How Did the 'Freedom From Facebook' Campaign Get Its Start?

In July, executives from YouTube, Facebook, and Twitter testified before Congress about their company’s content moderation practices. While Facebook’s head of global policy Monika Bickert spoke, protesters from a group called Freedom From Facebook, seated just behind her, held signs depicting Sheryl Sandberg and Mark Zuckerberg’s heads atop an octopus whose tentacles reached around the planet.

Freedom From Facebook has garnered renewed attention this week, after The New York Times revealed that Facebook employed an opposition firm called Definers to fight the group. Definers reportedly urged journalists to find links between Freedom From Facebook and billionaire philanthropist George Soros, a frequent target of far-right, anti-semitic conspiracy theories. That direct connection didn’t materialize. But where Freedom From Facebook did come from—and how Facebook countered it—does illustrate how seemingly grassroots movements in Washington aren’t always what they first appear.

The point here isn’t to question Freedom From Facebook’s intentions. Their efforts seem to stem from genuine concern over Facebook’s outsized role in the world. But the labyrinthine relationships and shadowy catalysts of the efforts on all sides of that debate show just how little involvement actual Facebook users have in the fight over reining the company in.

Since the 2016 presidential election, Facebook has confronted an onslaught of scandals, many of which drew scrutiny from federal lawmakers. First, Russian propagandists exploited the social network, using duplicitously bought ads to sway US voters. This March, journalists revealed data firm Cambridge Analytica had siphoned off information belonging to tens of millions of users. In the wake of this second controversy, Freedom From Facebook was born.

The initiative wasn’t formed by everyday Facebook users. It’s instead the product of progressive groups with established records of opposing tech companies, whose own relationships illustrate just how tangled these connections can be.

Specifically, Freedom From Facebook is an offshoot of the Open Markets Institute, a think tank that operated under the auspices of the New America Foundation until OMI head Barry Lynn publicly applauded antitrust fines levied against Google in Europe. Google is a major New America donor; Lynn’s entire team studying tech market dominance and monopolies got the ax, and spun out Open Markets as an independent body.

Earlier this year, former hedge fund executive David Magerman approached Lynn’s group with the idea to start to start a campaign in opposition to Facebook. Magerman poured over $400,000 into what became Freedom From Facebook, according to Axios. His involvement wasn’t known until Thursday. The connected between Freedom From Facebook and OMI was also not entirely explicit.

Freedom From Facebook has done more than stage protests on Capitol Hill. During Facebook’s annual shareholder meeting in May, the group chartered an airplane to fly overhead with a banner that read “YOU BROKE DEMOCRACY.” When Sandberg spoke at MIT in June, Freedom From Facebook took out a full-page advertisement in the student newspaper calling for the social network to be broken up. On Thursday, the group filed a complaint with the Federal Trade Commission asking the agency to investigate a Facebook breach disclosed in September that affected 30 million user accounts.

Freedom From Facebook also formed a coalition with a diverse set of progressive organizations, like Jewish Voice For Peace, which promotes peace in Israel and Palestine, and the Communications Workers of America, a labor union that represents media workers. The coalition now comprises 12 groups, who “all organize around this fundamental principle that Facebook is too powerful,” says Sarah Miller, the deputy director of Open Markets Institute. Confusingly, according to Freedom From Facebook’s website, the coalition also includes Citizens Against Monopoly, a nonprofit Miller says was set up by Open Markets itself.

Eddie Vale, a progressive public affairs consultant, also confirmed in an email that Open Markets hired him to work on the Freedom For Facebook Initiative. He led the protest in July featuring the octopus signs.

Definers began lobbying journalists, including those from WIRED, to look into Freedom From Facebook’s financial ties this past summer. The effort was led by Tim Miller, a former spokesperson for Jeb Bush and an independent public affairs consultant, according to The New York Times. “It matters because people should know whether FFF is a grassroots group as they claimed or something being run by professional Facebook critics,” Miller wrote in a blog post published Friday. He added that he believes the push to connect the group to Soros does not amount to anti-semitism, especially if it contains a modicum of truth. Facebook itself asserted much the same in a statement it released Thursday.

The extent of the Soros relationship seems to be that the billionaire philanthropist does provide funding to both Open Markets and some of the progressive groups who constitute the Freedom From Facebook coalition. There’s no indication, though, that he has any direct involvement with the initiative. Open Markets’ Miller says the think tank wasn’t aware Facebook was paying an opposition firm to ask journalists to look into its work. “I just think knowing Facebook as we do, I don’t know that I would say that we were surprised, but I do think the Soros angle was surprising,” she says.

After The Times published its report Wednesday evening, Facebook severed its ties with Definers. “This type of firm might be normal in Washington, but it’s not the sort of thing I want Facebook associated with,” CEO Mark Zuckerberg said on a call with reporters Thursday. Both Sheryl Sandberg and Mark Zuckerberg claim they didn’t know Facebook was working with Definers until the The Times published its story. This is not the first time Facebook has employed an opposition research firm. In 2011, the social network hired a public relations firm to plant unflattering stories about Google’s user privacy practices.

