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The Final Season of 'Game of Thrones' Has a Launch Date

Happy Monday, and welcome to another installment of The Monitor, WIRED’s roundup of the latest in the world of culture. In today’s news, HBO has finally coughed up a release date for the final season of Game of Thrones, Netflix is facing a lawsuit, and it looks like the Super Bowl won’t be marooned without a halftime show act.

Finally, a Date to Watch the Thrones

Always one to keep fans waiting in anticipation, HBO waited until three months out before to announce the launch date for Season 8 of Game of Thrones. Sunday night, just before the season premiere of True Detective, the network aired a teaser revealing that the epic fantasy’s final run will begin on April 14. What will the show look like when it does return? Snowy, as the Stark children—Arya, Sansa, Jon Snow—are about to confront some family demons at Winterfell. Or, at least, that’s what it seems like if the show’s new vague-as-hell-trailer is to be believed. Don’t worry, we’re sure plenty of third cousins you don’t remember will show up as well. And maybe Ed Sheeran.

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If You Want to Sue Netflix, Turn to Page Petty-Seven

In “Huh, didn’t see that coming!” news—there’s a lot of that these days, admittedly—Chooseco, the publisher behind the Choose Your Own Adventure books, is suing Netflix over its interactive Black Mirror episode, Bandersnatch. In the interactive episode, a young videogame programmer designs a game based on a “choose your own adventure” book, and the episode itself lets viewers make choices about what the characters will do in the story. Chooseco’s suit claims it has the trademark to the phrase “choose your own adventure” and that Netflix doesn’t have a license to use it. The company is seeking at least $25 million in damages, though it’s also possible that if the judge doesn’t like the way the arguments proceed, she’ll just bang her gavel and restart things from an earlier point.

Hold Up, Is That Adam Levine?!

After Rihanna, Adele, Jay-Z, and others reportedly passed on the gig, the NFL announced Sunday that Maroon 5 will be playing the halftime show at this year’s Super Bowl. The band—along with Big Boi and Travis Scott, who are joining them in hopes of stemming a mass Puppy Bowl exodus—will bring their Jagger-like moves to Atlanta’s Mercedes-Benz Stadium in Atlanta on February 3. And while he’s not part of the proceedings, we can only hope A$AP Ferg is nearby, his long quest at an end.


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Ockam provides easy to deploy identity, trust, and interoperability for IoT developers

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Maybe you’re not going to buy a $7,000 smart toilet, but the Internet of Things (IoT) is on its way to your home and office. Silly gadgets aside, IoT device inventors face many programming challenges. It’s hard adding identity, trust, and interoperability to IoT hardware. The Ockam startup will change this for the better.

Customers want IoT devices to be trustworthy and work with other vendors gear. Programmers know that’s easier said than done. Many IoT vendors’ answer is to not bother to add sufficient security or interoperability to their gadgets. This leads to one IoT security problem after another.

Ockam’s answer is to make it easy to add identity, trust, and interoperability by providing programmers with the open-source, Apache-licensed Ockam Software Developer Kit (SDK). With it, developers can add these important features to their devices without a deep understanding of secure IoT network architecture or cryptographic key identity management.

Also: Internet of Things (IoT): Cheat sheet TechRepublic

This is provided by a Golang library and a Command Line Interface (CLI). Additional languages, features, and tools will be supported in future releases.

Once properly embedded within a device’s firmware, the Ockam SDK enables the device to become an Ockam Blockchain Network (OBN) client. OBN provides a decentralized, open platform with high throughput and low latency. It also provides the infrastructure and protocols underpinning Ockam’s SDK.

Devices are assigned a unique Decentralized ID (DID). The DID is cryptographically secure identities for an array of entities. While used primarily to identify devices, it can also represent people, organizations, or other entities. With this, developers can codify complex graph relationships between people, organizations, devices, and assets.

Once on OBN, devices can can share data as verified claims with any other registered network device. This is secured by Ockam-provided, blockchain-powered Public Key Infrastructure (PKI).  Devices can also verify data that they receive from other registered OBN IoT devices. OBN is free of charge for developers until its general availability release later this year.

