Cloud Hosting is The Architecture of Cloud Computing Techniques

Cloud Hosting Technique

Cloud Hosting is The Architecture of Cloud Computing Techniques

Cloud Hosting is The Architecture of Cloud Computing Techniques

provides the hosting services in the form of a single virtual machine and is implemented through the use of cloud computing and cloud architecture. It dynamically distributes data and processes across the small servers of the system for processing. The cloud hosting system is divided into many virtual machines. The services offered by a loud hosting service provider are located at its premises and these can be accessed by using client software.

The cloud hosting allows the users to get their applications up and running much faster and enables the quick readjustment of virtual resources to meet the dynamic demands like increased data rate, traffic size and storage requirements. The users can assess the cloud using different client devices like desktops, laptops, tablets and phones. Some of the user devices require real time cloud computing for running their applications, while others can interact with a cloud application via web browsers. Some cloud applications only support specific client software dedicated for these applications. Some legacy applications are also supported through screen sharing technology. The internet giants such as Google and Amazon are using this state of art hosting technology successfully for their servers.

Cloud hosting can be offered in three different modes i.e. infrastructure as a service(IaaS) , platform as a service(PaaS) and software as a service(SaaS). The basic mode IaaS , offers the services in the form of physical or virtual machines ( computers & other processing devices), raw/block storage , firewalls , load balancing mechanism and networks .The IaaS mode services provider supply these resources from a large deployed pool of resources in data centers andthis also include provisioning of local area networks and  IP addresses. The PaaS mode cloud hosting services provider offers a cloud computing platform  that include an operating system, programming execution environment, database and server. The PaaS application software can be developed and run on a cloud platform and does not involve cost and complexity of buying and managing the hardware and software layers. The (SaaS) mode cloud hosting services provider  install and operate application software in the cloud and cloud users access the software from cloud clients and the cloud platform in this case is not managed by the clients. Clouds hosting can be physically deployed in the form of public cloud, personal cloud, hybrid cloud and community cloud.

Cloud hosting has greatly reduced the website operational cost. In older versions of servers, the clients used to pay for a specific bandwidth irrespective of the traffic on that server. The cloud hosting has tackled this problem through the skillful use of variable costing method, where the cost will increase with the traffic and as the load/traffic reduces the cost will be automatically decreases.

The cloud hosting has a great advantage in terms of its security, as it operates in isolated environment and only the host has the access to it. One of the biggest advantages of cloud hosting is that the cloud platform manageability, maintenance and upgrades can be easily and remotely accomplished, as it does not require any physical/hardware maintenance repair and replacement.

Their Flight Wasn't Until the Next Morning. Passengers Slept on the Floor. Then Airport Security Prodded Them to Stay Awake

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

Have you ever noticed that there are never enough seats for passengers at airports?

Many are forced to mill around because, well, what else are you going to do?

You don’t expect, however, airport staff to instruct you on the milling-around rules. Nor, indeed, on the sleeping-at-the-airport rules.

Last weekend, though, passengers at Stansted Airport near London had a difficult time.

Some passengers flew in from elsewhere late at night and didn’t have a connecting flight until the next morning.

What are passengers supposed to do all night? Wouldn’t you try to get some sleep?

The UK’s Metro describes how passengers tried to find any perch they could to get a few winks.

But when there are only 50 seats and perhaps 500 passengers, there’s only one option: the floor.

I’ve done it before. Perhaps you have too. You try and find a corner, lie down, grip your valuables and hope no one bothers you.

At Stansted last weekend, however, airport security patrolled the scene.

As one passenger, Ricardo Gavioli, told Metro: 

I even saw a young couple sitting together on the ground and when the woman tried to rest her head on her boyfriend’s chest and stretch her legs security came up and prodded her into an upright position.

Gavioli likened it to “sleep deprivation torture.” He said: 

The security were passing every ten minutes to tell people to sit upright and not to lie down.

Why would the airport behave this way?

The airport offered a simple statement: 

We don’t allow people to sleep on the floor or come with sleeping equipment (camp beds, hammocks, sleeping bags etc), and people sleeping on the floor will be asked to sit up or move if necessary. 

There is a caveat, says the airport:

However, nobody is stopped from sleeping or woken up while sitting in a chair.

How very reasonable when there’s hardly a chair to be had.

Why, in fact, doesn’t the airport start charging for chairs? I’m sure U.S. airlines can offer them software for that.

I wonder how Stansted executives fall asleep in meetings. Does security prod them awake, too?

Stansted has banned sleeping on the floor between midnight and 2 a.m. This, it claims, is to accommodate renovation work and, as the airport told the Telegraph:

Feedback shows passengers don’t like arriving at the airport for an early flight to find lots of people blocking access and getting in the way of both staff and those traveling.

They also don’t like having nowhere to sit.

Still, perhaps many will find this approach reasonable. 

Is it also reasonable, though, to prod people awake when they have nowhere else to go and they’re not doing any harm?

Stansted says too many travelers deliberately decide to sleep on the floor, so they don’t have to pay for a hotel.

On the people’s foghorn, Twitter, passengers offered reasonable arguments. There’s just nowhere to go in that airport.

Of course, the airport says passengers should arrive at a time nearer their scheduled departure. 

Many know, however, that this can also provide a crush not worth tolerating.

This airport security’s prodding behavior isn’t exactly unique.

The airport insisted this was to allow cleaners to do their jobs.

Perhaps one idea for passengers is to avoid Stansted altogether.  

Until, that is, the renovations are done and the reception is gloriously welcoming. 

Should both things ever occur, that is.

Gadget Lab Podcast: Pinterest’s Evan Sharp on What Makes Good Software

Why did Apple’s Jony Ive name Pinterest co-founder Evan Sharp as one of the figures in technology who he believes will change the future?

If you were wondering about that, here’s a great chance to learn a little bit more about Sharp and make the call yourself. During the 25th anniversary festival for WIRED last week, the Gadget Lab team had the chance to interview Sharp on stage, among other high-profile technologists. Over the next few weeks we’ll be publishing these taped conversations as a part of the podcast.

In this particularly interview, Mike and Arielle ask Sharp what it’s like to receive praise from Ive, how machine learning is changing software design, and whether Pinterest can remain once of the internet’s last happy places.

Show notes: Click here to read more about Jony Ive’s nomination of Evan Sharp for our 25th anniversary issue. And here’s Lauren’s WIRED 25 interview with Kevin Systrom, which we mentioned in this week’s show.

Recommendations this week: Lauren recommends the Dakota backpack from Dagne Dover. Mike recommends these awesome smartphone accessory lenses made by Moment.

Send the Gadget Lab hosts feedback on their personal Twitter feeds. Arielle Pardes can be found at @pardesoteric. Lauren Goode is @laurengoode. Michael Calore can be found at @snackfight. Bling the main hotline at @GadgetLab. Our theme song is by Solar Keys.

How to Listen

You can always listen to this week’s podcast through the audio player on this page, but if you want to subscribe for free to get every episode, here’s how:

If you’re on an iPhone or iPad, open the app called Podcasts, or just tap this link. You can also download an app like Overcast or Pocket Casts, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

If you use Android, you can find us in the Google Play Music app just by tapping here. You can also download an app like Pocket Casts or Radio Public, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

We’re also on Soundcloud, and every episode gets posted to wired.com as soon as it’s released. If you still can’t figure it out, or there’s another platform you use that we’re not on, let us know.

The Airline Says One Thing. The Flight Crews Pictured Sleeping On the Floor Say Another. This Is What They All Told Me

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

An airline’s crew were lying on the floor, apparently trying to sleep in a brightly-lit room.

