Investors in Tesla bonds show skepticism on buyout

NEW YORK (Reuters) – Investors in the debt of electric carmaker Tesla (TSLA.O) are betting the take-private deal described by Chief Executive Elon Musk will not materialize.

FILE PHOTO: A Tesla electric car supercharger station is seen in Los Angeles, California, U.S. August 2, 2018. REUTERS/Lucy Nicholson/FIle Photo

Like its stock price, Tesla bonds have given up all of the gains they made after Musk tweeted he had “secured” funding to take the company private, suggesting the credit market has scaled back the chances of a deal.

Tesla’s high-yield debt now trades at around 87.5 cents on the dollar, down from 93.0 cents on the dollar on August 7, according to Thomson Reuters data. Tesla’s convertible bonds due in 2021 88160RAC5=RRPS are trading around 107.20 cents on the dollar, down from 120.46 cents on the dollar on August 7.

Convertible bonds give bondholders the right to trade their debt for equity after shares rise over a certain price.

Bondholders are paid back in full in the event of a buyout – at 101 cents on the dollar for the junk bond coming due in 2025 88160RAE1=RRPS if certain conditions are met. The company’s longer-dated convertible debt would earn an additional premium above par if Tesla were taken private.

“The smart trade at the moment is to short the converts and go long the high-yield bonds, because that spread will collapse” in the event Tesla files for bankruptcy, said Lawrence McDonald, founder of the Bear Traps Report. McDonald believes bankruptcy is the path for Tesla if it does not find a buyer because of the company’s high leverage compared to its earnings before interest, taxes, depreciation and amortization.

A Tesla spokesperson declined to comment. Musk said in his second-quarter shareholder letter that the company can be sustainably profitable from the third quarter onwards.

McDonald contends, there continues to be a spread between the convertible and junk bonds because, despite falling prices, convertible bonds still trade at a bit of a premium because of the volatility of the equity.

Tesla investors have raised their bets against the convertible bonds: short positions in the three converts have risen, from $38.14 million on August 6 to $49.47 million on August 16, according to IHS Markit.

Tesla’s convertible bonds coming due in 2021 are currently trading around 107.20 cents on the dollar – roughly 20.8 cents on the dollar away from where they should trade if a deal at $420 was fully priced, said Geoffrey Dancey, managing partner and portfolio manager at Cutler Capital Management. Musk shocked investors with a tweet on August 7, saying he had “funding secured” for a possible buyout deal at $420 per share.

“If these bonds were priced for a takeover, they would trade at a serious premium to the conversion value compared to when the deal was announced,” said Dancey. “The convertibles are certainly not trading as if this company is going to be taken private at $420 and they never did.”

Longer-dated convertible bonds benefit from take-private deals as bondholders receive additional shares per bond in the event of an acquisition. In a $420 per share deal, the 2021 convertible bond would receive an additional 11 percent above face value, or 11 percent more stock.

On the day of Musk’s buyout tweet, when the share price hit an 11-month high of $387.46, more than $27 dollars above the 2021 conversion rate, the highest the 2021 note traded was 120.46 cents on the dollar.

That the debt is trading below the price prior to the deal tweet suggests the deal was never priced in. That it trades below its price before its solid second-quarter earnings call on August 1, suggests the tweet’s damage was more widespread.

Reporting by Kate Duguid; Editing by Jennifer Ablan and Nick Zieminski

Jeff Bezos Has a Bulletproof Hiring Strategy That All Comes Down to 3 Profound Questions

If you’re an entrepreneur, there’s also a good chance you’ve hired someone who you later had to let go for similar reasons. 

So the questions remain:

Why do the wrong people so frequently end up in the wrong positions? Is the hiring process broken? What’s going on? 

For some jobs, it’s not as important. non-intensive skill requirements often have a high turnover rate by their very nature, so hiring the perfect employee becomes less of a priority. But when extensive training is required, or valuable information is being passed on, you want to make sure it’s going to someone who is truly right for the job. 

So, how do we make that happen? 

Like many questions of the digital age, this one can be answered (succinctly, if not definitively) by looking through the lens of Amazon, one of the global economy’s most powerful forces, and its leader, Jeff Bezos.

Let’s start by rewinding a bit: 

Bezos got a lot of his inspiration and instruction on hiring from his experience with investment-management firm D.E. Shaw, where recruits were often asked seemingly random questions like, “how many fax machines are there in the United States?” 