This may all sound complex, but the complexities are hidden away behind its serverless architecture: A developer only needs the SDK. OBN’s complications, such as PKI, are abstracted away.

Some of Ockam’s structure may sound familiar. That’s because it’s taking a page from Twilio. Just like Twilio provides a common layer between telecommunications infrastructure and developers, to make it easy to incorporate messaging into applications, Ockam provides a “common rail” for adding secure identify to IoT devices. With a single line of code, Ockam enables developer to provision an immutable identity to a device.

Also: 7 ways to use Alexa around the office CNET

OBN is built on Microsoft Azure confidential compute. Microsoft Engineering is a dedicated technical partner, and Ockam CEO Matthew Gregory led Azure’s open-source software developer platform strategy.

Together, Ockam and OBN provides a backbone for the next generation of high performance IoT ecosystems. Ockam is interoperable and built for multi-party IoT networks. So, in theory, your devices will be able to work with other vendor’s gear.

According to Yorke Rhodes, co-founder of blockchain at Microsoft Azure: “Ockam’s team is best in class, bringing together skills and experience in enterprise, IoT, secure compute, scale-up, and Azure. We are thrilled to be collaborating with them on their innovative solution for the IoT developer community.”

I don’t know about “thrilled,” but I do know if I were building IoT devices, which I want to work and play well and securely with other devices, I’d be working with Ockam. It promises to make high-quality IoT development much easier.

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The Trump Administration Just Revealed a Brutal Truth About the Shutdown That Nobody Saw Coming

Late on Friday, we heard a brutally honest truth, attributed to senior Trump administration officials, about how unprepared we were for this unexpectedly long shutdown–and what that could mean for our economy and our counry.

Ironically, it came just hours after the Trump administration released some really great economic news: 312,000 new jobs in December. Those are fantastic numbers, but they’re pre-shutdown numbers. 

And they only highlight how much we suddenly have to lose. Here’s the money quote, as reported late Friday by The Washington Post:

The Trump administration, which had not anticipated a long-term shutdown, recognized only this week the breadth of the potential impact, several senior administration officials said.

The officials said they were focused now on understanding the scope of the consequences and determining whether there is anything they can do to intervene.

By next weekend, the partial government shutdown will be the longest in U.S. history, and the “scope of the consequences” that the administration is now trying to understand suddenly seems quite severe.  

Much of the problem comes from the fact that the government can’t pay and distribute literally hundreds of billions of dollars that are owed to Americans while it’s shut down. And that is likely to have a huge ripple effect on the economy. Here are a few examples.

$100 billion in tax refunds that won’t be issued on time

We start with the IRS, which cannot legally distribute people’s tax refunds during a shutdown. In any event, it’s super-understaffed (just 12 percent of IRS employees are working). Here are what the numbers looked like last year, according to The Wall Street Journal:

  • February 2, 2018:    $12.6 billion in refunds paid
  • February 16, 2018:    $101.2 billion in refunds paid
  • March 30, 2018:        $212 billion in refunds paid

None of that would get paid out under current plans. To put it in context, the dollar amounts here are roughly the annual economic output of entire cities, like Austin and Denver.

“That would hurt retailers that rely on consumers who file their taxes early and spend their refund money in February or March. And any such pullback in spending would weigh on the overall economy,” the AP reported.

Almost $5 billion in ‘food stamps’ won’t be paid

Next up is Supplemental Nutrition Assistance Program (SNAP). About 38 million Americans rely on SNAP, aka “food stamps” each month, but it’s no not funded in a shutdown.

January payments did go out, thanks to an emergency reserve. The government has enough left to afford about 63 percent of February’s tally. So, about $3 billon out of roughly $4.7 billion would be paid.

After that, if the shutdown lasts into March, the SNAP funds go to zero. While the total amount here is a lot less than the tax refunds, it’s extremely important to some people — and to businesses that rely on them as customers. 

Maybe $5 billion a month in federal salaries

About 800,000 federal workers are either on unpaid furlough or working without pay. What’s the total impact?

In 2015, the average annual federal salary was $84,500. Multiply that by 800,000, divide it by 12 months, and I get about $5.6 billion per month. 

In previous shutdowns, Congress ultimately authorized back pay, so let’s and assume that will happen here too. Meanwhile however, people can’t spend money in January and February if they don’t have it.

