Google’s Secret Microphone, Hackable Blockchains, and the Last Days of Theranos

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Good Thursday Morning,

DAYLIGHT  

As Theranos was collapsing, Elizabeth Holmes, who had a hard time cutting spending right to the end, came up with an unconventional plan that just proves you have to work pretty hard to create a Silicon Valley disaster as big as Theranos. She flew first-class across the country to pick up a 9-week-old Siberian husky she named Balto:

“For Holmes, the dog represented the journey that lay ahead for Theranos. As she explained to colleagues at the company’s headquarters, in Palo Alto, he was named after the world-famous sled dog who, in 1925, led a team of huskies on a dangerous, 600-mile trek from Nenana, Alaska, to remote Nome, Alaska, bearing an antitoxin that was used to fight a diphtheria outbreak…In Holmes’s telling, Balto’s perseverance mirrored her own…

“Each day, Holmes would wake up with Balto at the nearly empty Los Altos mansion that she was renting about six miles from her company’s headquarters. (Theranos covered the house’s rent.) Soon after, one of her two drivers, sometimes her two security personnel, and even sometimes one of her two assistants, would pick them up, and set off for work. And for the rest of the day, Balto would stroll through the labs with his owner. Holmes brushed it off when the scientists protested that the dog hair could contaminate samples. But there was another problem with Balto, too. He wasn’t potty-trained. Accustomed to the undomesticated life, Balto frequently urinated and defecated at will throughout Theranos headquarters.”

MARKETING

This year, for the first time, digital advertising will surpass print and TV advertising: “By year end, eMarketer expects companies to spend nearly $130 billion on digital ads, compared with about $110 billion on traditional advertisements, or about 54.2 percent of the ad market vs. 46.8 percent, respectively…The top two digital advertisers in the United States—Google and Facebook—are expected to maintain their dominant hold on ad dollars, as the tech giants’ combined ad revenue will command about 59 percent of the market, according to the forecasts.”

FINANCE

A little-noticed provision in President Trump’s 2017 tax package offers potentially huge tax breaks to opportunity funds that are looking to invest in distressed Main Streets: “The flood of capital is raising hopes as well as concerns. Those who championed the provision, which provides for a hefty tax break on long-term investments, believe the money can help distressed towns and neighborhoods that are still feeling the effects of the financial crisis and have barely benefited from the nine-year economic expansion. Skeptics worry that the funds will mostly target real estate and other projects that probably would have attracted investment even without the tax break, and may not deliver the returns being dangled.”

TECHNOLOGY

Google says the built-in microphone it never told Nest buyers about was “never supposed to be a secret”: “For Google, the revelation is particularly problematic and brings to mind previous privacy controversies, such as the 2010 incident in which the company acknowledged that its fleet of Street View cars “accidentally” collected personal data transmitted over consumers’ unsecured WiFi networks, including emails.”

Once hailed as unhackable, blockchains are now getting hacked: “In total, hackers have stolen nearly $2 billion worth of cryptocurrency since the beginning of 2017, mostly from exchanges, and that’s just what has been revealed publicly. These are not just opportunistic lone attackers, either. Sophisticated cybercrime organizations are now doing it too: analytics firm Chainalysis recently said that just two groups, both of which are apparently still active, may have stolen a combined $1 billion from exchanges.”

RETAIL

You might not have noticed, but the Girl Scouts have had a digital sales platform since 2014: “More than 7,300,000 boxes nationally are sold online every year, according to Heather Burlew-Hayden, chief marketing and membership officer for Girl Scouts of Northern California.” Some parents object, arguing that going door-to-door creates a sense of community and teaches a sales lesson in winning over a customer, but what is the effect on sales? “The bottom line? [Girls] who sell both ways, sell 76 percent more cookies than girls who don’t sell online, scouting officials say.”

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GOING GLOBAL

When the founders of  Physique 57 decided to expand into Saudi Arabia they thought the country was on the verge of sweeping social change that seemed full of promise: “Physique 57 is following in the fitness footsteps of Curves, Gold’s Gym, and CrossFit, while Starbucks has 166 stores in the country. AMC Theatres has announced plans to open up to 100 new cinemas there by 2030, while Netflix is making concessions to keep Saudis watching its content at home. ‘There are some really, really key advantages for American businesses in Saudi Arabia right now, despite all the risks,’ says Emily Hawthorne, a Middle East analyst with geopolitical consulting firm Stratfor.

“But for all of these American companies, doing business in Saudi Arabia means celebrating the crown prince’s reforms while staying silent about the devastating, US-backed war in Yemen; the jailing and reported torture of women activists who fought for the right to drive; and a draconian ‘male guardianship’ system that prevents Saudi women from attending university, traveling, marrying, or doing practically much else without the permission of a father, husband, brother, or son.”

Google sees a big opportunity in India. It’s playing the long-game by investing in the growing tech landscape where hundreds of millions are starting to use computers and the internet for the first time. “Since 2017, Indians have begun downloading more apps than Americans do. And last year, India became the biggest consumer of mobile data on Android phones. ‘We have not seen this kind of user behavior anywhere else in the world,’ says Rajan Anandan, vice president for India and Southeast Asia for Google.”

ZACK ELLER’S DEAL OF THE DAY

Pepsi has acquired Muscle Milk, a maker of protein shakes for an undisclosed amount. “The purchase shows PepsiCo is continuing to diversify as Americans consume fewer soft drinks and more goods that are seen as healthy and lower in sugar.”

FOOD

The World Restaurant Awards were held in Paris with an emphasis on inclusivity in the industry. Problem was most attendees were white and male. The evening showed diversity was a surface-level tagline. It’s been a tough year for restaurants as multiple reports indicate the sector has some of the highest instances of sexual harassment and misconduct. “Sure, Michelin would never utter a word about #MeToo, but if you are producing a new program that touts gender equity as one of its main tenets, you best be ready to frankly discuss the ugly issues as well. Yet this week’s event didn’t go that far.”

SPOTLIGHT

Reminder: Loren’s guest on Mind Your Business today will be Drew Greenblatt, CEO of Marlin Steel, who will explain how he went from making metal bagel baskets and being on the verge of going out of business to running a thriving manufacturer that can’t keep up with its backlog or hire enough workers. The show airs at 1:0 p.m. ET on SiriusXM 132. Got a question or a comment? Call during the show: 1-844-942-7866.

And that’s what’s ahead.

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