Why? The goal wasn’t to get precise answers but to identify the candidates who had the best problem-solving skills.

Moving on to Amazon, in 1998, Bezos brought it full circle, and explained exactly how he selects new hires in a letter to shareholders, challenging hiring executives to consider 3  questions about the candidate: 

  1. Will this person raise the average level of effectiveness of the group they’re entering?
  2. Will you admire this person?
  3. Along what dimension might this person be a superstar? 

This sort of approach might be more common today than it used to be, but there’s certainly no doubt that businesses continue to under-utilize the entire interview process as a way of finding employees who identify most with the company’s core needs and values, while simultaneously challenging your hiring executives to think about the candidate’s true potential in a way they most likely did not. 

Storytime: I know of one small-town movie rental store that’s still in business, despite over 95% of similar businesses closing down in the last 10 years. Their resilience is multi-faceted, without a doubt, but one thing about them stands out to me: their paper application consists of questions like

  1. What is your favorite movie? 
  2. What is the Fermi paradox?
  3. Calculate the area of this triangle.

Is it peculiar? Sure. But there’s more to it than eccentricity — there’s a clear attempt to employ only the people whom the management has determined are most likely to fit in with their business, and this type of outside-the-box thinking is a big part of Bezos’ and Amazon’s success. 

Whether it’s during the interview or after, the lesson here is to peel the layers back even further about a candidate’s potential, and challenge yourself to gauge their long-term fit & impact. During the interview, if you ask candidates those same, tired questions, ‘what are your strengths,’ or ‘what are your goals for the next five years,’ a huge opportunity is missed to ask them much more telling questions — questions that will let us know whether they are going to be dead weight or visionaries inside our organization. Which do you want?

The 2 Words You Need to Eliminate From Your Vocabulary Right Now if You Want to Meet Your Goals

I hear so many entrepreneurs, marketing managers, even vice presidents and CEO say things like, “I hope we get that new account, I hope we hit our sales goal, I hope we make our budget.”

The first question that comes to my mind is, “What are you hoping for? Make it happen.”

When someone says the words, “I hope,” a red light goes off in my mind letting me know they don’t have a plan. They are hoping for an outcome because they aren’t sure of how they’re going to get there–and hoping is always easier than digging into the work.

There’s a famous quote by Stephen Ambrose that says, “Where there is a will, there’s a way.” He’s also known for his quote, “Plan your work and work your plan.” The first time I heard this advice was when Ross Perot was running for President in 1992. As an independent candidate, winning was an uphill battle–and yet he still won 18.9 percent of the popular vote. His no-nonsense business approach to running the country was something that resonated with me for years.

In every one of my companies, I work hard to remove “I hope” statements from our culture, and focus more on cultivating an environment where “Here’s how” statements can lead the way. In order to do that, I’ve had to really nurture employees and fellow leadership team members to not just think or talk about executing, but to actually dig their heels in and get things done. 

The key to creating a culture of “does” and not “wishers” is to measure as many things as possible within your business. Not to the point where people are spending more time filling out excel spreadsheets than they are making productive strides forward, but enough to know whether you’re in “hope” territory or on the path to success. As the old saying goes, “What gets measured, gets done.”

I share a wide variety of examples in my book, All In. One very clear measure-for-success example is something I’m currently experiencing with my most recent company, LendingOne. In our industry, there are many other private lenders and competitors, so we’ve continuously had to ask how to get real estate investors to call us. If we were to just send out advertisements, invest in some marketing and hope for them to call, we’d be doing ourselves a great disservice. That’s not a business strategy, because most of the time you end up sitting around, waiting.

Instead, we’ve had to build very clear systems to build leads. We go so far as to monitor and measure daily and weekly performance against our sales plan. If something doesn’t seem to be working, we change our plan. And sometimes, even if things aren’t working, we fix it anyway–because we want to know if there’s an even better way of doing things.

Most businesses love the planning part. They love brainstorming all the things they “could” do. Some make it to the execution phase, where those plans are beginning to materialize and generate some sort of movement forward for the business. But the truth is, most businesses fail at the third part, which comes down to measuring their own success–and then iterating from there. 

Without measurement, your efforts are no better than shooting in the dark. You don’t know what’s working, what isn’t, and by how much. You don’t know what’s worked in the past, and it becomes tremendously difficult to make assumptions of what would work better moving forward. 

Putting a plan in place and “hoping” for an outcome isn’t a strategy. It’s an excuse.

