Uber told Spangenberg he was fired for violating a code of conduct and reformatting his computer, which erases everything on it. He said he deleted and began rebuilding his laptop because it had crashed, and that it was common practice.

He also got in trouble for accessing emails that dealt with his own job performance review. Spangenberg said he was only testing out a program to search company emails. The whole thing was a pretext, he said, to get rid of him.

In court filings, Uber responded that it “generally denies each and every allegation” made by Spangenberg.

Lawsuit says Uber destroyed documents

Spangenberg accuses Uber of destroying information he believed it was obligated to preserve. “Uber routinely deleted files which were subject to litigation holds, which was another practice I objected to,” his declaration says.

A company can face legal penalties or be held in contempt of court for scrubbing evidence it was supposed to keep.

Among his duties, Spangenberg said he was also a point person when foreign government agencies raided company offices abroad.

“Uber would lock down the office and immediately cut all connectivity so that law enforcement could not access Uber’s information,” his declaration states.

In May 2015, for example, the tax agency Revenu Quebec raided Uber’s Montreal office to gather evidence of tax evasion. Spangenberg said he worked from San Francisco to encrypt the office’s computers.

“My job was to just make sure that any time a laptop was seized, the protocol locked the laptops up,” he said.

Indeed, Quebec investigators – armed with a warrant to copy information from Uber computers – went back to a judge to say the computers had been remotely restarted and apparently encrypted, according to court records. They got permission to take the computers with them, but the machines are of little value if the information on them stays encrypted.

Efforts to encrypt data once a government search is in process “raises red flags and serious concerns,” said Judith Germano, a cybersecurity expert and former federal prosecutor.

A company could argue it was protecting sensitive information, she said. But if a judge determined it was a deliberate effort to hide evidence, the judge could impose legal sanctions or fines, and order the company to decrypt the data.

In its statement, Uber said, “We’ve had robust litigation hold procedures in place from our very first lawsuit to prevent deletion of emails relevant to ongoing litigation.” Uber said it has an obligation to protect personal information and that “we cooperate with authorities when they come to us with appropriate legal process.”

Uber challenged the Quebec search warrants in court, but in May, a Canadian judge wrote in French that Uber’s actions had “all the characteristics of an attempt to obstruct justice,” suggesting that “Uber wanted to shield evidence of its illegal conduct.” Uber is still appealing.

Looking back, Spangenberg describes a tangle of questionable practices and gaping vulnerabilities.

“The only information, truthfully, that I ever felt was safe inside of Uber is your credit card information,” he said. “Because it’s not stored by Uber.”


The Oppenheimer Way

On its web site, Oppenheimer sets forth its purported goal of helping investors. Here's what it asserts: "We strive to help individuals maximize returns through an investment approach that's rooted in four key principles. Make global connections, look to the long term, take intelligent risks, and invest with proven teams."

Let's take a closer look at the "proven teams" who stand at the ready to assist you with reaching your retirement goals.

A checkered history

According to a comprehensive study by the Securities Litigation and Consulting Group (SLCG), the "team" at Oppenheimer consists of 2,217 registered brokers. 276 of these brokers (12.45%) had "investor harm" events in their background. "Investor harm" is defined as an award or settlement in excess of a threshold amount. Of this group, 92 (4.15%) were previously fired by other firms and hired by Oppenheimer.

While Oppenheimer ranked #7 in the top 30 firms with 400 or more registered brokers ranked by the percentage of brokers with investor harm events as defined in a previous study, it was #1 among brokerage firms with more than 1000 registered brokers. That's not a ranking to be proud of.

This data is significant because findings of a number of studies indicate the risk a broker will commit misconduct is "significantly increased" if co-workers have previously committed misconduct.

The SLCG study quantified the risk to investors of dealing with the six brokerage firms with the highest misconduct disclosures (Oppenheimer was #7 overall) in no uncertain terms, as follows: "Given their coworkers' disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined by Qureshi and Sokobin and should be avoided by investors."

A cover-up

Clearly, this is data Oppenheimer and others in the securities are not eager for investors to learn. It appears that Oppenheimer intentionally delayed reporting events relating to misconduct by its brokers in order to keep that information from the prying eyes of the investing public.

According to a News Release dated November 17, 2016 issued by the Financial Industry Regulatory Authority, over a multi-year period, Oppenheimer failed to timely report more than 350 required filings to the regulatory authority. These filings included "actions taken by Oppenheimer against its employees, and settlements of securities-related arbitration and litigation claims."

The delay in reporting these claims was not minor. On average, according to the Release, "Oppenheimer made these filings more than four years late."

The Release also noted other misconduct by Oppenheimer, including failing to produce documents in discovery to customers who filed arbitrations, and for not applying applicable sales charge waivers to customers.

FINRA fined Oppenheimer $1.575 million and ordered it to pay $1.85 million to customers. As is typical, Oppenheimer " neither admitted nor denied the charges, but consented to the entry of FINRA's findings."

Lofty principles

In its annual report for 2015, Albert G. Lowenthal, the Chairman and CEO of Oppenheimer, stated: "As we stay true to our principles, always doing what is right and best for our clients in the best and worst of times, we can feel justly proud of our efforts."

Clients and prospective clients of Oppenheimer need to ask themselves whether these lofty statements have a hollow ring.