By distancing itself from Definers, Zuckerberg and Sandberg are putting space between themselves and how the sausage gets made in Washington. As they have grown more powerful, tech organizations including Facebook, but also Google, Amazon, and others, have poured millions into lobbying on Capitol Hill. Those efforts include fighting back against well-funded and sometimes secretive campaigns, like Freedom From Facebook. Meanwhile, the social network’s over two billion users mostly sit on the sidelines, watching the high-stakes battle unfold.

More Great WIRED Stories

Why You Should Join Uber's Rewards Program

Ridesharing is already a sweet deal (compared to taxis or owning your own car) but it’s about to get sweeter because a price war is now inevitable. The price war will manifest as both lower prices per ride and more perks, especially for frequent riders.

The rideshare companies are now launching “rewards programs” to secure customer loyalty, which means the best deals will go to customers who commit to, and stick with, a specific provider. The question you should be asking now is: which provider should I choose?

Personally, I haven’t used Uber since the scandals of two years ago, but if I did a lot of ridesharing, I’d be revisiting that decision. Why? Uber MUST offer the best loyalty program because its future existence depends upon it.

To understand why, let’s review how Uber got where it is today.

The Holy Grail of Branding

As branding goes, the brand name “Uber” was a stroke of marketing brilliance. While most companies would have gone with a brand name that had something that sounded transportation-y (think “Lyft”), “Uber” built upon pre-existing business lingo that connoted Nietzchean superiority (as in “Uber-guru Tony Robbins…”).

The combination of a positive emotional association with no pre-existing meaning for transportation helped the Uber brand morph into a uniquely-identifiable noun and verb as in “Let’s get an uber!” and “We can uber to the party.” Having your brand name represent your product category (e.g. Kleenex, Kool-Aid, Xerox) is the holy grail of branding.

That brand success would never have been possible for Uber’s main competitor Lyft, because”Lyft” sounds exactly like “lift,” which already has a specific meaning for transportation. Getting customers to say “Let’s get a Lyft” has little brand value because it sounds like you’re saying “Let’s get a lift.” In short, “Lyft” is just too on the nose.

Rebrand Not an Option

Unfortunately for Uber and its brand, the past couple of years have been full of bad publicity. The company has been credibly accused of lawbreaking, its management culture outed as sexist, and its business model criticized as exploitive.

The usual marketing response to that kind of overwhelming negative publicity is a rebrand. For example, the mercenary army known as Blackwater has rebranded twice (to “Xe Services” and then “Academi”) in an obvious attempt to distance itself from the time when several Blackwater employees were convicted of killing Iraqi civilians.

Uber, however, can’t rebrand without losing the close association between its brand name and the product category and must therefore continue to carry the negative baggage from its bad publicity. As a result, Lyft (despite having a weaker brand name) has grown from a market share blip to fully 35% of the U.S. ridesharing market.

Price War Inevitable

Ridesharing is a fully commoditized market, in the sense that the market players are providing nearly identical services. Assuming you’re in an area where multiple firms have coverage and, there’s no practical reason to take an Uber rather than any other service.

There are only two ways to grow share in a fully-commoditized market.

The first is to create brand preference through image management. Unfortunately for Uber, its brand is too tainted to pursue that strategy.

The second way to grow share in a fully commoditized market is to drop your prices or, alternatively, provide more product or service for the same price (which is much the same thing).

Earlier this week both Uber and Lyft announced rewards programs, which is clearly the opening salvo of a price war. At first glance, Uber’s program (which is built around Uber’s products) seems less attractive than Lyft’s program (which can convert into several popular frequent flyer miles.)

However, Uber is in a real bind. Their brand is tainted, their main competitor is capturing market share, but they can neither rebrand nor lower prices to overcome the negative brand perceptions. Because Uber’s marketing options are so narrow, it MUST win this price war, which means that whatever Lyft offers, Uber will have to beat.

Thus if can stomach Uber’s history, now is the time to commit to being a long-term Uber customer, sign up for their rewards program and do the bulk of your ridesharing with Uber.

All Is A Moot Point Next To Brexit Headline Watch

By Stephen Innes

Brexit Brexit Brexit

The fate of Brexit and the UK leadership continued hanging in the lurch Thursday, which predictably dominated the market attention triggering a wretched day for the pound which cratered some 300 pips to a low print around 1.273 and “the street” will be on headline watch across all time zones. By all accounts, UK PM May is at the end of her rope as the Brexit deal is running out of time. GBP is waiting on significant unknowns, but the EU is reportedly optimistic. Bloomberg reports say it is already circulating an agenda for the November 25 Brexit Summit.

Trade War

Of course, the US-China trade war wandered back into the picture as the cumulative news feeds suggest despite some favourable concessions offered up by China. It appears that both parties are looking to kick the can down the road until February to resolve some significant differences. While not too surprising, the fear here is that this long and winding road to compromise could be dotted with numerous pratfalls.


While the USD dollar has not reacted at all to the data overnight so arguably, traders have put positive US economic signs on the back burner while arguably focusing on Jay Powell’s comments yesterday that suggested the Fed is watching downside global risk. If the market starts to ignore positive data while only focusing on the negative, the USD will not benefit from tethering itself to all the positive US numbers which have been at the forefront of USD appreciation this year, an overly dovish ECB and BOJ notwithstanding.