Netflix Has Turned Off—And Deleted—User Reviews

The peer-to-peer recommendation has taken another hit.

Netflix has deleted all user reviews from its streaming service, the company confirmed to Vanity Fair on Sunday. The move means users will no longer have the ability to see what friends liked and didn’t and choose films based on those recommendations.

Netflix turned off the ability to post reviews to its service on July 30. In a support page announcing its decision, Netflix said that it’s removed user reviews because of “declining use” among its membership. Netflix added that it still allows users to give movies and TV series a “thumbs up” or “thumbs down.” It then provides a list of suggested content users would like based on their viewing history and the content they’ve rated highly with a “thumbs up.”

User reviews have long provided Netflix users an opportunity to see what others thought of a movie or series and gain some insight into content before they committed time to watching a program. However, the reviews did little to enhance the broader Netflix viewing experience. And, in a statement to Vanity Fair, a Netflix spokesperson said that it never incorporated good or bad reviews into its suggestion algorithm.

“Recommendations to members are always personalized based on what we think that specific member will enjoy watching based on what they have watched before,” the spokesperson said.

So, nothing will change in the Netflix viewing experience now that user reviews are gone. But the Netflix suggestion algorithm—and its accuracy—might be even more important than ever.

Brazil mall executives shrug off looming expansion

SAO PAULO (Reuters) – Fears of e-commerce taking off in Brazil have sunk shares of the country’s big mall operators this year, but industry executives expressed confidence that local shopping habits, the reputation of malls as public spaces safe from crime and other factors will help them avoid the shakeout that has hit their U.S. peers.

People are seen walking through Iguatemi shopping mall in Sao Paulo, Brazil August 16, 2018. REUTERS/Nacho Doce

The optimism of executives gathered this week at the Shopping Center International Congress in Sao Paulo contrasted sharply with global investor sentiment about malls in the age of online retail.

E-commerce giants Inc (AMZN.O) and Argentina’s Mercadolibre Inc (MELI.O) have set major expansions here, spooking some foreign investors and sending shares in Brazil’s three largest mall operators down more than 19 percent so far this year.

Executives and some major Brazilian shareholders say the threat of e-commerce is overblown. They say a better mix of non-retail tenants in malls, the high costs of shipping in Brazil and other factors should allow malls here to continue to thrive.

But some say the industry is overconfident, noting that Amazon has been scooping up local warehouses and negotiating air cargo deals in Brazil, while some retailers are reporting double-digit growth in online sales from last year.

Slideshow (4 Images)

“In New York, the investors are much more concerned about e-commerce than in Brazil,” said Thiago Muramatsu, chief financial officer at Cyrela Commercial Properties SA (CCPR3.SA) (CCP), which owns malls and office buildings. “In the U.S., they’re seeing a big crisis with malls closing everywhere, electronics retailers shrinking. But here in Brazil, there’s still upside.”

Several Brazilian executives and investors noted in interviews that the malls here attract a steady stream of patrons because they offer a relatively safe public environment in a country with the most murders in the world in recent years.

Home delivery, which Amazon and other e-commerce companies rely upon, is more difficult in Brazil due to shoddy highways, tricky state taxes and large-scale cargo robbery.

In addition, Brazil’s shopping mall market is not saturated, with just a fraction of the malls per capita found in the United States. Brazilian malls dedicate less area to retail, while many U.S. malls are just starting to diversify their tenant mix.

“Close to half of gross leasable area here is not retail. It’s dining … all sorts of things,” said Maximo Lima, a founding partner at real estate investment firm Hemisferio Sul Investimentos. “It’s a one-stop-shop for middle-class Brazilians to solve their life.”


While shares of the biggest mall operators have taken a hit, some Brazilian investors are still betting on malls.

Between November and April, Brazilian investment firm Vinci Partners raised 730 million reais ($187 million) — largely from domestic investors — for Vinci Shopping Centers (VISC11.SA), a vehicle known as an FII, which is Brazil’s answer to a real estate investment trust, or REIT.

Shares of the some of the larger, more liquid FIIs are also up this year, an indicator that local investors are more sanguine than their U.S. peers.

Still, mall operators are hedging their bets.

Firms such as CCP and BR Malls Participacoes SA (BRML3.SA), Brazil’s largest mall operator, have developed e-commerce units to adapt their business models for digital retail.

Multiplan Empreendimentos Imobiliarios SA (MULT3.SA), another major mall operator, told Reuters the company plans to follow suit.