It has second and third order effects, too as businesses that count on these employees as customers also get paid less.

All the other government spending and its effects

My colleague Chris Matyszczyk wrote earlier about how the pilots’ union at Delta and United wrote to President Trump urging him to end the shutdown because it affects “the safety, security and efficiency” of the aviation industry.

Already we’re seeing TSA screeners, calling in sick rather than show up to work without pay. Beyond that, air traffic controllers, maintenance personnel and air marshals are not getting paid

Would you want to fly in a situation like that if you didn’t have to? What happens to the airlines, and to the businesses that rely on them? Pick an industry, the story is the similar.

This article isn’t about the border wall, and it’s not about which political side is at fault. You can blame whomever you like. But if the shutdown that nobody expected continues, it’s starting to look like it could well be brutal.

Before You Quit Your Day Job for a Startup, Make Sure You Can Answer These 7 Questions

I’ve heard pitches from more than 20,000 entrepreneurs over the last two decades.  The top question I’m asked (other than “Will you invest in me?”) is, “Is my idea any good?”

Wantreprneuers from far and wide track me down to get my blessing before they quit their well-paying job to start a startup. Over the decades and in conjunction with other angel investors and venture capitalists, I’ve developed a seven-question list that potential founders should ask themselves before coming to ask me.

If your answer to all seven of these questions is “yes,” your idea is probably excellent. If not, you have some work to do.

1. Are you obsessed with the industry, customers, or problem?

Successful founders love what they do. They would learn about the industry, customer segment or problem even if they weren’t being paid. To be successful, you must be obsessive about your startup opportunity.

The difference between obsessive and caring is quite large. Caring is a given, and it’s not enough. Being obsessive means that you think about something dozens a time a day. If you aren’t obsessive, you won’t be able to accumulate the insights needed to garner strategic advantage–insights that only come from focusing on something for thousands of hours. 

2. Can you build the solution? 

Ideas are worthless until combined with relentless execution. You must be able to execute both your idea and your product. At the very least, you need to be able to create a prototype or minimum viable product, something you can get into the hands of early adopters and generate early proof of concept traction.

3. How elastic is demand?

Pain killer or vitamin? Cost saver or revenue generator? The best opportunities solve unmet market needs where demand is inelastic. This yields better margins in the long run and quicker traction in the short run.

Your opportunity must satisfy a need, not a want. A need is something you can’t live without. Air, water, and food are the classic examples. A want is something you can live without, like fancy shoes or expensive cars.

As the price of wants go up, demand for them peters out. Startups that satisfy needs will always have easier times attracting early adopters and generating revenue. 

4. Is the market large and growing?

Today, the market for anti-hacker security is hot. The market for thoroughbred horseshoes is not. Why focus on a small win? You’re investing your blood, sweat, and tears. Make sure the win is worth it.

By the way, the risk is actually much greater when you focus on a niche. Since you have less pool to swim in, you have less chance to learn through iteration. Always focus on bringing your solution into a market that is large and growing. It’s OK to start with a niche, but there must be lots of room to grow.

5. Are you exponentially better?

If you’re entering an extant market, you’re automatically at a disadvantage with sunk costs and less brand recognition than your competitors. To overcome that, you must be ten times faster, cheaper, stronger, and lighter than every other company in your industry to get people to switch from incumbent products.

Netflix killed Blockbuster by offering ten times the quantity of content at one-tenth the cost. Your solution must be exponentially better than any alternatives.

6. Are you ready to go all in? 

Design thinking and the Lean Startup method allow you to start most businesses as a side hustle. Your long-term goal still needs to be full time, all the time, all in. No one has ever changed the world with half measures.

7. Do you have frictionless access to early adopters?

Early adopters are customers who have the problem you solve, and are currently trying to solve that problem with a radically less efficient method. Before spell-check software, we used third party proofreaders, which were ten times more expensive and time consuming.

To be successful, you need a clear and low cost to get early adopters and turn them into your beachhead. Make sure you’re able to get your product directly to customers.

