Trump's Immigration Speech Won't Change Minds, Science Says

When President Trump first announced he would deliver a primetime address about the border wall, people objected. They argued that the networks shouldn’t run it, given Trump’s record of lying about immigration issues and the precedent of not airing presidential speeches deemed purely political. Misinformation experts warned that if news organizations do air the speech, they should fact-check it live. Now that it’s aired, what ultimately changed?

Senior advisor Jared Kushner apparently assured congress that popular support for the wall would grow. Political scientists countered that the far more likely result would be firing up Trump’s opponents while not changing the general public’s mind much at all. The other result, according to social science, will be to hijack your attention for days.

The way that the news media and social media users respond to Trump’s words, paired with the network effects of the internet, will keep the topic in the national discourse until some new shiny object comes along to divert everyone. “Research shows that speeches like this don’t tend to move public opinion. What they are effective at is diverting the attention of the media,” says Dartmouth political scientist Brendan Nyhan.

One person who appears to understand this consensus scientific view is Trump himself. Hours before his approximately 10-minute speech aired on every network in primetime, he reportedly told a group of network anchors that he knew the speech was pointless. “It’s not going to change a damn thing, but I’m still doing it,” the New York Times reports Trump saying. He said he only agreed to it because his media team insisted it was worth it.

Recent research by Stanford political scientists suggests that a direct policy plea’s main outcome is a strong uptick in news coverage about the policy for two to three days. If the goal of the communications team is to keep the media talking about an issue on the president’s terms—reacting to his framing of an issue, rather than framing it themselves (excuse me, ourselves)—then perhaps Trump’s communications team is right.

This hijacked conversation poses a risk to an informed populace. Not because the border wall is inherently good or bad, but because much of the information Trump shared in his speech to justify the wall was misleading or outright false. In her report “Oxygen of Amplification,” the Syracuse University researcher Whitney Phillips spelled out the ways in which the participatory nature of the internet traps the traditional news media in a cycle of spreading falsehood and partisanship.

The biggest effect of last night’s speech, in Phillips’ estimation, is the way in which it further made casually xenophobic language an acceptable part of national discussion. The underlying fear-mongering of much of Trump’s speech was inherently dehumanizing, as Phillips puts it. “Just having that message forwarded in such a public platform, the most public platform you could possibly imagine,” she says, sends the message that racist ideas are just “another night in America.”

In the wake of the 2016 election and its coordinated misinformation campaigns, the rules for how journalism should treat incendiary, polemic topics are being rewritten. Phillips argues for something called strategic silence: the decision to not produce a news report about something that appears to be spreading powerful rhetoric without inherent news value. That’s the case people tried to make when arguing that the networks should not air Trump’s speech.

In Phillips’ view, there was nothing newsworthy about this speech. She was at the airport in the hours leading up the speech, delayed at customs because of a lack of TSA personnel owing to the shutdown. In that context, she watched CNN’s ticker countdown to the speech while overhearing people discuss the real-world ramifications of the shutdown. Those impacts, she says, are the real story, and are profoundly newsworthy. “But that particular speech was pointless,” she says.

There is precedent for not running such an address. In 2014, the networks declined to air a speech by then-President Obama introducing the expansion of DACA reform, on the grounds that the speech was purely political. In last night’s address, Trump didn’t introduce any new policy, and the speech was arguably purely political, but the networks ran it.

Some news organizations attempted to preemptively fact-check the speech. Before the address, the Washington Post ran a cheat sheet of 20 false statements the president might say. By minute four, the president had uttered most of them. Prescient and useful reporting, but Nyhan points out that the people most likely to read such a story are news junkies who probably already made up their minds. Research suggests that partisans know a lot of facts that conform to their worldview, and fewer facts that challenge it—especially when it comes to heavily covered issues like immigration.

Phillips agrees. “[Fact checking] is never going to reach the intended audience. You are providing fact checks to an audience that already agrees,” she says.

Even if such a cheat sheet were read by the people who favor a border wall and fear “uncontrolled illegal migration,” as Trump put it last night, studies suggest that it would have little impact on their policy positions. Worse, some studies show that fact-checking—especially when undertaken “uncongenially” or with a snarky attitude (not that WaPo’s was)—can backfire, and actually drive partisans to believe the mistruth even more.