Those e-commerce units have taken various forms. CCP’s unit, for instance, allows customers to buy online, and pick up items at a mall.

“The customers will have to go to the mall,” said CCP’s Muramatsu. “So it may give them time to go to the movies, go to restaurants, even make additional purchases.”

Reporting by Gram Slattery and Gabriela Mello; Editing by Brad Haynes and David Gregorio

Investors Keep Giving Startups More Funding Than They Need. Here's Why the All-You-Can-Eat Buffet May Cause Indigestion

“This is the best time to raise money ever,” Slack founder Stewart Butterfield told the New York Times in April 2015. “It might be the best time for any kind of business in any industry to raise money for all of history, like since the time of the ancient Egyptians.”

In the months that followed, I and many other observers cited Butterfield’s thoroughly rational exuberance as evidence of a historic tech bubble, one data point among many that private-company valuations had become untethered from reality to a degree that made a painful correction not just inevitable but imminent. 

About those predictions: Um, maybe not. Sure, there was a momentary slowdown and some dying-off of also-rans in overcrowded sectors like on-demand delivery. But that was a blip. Three years later, even the Pharaohs would be jealous of the pyramids of capital piling up around Silicon Valley. 

“Investors participated in a record 273 mega-rounds [defined as at least $100 million raised] last year, according to the data provider Crunchbase,” reports the Times‘s Erin Griffith. “This year is on pace to easily eclipse that, with 268 completed in the first seven months of the year. In July, start-ups reached more than 50 financing deals worth a combined $15 billion, a new monthly high.” 

Mind you, this all-you-can-eat buffet isn’t open to anyone. The investors driving it– sovereign wealth funds, China’s Alibaba and Tencent, and Softbank’s $93 billion Vision Fund–are specifically on the hunt for startups that can ingest nine figures of cash without going straight into a diabetic coma. There’s some trickle-down effect, with early-stage startup funding rounds getting bigger, but it’s offset by a decrease in the number of such rounds

Bubbles are supposed to burst when the market runs out of greater fools willing to bid up an asset. It seems like those of us who called a top underestimated the greatness of some fools out there, or maybe even missed a phase shift to a new stable equilibrium. Whatever. It’s too soon to revisit the bubble question, so let’s talk instead about what this new funding environment does to the startups that operate in it.

On the podcast “This Week In Startups,” Randy Komisar suggested it’s making them weak and stupid. “Most entrepreneurs fail from indigestion, not malnourishment,” Komisar, a partner at of Kleiner Perkins Caufield Byers, told host and angel investor Jason Calacanis. “What happens is, when you’ve got too much capital, you’re insulated from market information,” he explained. 

In other words, not having enough money is a potential sign that whatever you’re doing might not be a great way of making money. It forces you to pay close attention to customer feedback and come up with creative solutions instead of just investing in a lot of Steelcase chairs and butts to fill them. 

Not everyone sees it this way. Back in 2015, Bill Gurley of Benchmark Capital was one of the loudest voices calling the situation “speculative and unstable.” He predicted the landscape would soon be littered with the corpses of “dead unicorns” and fretted that easy money without public-market scrutiny was rewarding startups for financial indiscipline. 

But now Gurley is resigned to the new reality. With interest rates at or near zero for the past decade, there’s just too much cheap money sloshing around. “No one in the history of business has seen what we are seeing right now,” he says via email. “It truly is unprecedented.” 

Hunger might make you smart, but “[i]f your competitor is going to raise $150 million and you want to be conservative and only raise $20 million, you’re going to get run over,” he told Griffith. 

That makes sense–except that businesses where the competition comes down to who can raise more money tend to be businesses where that competition inevitably drives margins down toward zero, and companies with tiny margins will have a hard time returning big multiples to their investors. That’s an argument Peter Thiel makes in his book Zero to One, and Gurley should be familiar with it, since it more or less describes the arc of his most notable portfolio company, Uber, from its birth until now. 

To escape from the infinitesimal-margin trap it has set for itself, Uber has long been counting on the arrival of self-driving cars, which will allow the company to pocket the full fare from each trip, not just the 30 percent left over after the driver’s cut. But the development of autonomous vehicles has so far been nothing but a money sink, drinking up between $125 million and $200 million per quarter, reports The Information. Now Uber–and Lyft, its main rival–see a similar hope in electric scooters and bikes, another form of driverless transport. But with margins on those trips likely to be equally bad, Uber and Lyft are–ironically, given their rhetoric about taking on vested interests–hoping to entrench themselves from competition in at least one market by partnering with the local government. In other words, they’re doing something not all that far from what they’ve always accused taxi fleet operators of doing. 