It looked a little too perfectly damning, to be honest. 

These were, though, 24 members of four Ryanair crews stranded by weather in Málaga, Spain and not provided with a hotel by the airline.

So it took to Twitter and Facebook and posted video of the crew staging the image.

I asked Ryanair whether this wasn’t a slightly unseemly move, one that may even have privacy implications.

An airline spokeswoman told me: 

The publication of this video reveals the facts and exposes the SNPVAC union fake news/false claims.This video proves that the original picture was staged and no crew ‘slept on the floor.’ All Ryanair offices and crew rooms are equipped for security reasons with CCTV cameras and notifications of same as required by GDPR [General Data Protection Regulation]. 

Why, though, didn’t the airline offer the crew a hotel for the night? Ryanair’s spokeswoman insisted: 

Due to storms in Porto (13 Oct) a number of flights diverted to Malaga and as this was a Spanish national holiday, hotels were fully booked.  The crew spent a short period of time in the crew room before being moved to a VIP lounge, and returned to Porto the next day (none of the crew operated flights).

Oddly, local resident Alex Macheras noted that Booking.com showed more than 1,800 hotel rooms available in Malaga that night.

Ryanair’s Chief Operating Officer Peter Bellew insisted that the airline had called 42 hotels.

There was nothing for it but to dutifully ask Bruno Fialho, vice-president of the SNPVAC union, to offer me his two minutes on Ryanair’s claims.

Please Fasten Your Seat Belts. 

Fialho’s version was a little different.

He told me that the 24 crew members were placed in the Ryanair crew room “so that they were kept isolated from the hundreds of passengers that were in the terminal.”

It was 1.15 a.m. Then, Fialho told me: 

For hours, the Crew attempted to contact Ryanair OPS and LESMA (local RYR Ground handling agent) to obtain information about the hotel accommodation and both replied that there weren’t any hotels available. The Crew also contacted directly some hotels in the Málaga area and there were rooms available.

This is already not looking good. Fialho says that the crew were sent to an airport lounge at around 3.45 a.m. There were chairs, sofas and toilets available, but no food or drinks.

Next, Fialho says, the crew were told they’d be flown to Portugal on a 10 a.m. flight, but still no food or drinks were offered. In addition, Fialho says, the crew was guarded by security personnel, preventing them from leaving.

Then, mordant comedy. Fialho told me: 

After the security guard made several phone calls, the Crew was allowed into the airport terminal to have some breakfast. Finally, at 9 a.m. the LESMA duty manager informs that he managed to get a hotel for everyone. However, the Crew was already informed of the flight at 10:00 a.m. (just 1 hour later) which the duty manager wasn’t aware.

No, it wasn’t over. Fialho again:

At 09.55 a.m. the Crew is sent on a bus to the aircraft with the information that 2 pilots were already there to take the aircraft ferry to Porto. When they got there, the aircraft was closed and the crew were left on the ramp. The Pilots decide to open the aircraft to wait inside as the weather conditions were adverse.

So the took off shortly afterwards, right? Well, no, says Fialho.

At 10.40 a.m. the Crew is informed of a 2 hour slot restriction and that they have to wait for another 10 pilots from Málaga Airport and other bases to take the same flight to Porto in order to operate the afternoon flights. The operating captain didn’t have permission to leave Málaga before those 10 pilots arrived.

Please tell me you’re still with me, as there’s more. A lot more. Next, Fialho says:

At 11.20 a.m., the Crew asks the operating Captain to open the aircraft bars and get something to eat, a request that was denied by Operations. The Crew decided to ignore the instruction and opened the bar anyway, as they were feeling very hungry.

Fialho says that the flight finally landed in Porto at 1.42 p.m. Worse, he says, the Crew Controller was convinced that the crews had been given hotels and were properly rested, so they were being scheduled for new flights.

Yes, I hear you cry, but what about the staged photo? According to Fialho: 

The photo was a gesture of protest, that immediately became viral. Laying on the floor was the only option to rest — their ‘suitable accommodation.’ And precisely due to the unusual, deplorable and despicable treatment given to the Crew, Ryanair became the object of a social media frenzy.

Fialho added another kink to the story of the photo: 

Ryanair rushes to call it ‘staged,’ but not before the Company’s Chief Operating Officer apologized to the crew via Twitter.

Fialho believes this is merely another example of Ryanair’s cold-blooded attitude to employee relations. But what about the privacy issue with the video? He told me: 

Regarding the evident breach of the Global Data Protection Regulations we will discuss this in the appropriate institutions. Ryanair did us all a favor by providing evidence that in fact there were no minimum conditions for their employees to spend the night with dignity.

The People’s Verdict.

If you look on Twitter and Facebook, sympathy largely rests with the cabin crews. 

Above all, however, a single impression remains — that relations between Ryanair and its employees are parlous at best. 

How you treat your employees says so much about how your company is run. And once employer/employee unpleasantness reaches the public sphere, please imagine what your customers will think.

Then again, I fear that many will merely mutter: “Yup, that’s Ryanair for you.”

Cornell And Harvard Researchers Show That People Like You More Than You Think

If you’re shy, or even a little introverted I’ve got good news and bad news and I’m going to let you choose which is which. 

A study conducted by researchers at Cornell, Harvard, and the University of Essex, and published in the Association for Psychological Science, looked at our perception of how liked we think we are in the course of having conversations.  The findings uncovered that the shyer you are, the larger the gap between how much you think you are liked and how much you actually are liked. So, if you are very shy, and prone to avoiding social interaction you will rank yourself as much less likable than others do.

According to the authors, “Our research suggests that accurately estimating how much a new conversation partner likes us — even though this a fundamental part of social life and something we have ample practice with — is a much more difficult task than we imagine.” 

In the research for the study participants were asked to conduct five minute conversations with each other. The participants almost always said that they were liked less than they actually were.

As reported by CNBC, one of the study’s co-authors. Yale University psychology professor Margaret S. Clark, said,  “We’re self-protectively pessimistic and do not want to assume the other likes us before we find out if that’s really true.” 

The bottom line is that those of us who are more introverted are also more critical of ourselves.

While this may seem somewhat obvious, it’s all too common pathology and an incredibly self-limiting viewpoint that can easily turn into a vicious cycle of negative reinforcement; your belief that you are not likable inhibits your attempts to put yourself out there, which in turn reinforces your belief. 

This is especially dangerous if you need to communicate as part of what you do professionally. For example, speaking in public, presenting you ideas, or simply trying to connect with coworkers, colleagues, customers, and business partners.

I’m Burning Up Inside

I’ve seen this time and again in my own work coaching people on public speaking. I recall one case where someone I was coaching on presenting to a camera was asked to role play. The setting was non-threatening,  a room with six other people and an unmanned video camera. Halfway through his presentation he stopped cold and said, “I just cannot do this anymore. I’m messing up. I can tell. I want to stop.” 

I could tell the other students were confused by his sudden panic attack. When I asked him to describe what he was feeling he said, ” I was just burning up inside. I could tell that I wasn’t coming across well. I’m nto an extrovert and just not good at speaking in front of people.” 

I asked the other students what they thought and every one was of the opinion that he was killing it. “No way,” he said, “You’re all just trying to make me feel better.”

So, I played back the video. Incredibly, he was polished, well spoken, calm, and perfectly composed. You couldn’t tell anything was wrong.

“What do you think now that you’ve seen it?” I asked him. He was adamant. “I don’t like looking at myself,” he said, “I’m not good on camera.” It’s amazing how we bend the truth to fit our narratives, even when it’s staring us in the face.