The views of the author are his alone. He is not affiliated with any broker, fund manager or advisory firm.

Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.

Get Dan's investing insights by signing up for his free, weekly newsletter here.

Correction: The FINRA sanctions were levied against Oppenheimer & Co., Inc.. My blog mistakenly referenced the web page of the Oppenheimer Funds. The Oppenheimer funds were not involved in the FINRA matter. I regret the error.


Thursday, December 15, 2016

The Growing Severity Of Cyber-Attacks And How To Protect Against Them

Despite the fact that cyber-attacks occur with greater frequency and intensity around the world, many either go unreported or are under-reported, leaving the public with a false sense of security about the threat they pose and the lives and property they impact. While governments, businesses and individuals are all being targeted on an exponential basis, infrastructure is becoming a target of choice among both individual and state-sponsored cyber-attackers, who recognize the value of disrupting what were previously thought of as impenetrable security systems. This has served to demonstrate just how vulnerable businesses, cities and countries have become, and the growing importance of achieving global risk agility in the face of such a threat.

As an example of the growing vulnerability of critical infrastructure, in December 2015 a presumed Russian cyber-attacker successfully seized control of the Prykarpattyaoblenergo Control Center (PCC) in the Ivano-Frankivsk region of Western Ukraine, leaving 230,000 without power for up to 6 hours. This marked the first time that a cyber weapon was successfully used against a nation's power grid. The attackers were skilled strategists who carefully planned their assault over many months, first doing reconnaissance to study the networks and siphon operator credentials, then launching a synchronized assault in a well-choreographed dance. The control systems in Ukraine were surprisingly more secure than some in the U.S., since they were well-segmented from the control center business networks with robust firewalls (Wired, 3/3/16), emphasizing just how vulnerable power systems are globally.

The PCC operated a common form of industrial control system known as a supervisory control and data acquisition system, which allows for remote controlling and monitoring of industrial processes -- in this case the distribution of electricity. The attackers overwrote firmware on critical devices at 16 substations, leaving them unresponsive to any remote commands from operators (Wired, 3/3/16), effectively leaving plant operators blind. It now seems clear, given the degree of sophistication of the intrusion, that the attackers could have rendered the system permanently inoperable.

If that is the case for a sophisticated power station, does an ordinary business stand a chance if hackers choose to penetrate its security system? Cyber-attacks are difficult to prevent, given the relative ease with which hackers can find a single system vulnerability, and the impossibility of plugging every conceivable security hole. Cyber-security professionals are in essence playing an endless game of cat and mouse, whereby a would-be attacker attempts to enter a system while security professionals attempt to defend a computer system from attack by applying continuous patches. The adversary then quickly moves to exploit the latest discovered vulnerability. That is why many computer security programs produce patches numerous times per day - even for home computers.

Cyber-Vigilance and the Need for More Resources

High profile cases of cyber-attack are increasingly becoming the norm. The U.S. government had little difficulty finding evidence to assign blame (to China) for the theft of personal information of more than 22 million government employees from the computer systems of the Office of Personnel Management in 2015. Similarly, it did not take long for the U.S. to determine that North Korea was responsible for the cyber-attack against Sony in 2015. Cyber-attacks essentially give nations of all sizes, degrees of wealth and resources a seat at the table of the super powers, affording them a disproportionate amount of clout. While China, the U.S. and Russia lead the world in cyber-attacks, virtually every government engages in such attacks, and nearly every country has its share of computer hackers.

International treaties intended to address the problem have limited impact because of the inability to hold signatories accountable and the difficulty associated with accurately determining the identity of responsible actors. Enhanced information sharing, combined with a mandate to swiftly and accurately release information regarding attacks to impacted citizens, provide a sensible foundation for designing a protocol to effectively address future attacks, yet very few governments routinely engage in this practice.

Clearly, governments, businesses and individuals must devote greater resources to becoming more cyber-vigilant, which means they must devote more resources toward anticipating and protecting against attacks. Governments and businesses need to also engage in more public-private partnerships in order to adequately address the issue. The European Union has recently implemented the "Network and Information Security Directive", which forces member states to adopt more rigid cyber-security standards, and creates an avenue for the 28 member states -- and the operators of essential services such as energy, transportation, and healthcare sectors -- to communicate (European Commission, Digital Single Marketplace). Other nations are in the process of acting accordingly. However, no nation allocates sufficient resources to adequately respond to the increasing threat of a cyber-attack against critical infrastructure, nor does any nation have a truly comprehensive plan to prevent or meaningfully react to the outcome of such attacks.

Taking Precautions

Taking precautions against cyber-attacks has become essential, particularly among financial institutions, which are frequently targeted for attack. Serious incidents have occurred this year across the globe, including among banks in Vietnam, Ecuador, and the best-known example -- the central bank of Bangladesh, in which $81 million was successfully stolen. For financial institutions, cyber-attacks have become so serious that in October of this year, the U.S. Treasury Department's Financial Crimes Enforcement Network issued an advisory on cyber-crime as well as guidelines for how and when to report suspicious activity. According to a recent report by Verizon, which involved 67 organizations in the private and public sectors, 48% of data breach incidents among banks in 2015 involved compromised web applications, prompting many financial institutions to require two-step verification procedures, and a host of other protective measures.