The Simple Engineering That Will Keep NYC's L Train Rolling

Ever since the last of the brackish water slithered out of the Canarsie Tunnel in the aftermath of 2012’s Superstorm Sandy, New Yorkers have been bracing for the pain. Public transit officials have long warned that the water damage to the 94-year-old tunnel, full of just-as-old subway equipment, would eventually require a long, painful, deeply inconvenient rehabilitation. That’s the tunnel that runs under the East River, carrying many of the L subway train’s 400,000 daily riders from popular Brooklyn neighborhoods like Williamsburg and Bushwick into Manhattan.

The surgery was scheduled for April 2019, when the stretch of L train that takes New Yorkers across Manhattan and into Brooklyn was scheduled to shut down for a 15-month repair job. Ahead of what they officially deemed the “L-pocalypse,” local officials created piles of plans to ramp up bus service, encourage biking, and run new ferry routes, and everything else they could think of to keep all those commuters from taking to cars and making already bad traffic fully catastrophic.

Those plans (as well as wilder ones proposed by concerned citizens) became a lot less necessary Thursday morning, when Governor Andrew Cuomo called a surprise press conference to proclaim that no, the L train won’t close completely, and yes, it will still be fixed for the future.

The new plan for the next few years is to keep the train open and running as normal during weekdays, whilst doing repairs on nights and weekends (the details remain fuzzy). The board of the Metropolitan Transportation Authority, which runs the subway, has yet to adopt the new plan, which was proposed by a commission of half a dozen engineers based at Columbia and Cornell Universities that Cuomo assembled last month, two years after the decision was made to close the line. But the agency put out a press release Thursday afternoon saying it “accepted the recommendations.”

Curious politics are clearly at work here, but New Yorkers are unlikely to care, as long as the subway keeps running. And if it does, it’ll be thanks to two bits of subway engineering infrastructure: benchwalls and cable racking.

Let’s start with benchwalls. If the train stopped in the tunnel and you had to get out, these are the stretches of concrete, running along each wall and resembling big benches, that you’d be walking on. Facilitating emergency exits is one of their main functions—without them, you’d have to jump out of the train, onto the ground and risk hitting the third rail. Benchwalls also hold most of the goodies that make the subway work, including the power and communications cables. When workers were building the line, which started service in 1924, putting the cables in the concrete was the best way to protect them from things like hungry rats and water damage.

Over the past century, those benchwalls have started to deteriorate, a process accelerated by the flooding from Hurricane Sandy. Explaining its full shutdown plan in 2016, the MTA said the tunnel’s bench walls “must be replaced to protect the structural integrity of the two tubes [east and west] that carry trains through the tunnel.”

Replacing these things involves jackhammering away concrete, removing the rubble, replacing the cabling inside, setting new concrete, and having it dry. It’s work you can’t do overnight or on weekends, because any one section takes several days. And you can’t run trains without leaving a walkway to lead people to safety in an emergency.

The new plan involves giving those benchwalls a bit of a demotion. They’ll still be used for emergency egress, but they won’t hold the cables anymore. Instead, the L train will use a “cable racking” system, in which new power and comms lines will be strung up and attached to the sides of the tunnel, above the benchwalls. Turns out, their protective jacketing has advanced since the Prohibition Era. “We’ve had tremendous progress in materials,” says Peter Kinget, a Cornell electrical engineer who served on the panel. , If the jacketing catches fire, it doesn’t produce noxious fumes. It’s impervious to vermin and H2O, obviating the need for the concrete armor. The workers will also shore up the sections of benchwall that are crumbling with fiber reinforced polymer, Cuomo says, leaving the old, inactive cables entombed inside.

That decoupling of the benchwall’s duties is a big deal, because it makes the work much easier to execute. You can cut back service at night and on weekends (by running trains in just one of the tunnel’s twin tubes) and have workers slip underground, setting up the racks and new cables segment by segment. During normal hours, the train operates as it usually does, pulling power from the cables already in the benchwalls. Once the work is done, the MTA will switch the trains over to the new set of cords.

Cable racking has been used for new metro lines in London, Hong Kong, and the Saudi capital of Riyadh, Cuomo says. This would be its first use in the US, and the first time it’s been used to fix up an existing line.