Oil Markets

Again, a significant crude build is weighing on market sentiment amid slowing global demand after the Energy Information Administration reported a substantial crude oil inventory build for the week to November 9 of 10.3 million barrels. While US inventory warehouses remain at eye-watering peaks and the most significant build since 2017, by-products drew down significantly which held traders’ downside ambition in check.

Also adding a modicum of support, Saudi Arabia admitted they were duped by President Trump who may have orchestrated probably one of the best sleight-of-hand tricks in some time. He effectively drove prices lower by offering up far more Iran sanction waivers than expected. The US administration caught OPEC wrong-footed by what was supposed to be the harshest sanction ever applied to Iran, only for the US to take relatively mild action exacerbating the supply glut.

Indeed, the Saudis cannot be too happy with Trump’s waivers, suggesting OPEC will cut production of 1.4 million barrels while risking the wrath of President Trump. Indeed the “Made in America oil policy” has significantly dented oil market sentiment. US shale producers are equally responsible for global oversupply. The latest data show producers running at an accelerating pace, placing the US as the largest oil producer in the world. As well, President Trump’s stinging OPEC tweets have legs. And then, US tariffs are compounding China’s economic woes and are fanning concerns about demand growth in 2019 and 2020.

The markets do appear to be finding some semblance of a base as the relatively flat and supportive price curve suggests traders are respecting the fact OPEC and its allies considering production cuts of more than the initially mentioned 1mm barrels per day. However, Russian President Vladimir Putin claimed that Russia, the largest non-OPEC ally, refuses to commit to production cuts just yet as he sees approximate current price levels as suiting them just fine. Putin went on to state that “where it [crude prices] is now, where it was recently, anything around $70 suits us [Russia] completely.”

So, for the time being, looming production cuts will act as a foil to the downside risk from shockingly high US inventory builds.

Gold Markets

A softer US dollar, GBP notwithstanding and the Fed triggering some early warning signals about global growth risk in 2019 are being viewed in a positive light for the gold market. Compound this with the usual toxic combination of tasks brewing in virtually every corner of the political world; Gold should continue to find demand on dips provided the USD remains in check.

Currency markets

All is a moot point next to Brexit headline watch.

How Business Owners Are Dealing With the Most Lethal Fires in California's Modern History

Jim Murphy was sleeping in his Bell Canyon, California home when his wife jolted him awake at 2 a.m. last Friday. 

“I really think it’s glowing orange on the hill above us,” she told him, worried that the wildfires, which erupted Thursday afternoon in Southern California, were edging closer and closer to their two-story home. Though skeptical, Murphy got into his car and drove up to the hill. There, he saw a blazing fire charging towards him, from three different directions. He texted his wife: “Start packing up immediately. We have to get out of here.” 

Murphy and his family are part of the more than 200,000 people estimated to be displaced by a series of wildfires engulfing parts of Northern and Southern California. Firefighters are struggling to contain the flames because the strong Santa Ana winds hitting the region keep sparking flare-ups. The infernos dubbed Camp Fire in the north and the Woolsey Fire in the south have ravaged nearly 230,000 acres–roughly six times the size of Pittsburgh–and destroyed more than 7,300 properties. At least 48 people are dead, and more than 200 are still missing. It is the most lethal fire-related disaster in California’s modern history.

“It’s definitely difficult, but I am very thankful for what I have and that everyone is safe,” says Murphy, founder and CEO of BroadVoice, a Northridge, California-based company that provides phone services over the internet, also known as VoIP. (Northridge is a neighborhood of Los Angeles in the San Fernando Valley that is so far unscathed by the fires.) “You have to look at the bright side and realize that things could be a lot worse,” says the entrepreneur, who is currently living in a hotel with his family, while also covering hotel expenses for employees displaced by the fires.

Now is obviously a trying time for business owners like Murphy who have been directly affected by the fires. However, even businesses far beyond the California border may yet feel its effect this holiday season. Last year, the state’s outbound shipments took a hit during a three-week period after the October 2017 Sonoma fire, according to data from research firm FTR, which specializes in the freight and transportation industry.

An Amazon fulfillment center near the Sacramento International Airport has been closed since Saturday, and there’s currently no timeline for its re-opening, the Sacramento Bee reports. Insured losses from Camp Fire, which decimated the entire town of Paradise, California, are currently estimated to reach $6 billion, according to a Moody’s report released Monday.

Of course, businesses in California are likely to take the brunt of the still raging fires. Between dealing with power and internet outages to air quality alerts and just generally figuring out whether and how to respond to the humanitarian crisis after the fires subside, business owners will be occupied well into the all important holiday shopping season–the biggest sales period all year for many companies. 

Sensitivity Training

There’s also the human factor. For owners who can open up shop–perhaps they’re near the burn zones but aren’t in them–it’s a question of whether doing so is insensitive. 

“A lot of the times we look at it from the business end and [ask] ‘Can we stay open?'” says Lawrence Nolan, founder and CEO of Hardcore Fitness, a chain of gyms with 18 locations in the U.S., half of them in southern California. “I think the bigger question is, ‘Should we?'” While his clients workout indoors, smoke can sometimes make its way inside, he says. Last wildfire season, he opted to suspend classes at the locations in the path of large smoky gusts. He’s prepared to do it again this year if the air quality near his gyms worsens.