Like an anorexic, we see ourselves in a mirror that is distorted by experiences which have shaped our self image in ways that simply do not reflect reality.

Much of how we are perceived is a fiction that we make up in our own mind. It’s based on artifacts of an image we have of ourselves that, in turn, are based on our worst fears and our weaknesses rather than an accurate reflection of ourselves and our strengths. It typically goes something like this: “I’m shy. That’s just who I am. Therefore people don’t like me or what I have to say.” My student couldn’t get beyond seeing his quirks and idiosyncrasies to see his composure and authenticity. 

It’s human nature, and even the most experienced presenters and performers deal with it. Even after three decades of presenting regularly to audiences of thousands I still look at videos of myself with an eye towards detail that would be lost on my worst critic. 

The Bad News Is Also The Good News

The only way to reshape this self image is to take every opportunity to put yourself “out there” and create more experiences that reinforce the positive aspects of who you are and how you come across.  I hate to tell you this, but the quirks and idiosyncrasies will always be there. Your job is to look beyond them to what does work and then amplify that. Yeah, I wish I had an easier way for you to develop an accurate self-image. I don’t. 

Those of us who are shy and inherently more introverted have the distinct benefit of also being more critical of ourselves than we should be. That can create anxiety, which isn’t pleasant, but at the same time it can provide the greatest impetus to grow and improve. 

So, good news or bad news? It all depends on what you choose to do with it.

Essential Advice for Businesses Considering the Blockchain

Blockchain technology began with Bitcoin, but it has since been coopted by businesses as the preferred brand name for all sorts of cryptographically spruced up databases. Just about every corporate innovation program is experimenting with, or at least eyeing, the trend—look, boss, we’re innovative! But how should companies really approach the technology, if at all?

Answer: with caution and commonsense.

“If you’re a CEO and someone is coming to you with a blockchain project, beware,” warned Julie Sweet, North American CEO for Accenture, the consulting firm, speaking at the Fortune Global Forum in Toronto, Canada, on Wednesday. Sweet thrust her fingers upward to couch the phrase “blockchain project” in air quotes.

“Blockchain is a technology, not an outcome,” Sweet said. While the tech is “ripe for experimentation and pilots, it has to start with, what’s the business challenge or opportunity?”

The business side of a company should lead any blockchain foray, Sweet said. Businesses must have a “clear ROI,” or return on investment, in mind before partnering with the technology side to move ahead on a pilot.

In March, Accenture teamed up with DHL, the German shipping giant, on a blockchain trial designed to track and trace medicine distribution for the pharmaceutical industry, Sweet said, citing one example. The partnership started by identifying a problem—rooting out counterfeit drugs—and it recognized that blockchain tech presented a “big opportunity” to address the issue, she said.

Sweet’s second piece of advice involved when and how deeply companies should wade into the depths of blockchain experimentation. “Today, given the state of the industry, the technology, and the complexity, for most companies the answer is still going to be monitor and participate as opposed to being a first mover,” she said.

In other words, businesses should maintain their awareness of what’s going on, but shouldn’t upheave their operations in order to be the first out the gate with some ill-considered blockchain stunt. The industry is nascent, and there are plenty of kinks still to work out.

Christine Moy, J.P. Morgan Chase’s blockchain program lead, who spoke on the panel alongside Sweet, agreed with the Accenture CEO’s guidance. Moy described how her team embeds itself with the heads of J.P. Morgan’s various lines of business in order to understand their overall strategies, priorities, and pain points before pursuing a blockchain application.

Moy offered an anecdote about her team’s early experience working with the bank’s treasury services business, which handles trillions of dollars in payments per day. When the group dug into the potential for a blockchain network to revamp cross-border transactions, it realized the cost of implementing such a system would outweigh the benefits.

“Everyone was a little bit bewildered because, from a clearing and settlement standpoint, the actual mechanism of clearing and settling a cross-border payment works just fine,” Moy said. Put another way, the bank did not see a reasonable return on investment.

“Whatever incremental optimization a blockchain could enable when stood up against the business case of having to retire legacy systems and migrate off and build an entirely new system, it just didn’t really make sense,” Moy said.

So Moy’s team reevaluated its approach. Eventually, it identified a real problem that did seem suited to a blockchain-based solution: consolidating international sanctions-related information into a single database shared among correspondent banks.

Sometimes payment instructions “just get stuck in the middle” as they’re passed through a “daisy chain” of intermediary banks, Moy said. The hold-ups are often the result of some bank requesting more information about the recipient of a transaction.

“Then it’s telephone calls, emails back up the chain—who has the information—I’m waiting,” Moy said, mentioning that delays can take anywhere from a “couple days to a couple weeks even.”

Moy’s team viewed this as a perfect fit for blockchain tech. Now the team’s “interbank information network,” which went into production two weeks ago with 90 participants, she said, lets banks swap that information on a blockchain.

In the beginning, everyone thought blockchain was “going to change the world, it’s going to disintermediate everyone—banks and clearing houses and everything,” Moy said. “Now we’ve come to this next level of maturity where we think of it less as disruption and more as transformation.”

Alex Tapscott, another panelist and coauthor of a popular book on the technology called Blockchain Revolution, urged members of the audience not to get too comfortable with the wait-and-see approach, noting that the Internet blindsided—and overturned—many businesses that failed to recognize its potential.

“If I’m in the CEO seat in 1994, I might think the Internet is just a medium for publishing information,” Tapscott said. That mentality led many business leaders to fatally ignore the potential for the technology, he said, citing the recent bankruptcy of Sears, once the nation’s biggest retailer, as proof.

“You have to take a step back and understand what could this could represent down the road,” continued Tapscott, who cofounded the Toronto-based Blockchain Research Institute, a think tank that studies the technology and partners with businesses on projects.

Sweet, however, reiterated that companies must maintain a targeted, business-first focus. “If it doesn’t have an ROI, then it’s not worth doing,” she said.

So, before you go ripping up your legacy systems and diving headfirst into blockchain, first consider these executives’ words of wisdom: What is it good for? How involved should my company be at this moment? And will I end up like Sears if I don’t?

The Cat-and-Mouse Game Between Regulators and Data Stewards

Data is king: Corporations hoover up the stuff to build new business lines. Hackers, meanwhile, steal it for their own revenue-seeking purposes. And regulators are increasingly worried about keeping both—companies and miscreants—in check, in the interest of protecting people’s privacy.

This dynamic between industry, government, and consumers was a subject of much discussion among the executives in attendance at Fortune’s Global Forum in Toronto on Tuesday. “Regulators always move too slow,” said Ken Xie, CEO, chairman, and founder of Fortinet, a cybersecurity firm, speaking on a panel about data stewardship. “It takes months or years to get anything done, but in the security space attackers take minutes.”

Regulators “are always behind,” Xie said.

Adam Lashinsky, Fortune’s executive editor and the panel’s moderator, acknowledged that government action tends to trail the pace of technology developments in the private sector. “On the other hand,” he said, government “plays an important role sometimes in driving this, whether or not industry likes it.”

Lashinsky cited the European Union data privacy law known as GDPR, or the General Data Protection Regulation, which went into effect in May, as an example of regulators exhibiting leadership.

Xie agreed GDPR “is going to help” consumers. He cited other examples of regulations designed to protect consumers and their data, including the Health Insurance Portability and Accountability Act, or HIPAA, a piece of U.S. regulation designed to strengthen the way businesses handle people’s health care information.

“But on the other side, the standards are really at a minimum,” Xie said, referring to HIPAA and similar laws. “They are way not enough to protect your data.”