“It’s a clever solution,” says Matt Cunningham, a civil engineer and global director of infrastructure for Canadian engineering firm IBI. It’s cheaper and easier than replacing all the cable-filled benchwalls, and it’s a proven method. “It’s going to work.”

Which brings up the unanswered question of why this idea is just surfacing now. Why not before the MTA decided on the full shutdown, then spent two years preparing for it? It makes Cuomo the politician who averted the traffic-spewing L-pocalypse—but it also makes one wonder why he didn’t come to the rescue earlier. (He’s been governor of New York since 2011.) In his press conference, he presented this as new solution, which is true if you compare it to the techniques used to build the subway in the previous century, but not if you take a slightly narrower view. “It’s not new technology that’s only now become available,” Cunningham says.

Of course, limiting service during nights and weekends to make this fix will still inflict some suffering, and the MTA has a terrible record of mismanaging this sort of operation, so any promises about deadlines or costs should be doubted. “You’re not getting a root canal on five teeth, you’re getting a root canal on three teeth,” says Allan Rutter, of Texas A&M’s Transportation Institute. “There’s gonna be pain.”

In infrastructure as well as in dental surgery, you’ve got to accept some drilling and discomfort. But less is definitely more.


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How Can We Best Prepare for Job Automation?

The best way to prepare is to transition away from things that are largely routine and predictable. Try to find a role that is largely focused on tasks that are not easy to automate.

I think this generally includes 3 areas:

  1. Creative work — where you are building something new, thinking outside the box in non-predictable ways, etc.
  2. Human-centered work — where you build sophisticated relationships with people. This would include caring roles, as with a nurse or social worker, but also business roles where you need a need understanding of your clients.
  3. Skilled trade work — this includes jobs that require lots of mobility, dexterity and flexibility in unpredictable environments. Examples would be electricians or plumbers. Building a robot that can do these jobs is probably far in the future.

What you do NOT want is to be the person who’s only role is to sit in front of a computer performing some predictable task–like cranking out the same report again and again. If you have a job like this you should worry and look to transition in other roles in the 3 areas I listed above.

One very important part of adapting is to realize that future careers will nearly all require continuous learning. So whether you are concerned with yourself or your children, a focus on learning–getting good at it and truly enjoying it–will be one of the most important components of success.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

Published on: Jan 3, 2019

The Day Apple Dreaded: iPhone Sales Falter in China and the Company Revises Sales Down

Trading on Apple shares was halted as the company warned of much lower sales than the guidance it had issued just two months ago. A punishing holiday season turned into lower than expected iPhone sales, which are the economic engine of the company. After-hours trading immediately sent shares down by more than 7 percent.

The guidance issued at the company’s last earnings announcement was for revenue between $89 billion and $93 billion, expenses of $9 billion to $9.1 billion, and gross margins between 38 percent and 38.5 percent.

The new guidance pegs revenue expectations at $84 billion, sharply below the low end of the previous estimates. Gross margin will be roughly 38 percent, at the low end of the previous range. Total expenses will be about $9.25 billion, or above prior estimates.

The earnings announcement for the holiday quarter won’t happen for a few weeks yet.

According to a letter from Tim Cook to investors, there are multiple reasons for the cut. He said that the company knew the timing of its iPhone launches could be a problem, shifting back as they did by a fiscal quarter. The number of launches was complex and caused logistics problems getting everything built and shipped. In addition, a strong dollar made overseas sales costlier for buyers.

But those were constraints on the top end of sales. The big issues were “expected economic weakness in some emerging markets.” Specifically, the big slowdown was in Greater China. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” the letter said.

At the heart was a slowing economy in China, in part likely because of the trade war with the U.S., but also a result of purely internal problems in the country. Whatever the balance, the result was “fewer iPhone upgrades than we had anticipated.”

Cook went on and tried to put some shine on the situation, pointing to almost 19 percent year-over-year growth in the combination of services, Macs, iPads, and wearables and other products. But while good for the future, that doesn’t matter.

Apple faces what happens to many businesses, particularly smaller ones. They become prisoners of one product line or a particularly big customer. When that happens, all you can do is try to diversify, because the day will come when the source of money trips and what was a profitable dependence begins to hit financial results.