Linda Coburn also has mixed feelings about reopening. She operates a Pedego location, a shop in Westlake Village, California, that sells and rents electric bicycles. Her store endured power outages and ash, which seeped in through a closed back door, covering her store’s merchandise. The shop is back in business but isn’t actively doing rentals. “I try not to encourage people to do things that don’t seem really smart to me,” she says. “Like riding into a fire zone.” 

The key is to be sensitive to your community–and to employees, says Lindsey Carnett, founder and CEO of Marketing Maven, a public relations firm out of Camarillo, California. “The biggest thing is to have empathy towards your employees,” she says, noting that over the interim she has instructed her staff to work from home should they need to. “You don’t know what everybody’s situation is, if somebody lives with a parent with asthma.”

On the day the fires started, Carnett, who is also a mom to a six-week-old baby, woke up at 3:30 a.m. to a televised press conference about the mass shooting that killed 12 people at the Borderline Bar & Grill, a bar she frequented in college located in Thousand Oaks, California. Her husband was a bouncer there “back in the day,” the officer who was shot went to her gym, and one of the boys who died was her sister-in-law’s cousin. “A lot of personal connections there,” she says.

A dozen hours later, the wildfires broke out and the evacuations began. Thankfully, she says, her home and offices have not sustained any damages. Work keeps her focused, in what she describes as a “high-intensity mode.”

The fires’ unpredictability, including where the next flare-up could burn, however, doesn’t stray far from her mind. “We’re kind of at the edge of our seats wondering ‘are we going to be OK tonight?'” she says.

The city is carrying out mandatory power outages a few miles away from her office, far enough it’s unlikely to happen in her area. “I’m hoping that’s not the case, but if it is, we just have to be flexible and go with the flow,” she says. “That’s just what you do when you’re an entrepreneur.”

Cocktails From a Keurig Pod Machine? Yes Please

You may soon be able to serve cocktails to yourself and your friends by putting a pod into a Keurig-style machine and pushing a button. Drinkworks, a joint venture of Keurig and Anheuser-Busch, is selling its first product, the Drinkworks Home Bar, exclusively in St. Louis, by mail order and at a few select retailers. Expansion to other markets is planned for 2019. (The daunting legalities of shipping alcohol between or even within states means they can’t just sell the pods on Amazon, for example.)

For those who can get them, the machines cost $299, and the pods cost $3.99 each, or $15.99 for four. Users put in water, and also have to install a CO2 cartridge (the machine comes with the first two) that can make an average of 12 drinks. At launch, the Drinkworks Home Bar can make 15 different cocktails, ranging from a G&T to a Long Island iced tea to sangria to a White Russian or mai tai, or three different kinds of margarita. It can also produce a couple of brands of beer and even a hard cider. 

A lot of the technology inside the Drinkworks machine likely descended from Keurig Kold, Keurig’s and Coca-Cola’s attempt to to challenge Pepsi-backed SodaStream’s dominance of the at-home soda market. The Keurig Kold had the advantage of making drinks one of a time, and of offering Coca-Cola as well as other Coca-Cola-owned beverages, such as Sprite. But those upsides couldn’t overcome the Kold’s significant price disadvantages. The machine cost $299 and up, and the pods started at $3.99 for a pack of four, with each pod producing an 8-ounce beverage, smaller than a standard can, at least in the U.S. Keurig had to give up on the Kold after less than a year.

Keurig and its beer-behemoth partner are betting that the calculus will be different for alcoholic beverages. The product has met with skepticism in the press so far, but I think they might be on to something. Coffee and soda, and for that matter beer, are beverages people often  drink at home, and they usually only want one or two kinds. But the Keurig and its pods really come into their own in places like waiting rooms and lobbies where many different people can each have the hot beverage they like most. 

Likewise, I don’t see much reason for the Home Bar for just me if I always drink the same cocktail every evening–it would be cheaper and simpler to go out and buy the appropriate ingredients (or–even easier–a mix) and make it myself. But if I’m having a party, with 30 or 40 people who each want a different drink, then the Home Bar has a lot of appeal. Plus, it’s fun. It even has its own iPhone app so you can monitor its progress while it makes your drink. (The process is different for different beverages–the machine reads a bar code on the pod to figure out what to do–and most or all drinks can be made in a minute or less.)

I’ve never wanted a Keurig machine, but if the Home Bar goes on sale in my area, I might be seriously tempted to get one before my next big party. Or even my next book group gathering. Will other consumers feel the same way? We’ll have to wait and see.

GE Will Split Up: Here Is A Sum Of The Parts

In the past General Electric (NYSE:GE), like most companies was valued based on earnings or cash flow. However, the former and current CEOs have stated significant portions of the company will be sold, spun-off or monetized in other ways. That indicates the best way to value the company now is a sum of the parts.

This calculation has been recently done by others, though in the case of stock analysts, the actual calculation is not available to the public.