Even if fact-checking can on occasion correct false beliefs, its overall impact is likely to be low. In research forthcoming in the journal Political Behavior, Nyhan and coauthors report that individual fact-checks can work: both Democrats and Republicans are willing to accept new information that goes counter to their own incorrect ideas. But they don’t end up changing which policies and candidates they support. “Factual corrections can achieve the limited objective of creating a more informed citizenry but struggle to change citizens’ minds about whom to support,” they write. Other research backs up this finding.

So all the attempts to fact-check Trump’s misstatements about illegal immigrants violently murdering lots of Americans are unlikely to reach their target audience, and even if they do, the individuals who believe him probably won’t change their minds about a border wall.

In other words, it won’t change a damn thing. But people will keep talking about it for days to come.


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

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

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

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

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

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

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

2. Can you build the solution? 

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

3. How elastic is demand?

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

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

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

4. Is the market large and growing?

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

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

5. Are you exponentially better?

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

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

6. Are you ready to go all in? 

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

7. Do you have frictionless access to early adopters?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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How Can We Best Prepare for Job Automation?

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

I think this generally includes 3 areas:

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

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

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

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

Published on: Jan 3, 2019

AbbVie: This Dividend Aristocrat Offers Double-Digit Total Return Potential

Source: Abbvie Media Resources

With the financial markets likely to enter 2019 having just had the worst December since the Great Depression, there have been many stocks that have taken a beating the past month.

Abbvie (ABBV) has not been exempt from this market plunge as it has fallen nearly ~27.6% from its all-time high of $125.86 a share in January 2018. Moreover, Abbvie has fallen ~3.3% since the beginning of December, from $94.27 a share to $91.12 as of close on December 28, meaning the company has been hit harder than other pharma stocks this year. In addition to concerns over Abbvie’s concentration risk with Humira, another concern in the past 9 months to the investor community was Abbvie’s announcement this past March that it wouldn’t pursue accelerated approval for Rova T to treat RR SCLC, due to disappointing Phase 2 results. Although the company will move forward with the ongoing Phase 3 studies, investor consensus is that the $10.2 billion StemCentryx acquisition, once thought to be a promising oncology acquisition, will instead prove to be a bust. Consequently, the company’s shares have not rebounded to the $110+ range the shares were at January through most of March.

As such, I believe that Abbvie is currently worthy of a dividend growth investor’s consideration. There are three main reasons to support my opinion that Abbvie is an attractive investment, worthy of further due diligence from a potential investor. The first reason is that although its dividend history as an independent company has been brief, it has been spectacular, and I believe it will continue to deliver solid dividend increases going forward. This leads me into my second point that Abbvie has the appropriate drug pipeline to offset the eventual declines in revenue from Humira, which would lead to continued strong dividend increases. Lastly, the company’s current valuation is appealing.

Reason #1: Abbvie’s Safe And Growing Dividend

Since the formation of the company in 2013 as a spin-off of the biopharmaceuticals division of Abbott Laboratories, Abbvie has raised its dividend each year. Abbvie is technically a dividend aristocrat when we factor in its former parent company’s 46 years of consecutive dividend increases.

The company recently announced an 11.5% dividend increase from $0.96/share quarterly to current quarterly dividend of $1.07. Using the company’s midpoint earnings guidance of adjusted diluted EPS of $7.91/share for FY 2018, we can see that the payout ratio in terms of EPS is 54.1%. This is about where I’d like a pharma dividend payer to be at as it leaves the company plenty of capital to invest in the research and development that will be necessary to develop new blockbuster drugs in the future, not to mention also returning capital to shareholders in the form of share buybacks when the company’s shares are attractively priced.

Moreover, we can examine the company’s free cash flow numbers to arrive at the FCF dividend payout ratio. Per the company’s most recent financial release, Abbvie has generated FCF of $9.5 billion while paying $4.1 billion in dividends during that time. This would mean the payout ratio using FCF is roughly 43%.

Both methods of gauging the company’s payout ratio show us that the dividend is clearly safe and reasonable, allowing raises fairly similar to the most recent of 11.5%, while still heavily investing in the company’s future through R&D.

With a dividend yield of 4.7%, it is wise to question why the yield is so high currently. This leads us into our next point in which we’ll discuss the risks that Abbvie is facing, and why I believe these risks are being more than factored into the company’s stock price.

Reason #2: While Bears Argue Abbvie Will Not Be Able To Offset Humira’s Eventual Revenue Declines, I Believe The Contrary Is True

The primary concern that investors have had with Abbvie for several years is that Abbvie is too reliant on Humira. They conclude that because Humira accounts for 62% of Abbvie’s revenue as of Q3 2018 and 70%+ of its profits, when Humira sales eventually decline, the company’s prospects will also decline.