While cyber-attacks can pose a nuisance for countries with cyber defense capability, for businesses without it, cyber-attacks can pose an existential threat, not just operationally, but in terms of reputation risk, so they must create a sturdy defense. A large variety of insurance carriers now provide cyber-risk insurance, which can provide meaningful protection. But businesses must go further than to take out insurance. Business continuity plans must be carefully crafted, and an implementation plan must be both realistic and executable. Employees must be trained what not to do (i.e. click on the wrong email link), as well as what to do in the event of an attack. And crisis management programs should be put into place in advance of actually needing to do so, so as to be able to respond in a meaningful fashion.

Apart from heightening awareness to cyber-attacks, a number of actions should also be taken so as to avoid the gaze of regulatory and legal action that can occur after an attack has occurred. To the extent possible, avoid collecting or retaining unnecessary personal information of customers. Restrict access to sensitive information to a small pool of employees. Deploy best practice methods to store and transmit sensitive information, and be sure to require that third party partners and service providers do the same. If there is a data breach, be sure to carefully weigh the key messages you wish to convey to your customers, partners, and employees. Don't make matters worse by sending the wrong message to the marketplace.

Conclusion

Governments around the world have plans in place to deal with the consequences of natural disasters, yet none have disaster relief plans for a downed power grid. Clearly, this must change. Local and state governments must work together with their national counterparts to produce and quickly implement plans to address future attacks. The same may certainly be said of the need for businesses to put cyber-risk on the front burner, stop presuming it is someone else's problem, and devote the resources necessary to seriously and effectively combat the problem. Doing so will take as much will and determination as successfully tackling any other risk that poses a potentially existential threat to a firm. If a child can hack into the Pentagon, as has been done, there really is no place to hide. The only solution is to confront this menace head on.

*Dante Disparte is the CEO and Daniel Wagner is Managing Director of Risk Cooperative. They are the co-authors of the new book "Global Risk Agility and Decision Making".

This article first appeared in the Winter 2016 issue of Professional Investor magazine.


Tuesday, December 13, 2016

As a Professional Investor, Here's Why I Avoid Trends

What trend or opportunity are you most interested in as an investor, today? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Peter Fenton, General Partner at Benchmark, Dad, aspiring Cellist, on Quora.

I don't invest in trends. I know it sounds a bit too-cool-for-school but what I've found is that you get far more insight from purpose than from trends. So, for example, in the case of Docker, I invested in Dotcloud (which became Docker), in the purpose of this radical, intense leader, Solomon, who wanted to give the world's programmers superpowers, tools of mass innovation. In the case of Yelp, it was Jeremy's purpose to allow for the truth of great (and bad) local businesses to be visible to all. Or when I met Jack in 2007, he had this unstoppable purpose for Twitter to "bring you closer". Sometimes that purpose is just this raw force, an energy, like it was in the case of Shay at Elastic in 2012. When I feel like the trend, the space, the concepts vs the tactile reality of a purpose forms the narrative of the investment I lose all interest.

Another way to look at this is that I've found the best entrepreneurs have discovered preconditions that enable their purpose, that make it possible today versus in ten years. To increase the odds of finding the extraordinary, it helps to have a point of view about the most dynamic preconditions. As my partner Matt Cohler says, "to see the present most clearly". Obviously mobile ubiquity is the major precondition today, with the additional attributes of GPS, high quality cameras, and ever improving networks. I don't think we've even started to realize the potential of this enhanced mobile ubiquity. Another precondition is social behavioral norms, our readiness to share, to engage expands in what feels like a geometric way when the conditions are right. An "all cloud" world is another precondition -- it forces every layer of the technology stack to be reconsidered and in many cases reinvented for the cloud. Mass compute and mass storage is a precondition for machine learning at scale.

To make this more concrete, take the example of Houseparty. Ben's an extraordinary entrepreneur, he's moved by a purpose to make you feel closer to your friends when they're not physically present, and he has a fresh, new approach using live video. The preconditions of live video open up this world of exploration and the right entrepreneurial mind figures it out. I deeply regret not being his investor!

This question originally appeared on Quora. - the knowledge sharing network where compelling questions are answered by people with unique insights. You can follow Quora on Twitter, Facebook, and Google+.

More questions:​

  • Investing: What companies outside of your portfolio are you most bullish on?
  • Business: What are some of the smartest business moves made by tech startups and companies recently?
  • Venture Capital: What do you do differently than a vast majority of other VCs?


Sunday, December 11, 2016

Deforestation and the Trillion-Dollar Time Bomb

You probably recognize many of the companies on the first of the two lists we'll be examining today - like Colgate Palmolive, L'OrĂ©al, and McDonald's, which are household names. You might not know the others - like Marfrig Global Foods and Bunge - but they're equally massive, and they depend on sustainable supplies of palm, soy, cattle, and timber & pulp - the "big four" forest risk commodities responsible most of the world's deforestation. These four commodities account for 24% of the cumulative income of 187 companies surveyed for a new report called "Revenue at risk: Why addressing deforestation is critical to business success", and their supplies could be disrupted if deforestation continues.

Produced by CDP (formerly the Carbon Disclosure Project) at the behest of 365 institutional investors, the report concludes that disruptions in supplies of forest risk commodities could cost $906 billion per year.