On October 9, 2018, Nicholas Heymann of William Blair determined a sum of the parts valuation of $14.60 to $16.78 per share.

On June 27, 2018, Seeking Alpha’s DoctorRx determined a sum of the parts value of at least $18 per share, before further deterioration.

Here is my market value analysis by segment:


The aviation segment, which focuses on jet engines, is the crown jewel. Like Amazon Web Services to Amazon, it is probably worth at least half of all of GE. Revenues are growing 10% per year. What is particularly inviting to investors is future revenues are very predictable due to a huge backlog that goes well into the future. Investors love predictable income streams. The Aviation segment had revenues of $22.1 billion in the first nine months of 2018 and operating income of $4.74 billion. Annualized operating income is $6.32 billion. Less 20% for taxes, net income is $5.06 billion. To determine a proper PE ratio, GE aviation was compared to other large aerospace companies.

Sources: Value Line, Yahoo Finance and forms 10-Q.

As shown above, the aerospace industry gets an above average PE ratio, despite below average revenue growth. I attribute this to the huge backlogs which allows investors visibility well into the future, unlike most other industries. HEICO appears to be an outlier. Excluding HEICO, the peer trailing PE ratio is 21.9. GE aviation has a 10% revenue growth rate, significantly above peer average. Boeing, its largest customer, is the best comparable. Based on the comparables, especially Boeing, I believe a PE ratio of 25 is appropriate. With a post-tax annualized earnings of $5.06 billion, the value of GE aviation is $126.5 billion.


GE Power along with lighting is one of GE original businesses. In fact, GE essentially invented this business. Until recently it was GE’s largest business. GE Power had revenues of $20.5 billion in the first nine months of 2018, and $5.7 billion in the last quarter. Revenues were down 21% year to date and 33% in the last quarter. This division lost $631 million in the last quarter and made $64 million for the year. This segment is one of the main reasons it is difficult to value GE based on a PE ratio right now. This is a large business that still has lots of value but is currently reducing overall earnings. That means it is reducing market value if you use a PE ratio, when in fact it still adds to value.

This segment is hard to value as it has no pure play competitors. Siemans is in this business. Its segment in power had revenues of 3.64 billion euros in the fiscal year ended September 30, 2018, down 8% from a year earlier. This confirms that GE’s problems are industrywide not specific to GE. However, Siemans revenue decline was much less than GE’s. Siemans is not a good comparable for value as the power division is only about 12% of the total.

Mitsubishi Heavy Industries (OTCPK:MHVYF) is probably the closest to a pure play. It had revenues of $36.1 billion last fiscal year ended March, 2018. The stock currently trades at 36.5% of that. GE Power has historically had a profit margin 3-4 times higher than Mitsubishi.

For other comparables, I looked for industrial companies that have declining sales and earnings.

Sources: Value Line, Yahoo Finance and forms 10-Q.

All three shown above are industrial companies or construction companies. Briggs & Stratton is a small engine company that is facing increased competition from lower cost overseas companies. Flowserve and Fluor are diversified but have a lot of exposure to the oil and gas industry. Fluor is a construction company. These routinely have lower profit margins and lower price to sales than average. GE Power has underperformed all three recently but has more recurring revenue by far. Based on Mitsubishi, Briggs & Stratton and Fluor I estimate GE Power to be worth 40% of revenues. I placed it a bit higher than those three due to close to 50% of GE Powers revenue currently from recurring service contracts. Revenues totaled $20.5 billion in the first nine months of this year. Assuming the fourth quarter is the same as the third, annualized sales are $26.3 billion and market value is $10.5 billion.

A second methodology was used based on earnings power. GE Power earned between $4 to $5 billion in operating income during 2013-2016 with operating profit margins of 13-16%. That indicates earnings power is much higher than what is happening today. This industry is facing a secular headwind from renewable power and may not be again what it was in that heyday. Assuming a new lower revenue rate of $25 billion, down from $36.8 billion in 2016, and an operating profit margin of 12%, operating profit potential is $3 billion a year. That is $2.4 billion after a 20% tax. If business is permanently reduced, then GE will right size the company to get to this profit margin. However, that will take time. Based on the time needed to right size and the revenue decline a PE ratio of 8 is currently appropriate. That values the segment at $19.2 billion.

The two methodologies I used show very different values. Putting a two thirds weight on the comparables, my market value for GE Power is $13.4 billion.


GE is selling its transportation division to Wabtec for $2.9 billion in cash plus 50% of Wabtec stock. Wabtec had a market cap of $8.14 billion on November 13, 2018. This indicates GE’s portion is worth the same, plus the cash. GE sold this business at what appears to be a cyclical low in the industry. While not good for GE now, it bodes well for the future.


Healthcare revenues were $14.38 billion for the first nine months of 2018, up 5.0% from one year earlier. Operating income was $2.52 billion over that period, up 8.0%. However, revenues and earnings stalled in the most recent quarter. Operating income is $3.36 billion annualized and $2.68 billion after assuming a 20% income tax rate. The Healthcare segment when spun off is expected to carry a projected $18 billion of debt, including pension obligations.

The comparables used below are large healthcare equipment companies. Those with significant acquisitions were excluded.