Apple has tried to do that, but none of the new growth comes close to the magnitude of the iPhone contribution. And China was supposed to be the new engine of growth when none of the other product lines–iPads or Watches–showed itself possessing the potential once shown by the company’s smartphones.

The 10,000 Foot View of Your Business You Must Take Before Picking a Software System

That’s so vague, and that’s exactly the reason why so many companies struggle to make meaningful process working “on the business”, year after year. Let me help to clarify these confusing terms, and give you the direction that you need to make a dent this year.

The “system” is the tool that you use to get the job done. It could be a big piece of machinery, but for most of us, it is the different software tools that your company runs on.

“Processes” are the sequence of steps that you and your team take to do the work — the actions, regardless of the system. The problem is, too many entrepreneurs start with the system.

Instead of focusing on how you manage a client project, you focus on how the project management tool works.

You can get lost in a sea of software, and end up jumping ship from one to the next chasing features that may or may not matter to your business. But, if you understand your process first, it’s like going to the grocery store with a list, and not an empty stomach.

I was working with a retail store once that used spreadsheets to manage their inventory, credit card terminals for each sale, PayPal for online transactions, handwritten sheets for their packing lists, and a bloated database tool for customer information. Instead of stepping back and looking at the business as a whole, they solved one problem at a time with another software, creating a complicated mess of their operations.

It shouldn’t be so hard. Whatever industry you’re in, here’s how to fine tune your process first to make sure you’re investing in something that can stick. 

Map your process.

Break out the sticky notes! I’ve banned those little yellow clutter-causers from my office, except for when we’re working on processes. Then, we break them out of their special hiding place and go nuts!

If you don’t have sticky notes, use a whiteboard or a blank sheet of paper, and draw each linear step in your product fulfillment or service delivery process. Each step (or sticky) should represent a significant step in your process. So, combine small things like “open this URL” and “go to this page” and “enter this password” into something broader like “log into online store.”

Your core company process should stretch from how you attract prospects, close a sale, onboard the customer, deliver the product or service, collect payment, and and continue to engage the customer. 

Find your bottlenecks.

The simple act of writing out the steps of your process is bound to surface some inefficiency. Where in your process are there bottlenecks — or slow downs — today? Where are there too many handoffs where information or tasks could flow more seamlessly from one person or department to another?

Now, you don’t need to fix your entire process in one sitting. That isn’t the point. But, you do want to identify where you have some work to do. These inefficiencies or areas for improvement could be supplemented or solved with the right system. You are building your shopping list. 

Become a ‘manual’ master.

A client hired me once wanting to build a custom software for a new way to facilitate meetings. The idea was full of assumptions about how the users would behave, and what problems they were trying to solve. 

Instead, I suggested that he use index cards to replicate the functionality manually, and offline, for a full month before we quote out the software. That way he could validate some assumptions before investing a dime in a custom software project. The idea was dead a weak later, and he saved a lot of money. 

Similarly, think of the software tools and systems that you invest in a way to improve the efficiency of your manual process, not a gamble on a brand new, untested way to work.

Scale with a system.

Now, with a proven manual process and a wish list of requirements, you are ready to go system shopping. 

It’s easy to get overwhelmed by the thousands of tools available. If you’re software shopping, check out review sites like Capterra an G2Crowd, or maker communities like Product Hunt to see how each system is differentiated before diving into demos. 

With hardware, consider renting a device before making a big purchase, or talking to another customer that is successfully using the equipment. 

The system you ultimately select should increase your capacity by eliminating bottlenecks and making your proven process more efficient. Your process shows you generally how to get from point A to point B, like a path through the woods. As you test that process, the “path in the woods” gets more and more defined, and perhaps you invest a little in clearing the leaves and branches, or building stairs on a steep hill. 

When do decide to build a highway from point A to point B — your system —  you should be confident in the path, and eager to increase the traffic down the route. 

The 10 Most Googled People of 2018 (Who'd You Look Up?)

There’s perhaps no better log of what’s on your mind than your browser search history. (Who hasn’t deleted their search history on a shared computer?)

It stands to reason, then, that getting a window into our collective psyche is as simple as perusing Google’s list of most-searched terms of the year. Google recently released The Year In Search–a comprehensive breakdown of everything we searched for this year, organized by category.