There's another list, too: the Forest 500, which names and shames the 500 entities that can end deforestation. Half those entities are companies, and many of them have pledged to end practices that kill forests. The list is compiled by the Global Canopy Programme (GCP), which ranks those pledges and gives credit for good ones. GCP also published a report today, and it's called "Sleeping giants of deforestation".

It shows that 57% of the companies on the Forest 500 either have no policies to end deforestation or none that the organization deems credible, while the CDP report shows that just 42% of the companies on the risk side have even bothered to investigate the ways that supply disruptions could impact their business.

On top of that, the Forest Trends Supply Change project tracks the progress that companies are reporting on their deforestation pledges and shows less than half of them are even reporting progress.

Add the findings up, and you find a global agriculture sector facing an existential threat and partially acting on it, but mostly hobbled by poor traceability and weak governance or blinded by apathy and overconfidence and frustrated by shortages of certified raw materials.

The GCP report looked at countries, too, and found many of those on the supply side - the rainforest countries that export forest risk commodities - were beginning to take action, while those on the demand side - the developed countries that import them - aren't. Paradoxically, while developed countries often funded sustainability efforts in tropical countries, only two of the importing countries on the Forest 500 - Germany and the Netherlands - formally support national sustainability efforts among consumers.

The Bright(ish) Side

It's not all doom and gloom.

Supply Change also found that those pledges with publicly-available disclosure were, on average, more than 70% of the way towards completion; and while many companies are certainly avoiding disclosure to hide bad performance, others have taken productive actions that are just difficult to quantify.

Danone, for example, is helping small farmers around the world shift to sustainable farming, and progress on that front won't show up incrementally the way shifting to certified commodities does. Likewise, Norwegian consumer goods group Orkla implemented a three-pronged sustainable palm oil policy in 2014 and recently saw their Forest 500 rating jump from three stars to five, as did two other companies: Colgate Palmolive and Marks & Spencer.

Orkla has been working for years to replace palm oil with options that are healthier and not associated with deforestation, and they launched their sustainable palm oil policy in 2014. That involved renegotiating their contracts with key suppliers and becoming a member of the RSPO at Group level.

"We have a regular dialogue with suppliers about the progress of the work," says Ellen Behrens, the company's Vice President for Corporate Responsibility. "We only work with suppliers who have good plans for sustainable improvement. Examples of supplier activities include the use of satellite-based risk assessments, fire alert systems and various types of training programs."

Like Danone, they're also looking to drive complex changes on the ground.

"We look for suppliers who engage in training of mill management and of farmers, and who engage in awareness-building in local communities," she says.

The final component, she says, is certification, which among others is important to monitor compliance with important aspects such as working conditions and the use of pesticides. Their most recent disclosure document shows that 40% of the palm oil, blends, and derivatives they purchase are either certified as sustainable by the Roundtable on Sustainable Palm Oil (RSPO) or have their impacts offset by Green Palm certificates.

"Certification is the easiest activity to communicate in a quantified way," says Behrens. "We're currently looking into how to verify other activities."

That's something to keep in mind as you explore the group's Supply Change profile: companies whose only pledge involves certification will show more "quantitative progress" than those undertaking more complex strategies, so it pays to heed the milestones embedded in the profiles as well.

Radical Transparency

The reports come in as a flurry of new transparency tools are also coming on line, as we covered in a recent edition of the Bionic Planet podcast, which is available on iTunes, TuneIn, Stitcher, and here:

Perils and Possibility

The CDP report uncovered a disturbing sense of confidence among companies with high exposure to the big four commodities, with 72% of them expressing confidence in their ability to source them in the future - even as 81% of companies in the Agricultural Production sector reported impacts related to forest-risk commodities in the past five years.

On the other hand, many also seemed unaware of the potential for growth that a shift to sustainable sourcing could offer.

"Investors are poised to capitalize on the opportunities that await," wrote CDP CEO Paul Simpson in the foreword. "Some of the biggest index providers in the world, including S&P and STOXX, have created low-carbon indices to help investors direct their money towards the sustainable companies of the future. Investors see opportunities in sustainably managed timberland, and are beginning to direct funding to innovative approaches to protect forests, such as REDD+ credits."

This story is cross-posted on Ecosystem Marketplace. Read the original.


Dollar Strength To Weigh On GDP

The dollar has spiked rather dramatically over the past several weeks on prospects of better economic growth and higher interest rates.  In fact, on a trade-weighted basis the dollar has eclipsed its highs from January of this year and is now hovering around levels last seen in early 2002.  While it’s generally a positive sign when a currency strengthens, dramatic movements in short periods of time can have serious repercussions for trade.  A rising dollar makes US exports less competitive relative to products and services sold by competitors based in countries with weakening currencies.  Therefore, dollar strength can act as a strong headwind for those US companies heavily dependent on exports.  And since 40-50 percent (estimates vary) of S&P 500 revenues are derived outside the US, a rapidly rising dollar is no trivial matter as it relates to corporate sales and profitability.  US consumers, on the other hand, generally benefit from dollar strength as they can use their stronger dollars to buy more goods and services imported from other countries.  But then again, the consumer’s gain comes at the expense of US companies that are losing US wallet share to foreign competitors.