Sherry Shannon-Vanstone, founder and president of Profound Impact Corp., an Ontario-based startup, who also spoke on the panel, praised Canada’s approach to data privacy law. She said the country is planning to tweak its own regulations in the wake of GDPR.

“Consumers have the right to know what data is being collected on them and how it’s being stored,” said Shannon-Vanstone, who was formerly the chairman and CEO of Trustpoint Innovation, an IT company acquired last year by a Canadian subsidiary of ETAS, a German automotive software-maker.

David Kenny, who heads IBM’s artificial intelligence unit, said IBM supported the passage of GDPR. He further urged industry and government to cooperate on a federal, if not global, level, saying that “the more consistent things run, the easier it is to solve them.”

Most regulators “describe what needs to happen. They’re not so good on the how,” Kenny said. “The software guys need to come together to solve the how.”

Chinese electric car makers, nurtured by state, now look for way out of glut

HANGZHOU, China (Reuters) – Humming away in an industrial estate in the eastern Chinese resort city of Hangzhou, electric vehicle designer Automagic is one of hundreds of companies looking to ride the country’s wave of investment in clean transportation.

The company wants to find a niche in a crowded sector that already includes renewable equipment manufacturers, battery makers and property developers like the Evergrande Group, as well as established auto giants.

But not all of these electric vehicle hopefuls will make it to the finish line.

“This (large number of firms) is inevitable, because whenever there is an emerging technology or emerging industry, there must be a hundred schools of thought and a hundred flowers blooming,” said Zhou Xuan, Automagic’s general manager, referring to Chinese leader Mao Zedong’s ill-fated 1956 “Hundred Flowers” campaign aimed at encouraging new ideas.

China is using preferential policies and brute manufacturing power to position itself at the forefront of global efforts to electrify transportation. By the end of 2017, ownership of new energy vehicles (NEV) – those powered by fuels other than petrol – reached 1.8 million in China, over half the world’s total.

With market expectations high, Chinese EV maker NIO, a rival to Tesla, launched a high-profile IPO in New York last month.

In July, the industry ministry published a list of 428 recommended NEV designs built by 118 enterprises throughout the country. It included not only established carmakers like FAW Group and Geely Automobiles, but also small, new entrants with names like Greenwheel, Wuhu Bodge Automobiles and Jiangsu Friendly Cars.

But regulators are already concerned about overcapacity and “blind development.” As subsidies are cut, smaller start-ups need to develop a competitive edge.

“After a period of intense competition, the rocks will appear, and the weak will be consolidated or eliminated,” Zhou said.

STRATEGIC GLUTS

Overcapacity has been a persistent concern for many Chinese industries, with thousands of firms, backed by growth-hungry local governments and supported by risky loans, expanding quickly.

Over the years, China has been forced to take action against price-sapping supply gluts in steel, coal and solar panels, among others.

Electric vehicles could be next, as local governments feel pressure to create champions while following state instructions to “upgrade” their heavy industrial economies.

Some executives say the market is already distorted by subsidies granted to inefficient and poorly performing firms.

“Right now, the rapid growth of NEVs is not a market choice but government-guided behavior, with growth stimulated by subsidies,” said Li Lei, deputy director of the new energy department of Jiangxi Dacheng Autos, a new joint venture carmaker in eastern China’s Jiangxi province.

Though sales soared 88 percent in the first eight months of 2018, hitting 601,000 units, the National Development and Reform Commission (NDRC) has promised to tackle irrational growth in the sector.

In draft rules released this year, it said it would “plan and arrange the new energy vehicle industry scientifically,” and block new production capacity in regions where the utilization rate was less than 80 percent.

But China has often relied on “strategic” supply gluts to boost competitiveness. Excess production in solar power forced producers to reduce costs and compete, subsidy-free, with conventional energy sources.

Liu Xiaolu, sales manager with ICONIQ Motors, a Tianjin-based luxury electric vehicle maker, said the large number of companies could be a “necessary stage” of development for the sector.

“You cannot say that 20 enterprises will definitely be able to develop the entire industry by themselves, and it probably needs everyone to come together, and then gradually get eliminated afterwards,” he said.

COMPETITIVE EDGE

Established automakers told Reuters they’d already had plenty of time to prepare for the shift towards electric transportation.

Xu Hongfei, general manager with Zotye Automobile, a mid-sized Chinese automaker, said it had been preparing for China’s “exit schedule” from traditional vehicles for more than a decade and had developed core technologies such as batteries.

With a staff of 20, Automagic was founded in 2015 by former engineers from IBM and Geely. It is talking with partners to bring its models to the market.

The company is focusing on small, short-distance family vehicles rather than large-scale cars built by the likes of BYD. It is also seeking better ways to produce, recharge and recycle batteries.

“The most important point is that new energy vehicles need to be energy efficient, with low energy consumption, so we focus on cutting weight and making cars smaller so battery use can be reduced,” said Zhong Jin, Automagic’s co-founder and chief executive.

GCL, one of China’s biggest renewable developers, plans to turn its “new energy town” at Jurong in Jiangsu province into a major manufacturing center with its expertise in batteries and recycling expertise, and even create a battery rental system.

Although all the companies are trying to get an edge through innovation, Li of Jiangxi Dacheng said success could simply come down to market positioning.

“Our company doesn’t have any very big advantages or very big disadvantages and competition is dependent first on branding, second on financing, and third on sales channels,” he said.

Additional reporting by Shanghai newsroom; Editing by Gerry Doyle

Microsoft Co-Founder Paul Allen Has Died at 65

Paul Allen has died. The co-founder of Microsoft, and an investor who bet often far in advance on new technology, medical research, and urban initiatives was 65. His real-estate venture, Vulcan, released news of his death the afternoon of Oct. 15 in Seattle.

Vulcan CEO Bill Hilf said in a statement, “All of us who had the honor of working with Paul feel inexpressible loss today. He possessed a remarkable intellect and a passion to solve some of the world’s most difficult problems, with the conviction that creative thinking and new approaches could make profound and lasting impact.”

The statement showed the diversity of Allen’s interests, as it was made on behalf of the company; Allen’s two sports teams, the Seattle Seahawks and Portland Trailblazers; Stratolaunch Systems, a firm designing an air-based space-launch system; and two non-profits: the Allen Institute, a bioscience research organization, and the Allen Institute for Artificial Intelligence, which focuses on providing free data and tools to AI researchers.

Allen had suffered multiple bouts of cancer, starting with a diagnosis in 1982, just seven years after he and Bill Gates founded Microsoft together. He recovered, but contracted a different in 2009, from which he was also considered in remission. On Oct. 1, he and his firm posted the latest diagnosis. He was optimistic about the outcome.

Allen’s sister, Jody Allen, said in statement provided by Vulcan and on behalf of his family, “While most knew Paul Allen as a technologist and philanthropist, for us he was a much-loved brother and uncle, and an exceptional friend. Paul’s family and friends were blessed to experience his wit, warmth, his generosity and deep concern.”

Through Vulcan and other investments, Allen was instrumental in reshaping Seattle’s building landscape to provide the space as a first home for companies founded in the city, like Amazon, as they massively expanded, and as increasingly large outposts for Silicon Valley firms like Google and Facebook.

Weighing The Week Ahead: Can Earnings Season Spark A Rebound In Stocks?

We have a normal economic calendar with a focus on housing data. Earnings season will be in full swing. The background for this news will, of course, be the stock market volatility and decline of the past week. That story will command the early-week attention, especially if aggressive selling resumes. Recent earnings seasons have buoyed stocks, leaving the punditry with this question: Can earnings season spark a rebound in stocks?