Johnson & Johnson (NYSE:JNJ) deserves a lower PE because a lot of its revenues come from drugs with patent expirations. It also has lower growth. Boston Scientific (NYSE:BSX) and Stryker (NYSE:SYK) have better revenue and earnings growth. Medtronic (NYSE:MDT) is probably the best comparable. Though its product line is different, the growth profile and size is similar. Based on the comparables, a PE ratio of 19 is determined. This puts market value of $50.92 billion.

Renewable Power

This segment primarily deals with wind power. The best comparable is Vestas (OTCPK:VWDRY) which is a pure play in this field and the largest player. Vestas had revenues of 6.77 billion Euros in the first nine months of 2018, down 1% from the prior year. Net profit was 464 million Euros for a 6.8% profit margin. It currently has a market cap of $12.8 billion euros for an annualized PE ratio of 20.7. GE’s Renewable Power segment is much less profitable. Revenues totaled $6.71 billion for the first nine months of 2018 with an operating profit of $220 million. The profit margin is less than half that of Vestas after taxes. Vestas trades at 1.42x sales. GE with half the profit margin should trade at about half Vestas price to sales. That puts the market cap at $6.35 billion. However, being in the exact same business, a premium needs to be given to GE Renewable Power as it has more upside than Vestas which is currently maximizing profits better. My estimate for GE Renewable Power is $7.5 billion.

Baker Hughes

This one is quite simple. GE owns 62.5% of Baker Hughes (NYSE:BHGE) and is in the process of selling down to a 50% ownership. Baker Hughes is publicly traded currently and had a market cap of $26.53 billion on November 13, 2018. GE’s portion is $16.58 billion.


GE Lighting is for sale. It had revenues of $1.27 billion for the first nine months of 2018, down 10% from the prior year. Operating earnings were $52 million, up 27% over the same period. Lighting is a struggling industry right now due to declining pricing and most competitors are also struggling. Acuity is a pure play and also the largest lighting company in the U.S. It currently trades at a trailing PE ratio of 14. Acuity has a better profit margin and better growth than GE Lighting. Revenue growth has averaged 9% over the past three years, though its now closer to 4%. Based on Acuity, a PE ratio of 12 is appropriate for GE Lighting. After a 20% income tax, that puts market value at $832 million.

GE Capital

GE Capital is primarily comprised of by revenues of; aircraft finance 48%, insurance 28%, energy financial services 12%, industrial and other 12%. This segment lost $106 million from continuing operations in the first 9 months of 2018. The insurance portion is primarily long term care insurance. This insurance is no longer offered by many former providers due to increasing losses. Earnings in each segment are not broken out. So a comparison using a PE ratio or cash flow is not available. Many financial companies are valued in part by book value. Tangible book value of GE Capital was $9.00 billion on September 30, 2018. GE has agreed with regulators to pump $11 billion into its insurance subsidiaries through 2024, due to long term care losses. That is $2.2 billion per year. Discounted at 5% (their long term bond rate), the present value is $9.5 billion. This exceeds tangible book value. For this reason, I assume no value for GE Capital.

Market Value: Sum of the Parts

Values were determined above pus liabilities and other assets are totaled below.

Sources: Calculations above; September 2018 10-Q.

Based on a sum of the parts, GE is worth $16.35 per share. This is similar to the recent William Blair calculation. As a general rule, companies trade at a discount to a sum of their parts, especially conglomerates. This is partially offset by the fact the GE is dividing itself up with plans to spinoff Healthcare, sell lighting, and sell part of transportation and Baker Hughes. Since GE is in the process of monetizing large portions of its business, a 15% discount is assumed, versus larger discounts usually used. That puts current value at $13.90.

The important thing to note is that only parts of GE are struggling. The aviation segment alone is worth over half of the market value and is doing very well. In my opinion, the stock is down for two primary reasons. They are; an avalanche of bad news over the past year and the dividend cut. The dividend cut specifically is causing dividend investors to sell and temporarily putting further downward pressure on the price. GE used to be a dividend investors staple so the exodus will be significant. It should also be noted there is a new sheriff in town and sale and spinoff plans could change.

I recommend a long position in GE with a price target of $13.90.

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.

Rest In Peace, Stan Lee. (Here's the Big Break He Told Inc. About in 2009)

The comics world mourned the death Monday of Stan Lee, the man who dreamed up some of the most iconic characters and superheroes of the last 60 years–including Spider-Man, Hulk, the Avengers, the X-Men, the Fantastic Four, Black Panther, and Daredevil. 

Lee was also a reluctant entrepreneur. His creations became the center of an empire that Disney bought for more than $4 billion. But he told Inc. in 2009 that never loved the business side of his business. 

As he remembered, if you had to point to one big break in his life, it was the advice his wife gave him in the early 1960s when he was about to quit the comics business. His boss was his cousin’s husband, Martin Goodman, and Lee was annoyed that he was being pushed relentlessly to copy the competition, and wanted to go out on his own.

I said to my wife, “I don’t think I’m getting anywhere. I think I’d like to quit.” She gave me the best piece of advice in the world.

She said, “Why not write one book the way you’d like to, instead of the way Martin wants you to? Get it out of your system. The worst thing that will happen is he’ll fire you — but you want to quit anyway.”