We generally hear our politicians say that they are supportive of a strong dollar.  However, an appreciating dollar can cause problems for policymakers and central bankers as well as US corporations.  Why?  Because the size of our economy is measured by the following formula:

GDP = Personal Consumption Expenditures (~68% of total GDP in 2015) + Gross Private Domestic Investment (17%) + Government Expenditures (18%) + Net Exports of Goods & Services (-3%)

The final component in the equation, Net Exports of Goods & Services, is derived by subtracting imports from exports.  Because we always import more than we export, this component of GDP is always negative.  So, as we discussed above, we can expect imports to increase and exports to decrease in a rising-dollar environment.  If we hold all else equal, the rise in imports and drop in exports caused by an appreciating dollar is a drag on economic growth.  How much of a drag?  Well, since 1995 net exports have subtracted anywhere from 0.8% to 5.6% from GDP (on a quarterly basis), with an average of 3.4%.  This compares to about 3.1% in the most recent quarter (3Q16).  With the trade-weighted dollar at 14-year highs, net exports are currently subtracting just 3.1% from GDP – below the 20-year average of 3.4%.  You would think that the drag would be much greater given the huge dollar appreciation over the past couple of years.  Seems like something has to give, right?

We decided to go back and try to quantify the possible effects on GDP from the recent spike in the value of the dollar.  The last time the trade-weighted dollar index was this high (approaching 130) in 2001-2002, the trade deficit was subtracting 4.0%-5.0% from GDP.  In the chart below, we went back 20 years and tracked the quarterly average trade-weighted dollar against the ratio of trade deficit to GDP.  We also ran a regression to see how GDP growth would be affected if the trade-weighted dollar held current levels for the remainder of the fourth quarter.  Our regression analysis told us that the dollar’s recent strength could be a drag of 0.50%-0.90% of GDP in the fourth quarter.  It is hard to see how we hit some of the optimistic estimates out there (some as high as 3.5%-4.0% for the 4Q) if trade is causing such a nasty drag.

Source: The Bureau of Economic Analysis and The Federal Reserve

It should also be acknowledged that the effect on net exports from changes in the dollar seems to lag.  As such, we may not see the full negative impact in the fourth quarter.  In the second chart below, we put a three quarter lag on the historical deficit data.  It turns out that there was a much better correlation (R-squared of 42%) with a three quarter lag.  In other words, it seems to take (on average) three quarters for changes in the value of the dollar to affect the ratio of trade deficit to GDP.  As such, we suspect that if the dollar maintains current levels or rises further there will be a sizeable drag on GDP in 2017.

Source: The Bureau of Economic Analysis and The Federal Reserve

So what is our message?  Sudden and dramatic strength in the dollar is not without its risks, and the markets appear to be ignoring these risks (for the most part).  Aside from corporate profits and GDP, the bigger immediate risk is that of capital flight from the emerging markets.  We saw this late last year when the Fed had been forecasting as many as four interest-rate hikes in 2016.  The problem is that there has been a massive amount of dollar-denominated debt issued by entities in emerging markets over the past several years.  If money starts pouring out of those regions and into the US, those entities will find it that much harder to pay back their debts.  In addition, interest rates will rise in those regions, compounding the difficulties in servicing and refinancing that debt.  These pressures, at worst, could lead to a financial crisis.  At best, we can expect extended economic weakness in the emerging market countries.  Secondly, dramatic dollar appreciation can lead to disinflationary effects in the US as importers can lower prices in dollar terms and still maintain profitability.  While this is not as big an issue as it was in years past, the Fed is still trying to spur inflation through monetary policy.

As noted, sustained dollar strength could also have a longer-term effect on US economic growth and corporate profits.  At present, economists and stock analysts don’t appear to fully appreciate the impact that the surge in the dollar could have.  But the risks are clear and present, and this is a major reason why we do not believe the US economy can dramatically “decouple” from the rest of the world.  Like it or not, we’re in a global economy and can’t go it alone.


Saturday, December 10, 2016

Bringing International Corporations To The Anti-Corruption Table

Since his first day in office, Secretary of State John F. Kerry has maintained that economic policy is foreign policy and vice versa. This principle recognizes that the bellwether for a country's success depends squarely on the soundness of its economic policies and whether it allows businesses - within and without its borders - to operate in environments of transparency, consistency, and predictability.

Combating corruption is critical to establishing and maintaining such environments. Corruption poses a major threat to global prosperity and it undermines the rule of law, government institutions, and human dignity. The World Bank has estimated that $1 trillion of transactions worldwide are tainted by bribery each year.

The United States has been robustly engaged on a wide variety of fronts to address corruption, from legislative efforts at home, to foreign assistance and bilateral and multilateral diplomacy. But while governments can take a leading role in addressing corruption, other stakeholders also need to step forward, including civil society organizations, businesses, the media, and ordinary citizens, so we can collectively take action to fight the root causes of graft.

That is why, as we mark International Anti-Corruption Day, I want to bring attention to a critical weapon that is gaining recognition in the fight against corruption. This is the principle of corporate liability, which can play a key part in ensuring international business is conducted in an aboveboard manner, free of corruption and bribery.

Corporate liability ensures that companies and corporations can be held responsible for the illegal actions of their employees. In other words, companies can be held just as liable for wrongdoing as the individual officers, employees, or agents involved in the offense.