Fortunately, per company forecasts for the remainder of 2018, sales of Humira are as follows:

  • International: $6.3 billion (32%)
  • US: $13.7 billion (68%)
  • Total Humira sales: $20 billion

The company is currently facing tough biosimilar competition in the European Union as competitors such as Amgen, Biogen, Mylan, and Norvartis releasing biosimilar versions of Humira. With discounting of Humira ranging from as low as 10%, to as high as 80% in Nordic countries, international Humira sales are expected to decline 26-27% in 2019, per Reuters.

Source: Abbvie Investor Presentation

Although this isn’t the most encouraging news, the bulk of Humira’s sales are generated in the United States. Assuming a 27% decline in international Humira sales, the company’s international sales will decline by $1.7 billion. This would equate to a ~5% sales overall sales decline by itself. However, with strong Humira patent protection in the US, Abbvie won’t face any rival biosimilar Humira drugs in the US until 2023. In the meantime, Humira sales will continue to grow at a clip of roughly 10-12% in the US, before peaking at $21 billion in total sales in 2020. This would equate to an increase in Humira sales of nearly $1.4 billion to $1.6 billion. An overall decline in Humira sales of $100 million to $300 million would mean that the company will see a revenue decline of less than 1% in 2019, not accounting for any growth experienced from other drugs on the market or in the pipeline.

Source: Abbvie Investor Presentation

Abbvie’s management recognizes the threats posed by concentration risk from Humira and they have developed a corporate strategy focused on extensive research and development to drive innovation, and deliver results to shareholders in the process.

Even if we assume that Rova T will be a complete bust, producing no revenue for Abbvie, and that Humira’s sales will fall considerably in the next 5 years, Abbvie has several promising drugs at various phases of development and marketing, as shown by the above illustration including:

  • Venclexta
  • Imbruvica
  • Risankizumab
  • Upadacitinib
  • Orilissa

In the Oncology division, Venclexta and Imbruvica offer a lot of promise to Abbvie. Venclexta earned FDA approval for the treatment of chronic lymphocytic leukemia (CLL) in April 2016. Upon examining Venclexta, we can see that Fierce Biotech is estimating that Venclexta could generate peak sales of $2 billion if it earns up to three separate breakthrough designations, which could potentially occur. Moreover, Imbruvica has shown tremendous promise and it appears as though the 2022 sales forecast by Fierce Biotech of $8.29 billion could prove to be accurate. According to the Abbvie news release, sales of Imbruvica totaled $972 million, representing a 41.3% YOY growth. It’s easy to see how these two oncology drugs alone could offset quite a bit of revenue decline in Humira over the coming years.

Moving to the immunology segment, the two most promising late-stage assets include Risankizumab and Upadacitinib. After a Phase III sweep by Risankizumab, it is reasonable to conclude that Risankizumab will be able to easily take market share from older drugs, such as Stelara and Abbvie’s own Humira. The only question regarding how much Abbvie is able to monetize this drug lies in how well it can compete with other newer, similar drugs including Eli Lilly’s Taltz, and Novartis’ Cosentyx as both of those drugs also delivered promising results in treating psoriasis. The blockbuster potential is there as Abbvie projects that Risankizumab could mature into a drug with peak sales of $4-5 billion. Regarding Upadacitinib, there is guidance from Abbvie that the drug could mature into $6.3 billion in sales by 2025.

This seems like a reason estimate, given that recent studies have shown the drug’s remission rates are 66%, double that of the standard of care (Methotrexate). The concern with Upadacitinib is the possibility that it may not be able to avoid fate of the black box warning cautioning against thrombosis that Eli Lilly’s Olumiant was forced to comply with when the FDA approved Olumiant with that caveat, in addition to only clearing the use of Olumiant in patients that have already tried drugs, such as Humira and Enbrel. If Upadacitinib is able to avoid the black box warning, it absolutely could become a $6+ billion blockbuster for Abbvie. I believe that the data of one adverse event out of the 631 patients treated with Upadacitinib in the trial is encouraging, but as with all pharma stocks, we won’t know for certain what the future holds for Abbvie’s recent Upadacitinib submission to the FDA until the company receives a decision from the FDA.