Last Week Recap

In my last edition of WTWA I took note of rising interest rates asking whether they signaled the beginning of the end for the stock rally. That was a good call. The question dominated financial news on Monday and Tuesday, even though stocks barely moved. It was almost as if the news coverage was pre-planned, and events did not matter. That changed on Wednesday, when the major market decline gave legs to the story. The last edition of WTWA provided a good preview of this, but certainly no prediction of the sharp selling.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, including commentary on volume. Check it out.

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The market declined 4.1% on the week. Wednesday saw the largest single-day loss since February. The weekly trading range was about 6.4%. Volatility spike higher, exceeding the long-term averages. The VIX implied volatility measure remained higher than the actual results. I summarize actual and implied volatility each week in our Indicator Snapshot section below.

Noteworthy

Have you already purchased your last car? Justin Rowlatt (BBC News) raises the provocative question and provides plenty of evidence. Internal combustion engines have 2000 parts, compared to about 20 for electric cars, which may have life spans of 500,000 miles.

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The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

When relevant, I include expectations (E) and the prior reading (P).

The Good

  • Inflation data remained benign. PPI registered a gain of 0.2% up from P of -0.1% but in line with expectations. CPI gained only 0.1% P 0.2% headline and 0.1% core. E 0.2%.
  • High Frequency Indicators have turned positive, including the long-leading cluster. New Deal Democrat’s helpful weekly update breaks the data into two groups, providing both detail and a summary on each. The long-leading group has shifted back and for recently, and he continues to monitor it closely. For now, it is positive.
  • Economic growthfor Q3 and forward remains strong. Calculated Risk summarizes the key sources, “It looks like GDP will be in the 3s in Q3”.
  • Market sentiment has turned negative – very negative. David Templeton (HORAN) updates the Fear and Greed picture, a positive contrarian factor.

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The Bad

As has been the recent case, most of the “bad” news consists of indicators slightly off the best levels.

  • NFIB Small Business optimism was slightly off the high from last month – 107.9 vs. 108.8. Bespoke also looks at the reasons behind the headline number.

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  • Initial jobless claims rose to 214K E 208K P 207K
  • Michigan sentiment declined to 99.0 E 100 P 100.1. Bespoke notes that sentiment remains near the recent highs and highlights the move in inflation expectations. Expectations for income growth were also lower. The survey period captured only part of last week’s decline, and probably none of it for most respondents.

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The Ugly

Hurricane Florence led to 51 deaths and estimated damages of $30 billion to $50 billion. The events have also exposed other problems. The Bipartisan Policy Center provides a good analysis, with this comment on some needed reforms:

Hurricane Florence has, like many other recent disasters, exposed a variety of flaws in the pre-disaster and post-disaster policies of the United States. These gaps undermine the nation’s resilience, endanger residents, and further jeopardize the soundness of already aging infrastructure. For immediate recovery needs, Congress has repeatedly turned to supplemental funding as short-term fixes, but to prevent this level of destruction from reoccurring in the wake of the next disaster, there needs to be a dramatic overhaul of the national infrastructure investments and disaster framework. Spending more upfront, with a focus on increased resiliency and mitigation, saves money when a disaster hits. For every $1 spent on mitigation, an estimated $6 is saved that otherwise would have been spent in recovery costs.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

The calendar is a big one, with a strong emphasis on housing. Also featured will be retail sales, the Fed minutes, and leading indicators. The Philly Fed has its fans, and it has had some market-moving moments. A favorite of mine is the JOLTS report, which has special significance as our best read on the tightening labor market.

It is also a big week for Q3 earnings reports, where we had our first taste last week. Many large companies will report. Expectations are for continuing increases in the 20% range on a year-over-year basis. (Barron’s).

Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

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Next Week’s Theme

Once again, I expect last week’s news to linger into the week ahead. My hope is that the story will turn to earnings season and substantive stock news. For the moment everyone is preoccupied with last week’s big stock declines. Mrs. OldProf and I were watching an interview with a European notable who described the stock decline as either a healthy correction or the start of a new trend. She astutely observed that he certainly had all the bases covered! By week’s end I expect pundits to be asking: Can earnings season generate a rebound in stocks?

But for the moment, we need to review the week behind. Sometimes an understanding of that is necessary to plan for the week ahead.

As is my custom, I will cite a range of viewpoints and include some links. I will organize these into two sections: Alleged causes and Recommended strategies.

Causes

  • Valuation – Always cited when stocks move a bit lower.
  • Profit Taking – A tried and true reason when a rising market changes course. (Barron’s, which also mentions some of the other potential causes listed here).
  • The Fed – Now apparently less data dependent, planning to keep raising rates above neutral regardless of the strength of the economy. Leading Fed guru Tim Duy notes the increased importance of the “dot plots,” the report of individual Fed participants expectations for future rates.

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  • Tariffs – Dr. Ed Yardeni analyzes the impact of various tariff announcements and muses on the possibility that a trade war with China is now the “base case” as JP Morgan suggests. Dr. Ed believes:

…the US economy will be strong enough to boost S&P 500 earnings by 6.8% to $173 per share, which has been our number for next year for a while. I don’t think that the escalating trade war with China will be the event that ends the bull market in the US (Fig. 3). However, it may already be marking the beginning of a severe and prolonged bear market in China (Fig. 4).

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  • Interest rates – The standard shorthand explanation from major news sources.
  • Technical signals – Eddy Elfenbein notes that Thursday’s trading took the S&P 500 below its 200-day moving average, a widely-followed technical indicator. Eddy also observes that panic is not indicated. The two-day loss is not that unusual, and not even the worst for 2018. The chart below illustrates both points.

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  • Algorithms — blamed for anything and everything.
  • Emotion — Just another panic attack writes Scott Grannis. He concludes, “It wouldn’t be surprising to see prices decline further, but it would be surprising if this proved to be the beginning of a major rout or recession”. In his summary of key indicators, he includes an interesting chart of VIX peaks. He creates a ratio with the ten-year note yield. It is a coincident measure.

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What to do now?

  • Buy bonds, say bond fund managers and bond research houses. Flirting with Models offers some alternatives for diversification.
  • Buy gold (or silver) say the fear-inspiring commercials.
  • Sell everything – the verdict of many investment newsletters
  • Don’t panic? Cullen Roche explains why this admonition is not helpful.
  • Buy the dip – David Templeton (HORAN) takes a good look at the data, concluding:

Some might say the decline has caused damage to the market, but a better phrase might be created opportunity. As the below chart shows only 11% of S&P 500 stocks are trading above their 50 day moving average. The last time this occurred was in February earlier this year. That turns out to be a low point in the market so far in 2018. In regards to the 200 day moving average, 41% of stocks are trading above that level, again similar to the early 2018 market low.

  • Buy with both hands – Ralph Vince sees the current opportunity as “juicy.”
  • Get perspective by considering data – then figure out how it applies to you. Brett Steenbarger explains both.

In today’s Final Thought, I’ll add a few of my own observations.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

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Short-term trading conditions remain favorable, despite some deterioration. The overall health indicator for our models remains positive, although some of the individual models stopped out specific positions. Super-high volatility is not attractive for most trading systems. If these high levels continue, I expect further deterioration next week. The VIX spiked much higher than actual volatility, indicating sentiment worse than the reality.

Fundamentals indicators are all solid, with stocks much more attractive than recently. The earnings yield advantage over the S&P 500 has improved significantly.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Doug Short and Jill Mislinski: Regular updating of an array of indicators. Great charts and analysis.