When a legal system embraces corporate liability, the effects can be profound. For example, in the United States, the U.S. Foreign Corrupt Practices Act (FCPA) authorizes regulators, including the Department of Justice and Securities and Exchange Commission, to hold corporations liable when their employees engage in foreign bribery.

Because corporations are on the hook for the actions of their employees, they have a real incentive to discourage employees from engaging in bribery or other corrupt behavior. In effect, this makes corporations themselves instrumental agents in the fight against foreign bribery.

In addition to our country's enforcement of the FCPA, I am pleased to note that because of the Anti-Bribery Convention - the world's foremost international agreement to address foreign bribery - and the peer review of the Organization for Economic Cooperation and Development (OECD) Working Group on Bribery, many countries have adopted corporate liability laws for the first time.

This is real progress considering that 16 of the 41 Convention Parties had no established system for corporate liability prior to the Convention. And while the Convention obligates its Parties to establish corporate liability only for bribery of a foreign public official, many Parties have either adopted a broader form of corporate liability, or started with foreign bribery and then widened the scope.

These developments are helping to foster greater corporate responsibility in a range of areas, including environmental, tax, competition, and customs law. And thanks to the concerted efforts of the United States and the other Parties of the OECD Anti-Bribery Convention, we are deterring crime and allowing more businesses to do what they do best: create jobs and economic opportunity around the world.


Friday, December 9, 2016

ADHD makes for better entrepreneurs

Entrepreneurship researcher Johan Wiklund of Syracuse University was alerted to the link between ADHD and entrepreneurship after family experiences led him to learn more about mental health issues. This encouraged him to look at how ADHD can be a positive influence. We spoke to Wiklund about his research.

ResearchGate: What inspired you to study ADHD and entrepreneurship?

Wiklund: I have been involved in entrepreneurship research for 20 years. A couple of years ago we had some mental health issues in the family for the first time. This opened my eyes. After learning more about mental disorders, I began to see links between ADHD and entrepreneurship. I asked some psychiatrist and psychologist friends and they thought it made sense. I conducted a case study with 16 entrepreneurs who all had a formal ADHD diagnoses. This case study confirmed many of my hunches and set me off on the course I am now pursuing.

RG: What makes a good entrepreneur?

Wiklund: It is virtually impossible to define what makes a good entrepreneur, because as an entrepreneur you can choose to do whatever you want, for whatever reason you want. So, first you need to have your own definition of what a 'good' entrepreneur is. But fundamentally, you must be willing to try out new things even if you are uncertain, be willing to accept failure, and to get back up when you fail.

RG: What are your results so far? What is it about ADHD that could benefit or lead someone to become an entrepreneur?

Wiklund: Hyperactivity and impulsivity among people with ADHD can be positive for entrepreneurship. Impulsivity is particularly interesting because it is such a negatively loaded word. But it is impulsivity that triggers people with ADHD to act and take risks where other people would wait and see. They also tend to look at the potential gains rather than fear the potential losses, which helps them keep going and to keep coming back.

RG: Are there downsides as well?

Wiklund: The attention deficit aspect of ADHD is negative unlike the impulsivity and hyperactivity aspects. It seems that people high on the attention deficit dimension shy away from entrepreneurship.

For practicing entrepreneurs with ADHD, organization is a problem. Every person that I have spoken to with ADHD hates bookkeeping and has a very hard time with it. This is why they need people around them for support.

RG: Does this apply to people who medicate their ADHD symptoms?

Wiklund: ADHD symptoms can be difficult if they become too extreme. If this happens medication is of course helpful. However, from what I have seen, entrepreneurs with ADHD typically don't medicate when they want to be creative and generate ideas, but do medicate when they meet with customers, or need to be focused on tasks that they consider boring.

RG: Are there any famous entrepreneurs that have ADHD?

Wiklund: Yes, there are several famous entrepreneurs with ADHD. It is hard to get confirmation on who actually has a formal diagnosis, but it seems that David Neeleman of JetBlue and Richard Branson of Virgin do have confirmed formal diagnoses.

RG: Are there other examples of disorders benefiting a person's pursuit?

Wiklund: People with dyslexia are also attracted to and can do very well in entrepreneurship. But the link between dyslexia and entrepreneurship is less straightforward. There is nothing directly related to reading difficulty that makes you suited for entrepreneurship. It may be other neurological differences that matter, such as creativity.

RG: What studies have you done so far?

Wiklund: To date I have carried out three primary studies. The first was a case study of 16 entrepreneurs with ADHD diagnoses. This helped me get a basic understanding of how ADHD symptoms manifest in entrepreneurship and develop a conceptual model. The second study was a survey of MBA alumni. The third study is a survey of successful entrepreneurs. Preliminary results suggest that ADHD symptoms are directly linked to behaving more entrepreneurially within their organizations, and positively linked to growth and performance. Very interesting findings!

This interview originally appeared on ResearchGate News. For updates on this research, follow the project on ResearchGate.


9 Office Gift-Giving Dos And Don’ts

Keep the occasion jolly by following these nine rules of office gift-giving etiquette.

1. If you give your boss a gift, make it a group effort. Doing so allows everyone to participate at a lower cost per person while providing a more substantial offering than any one individual could (or should) give on their own. If you must do it alone, opt for something heartfelt (a holiday plant or baked goods) rather than expensive and overly personal.