Finally, moving into the focused investment segment of Abbvie, we will discuss the most promising drug in that segment. As seen above, that drug is Elagolix aka Orilissa. Orilissa is the first FDA approved oral treatment for moderate to severe endometriosis pain in over a decade. The most encouraging news to come out of the FDA approval is that regulators green-lighted the product at two dosage strengths, without adding a black box warning for bone mineral density changes. This likely de-risks Orilissa and means that it could become the standard of care in treating moderate to severe endometriosis, a largely under-served market. Ultimately, Goldman Sachs analyst Jami Rubin believes that the drug could generate sales of $1 billion a year by 2020, and $2 billion a year by 2025 if industry experts are correct in their prediction of a uterine fibroids OK from the FDA by 2020.

Although the above figures that have been provided on the sales potential of the aforementioned drugs are just estimates, I believe these estimates are reasonable and even if some prove to be incorrect, it only takes one or two blockbuster drugs to be able to offset the eventual revenue declines in Humira, and drive earnings growth for years to come.

One final bearish concern present in the entire pharma industry is the worry that the government will eventually place more stringent pricing regulations on the drugs that Abbvie and other pharma giants produce. Back in July 2018, President Trump criticized and vaguely threatened Pfizer after it announced price hikes on over 40 of its drugs. Although this has been an issue that politicians have talked about for some time, as prescription expenditures rise and threaten to destroy Medicare budgets, it is reasonable to conclude the government will face no choice but to eventually take action to more stringently regulate drug price hikes, unless the billions of lobbying dollars by pharma continue to convince legislators to continue to ignore the issue. If/when this more stringent pricing regulation does happen, this would be a blow to the pharma industry as a whole, causing margins to crater. I don’t believe that this is an immediate threat to Abbvie or other pharma companies because as we all know, the federal government generally defers issues for years at a time. However, I do believe this is a risk that must be carefully monitored by investors in the pharma industry, in order to be proactive rather than reactive to a potential headwind in the industry.

Source: Abbvie Investor Presentation

In summary in regards to Abbvie’s growth story moving forward, I believe that Abbvie’s growth platform pitched in the above slide isn’t just another rosy picture that is portrayed by management. We haven’t even covered promising drugs in Abbvie’s early to mid stage development phase, so the thought that Abbvie could reach $35 billion in non-Humira sales by 2025 seems reasonable. The growth that is likely to occur in Imbruvica of another $4+ billion in sales by 2022, in combination with Venclexta peak sales of $2 billion, $4-5 billion from Risankizumab, $6+ billion from Upadacitinib, and $1-2 billion from Orilissa more than offset the projected $9 billion decline in Humira sales from 2020 to 2025. Even factoring in a couple of disappointing results in Abbvie’s pipeline, Abbvie shouldn’t face the same fate of over-reliance on one drug as Gilead Sciences did when its blockbuster Hep C drug, Harvoni experienced a sudden decline in sales. Having examined various drugs of Abbvie’s, both currently on the market and in development, there is certainly a lot of potential for growth moving forward. Having examined the company’s current dividend yield and the risks/opportunities that Abbvie is presented with, this leads me into my next point.

Reason #3: Abbvie’s Valuation is Currently Attractive

The above analysis would be all for naught if I didn’t believe that Abbvie’s current price is compelling for those willing to tolerate the risks mentioned above.

Though the stock has since rebounded strongly from its 52 week low of $77.50 a share, the December 28 share price of $91.12 represents a solid buying opportunity.

Abbvie’s current dividend yield of 4.7% compares very favorably to the 5 year average yield of 3.5%. If the company’s yield reverts back to its average yield of around 3.5%, this would result in a 34.3% increase in the stock price. This would translate into a current stock price of $122.36, which isn’t far off of what the stock’s 52 week high was in January. Of course, I can’t accurately predict if or when the company’s yield will revert back to 3.5%. It may take several years for Abbvie’s yield to revert to around 3.5% as the market waits for Abbvie’s diversification away from Humira to play out.

Moreover, the company’s earnings midpoint of $7.91 for FY 2018 compared against the current price of $91.12 means that Abbvie is sporting an 11.5 PE ratio. For a large-cap pharma stock with a projected 5 year annual growth rate of nearly 17%, this is an attractive entry point.

Summary:

It is my opinion that Abbvie’s dividend is currently safe and unless Abbvie is unable to offset eventual declines in Humira revenue (which I view as unlikely), the dividend should remain safe and continue to grow going forward.