“As VCs that compete at the top tier, we are involved with businesses going after big markets,” Gurley says. “I don’t think there is a single ‘business model’ that’s 100 percent immune to a competitor blasting at you with hundreds of millions of dollars.” 

In any case, unless there are mega-funds on other planets, Uber and other beyond-late-stage unicorns will eventually have to move out of their parents’ houses and get a job. They’ll have to IPO, that is. But the real world is a harsh place for companies that never had to think about where money comes from until their first Wall Street earnings call. In Bloomberg, Shira Ovide notes that the proportion of young public companies with negative cash flow from operations has risen sharply since 2014, jumping from 29 percent to 37 percent. 

You would think the investors writing $100 million checks would be keener than anyone to see the companies they fund generate profits. But they have other things on their mind. “These giant funds are looking for start-ups that can take large sums of money with one shot,” reports Griffith. “Writing lots of small checks is too time-consuming, and the returns from small bets will not make a difference for a such a big fund.” 

We’ve always had smart money and dumb money. Now, apparently, there’s lazy money. Investors insisting on giving startups more money than they need because figuring out what else to do with it is too much of a hassle may not be proof of a bubble, but it’s definitely a sign their interests aren’t aligned with those of their entrepreneurs. Even a healthy appetite can get indigestion from force-feeding.

Uber’s New Security Chief Is Ex-NSA. Is He Up to Its Transparency Challenge?

Uber is on a quest to regain people’s trust, and that’s not just about becoming a more ethical, law-abiding company that takes passenger safety more seriously—it’s also a cybersecurity matter, following last year’s revelation of a hack that compromised the personal data of 57 million users.

A reminder: chief security officer Joe Sullivan paid the hackers $100,000 (with former CEO Travis Kalanick’s approval) to delete the stolen data and sign non-disclosure agreements, in an attempt to cover up the incident. That’s a really bad practice, to put it mildly, and the company was lucky to walk away with a mere slap on the wrist from the Federal Trade Commission.

Uber, now under the leadership of Dara Khosrowshahi, has finally found its replacement for Sullivan: Matt Olsen, a former National Security Agency general counsel and National Counterterrorism Center director, and until recently the president and chief revenue office at IronNet Cybersecurity, which he co-founded with former NSA chief Keith Alexander.

Olsen is certainly making the right noises. Per the New York Times, Uber’s secretive hack-hiding strategy “doesn’t make sense” to him. “I think they understand the need to be transparent and ethical, and vigilant in complying not just with the laws and regulations that apply, but the norms and standards that Uber customers and stakeholders expect of the company,” Olsen said.

Matt Olsen previously worked at the National Counterterrorism Center (MANDEL NGAN/AFP/Getty Images)

Matt Olsen previously worked at the National Counterterrorism Center (MANDEL NGAN/AFP/Getty Images)


Crucially, Olsen intends to unify Uber’s security team, which currently has separate groups dealing with online and physical security. That’s good: a platform straddling physical and virtual layers needs to treat safety in a cohesive way.

You may be forgiven for raising an eyebrow at this Olsen quote, though: “For any large organization, whether you’re talking NSA or a company like Uber, having a plan and having practiced and exercised how to respond to a breach is critically important.”

The NSA also had an extremely high-profile breach several years ago, courtesy of whistleblower Edward Snowden, that caught the organization entirely by surprise. And leaked NSA hacking tools have been used by malicious actors, most notoriously in the WannaCry ransomware epidemic. Albeit for understandable reasons, the agency’s responses to these catastrophes could not be described as particularly transparent.

In fairness, all this happened after Olsen’s time at the agency. Uber’s new hire certainly does carry credentials that suggest he understands the reality of breaches and their prevention and mitigation. If Uber falls victim to future breaches, though, let’s hope he’s serious about the need for transparency.

A version of this story first appeared in CEO Daily, Fortune’s daily newsletter on succeeding big in business. Subscribe here.

Tesla forms three-member panel to look at any Musk deal

(Reuters) – Tesla Inc’s board (TSLA.O) named a special committee of three directors on Tuesday which will evaluate Elon Musk’s proposals to take the company private, although it said it was yet to see a firm offer from the company’s chief executive.