2. Participation is key. If your office has an exchange, plan on being a part of it. If you sit on the sidelines for any reason, you could be viewed as a Grinch. The cost is usually minimal, and it opens the door to build holiday goodwill.

3. Give discreetly to work friends. If you have a small present for a few select colleagues, swap gifts outside of the office. Otherwise, you risk other people finding out and wondering why they were excluded.

4. Remember your team. The holidays provide an opportunity to say thank you to the people who support you year-round. If you supervise a small team, (say, less than five) consider a token of appreciation for each. A gift card to a favorite restaurant or retailer you know they like is a welcome treat.

5. Aim for the sweet spot on price limits. No matter the spending guidelines in an organized office event, there will always be someone who exceeds them. This holiday blunder can inadvertently cause problems, making the appropriately priced offerings look meager by comparison. Conversely, don’t underspend, either. Purchase something near the top of the recommended range.

6. Wrap it up. Embellish your package with pretty paper, gift bags and bows. The extra effort makes the person receiving the present feel special – and that’s what the season is all about.

7. Don’t overdo it. Resist the temptation to go overboard. Avoid using the holidays as a time to show off, or ingratiate yourself with an over the top gift to impress. Clients can read through shallow attempts of grandeur. A modest gift showing gratitude is a far better holiday choice.

8. Smile and say thank you. This is the correct response when a co-worker (or anyone else, for that matter) presents you with something but you don’t have anything for them. You are not obligated to buy a present in return if you had no intention of doing so. The only requirement is to offer your sincere thanks for their thoughtfulness.

9. Remember extraordinary acts of kindness. If your mentor gives you guidance or a colleague goes out of their way to help you succeed this year, now is a great time to recognize them. An act of appreciation doesn’t have to be fancy – a pretty mug with a bag of chocolate-covered espresso beans and a gift card to a nearby coffee shop is perfect. The holidays provide extra room to acknowledge their acts of thoughtfulness.

For more of Diane’s etiquette tips, visit her blog, connect with her here on The Huffington Post, “like” The Protocol School of Texas on Facebook, or follow her on Pinterest and Instagram.


Thursday, December 8, 2016

The Single Most Important Question You Can Ask Your Employees

As leaders, we are always looking for the right questions to ask our people. When our employees are faced with a challenge it's tempting to give them advice or to tell them what they need to do, but by doing so you impede their growth and cheat yourself from getting some potentially fresh and powerful ideas. Plus, you don't want to be responsible for every decision that needs to be made. You need to save your energy for more critical decisions.

THE POWER OF ASKING, NOT TELLING
Asking, instead of telling, is one of the hardest behaviors I've had to change as an entrepreneur. Asking the right questions allows your employees to go deeper. It allows them to answer their own questions through a process of self-discovery. It also allows them to take responsibility for what they are accountable for. By working on asking versus telling I've noticed a decline in the number of problems that cross my desk on a daily basis. That simple change alone has had an incredible impact on my business and has allowed me to have more time to focus on the things that matter.

A good leader is constantly engaged in the habit of giving feedback to his people rather than engaging in the de facto method of simply telling, directing, or commanding them. We encourage our employees to be open to feedback because, after all, it's a way we see our blind spots. We encourage them to solicit feedback from their peers, and from their managers so they can be open to the things that others may know about them, but they may not be aware of themselves.

THE MOST POWERFUL QUESTION YOU CAN ASK EMPLOYEES
When was the last time you asked for feedback, and I mean powerful, honest feedback about your performance, work ethic or management style, from your people? Despite the fact that we may think we already know what we need to work on, I guarantee that you still have some blind spots of your own. Remember, even professional sports stars, musicians, and even politicians have coaches. None of us can see all of our weakness. In fact, what we may see as a "strength" others see as a fault. With this in mind I decided to take a leap of faith and started experimenting with my team with what I believe is the single most important and powerful question a leader can ask his or her people, which is:

"What's one thing I could stop doing (or be doing differently) that would make it easier to work with me?"

Ouch. If that doesn't make you cringe try reading it again. It's painful. But it's powerful! We have to be willing to touch the place that hurts in order to discover the areas we need to adjust. So take a deep breath, embrace the idea of being vulnerable, and create a safe space that allows them to answer with honesty. Be careful - if you ask for sincere feedback but you become defensive, angry, or hostile, you will have burned a bridge of trust that will take months or years to rebuild with your employee. In fact, they may never, ever be honest with you again and there may be a time in the future where their feedback could save your company. You asked for it so shut up and take it! Respect the other person for being brave enough to take you up on your question. You're the boss, remember? It's intimidating for them to answer you honestly.

LEAN INTO THE DISCOMFORT
I challenge you to lean into the discomfort and ask this question often. Regardless of your opinion, the feedback you receive will always contain a nugget of truth if not an entire harvest. We all know there are things about ourselves we need to work on. We're not fooling anyone, including ourselves when we pretend there's not. If you're not growing personally you can't expect your employees to grow. Whether you see it or not, they look to you to set the example. Why not take some time to discover more about yourself and how you impact others around you? Ask more than one employee, too. Try asking everyone you work with. If you're not quite up to a face-to-face meeting with potentially painful responses, try email, or use a company that specializes in free, anonymous feedback, like https://www.suggestionox.com/. Get a variety of answers from a variety of people so you can really get down to business and make the proper adjustments. The temporary pain will be well worth it.