As with any company, an investor must consider the future of the company, industry/company risks, and valuation, before making an investment. The biotech space faces their own set of risks, including concentration risk, patent expirations, generic competition, pipeline issues, and regulatory risks.

Despite Humira set to face stiff biosimilar competition in the United States starting in 2023, I believe Abbvie has the pipeline necessary to more than offset the eventual revenue declines in Humira, driving future growth.

As far as regulatory risks go, the risks that Abbvie faces are risks that its industry peers are also facing. Increased public and government scrutiny regarding drug price increases is a concern, but without rewarding companies such as Abbvie for serving the unmet health needs of patients, the outcome of a full-fledged regulatory backlash against pharma companies is one the United States and the world in general can’t afford. I don’t view this risk as an immediate risk, but one for investors to monitor coming years.

At the current stock price, I believe that the bearish arguments are being given too much credence, while the bullish arguments are not being given enough. This is the reason for the current disconnect between Abbvie’s stock price and its true valuation, from an objective standpoint. Abbvie’s 4.7% dividend yield and an 8% 5 year earnings growth rate (less than half the projected ~17% and just over a third of the previous 5 year growth rate), offers a 12.7% annual return over the next 5 years, assuming a static valuation multiple. Despite these perhaps overly conservative assumptions, Abbvie still offers one of the more compelling investment opportunities in today’s market for those who can tolerate the risks. I believe this creates an attractive entry point for both those considering initiating a position in Abbvie or those looking to add to their position.

Disclosure: I am/we are long ABBV. 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.

The FCC Faces the Government Shutdown: What You Need to Know

You can add the Federal Communications Commission to the list of government shutdown casualties: The agency will shutter most of its operations on Thursday. Its outage-reporting system will remain online, so you can still let the FCC know if your local 911 service goes down. But if you run into billing or privacy issues with your mobile phone provider, you won’t be able to file a complaint online or by phone, and there will be no one to read your snail-mail letters.

You could be forgiven for thinking this is business as usual for the FCC. The agency has washed its hands of much of its oversight over broadband and text-message service providers since Republicans gained control of the agency in 2017, and critics argue that recent changes allow the agency to ignore consumer complaints, even when the government is operating. But as the agency responsible for managing use of the nation’s airwaves, the FCC plays an important role in internet and media. For example, it must decide the fate of the planned merger between T-Mobile and Sprint, approve or reject Nexstar Media Group’s proposed acquisition of fellow TV-station-owner Tribune Media Company, and continue allocating parts of the wireless spectrum for use in 5G wireless networks.

The FCC will continue to auction off rights to use the wireless spectrum during the shutdown because those auctions are funded by the auctions themselves. That’s good news for carriers eager to license new chunks of spectrum for 5G. But, depending on how long the shutdown lasts, mergers could be significantly delayed.

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A few extra days off won’t meaningfully delay the agency’s major decisions, says former FCC lawyer Gigi Sohn. But if the shutdown stretches into weeks, it will likely disrupt much of the agency’s work. FCC staff won’t be allowed to read email or take meetings unless they’re related to continuing activities like spectrum auctions, so staff will have a lot of catching up to do when they return to work. The FCC had remained open while other agencies shut down because of “available funds,” the FCC said on December 21.

It’s not clear what the shutdown will mean for the agency’s investigation into telecom company CenturyLink’s outage that knocked out 911 coverage in many parts of the country last month.

The FCC’s website will remain online during the shutdown, but there will be no updates, and some features, such a tool that lets people access data about informal complaints filed with the agency, won’t be available.


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The Silver Lining in Apple’s Very Bad iPhone News

Apple on Wednesday warned investors that its revenue for the last three months of 2018 would not live up to previous estimates, or even come particularly close. The main culprit appears to be China, where the trade war and a broader economic slowdown contributed to plummeting iPhone sales. But CEO Tim Cook’s letter to investors pointed to a secondary thread as well, one that Apple customers, environmentalists, and even the company itself should view not as a liability but an asset: People are holding onto their iPhones longer.

That’s not just in China. Cook noted that iPhone upgrades were “not as strong as we thought they would be” in developed markets as well, citing “macroeconomic conditions,” a shift in how carriers price smartphones, a strong US dollar, and temporarily discounted battery replacements. He neglected to mention the simple fact that an iPhone can perform capably for years—and consumers are finally getting wise.