FILE PHOTO: A Tesla sales and service center is shown in Costa Mesa, California, U.S., June 28, 2018. REUTERS/Mike Blake/File Photo

Musk said on Monday he was in talks with a Saudi sovereign fund for taking the electric car maker private. He later tweeted he was working with buyout firm Silver Lake and investment bank Goldman Sachs Group Inc (GS.N) as financial advisers on his plan.

The special committee is composed of independent directors Brad Buss, Robyn Denholm and Linda Johnson Rice.

Buss served as chief financial officer of solar panel installer SolarCity for two years before retiring in 2016. Tesla bought SolarCity that year. Denholm, the first woman to join Tesla’s board, is chief operations officer of telecom firm Telstra and the ex-CFO of network gear maker Juniper Networks (JNPR.N). Rice, the first African-American and second woman to join the company’s board, is the chairman of Johnson Publishing Co, home to Ebony and Jet magazines.

The special committee has the authority to take any action on behalf of the board to evaluate and negotiate a potential transaction and alternatives to any transaction proposed by Musk, the company said in the statement.

Latham and Watkins LLP has been retained by the committee as its legal counsel. Wilson Sonsini Goodrich and Rosati will be legal counsel for Tesla itself.

Shares in Tesla, which are still well below highs hit when Musk initially raised the prospect of the transaction last week, inched up 0.7 percent in trading before the bell.

Reporting by Supantha Mukherjee in Bengaluru

Infosys to build software development center in eastern India

(Reuters) – Indian information technology company Infosys Ltd said on Monday it would open a software development center in the eastern state of West Bengal, with an investment of about 1 billion rupees ($14.28 million).

Employees walk along a corridor in the Infosys campus in the southern Indian city of Bangalore September 23, 2014. REUTERS/Abhishek Chinnappa

The first phase of construction on the 525,000-square feet facility will be able to accommodate 1,000 employees, the country’s second-biggest software services exporter said.

The first phase is expected to be completed within 15 months from the date of obtaining regulatory clearances, the company said.

Reporting by Abinaya Vijayaraghavan in Bengaluru; Editing by Subhranshu Sahu

The Creative Ways Your Boss Is Spying on You

Earlier this year, Amazon successfully patented an “ultrasonic tracker of a worker’s hands to monitor performance of assigned tasks.” Eerie, yes, but far from the only creative method of employee surveillance. Upwork watches freelancers through their webcams, and a UK railway company recently equipped workers with a wearable that measures their energy levels. By one study’s estimate, 94 percent of organizations currently monitor workers in some way. Regulations governing such conduct are lax; they haven’t changed since the 19th century.

The most common snooping techniques are relatively subtle. A system called Teramind—which lists BNP Paribas and the telecom giant Orange as customers on its website—sends pop-up warnings if it suspects employees are about to slack off or share confidential documents. Other companies rely on tools like Hubstaff to record the websites that workers are visiting and how much they’re typing.

Such software “solutions” pitch themselves as ways to enhance productivity. But trouble emerges, critics say, when employers invest too much significance in these metrics.

That’s because data has never been able to capture the finer points of creativity and the idiosyncratic nature of work. Where one account manager might do her best thinking behind a desk, another knows he’s sharpest on an afternoon stroll—a behavior that algorithms could blithely declare deviant. This then creates “a hidden layer of management,” says Jason Schultz, director of the NYU School of Law’s Technology Law & Policy Clinic. Those midday walkers might never find out why they’ve been passed over for a promotion. Once established, the image of the “ideal” employee sticks.

Try to hide from this all-seeing eye of corporate America—and you might make matters worse. Even the cleverest spoofing hacks can backfire. “The more workers try to be invisible, the more managers have a hard time figuring out what’s happening, and that justifies more surveillance,” says Michel Anteby, an associate professor of organizational behavior at Boston University. He calls it the “cycle of coercive surveillance.” Translation: lose/lose.

Unless you want to be spied on. In a recent study of Uber drivers, researchers found that a monitored employee can sometimes feel “more secure than the worker who … doesn’t know if her boss knows that she is working.” NYU’s Schultz admits that a degree of oversight can galvanize commitment, but he wants a law restricting its use to workplace tasks. Others insist data should be anonymized. One model is Humanyze, a “people analytics” service that provides clients not with individualized employee reports but rather with big-picture trends. Workers are then accountable to that big picture, each contributing modest brushstrokes. Don’t paint outside the lines.

This article appears in the August issue. Subscribe now.

More Great WIRED Stories