To Bot or Not to Bot. Here Come the Chatbots

Donna Peeples, CCO, Pypestream

How intelligent automation can improve the customer experience for brands

The bot economy has arrived. These days, chatbots are on the tip of everyone’s tongue and at our fingertips. Easier to build and distribute than mobile apps, bots are invading the mobile messaging platforms of choice for consumers today.

While it’s still early, thousands of bots are now available. Consider the fact that Facebook Messenger had zero bots in February of 2016 and by November of this year had over 34,000. Today bots allow consumers to do everything from call an Uber, book a flight or make a restaurant reservation, to review an e-commerce order or ask for the latest news or weather forecast.

While many bots are more annoying than helpful, 2017 represents the turning point where we’ll see more companies leverage bots for customer service and to aid consumers in making buying decisions. That could mean fewer Google searches for consumers in the future, allowing them to get the information or help they need directly from brands in a more conversational and engaging way.

Chatbots offer brands a chance to be where consumers are: messaging. While smartphone owners only use a handful of apps, messaging apps are the platform of choice for consumers with more than 2.5 billion global users this year. And this trend is set to continue, with messaging apps now outpacing social media networks in growth.

Without a doubt, mobile messaging is a channel brands absolutely must embrace. And chatbots, if done the right way, offer businesses an opportunity to create a better real-time experience for customers. That said, not all examples of chatbots we’re seeing right now are good ones.  In the case of Microsoft’s Tay earlier this year, we saw how disastrous an open-ended AI bot system can be. Tay showed us what can go wrong when there are no guardrails in place to prevent comments outside the scope of what would be helpful to a customer.

As we head into 2017, one of the biggest misconception about chatbots is they can answer anything and everything. The belief that automating conversations in an open-ended way will in itself add value for customers. The reality is the most effective bots are purpose-built to solve very specific problems for customers–making common customer service requests and commerce easier, while ensuring customer privacy.

In other words, less is more. The focus of any bot should be intelligent automation of existing business processes delivered in a conversational way. And it’s critical to keep the customer experience in mind.

Delivering a great experience through intelligent automation

At the end of the day, chatbots should improve customer service, save customers time or help them with their buying decisions - such as customizing a product order or helping with a specific request. The experience and use case has to make sense and add value to the conversations customers are already having. How will a bot relate to customers? What specific problems will it solve? How will it improve existing processes for customer service, communication and commerce?

The ideal approach is to analyze customer communication and transactional processes, then identify areas where automation is both easy and effective. An example of this is the range of frequently asked questions that require a repeated and often scripted response from a live agent. Instead of having the customer go through the process of speaking with an agent, a chatbot can easily handle this conversation and transform an otherwise annoying experience.

Solving for these low-hanging-fruit issues first with bots allows brands to learn how to effectively automate their business, and over time they can increase the complexity. But keeping it simple is key, initially. We’re only just starting to see the ways in which chatbots can improve customer relationships. Any new technology needs to be implemented strategically and mastered over time, in gradual increments. Trying to do too much, too soon, often results in poor customer experiences.

Our approach at Pypestream reflects this philosophy. When we deploy bots for businesses we assess specific conversations and look for the repeatable interactions and apply business rules that a chatbot can handle with ease. From there, we grow and expand the chatbot’s capability using both business and behavioral data. Eventually, the chatbot can handle the majority of conversations allowing for lightning fast interactions and happy customers.

Customer service: the sweet spot for bots

Customer service is a natural for chatbots. Most often we see about 80-90% of customer service inquiries are for the same issues and require the same responses. These repetitive interactions are easily automated and streamlined with chatbots. The desired result is a reduction in operational costs for businesses while improving the speed and efficiency of customer service. In addition, chatbots can be triggered to proactively address real-time issues avoiding the costs of inbound calls. For example, alerts to a cable outage with instructions on how to reset the modem; where is my insurance claim in process and when can I expect my payment or storm notifications with safety instructions around down power lines and updates on when power will be restored.

Given how fresh chatbot technology is right now, the best outcomes are those that combine bots with humans. This is particularly true for customer service interactions. It’s difficult to predict or plan for every potential customer inquiry. Therefore, live agents are still needed to field the questions and inquiries that fall outside of a chatbot’s parameters - the more complex, higher touch interactions.

Overall though, for customers, the ideal experiences with businesses are intuitive and easy. The less friction, the better. That’s the central idea for the use of bots: convenience. When customers send a message to businesses to resolve problems, schedule appointments and make secure payments, the customer service experience is streamlined, frictionless and, well, easy.

Expect chatbots to continue to grow in popularity

Mobile messaging is steadily becoming the most popular means of communicating, as indicated by the staggering number of people on WhatsApp, Facebook Messenger and other p2p applications. Chatbots offer a way for businesses to enter the messaging era and join the conversation. New platforms will emerge to support issues of privacy and security that are so essential to customer communication. But ultimately, as investment in the technology increases, we can expect to see more companies ditching traditional communication models for messaging.

If done the right way, conversational technology and bots have the potential to make a dramatic and positive impact on the customer experience, but only if brands take the right approach through intelligent automaton.