As recently as 2015, smartphone users on average upgraded their phone roughly every 24 months, says Cliff Maldonado, founder of BayStreet Research, which tracks the mobile industry. As of the fourth quarter of last year, that had jumped to at least 35 months. “You’re looking at people holding onto their devices an extra year,” Maldonado says. “It’s been considerable.”

A few factors contribute to the trend, chief among them the shift from buying phones on a two-year contract—heavily subsidized by the carriers—to installment plans in which the customer pays full freight. T-Mobile introduced the practice in the US in 2014, and by 2015 it had become the norm. The full effects, though, have only kicked in more recently. People still generally pay for their smartphone over two years; once they’re paid off, though, their monthly bill suddenly drops by, say, $25.

The shift has also caused a sharp drop-off in carrier incentives. They turn out not to be worth it. “They’re actually encouraging that dynamic of holding your smartphone longer. It’s in their best interest,” Maldonado says. “It actually costs them to get you into a new phone, to do those promotions, to run the transaction and put it on their books and finance it.”

Bottom line: If your service is reliable and your iPhone still works fine, why go through the hassle?

“There’s not as many subsidies as there used to be from a carrier point of view,” Cook told CNBC Wednesday. “And where that didn’t all happen yesterday, if you’ve been out of the market for two or three years and you come back, it looks like that to you.”

Meanwhile, older iPhones work better, for longer, thanks to Apple itself. When Apple vice president Craig Federighi introduced iOS 12 in June at Apple’s Worldwide Developers Conference, he emphasized how much it improved the performance of older devices. Among the numbers he cited: The 2014 iPhone 6 Plus opens apps 40 percent faster with iOS 12 than it had with iOS 11, and its keyboard appears up to 50 percent faster than before. And while Apple’s battery scandal of a year ago was a black mark for the company, it at least reminded Apple owners that they didn’t necessarily need a new iPhone. Eligible iPhone owners found that a $29 battery replacement—it normally costs $79—made their iPhone 6 feel something close to new.

“There definitely has been a major shift in customer perception, after all the controversy,” says Kyle Wiens, founder of online repair community iFixit. “What it really did more than anything else was remind you that the battery on your phone really can be replaced. Apple successfully brainwashing the public into thinking the battery was something they never needed to think about led people to prematurely buy these devices.”

Combine all of that with the fact that new model iPhones—and Android phones for that matter—have lacked a killer feature, much less one that would inspire someone to spend $1,000 or more if they didn’t absolutely have to. “Phones used to be toys, and shiny objects,” Maldonado says. “Now they’re utilities. You’ve got to have it, and the joy of getting a new one is pretty minor. Facebook and email looks the same; the camera’s still great.”

In the near term, these dynamics aren’t ideal for Apple; its stock dropped more than 7 percent in after-hours trading following Wednesday’s news. But it’s terrific news for consumers, who have apparently realized that a smartphone does not have a two-year expiration date. That saves money in the long run. And pulling the throttle back on iPhone sales may turn out to be equally welcome news for the planet.

According to Apple’s most recent sustainability report, the manufacture of each Apple device generates on average 90 pounds of carbon emissions. Wiens suggests that the creation of each iPhone requires hundreds of pounds of raw materials.

Manufacturing electronics is environmentally intense, Wiens says. “We can’t live in a world where we’re making 3 billion new smartphones a year. We don’t have the resources for it. We have to reduce how many overall devices we’re making. There are lots of ways to do it, but it gets down to demand, and how many we’re buying. That’s not what Apple wants, but it’s what the environment needs.”

Which raises a question: Why does Apple bother extending the lives of older iPhones? The altruistic answer comes from Lisa Jackson, who oversees the company’s environmental efforts.

“We also make sure to design and build durable products that last as long as possible,” Jackson said at Apple’s September hardware event. “Because they last longer, you can keep using them. And keeping using them is the best thing for the planet.”

Given a long enough horizon, Apple may see a financial benefit from less frequent upgrades as well. An iPhone that lasts longer keeps customers in the iOS ecosystem longer. That becomes even more important as the company places greater emphasis not on hardware but on services like Apple Music. It also offers an important point of differentiation from Android, whose fragmented ecosystem means even flagship devices rarely continue to be fully supported beyond two years.

“In reality, the big picture is still very good for Apple,” Maldonado says. Compared with Android, “Apple’s in a better spot, because the phones last longer.”

That’s cold comfort today and doesn’t help a whit with China. But news that people are holding onto their iPhones longer should be taken for what it really is: A sign of progress and a win for everyone. Even Apple.


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