Georg Vrba: Business cycle indicator and market timing tools. None of Georg’s indicators signal recession. Here is the latest chart on the Business Cycle Index.

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Insight for Traders

Check out our weekly Stock Exchange post. We combine links to important posts about trading, themes of current interest, and ideas from our trading models. This week we asked whether traders thought they could actually understand the stock market. Or perhaps they were just pretending. In many ways, it is a companion to today’s post, but with a trader orientation. We shared advice by top trading experts and discussed some recent picks from our trading models. Our ringleader and editor, Blue Harbinger, provided fundamental counterpoint for the models, all of which are technically-based.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility.

Best of the Week

If I had to pick a single most important source for investors to read this week, it would be Ashby Daniels’ (Retirement Field Guide) discussion of emotions and retirement planning. He illustrates his ideas with the story of an actual investor who made a knee-jerk market call that turned out well – at least for a few percentage points. Now what?

He writes:

Many people are quick to say that they aren’t market timers (nobody likes to be labeled as such), but then in the next sentence proceed to ask what I think of the market and whether now is a good time to invest more or to take some chips off the table.

In fact, the question, “What do you think of the market?” is by far the most popular question that I get asked. I just want to be on the record in saying that, “Anything other than establishing a portfolio built specifically for you and sticking with that portfolio is an attempt at market timing.” With the exception of life changes, how could it be anything else?

Read the full article for some good ideas about how to plan and stick to the plan. [Jeff – I suppose I like his approach since it is so close to my own, but there is nothing wrong with that].

Stock Ideas

Chuck Carnevale provides his usual comprehensive analysis combined with a lesson in using data. He sees Whirlpool [WHR] as a cheap stock with little downside. Be sure to watch the video to see why he calls this a “fire sale valuation.”

Blue Harbinger also surveys beaten-down names and finds one from his watch list, Ship Finance International (SFL).

Alphabet? (GOOG) Stone Fox Capital likes the opportunity, IF the company dodges or resolves regulatory issues.

They also like Advanced Micro Devices (AMD), calling market fears about competition with Intel (INTC) unwarranted.

Eddy Elfenbein does not make a specific recommendation, but he takes note of the current weakness in semiconductors, after years of strength.

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Personal Finance

Seeking Alpha Senior Editor Gil Weinreich’s Asset Allocation Daily is consistently both interesting and informative. His upbeat analysis,4 Ways to Prevail Over Automation, is factual, pragmatic, and inspirational. Later in the week, his thoughts were more sobering. He challenged investors to consider how they would consider a prolonged decline. That is a topic that everyone should think about in advance.

Abnormal Returns is an important daily source for all of us following investment news. His Wednesday Personal Finance Post is especially helpful for individual investors. This week had several good posts on retirement. I especially liked Mike Piper’s warning that you might not be able to pick your retirement age. He combines data with some good examples. And, today’s Best of the Week (above).

Watch out for…

Bonds. The Mad Hedge Fund Trader says The Fat Lady is Singing for the Bond Market.

Final Thought

What caused the sharp market decline? Interest rates are a poor explanation, since the entire yield curve was the same on Wednesday morning as it was on Friday. Astute traders scoffed at the explanations offered (Avi Gilburt).

I covered the possible pattern in last week’s edition, which was an accurate preview. Briefly put, a smidgen of news sparks some trading from both human traders and algorithms. This is directionally correct, but without analysis of the overall significance. The selling often spreads to an ETF that has concentrations in the affected stocks. Sometimes prices that are viewed by some as important “technical” levels are violated. This sparks selling by a different group of traders. Despite the lack of overall logic or a cohesive explanation, the financial news must satisfy demand for an explanation. I wrote last week:

Every time the market makes a small move we are bombarded by observers predicting the worst. It is important to remember that declines of 15-20% happen regularly and without any particular reason. No one can predict these accurately, so the average investor should learn to take advantage of the movement rather than falling for the persistent pseudo-warnings. Alan Steel calls it the Fear Economy, and reviews the history of predictions by one prominent uber-bear.

Alan Steel has another great post. Starting with a bearish call from one economist from a big institution, he traces the consequences:

Let’s face it they’d seen articles written by “proper experts” reminding readers that October was a dangerous month to invest in shares.

Mark Twain used to say that yonks ago. Although he also reckoned that February, December, August, May, January, July, September, March, November April and June were, too. Say no more.

No matter what we said this couple of perpetual worriers cashed out and stuck their significant life savings in bank deposit, assuring us they’d reinvest when it felt better. So when would that be? “When the market’s higher of course”. No, they didn’t spot the irony. So three years later how have they done? Not good I’m afraid . Earned literally sod all in interest, and lost money in real terms thanks to inflation.

And also this…

In August 2010 an analysis was made of ten renowned economic experts and their predictions related to an imminent “double-dip recession” in the wake of the 2007/8 Great Financial Crisis. They included well –known revered figures including Robert Shiller (Prof at Yale University), Bill Gross (Former managing partner at PIMCO), Nouriel Roubini (Prof at New York University) as well as those economists representing Goldman Sachs, The Institute of Directors and the National Institute for Economic and Social Research.

They all saw the probabilities of a double-dip recession as higher than normal. One or two saw the probability as high as 50% to over 60%. And they were wrong. Unless you count the fall in demand for Hummus and Taramasalata in Greece.

[A few months earlier, in May of 2010, I challenged these ideas with my Dow 20K call – the market doubling rather than being cut in half. There were plenty of skeptics, especially on Seeking Alpha. Or this halfway update. And finally, the 2016 CNBC coverage. The important takeaway is that the key indicators I am using have not changed, nor has the avalanche of negativity. The time to worry will come – probably when recession odds move higher.]

Barry Ritholtz offers a challenge on the same concept. He notes that the factors alleged to underly the decline were well known in advance. So many offered great explanations with the benefit of hindsight. But not on Tuesday.

What now? Your best course of action depends upon your personal circumstances and time frame.

If you are a trader, follow your system. Use your stops to exit positions. Get ready for another day.

If you are a passive investor with an “all-weather” portfolio, you should not do anything. This sort of move comes with the territory. If you find it disturbing, then your stock position may be too large. Or you need to spend less time watching the news!

If you are an active investor who determines values of the companies you hold and price targets for the stocks, you should ignore the opinion of the emotional Mr. Market. Take advantage of price disparities to buy or sell as indicated. Volatility provides opportunity.

[Note: If you find these recommendations difficult, you may be using the wrong method. We combine these perspectives to right-size risk. My two papers on investor pitfalls and understanding risk are available at no charge.]

I’m more worried about:

  • China trade. Any mention of progress or lack thereof generates an immediate market reaction. This issue is important and could provide the catalyst for major gains.
  • The LIBOR transition. This reference rate for many contracts has proven to be both unfair and unstable. Improvements are coming, but Richard Berner (Bipartisan Policy Center) warns that we should not be complacent during the transition.

I’m less worried about:

  • Earnings growth. Can it be a catalyst again this month? The reaction to conference calls will give us a sense of the market mood.

Disclosure: I am/we are long WHR, INTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Short calls versus both WHR and INTC.

Jeff Weiner on How Technology Accentuates Tribalism

This weekend is WIRED’s 25th Anniversary festival. We started it off with three conversations with brilliant CEOs about the future of work: Patrick Collison of Stripe, Stacy Brown-Philpot of TaskRabbit, and Jeff Weiner of LinkedIn. Here is the transcript of my talk with Weiner.

Nicholas Thompson: One thing that I love about you is that your career dates to 1994 and an essay that you read in WIRED magazine. So, explain how a review of a Nicholas Negroponte book led you to become who you are.