So in 1961 we did The Fantastic Four. I tried to make the characters different in the sense that they had real emotions and problems. And it caught on. After that, Martin asked me to come up with some other superheroes. That’s when I did the X-Men and The Hulk. And we stopped being a company that imitated.

Lee’s wife died in 2017. They’d been married for 69 years. He leaves a daughter, and a legacy that people won’t soon forget.

Here’s what else I’m reading today:

Do not hire this 1 person

Seth Godin has a new book out. Like most of what he writes, there are some very interesting takeaways. If you take just one point away as an entrepreneur however, here’s his best advice about the one person no startup should ever hire: a chief marketing officer.

Instead, “go to a shelter and get a German shepherd,” he suggests in an interview with Inc.’s Leigh Buchanan, and train it to bite you every time you think about hiring a CMO. 

That’s because Godin thinks most startups fail because of product problems, or customer service problems that need to be addressed. And the person who is in charge of overseeing product and customer service–and yes, marketing and everything else–is called the CEO. Or maybe the founder. The entrepreneur. In other words, you.

It’s the hardest, best job you’ll ever have, and it’s the one you’ve signed on for. Relish it.

Netflix has some truly eye-opening new technology

Oh, there’s nothing dystopian about this at all: Netflix just unveiled a feature it calls EyeNav, in which its iPhone app tracks your eye movements so you can select shows by simply staring at them, and press stop by sticking out your tongue. Once you get past the inherent creepiness, the entertainment giant says it’s excited about how this could make its app more accessible.
–Bill Murphy Jr., Inc.

The war at 7-Eleven

There’s a war going on inside 7-Eleven, at least according to some franchisees who say the company is tipping off Immigrations and Customs Enforcement (ICE), and resulting in raids on stores owned by it least cooperative store owners.
–Laureen Etter and Michael Smith, Bloomberg

A Black Friday prediction

A new study says Americans plan to spend $520 each on average during Black Friday, with over half of U.S. residents making at least one in-person purchase. It’s not exactly a double blind scientific study–online coupon site Slickdeals surveyed 2,000 people. But it’s good news, so we’ll take it.

What on earth was Hasbro thinking?

The game of Monopoly is 83 years old. Hasbro owns the copyright now, and for almost 25 years, they’ve licensed lots of different versions, from Auburn University-themed edition to an X-Men Collector’s Edition. The latest edition to make the rounds, just in time for the holidays: Millennial Monopoly, in which players don’t buy real estate (it’s too expensive), and collect experiences rather than cash.

The rules say the player with the most student loan debt rolls first, and the rules recommend playing in your parents’ basement. Millennials are not amused, which leads to the question: who did they think would buy this?
–Gina Loukareas, Boing-Boing

Amazon and Apple Just Announced They're Working Together in a Very Surprising Way. (Everyone Else: Be Afraid)

Where did you buy the last thing you bought from Apple? At the Apple Store? Online via Maybe at a retailer like Best Buy or Target, or via your mobile phone provider? 

The one place you probably didn’t buy it:

But that might be about to change. For the 2019 holiday season, Apple will be selling its iPhones, iPads and other products directly via Amazon

This is a big change, and it makes sense for Apple, which has seen iPhone sales dip and is looking for any advantage. But there’s risk on both sides. The two companies are competitors, and Apple is giving up some customer data by making this move.

Moreover, if you’re Amazon and facing rumblings about antitrust action basically every day, there has to be some hesitation to teaming up with other tech titans. And if you compete with either of these companies, sorry to ruin your Monday morning as you wake up to see them working together.

The upside: Well, if you’re looking for a last minute holiday gift like an Apple Watch, at least you can probably buy it with one click. 

Here’s what else I’m reading today:

The Satanic Temple sues Netflix

This is the kind of headline you have to read a few times to make sense of. A religious organization is suing Netflix for copyright and trademark violations, saying the entertainment giant ripped off their $30,000 statue of a deity called BBBB, and used it in the show “Chilling Adventures of Sabrina.”

They’re asking for $150 million, but they probably already got what they really want: a 10X increase in Google searches for “The Satanic Temple.”
–Bill Murphy Jr., Inc.

Oh, and speaking of strange bedfellows with Amazon

A few months ago, Sen. Bernie Sanders was Amazon’s biggest antagonist on Capitol Hill. Then Amazon raised its internal minimum wage to $15 an hour, and Sanders praised them for it.

Now, he’s promising to introduce legislation  in Congress to raise the minimum wage across the United States to that level (from $7.25 to $15).
–Sen. Bernie Sanders, Twitter

Awww, Black Friday is kinda cute compared to this

Alibaba sold more than $1 billion worth of products in the very first minute of the 2018 edition of Singles Day, which if you don’t know is a roughly 25-year-old Chinese tradition celebrating single people–and the biggest online shopping day of the year.