So what was on our minds in 2018? When it comes to people, these individuals were. Don’t worry–if you don’t know one … I Googled it for you:

10. Cardi B

American rapper whose standout hits include Bodak Yellow and this year’s breakout, I Like It, which currently has 674M streams on Spotify and counting. 

9. Stormy Daniels

Her legal name is Stephanie Clifford, and she is an American stripper, porn star, and director who got into a legal battle with Trump and his lawyer Michael Cohen this year. Trump and company paid Daniels $130,000 to stay quiet about an affair she says had with Trump in 2006.

8. Hailey Baldwin

Daughter of Stephen Baldwin, she’s a model and TV personality who married Justin Bieber this year. While legally married, the couple has yet to stage a large-scale wedding with family and friends.

7. Brett Kavanaugh

A polarizing figure, Kavanaugh was appointed to the Supreme Court this year following what some described as an excruciating and exhausting battle for confirmation. Multiple allegations of sexual misconduct were levied against him. 

6. Jair Bolsonaro

Bolsonaro was elected president of Brazil in October, 2018. A very right-wing figure, many have compared him to Trump.

5. Khloé Kardashian

Younger sister of Kim Kardashian, Khloe nearly broke the internet this year when she had her baby girl, True Thompson, in April 2018.

4. Logan Paul

On December 31, 2017, controversial vlogger Paul uploaded a YouTube video showing the corpse of a suicide victim. The video gained 6.3M views within 24 hours, sparked outrage on many fronts, and almost cost Paul his YouTube channel. Paul has since been reinstated on the platform and contributed $1M to suicide prevention agencies.

3. Sylvester Stallone

Stallone did not die this past year, but a lot of people feared otherwise. In February, popular searches included “Sylvester Stallone dead 2018” and “Did sylvester stallone die.” The countries where the hoax was passed around the most? South Africa, Ghana, and Bolivia (the U.S. came in 22nd on the list of Stallone searches).

2. Demi Lovato

A Grammy-nominated musical artist, Lovato was hospitalized this year for a suspected overdose. “I have always been transparent about my journey with addiction,” Lovato said on social media. “What I’ve learned is that this illness is not something that disappears or fades with time. It is something I must continue to overcome and have not done yet. I will keep fighting.”

1. Meghan Markle

Markle married Prince Harry in a royal wedding this year, the guest list of which included Serena Williams, George Clooney, Oprah, Elton John, and the Spice Girls.

General Electric's Healthcare IPO Is Actually Just What The Doctor Ordered

2018 has been an eventful year for General Electric (GE) and its shareholders, as this storied company will finish the year with a new CEO, Mr. Larry Culp, and in the midst of major restructuring efforts (not the first time hearing this, right?). As such, it should come as no surprise that GE shares have significantly underperformed the broader market over the last 12 months.

Chart

GE data by YCharts

Yes, it has been that bad. GE is positioned to spin/sell off several major businesses, including GE Healthcare, and I believe that most of the bad news is already baked into the stock. However, as I described in GE: It Ain’t Goin’ Be Easy, it is going to be tough sledding to turn around this large conglomerate, but, in my opinion, Mr. Culp is the right guy for the job. But, it is important to also remember that Mr. Culp and team have some great assets that can be utilized to jump start the recovery process, and it all starts with the GE Healthcare spinoff, in my mind.

Therefore, while I agree with many of the points made in General Electric Healthcare IPO Is Too Risky In This Environment, I believe that the GE Healthcare spinoff is just what the doctor ordered, even in this market.

GE Healthcare, Just What The Doctor Ordered

The GE Healthcare spinoff should be viewed as a direct attempt to unlock shareholder value. Many people ask why it would make sense for GE to get rid of a promising business like GE Healthcare, and while it would be great if a large collection of “good” businesses could be managed under one umbrella, I believe that it is now time for GE to create a more focused, simpler business.

Source: GE, Investor Presentation

To the point of unlocking shareholder value, GE Healthcare does not get the respect/love that it deserves from the market so, at the end of the day, something has to be done. In my mind, this is the overarching reason to proceed with a spinoff.

Let’s consider a few important points:

1) A promising business with an impressive track record

GE Healthcare is a growing business that has been able to report strong operating results over the last five years.