Jeff Weiner: It’s all true. I’m not sure I’d be sitting in this seat today if it weren’t for WIRED. I was first introduced to the internet prior to its commercialization while I was still in school as a senior at Wharton undergrad. I was on a consulting project with a buddy of mine and three DuPont engineers who were interested in leveraging this thing called the Internet for desktop teleconferencing. So I was exposed to the technology and became really fascinated by the implications and kind of developed this thesis that it was going to change everything, there would be this concept of convergence, and I had always been interesting in education reform. And so I really started to roll up my sleeves to better understand the opportunities and how it would impact society.

Fast forward, I ended up joining the corporate development group of Warner Brothers. I’d been in Boston in a consulting group for a little while. And shortly after joining, I read my copy of WIRED that month. It is probably close to 24 years to the day. And I would read WIRED cover to cover. Everything about it was fascinating to me—the look, the feel, the narration, the voice, how unique it was. And of course, it was covering something I was so fascinated by. I would even read the book reviews, including one in this particular edition about Nicholas Negroponte and his vision for the digital future. I ended up buying the book. And essentially what I picked up from it was everything that could be converted from an atom to a bit would be.

I had just joined Warner Brothers and I knew that everything about the place was going to be transformed. And within a month or two of that revelation the guy who was running corporate development at the time said Warner Brothers needed an interactive division. They would have a CD-ROM component, which was all the rage back then. They would have an online component, which most people in the group didn’t really understand or have experience with. I had just joined AOL about nine months prior. And it was going to have an out-of-home interactive entertainment component, a kiosk. That fell by the wayside. The CD-ROM component never got approved. But I volunteered to write the online business plan, and 24 years later, here we are.

NT: That is extraordinary. And that is, of course, one of the most important ideas of last 25 years, right. Everything that is an atom will become a bit. So let me ask you a very simple follow up question: What is the equivalent idea today?

JW: Let’s get Nicholas Negroponte on the phone and find out!

Jeff Weiner

Amy Lombard

For me, it’s far less about the technology today and it’s far more about the implications of technology on society. And I think increasingly, we need to proactively ask ourselves far more difficult, challenging questions—provocative questions—about the potential unintended consequences of these technologies. And to the best of our ability, try to understand the implications for society. I think it’s safe to say, certainly for those founders and CEOs that I know and work with in the Valley, people have the best of intentions when they are innovating, when they’re creating these breakthroughs, their visions for their companies. But you can see, it feels like every week there’s another headline that is talking about how some of this stuff is going in the wrong direction. And technology certainly didn’t create tribalism, tribalism is a part of human nature, it protects us. The whole idea of ingroups keeps us safe and secure.

But technology is dramatically accelerating and reinforcing tribalism at a time when increasingly we need to be coming together as a society—and you can talk about society in a town, a city, a state, a country, the world—when we increasingly need to be coming together to solve some pretty big challenges. So to me it would be about understanding the impact of technology as proactively as possible. And trying to create as much value, and trying to bring people together to the best of our ability.

NT: Alright. So, you set up an easy question in your answer, which is: You worry about the worst possible unintended consequences of technology. What is the worst possible unintended consequence of LinkedIn?

JW: So, you know, our vision is to create economic opportunity for every member of the global workforce. There’s over 3 billion people in the global workforce. And that vision was originally put into place to inspire our employees. It was true north. It was the dream, it wasn’t necessarily something we were going to measure ourselves against. That was our mission. That was the role of the mission, which is to connect the world’s professionals to make them more productive and successful. There’s roughly 780 million knowledge workers, or professionals, pre-professionals, students that aspire to become white-collar professionals in the world. Three billion people in the global workforce. The unintended consequence of too closely focusing on our mission without truly thinking through how we’re going to operationalize the vision is to reinforce unconscious bias, to reinforce these growing socioeconomic chasms on a global basis, especially here in the United States, by providing more and more opportunity for those that went to the right schools, worked at the right companies, and already have the right networks.

NT: Oh, I see. Your network could possibly reinforce all of the biases.

JW: Oh, not quite possibly—it does. And it does for all of us. And despite, again, the best of intentions, people have a tendency to want to work with and recruit those that look like them, that sound like them. And it’s not through, more often than not, it’s not through explicit bias. These are unconscious biases, and so I’ll give you a perfect anecdote here. We recently rolled out an Ask For a Referral capability on LinkedIn. And this makes all the sense in the world when you consider how many people find their jobs by virtue of who they know. So just a quick show of hands, How many people here have ever gotten a job by virtue of their network? Someone they knew at the company. So it’s about 90 plus percent. So we rolled out this functionality, made all the sense in the world. And it took off. And the results were incredible. We found that people asking for a referral within an organization they were interested in working for, by virtue of a job post on LinkedIn and tapping the power of their LinkedIn network, were eight times more likely to get the job. Eight times more likely to be hired. And it creates a more effective, efficient process for the prospect, for the company themselves, etcetera. So, our head of social impact, a woman named Meg Garlinghouse, who I’ve been working with for a really long time— we first met at Yahoo, and she’s one of, if not the, best in the business—she pulled me aside shortly after we launched this thing and she said, “I understand everyone’s celebrating the success of this product but have we considered the unintended consequences?” I said, “What do you mean?” She said, “What about the people that don’t have the networks?” Just stopped me cold in my tracks. I mean we have the wonderful privilege of working with some extraordinary organizations both here in the community locally and more broadly. Boys and Girls Club of the Peninsula, Gear Up, organizations like this where you’ve got extraordinary talent that just doesn’t necessarily have access to the right four-year diploma, or the right people. But we work with these people, we hire them, we’re thrilled to have them join the company because they are so capable, they have all the raw materials, all the aptitude, the resiliency, the grit, the learning curves, the compassion by virtue of the experiences they’ve had in their life. But they don’t have the networks. And so with questions like that raised, we are able to ask ourselves these tough questions and then answer them hopefully in the right way. And what we ended up doing with that kind of ethos in mind, to broaden this aperture, to create economic opportunity for every member of the global workforce, we created something called the Career Advice Hub. And the Career Advice Hub enables any member of LinkedIn to raise their hand and ask for help, and for any member of LinkedIn to volunteer to help them, to mentor them. And within a few short months after launching that, we’ve already had two million people ask for help. And we’ve had over a million people volunteer to mentor folks, ideally outside of their network. So that would be an example of how we’re addressing them.

NT: When I get LinkedIn connection requests, I usually sort them by “has mutual connections” to “has no mutual connections,” so I will commit to reversing, flipping from lowest the highest now.

JW: So it’s wonderful to hear that. And in all seriousness, we want to potentially try to productize this to raise greater awareness for how people can begin to diversify their networks, because again there’s this almost self-fulfilling prophecy, this self-reinforcing dynamic, just sticking with the people you know. So it’s wonderful to hear you’re doing that. We’re going to try to facilitate that for everyone.

NT: And you’ve also, I noticed a couple of weeks ago, I don’t know the timing, you rolled out an AI system to help hirers find more diverse candidates. Is that an initiative that came out of the same realization in the same conversation? And how does it work?