It’s on November 11 each year (11/11 representing four single people), and this was the biggest in history. By the time China hit Nov. 12, the total sales revenue on the world’s largest online platform was $30.8 billion.
–Arjun Kharpal, CNBC

25 years ago yesterday

Here’s a milestone that went completely unnoticed. Before Netscape, before Internet Explorer, before Firefox, before Chrome, before Safari, before Firefox again, there was Mosaic. The first consumer-friendly browser was released, in version 1.0, 25 years ago yesterday. 
–National Center for Supercomputing Applications, University of Illinois

Criminals ruin something really cool

The U.S. Postal Service has a service called Informed Delivery that lets you get scanned images of your incoming mail before it’s actually delivered. It’s free, useful, underutilized- and apparently not as safe as people hoped. The U.S. Secret Service is now warning that hackers have figured it out and are using it to steal identities.
–Melissa Locker, Fast Company

At Netflix, There's a Big Fight Between Two Groups of Crazies. It's Something Every Company Can Learn From

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

In the red corner, a group of self-regarding know-it-alls who believe the sun shines out of their every orifice because their abilities are manifest and manifold. 

In the blue corner, a group of self-regarding know-it-alls who believe the sun shines out of their every orifice and they have the numbers to prove it. In real time.

It’s between movie types who think they know a hit when they see one and data types who think they know a hit when they see one obeying their algorithmic predictions.

Entertainingly, the movie types are based in Hollywood, California while the data types slum it in Los Gatos, California a place that is to excitement what the paper towel is to culinary excellence.

The Journal describes how the nerds believe they know precisely which images from movies can generate clicks.

They claim that advertising is truly unnecessary. Instead, they think their algorithm can find the right viewers for a particular show.

Meanwhile, the Hollywood types prefer to lean on their alleged creativity and star-power. Oh, and marketing budgets.

I confess that when Netflix’s supposedly legendary algorithm recommends a show to me, it’s almost always a complete nonsense.

Indeed, it’s so painfully awful that I spend far too much time trawling the app to find something I might actually like.

It’s as if the machine truly has no clue about any Netflix show I’ve ever watched.

Occasionally, it seems to be so confused — or perhaps exasperated — that it’ll even recommend shows I’ve already seen.

I contacted Netflix to ask whether it was enjoying the tension between the numbers and the artists. I’ll update, should human or algorithm reply.

This apparent standoff between nerds and talent is one that’s surely being repeated across so many businesses.

The nerds appear to behave as if the algorithm is everything. They insist that the numbers tell the whole story. They seem to ignore that the algorithm was built by humans and is infused with a multitude of flaws.

On the other side are people who believe they know the business and have an instinct for its quirks and vicissitudes, none of which can be described by computer-generated numbers.

I recently read a fascinating book called Astroball: The New Way To Win It All. In it, Ben Reiter describes how the Houston Astros committed themselves emotionally to data nerds running their show.

I couldn’t help getting the impression, however, that at least some of their major decisions were made by not being a Slave to the Rithm.

The signing of star pitcher Justin Verlander, for example.

It seems that now some of the Hollywood types at Netflix are following that thought process, finding ways to outmaneuver the sure-thinging crazies that are nerds.

The ultimate problem for Netflix is that there’s now so much stuff in the world that it’s hard to find anything one might like.

Even when one finds it, how stimulating can it be when so much now seems to be created accordingly to a certain formula? 

I do, though, suffer from a helpful countenance. I have one idea that I believe would be a huge hit for the company.

A reality show that follows the artists and the nerds as they prepare to battle each other for supremacy at Netflix.

Now that’s something I’d really want to watch.

Apple finds quality problems in some iPhone X and MacBook models

The new Apple iPhone X are seen on display at the Apple Store in Manhattan, New York, U.S., September 21, 2018. REUTERS/Shannon Stapleton

(Reuters) – Apple Inc said on Friday it had found some issues affecting some of its iPhone X and 13-inch MacBook pro products and said the company would fix them free of charge.

The repair offers are the latest in a string of product quality problems over the past year even as Apple has raised prices for most of its laptops, tablets and phones to new heights. Its top-end iPhones now sell for as much as $1,449 and its best iPad goes for as much as $1,899.

Apple said displays on iPhone X, which came out in 2017 with a starting price of $999, may experience touch issues due to a component failure, adding it would replace those parts for free. The company said it only affects the original iPhone X, which has been superseded by the iPhone XS and XR released this autumn.

The screens on affected phones may not respond correctly to touch or it could react even without being touched, the Cupertino, California-based company said.

For the 13-inch MacBook Pro computers, it said an issue may result in data loss and failure of the storage drive. Apple said it would service those affected drives.

Only a limited number of 128GB and 256GB solid-state drives in 13-inch MacBook Pro units sold between June 2017 and June 2018 were affected, Apple said on its website.

Last year, Apple began a massive battery replacement program after it conceded that a software update intended to help some iPhone models deal with aging batteries slowed down the performance of the phones. The battery imbroglio resulted in inquires from U.S. lawmakers.

In June, Apple said it would offer free replacements for the keyboards in some MacBook and MacBook Pro models. The keyboards, which Apple introduced in laptops starting in 2015, had generated complaints on social media for how much noise they made while typing and for malfunctioning unexpectedly. Apple changed the design of the keyboard this year, adding a layer of silicone underneath the keys.

Reporting by Ismail Shakil in Bengaluru and Stephen Nellis in San Francisco