Source: 2017 10-K

The segment’s revenue is up single digits (5%) over the last five years, but, more importantly, profit is up by an impressive 13%. Additionally, management has been able to improve GE Healthcare’s operating profit margin by over 100 bps.

$ – in mil 2017 2016 2015 2014 2013 (Chg ’13 to ’17)
Revenue $19,116 $18,291 $17,639 $18,299 $18,200 $916
Chg 5% 4% -4% 1% 5%
Profit $3,448 $3,161 $2,882 $3,047 $3,048 $400
Chg 9% 10% -5% 0% 13%
Operating Profit Margin 18.0% 17.3% 16.3% 16.7% 16.7% 1.3%
8%

2) The recent results for GE Healthcare tell a similar story

Over the first nine months of 2018, GE Healthcare’s operating results show that this business unit is in a great position heading into 2019.

Source: Q3 2018 10-Q

And management has continued to improve the unit’s cost structure, as shown by the fact that the profit margin is up 50 bps YoY.

Source: Q3 2018 10-Q

3) What really matters, it’s all about creating value

The takeaway from the first two points is: GE Healthcare is a collection of assets with promising business prospects, and the numbers prove it. When taking a step back, I believe that the benefits of a GE Healthcare spinoff are threefold: (1) GE Healthcare will be valued like it should be, (2) the new GE will receive some much needed capital [let’s also not forget that approximately $18B in liabilities are going with the business unit], and (3) Mr. Culp and team will be able to focus their attention on a more streamlined business, which is especially important given the current state of this conglomerate – the Power unit should be front of mind.

It was reported that GE confidentially filed for the GE Healthcare IPO, and Mr. Culp recently floated the idea of spinning off a larger portion of the unit, so the market should get ready for this soon-to-be new publicly traded entity.

There are several good examples for what type of valuation GE Healthcare may receive when it’s eventually spun off and, as a shareholder, I like what I have seen so far. For example, American Money Management LLC provided this breakdown:

Source: AMM Research Report

Observations from AMM’s results:

  • GE Healthcare could have a market cap in the range of $33B-$60B.
  • GE Healthcare represents a material amount of the current share price for GE (the stock is trading at $7.51 per share).

I could provide at least three additional research reports estimating the value that GE Healthcare may receive, but I will save you the time by saying that most, if not all, analysts believe that the business unit makes up at least 50% of GE’s total market cap as of today (approximately $65B). I previously calculated a pre-liability market cap for GE Healthcare of $75B. AMM’s report is more conservative, and probably a little more realistic given the broader market dynamics.

Risks

Downside risks: (1) The company has significant fines related to the DOJ/SEC investigations, (2) Power takes longer than 18-24 months to recover and burns through cash, (3) management has a fire sale and disposes of assets at rock bottom prices, (4) the company’s credit rating hits junk status, and (5) additional insurance reserve charges are booked.

Upside risks: (1) the spins [Transportation, Healthcare, and Baker Hughes (NYSE:BHGE)] bring in more capital than anticipated, (2) the pension deficit shrinks as a result of the positive tailwinds, and (3) well-known investors put money to work in GE which leads to a positive change in sentiment.

Bottom Line

Make no mistake about it, GE is a high risk/high reward stock at this point in time. A turnaround will not be easy, and it will likely take an extended period of time (years instead of months), but I believe that management is already heading in the right direction. In my mind, the GE Healthcare spin will be a giant step forward.

Mr. Culp has a finite amount of capital that can allocated across the business portfolio so, at this point in time, it simply makes more sense for GE Healthcare to operate as a standalone entity. It helps that GE Healthcare is a great business that operates in a promising environment. In my opinion, GE Healthcare could turn out to be the catalyst that gets GE’s stock back into the double-digit range.

Lastly, I believe that the spins (Healthcare, Baker Hughes, & Transportation) will eventually lose the conglomerate discount that is currently being applied in the years ahead. As such, the asset disposals (including the GE Healthcare spin) will benefit the newly created entities and the “New GE” in 2019 and beyond. GE is definitely still a 3- to 5-year story, but I believe that the stock is a great long-term investment, if it meets your risk/return profile.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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