JW: To some extent. We started to think about the concept of diversity and really extending diversity to include inclusion and belonging. We don’t think diversity is enough. Oftentimes with regard to diversity initiatives, people will look to hire folks into their organization that are more reflective of the customers that they serve, which is wonderful. But all too often that becomes a numbers exercise. And it needs to be much more than that, because you can bring a more diverse group of people into your company, but if they’re not included in the right discussions where decisions are being made, then it’s not going to achieve the objective that you were looking for. So there’s got to be diversity, there has to be inclusion, and inclusion is not enough. Oftentimes now you’ll hear people talking about diversity and inclusion—D&I. At LinkedIn, we also feel like it’s really important to focus on belonging. So if you use the meeting as the metaphor and diversity is making sure you have the right people within your organization, then inclusion is making sure they’re invited to the right meetings, belonging is ensuring that once those people are in the meetings, when they look up at the people around the table, they actually feel like they belong there. And if you don’t go that last mile, you may have the right people around the table, but they look up and they don’t see people that look like them, or sound like them, or have the right or similar backgrounds or experiences. And when they don’t feel like they belong, they’re not operating at their best.

NT: But do you mean that LinkedIn…LinkedIn can solve that problem at LinkedIn. You as the CEO can change the way your corporate culture works, and you can solve the problem of recruiting at WIRED or at any other company. But do you actually think that LinkedIn can solve culture problems within outside organizations? Or is it just LinkedIn can solve pipeline of people coming in?

JW: So when you say “solve,” solve cultural or societal issues…

NT: Yeah, can you solve diversity in America, Jeff?

JW: I would love to think that we can help!

NT: No, but do you view LinkedIn’s mission as, working on this problem as on the outside, working on this problem as it relates to people come into the organizations, or do you view it as going higher up in a stack of how organizations are managed and run?

JW: The beauty of the vision is it’s all of it. So when we talk about every member of the global workforce, we mean it. So every employee of LinkedIn at this point, we are—it’s not just the vision, we’re operationalizing the vision. We are going to try to create economic opportunity for all three billion members of the global workforce. And there’s really two components of this “every” which is by far away the most important word in that vision statement. One is going beyond our core, the white collar worker the knowledge professional, to include frontline workers, middle skilled workers, and blue collar workers. And we have some really exciting initiatives underway along those lines.

And then it goes to the point we were talking about earlier. There are also professional aspirants. There are folks that want to become knowledge workers, folks that are working towards that end, that would fall more within our core addressable opportunity in terms of knowledge workers, who to the point we were just discussing, don’t necessarily have the right networks or don’t necessarily have the right degrees. And so we are very focused on that as well. And it comes from the kinds of products I was talking about earlier, the kinds of AI efforts, talent pooling searching capabilities that we’re developing to facilitate the way in which companies can go out and create a more diverse workforce, and create a greater sense of inclusion. It also includes the way we do business. So it’s on both fronts. And one example of that would be within our engineering ranks, for example. We’ve recently taken a page out of the German playbook, the vocational training playbook, and we’ve created an apprenticeship program for people that don’t have a traditional four-year CS background. And as long as they have completed coding bootcamp, we will train them and apprentice them, and hopefully be in a position where we can hire them as software engineers. And it’s not just on the R&D front. Our head of recruiting just recently created an apprenticeship program we call Ramp, which seeks to tap folks from underserved segments of our member population, underrepresented minorities, opportunity youth, veterans, people in the later stages of their career who are in midstream of making a huge change and may have trouble getting work, and we’re training them to be recruiters, because they have the networks that enable us to become more diverse. And with success, we want to open source that. This is not going to be proprietary. As much as we believe that could create a competitive advantage, it’s too important. It’s too aligned with our vision statement. So in the success, Brendan Browne, the head of recruiting, wants to graduate a thousand apprentices a thousand recruiters over the next ten years just within LinkedIn. And then we want to open that up, and share best practices with other companies to take that to the next level.

NT: I will say that as someone who worked in Silicon Valley for a Linux company in 1997, the fact that everybody at Microsoft is now talking about open source is the most extraordinary evolution I’ve seen! Let me ask you a little bit about the data you have. You probably have the best data set on the world’s workforce, probably better than any government. If not now, it will be soon. What are you seeing in the way jobs are changing, and the way churn is happening? I’ve seen lots of people are worried about the way AI will change jobs, that robotics will change jobs. What have you seen in the data set, and where are we headed? What do you know about how jobs will change that most of us don’t know?

JW: So in terms of forecasting the crystal ball, the data is a reflection of what’s happening now or what was happening. And we can certainly use that to try to connect dots and see some patterns, but we also partner with third parties, some incredibly bright folks—think tanks, consulting firms—to better understand these trends given what we’re trying to accomplish. McKinsey Global Institute would be a perfect example. They’re estimating currently roughly half of all work activities are susceptible, will be impacted by AI. So that’s current. This isn’t science fiction. And they more recently came out a study that suggested that between 400 and 800 million jobs could be displaced on a global basis by virtue of AI. That’s not a net number, and jobs will be created. But clearly this is going to have massive impact on society.

So how can folks begin to get ahead of those trends? And that’s where our data can become I think really valuable for companies who are trying to answer these questions and develop the right workforce strategies so they can create work for their employees, for the jobs that are and will be, and not just the jobs that once were. Because we have a tendency to be looking in the rearview mirror too often here. And our workforce strategies could be a bit antiquated if we’re not looking proactively into the future. So we’ve developed one methodology in particular that enables us to look at the state in a really unique and hopefully valuable way, which we call skills gap analytics. So for any given locality anywhere in the world we can better understand the fastest growing jobs within that locality, the skills required to obtain those jobs, the aggregate skills of the workforce within that locality, measure the size of the gap, and then make that data accessible to people who are trying to fix it. And so that could be working with local governments, it could be working with local schools, in could be in cooperation with public and private sector. And then last year we rolled out a product called LinkedIn talent insights that was opened up as a beta pilot program. We just rolled it out generally available to all of our customers, and that enables them to do the same workforce planning within their organizations that we can do for governments around the world. Two really interesting trends we’re seeing here in the US: When I talk about a skills gap here on stage, what’s the first thing that comes to mind? what’s the first skill you think there would be a gap on?

Audience: Coding.

JW: Coding. That’s what everyone says. So software development, software engineering, cloud computing, data storage, web development, mobile development, and, of course, AI. Very top of mind, and when I meet with and talk to customers all over the world, I’m feeling a far greater sense of urgency on that front. But it turns out, that’s not the biggest skills gap in the United States. The biggest skills gap the United States is soft skills. Written communication, oral communication, team building, people leadership, collaboration. For jobs like sales, sales development, business development, customer service. This is the biggest gap, and it’s counter-intuitive. Everyone’s so keenly focused on technology and AI. It’s related though.

The good news comes on two fronts with regard to this particular gap. The first is that for as powerful as AI will ultimately become and is becoming, we’re still a ways away from computers being able to replicate and replace human interaction and human touch. So there’s wonderful incentive for people to develop these skills because those jobs are going to be more stable for a longer period of time. We’re also capable of closing these gaps now, today. Companies have the expertise within their organizations to train and re-skill their current workforce and future prospects. So that’s the good news on that front. With regard to technology this is also a bit counterintuitive because rather than try to just train everyone to become a software engineer, one of the things that’s going to be most important in terms of preparing the workforce to re-skill for that trend we were talking about earlier, is that people just have basic digital fluency skills. Before you start thinking about becoming an AI scientist, you need to know how to send email, how to work a spreadsheet, how to do word processing, and believe it or not, there are broad swaths of the population and the workforce that don’t have those skills. And it turns out if you don’t have these foundational skills, if you’re in a position where you need to re-skill for a more advanced technology, if you don’t have that foundation in place, it becomes almost prohibitively complex to learn multiple skills at the same time. So that’s an area we want to help people focus on as well.

NT: Alright. So, do not tell your children to be engineers but do tell them to go on the streams and to like and to comment and to share, because that is a very important soft skill! Thank you very much Jeff! That was fantastic.


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