GE’s $100 Billion Wipeout Heralds Reckoning for an American Icon

Few under the age of 30 might remember, but General Electric Co. was once a model of corporate greatness.

Back in 1999, when Steve Jobs was still fiddling with iMacs, Fortune magazine proclaimed Jack Welch, then GE’s chief executive officer, the best manager of the 20th Century.

Few people — of whatever age — would lavish such praise on the manufacturer these days.

GE, that paragon of modern management, has fallen so far that it’s scarcely recognizable. The old GE is dead, undone by an unfortunate mix of missteps and bad luck. The new one now confronts some of the most daunting challenges in the company’s 125-year history.

The numbers tell the story: This year alone, roughly $100 billion has been wiped off GE’s stock market value. With mounting cash-flow problems at the once-mighty company, even the dividend is at risk of being cut. The last time GE chopped the payout was in the Great Recession — and before that, the Great Depression.

Read more: Bloomberg Gadfly on GE dividend

And yet the hit to the collective psyche of generations of investors and managers is incalculable. For decades, GE-think infiltrated boardrooms around the world. Six Sigma quality control, strict performance metrics, management boot camps — all that and more informed the MBAs of the 1970s, ’80s, ’90s and into this century. GE, in turn, seeded corporate America with its executives.

Anxious Investors

Now, John Flannery, GE’s new CEO, is struggling to win back the trust of anxious investors. He’s set to detail his turnaround plans on Monday — and has said he’ll consider every option.

“There’s nothing less than the fate of a once great, great company on the line,” said Thomas O’Boyle, the author of “At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit.” “Some of the fundamental notions about its status as a conglomerate and whether it can succeed in a world of increasing complexity are really being challenged right now.”

In hindsight, the seeds of this struggle were planted decades ago. Welch expanded and reshaped GE with hundreds of acquisitions and demanded every GE unit be No. 1 or No. 2 in its industry. He also culled low-performers ruthlessly, earning the nickname Neutron Jack. By the time he retired, in 2001, GE’s market value had soared from less than $20 billion to almost $400 billion.

But all that maneuvering, plus GE’s increasingly complex financial operations, obscured the underlying performance and put the company in peril during the 2008 financial crisis. Welch’s successor, Jeffrey Immelt, soon embarked on a plan to undo much of the House that Jack Built. He would sell NBC and most of the finance operations — two of the businesses that defined Welch’s tenure — along with units such as plastics and home-appliances.

The moves narrowed GE’s focus, yet it remains a collection of somewhat disparate manufacturing businesses, ranging from jet engines to oilfield equipment.

Out of Favor

Unfortunately for GE, that industrial conglomerate model has fallen sharply out of favor on Wall Street. And the rise of activist investors like Nelson Peltz has encouraged companies to try to boost their stock prices however they can, rather than focus on the long term. GE recently welcomed one of Peltz’s partners at Trian Fund Management to the board.

“The reckoning had to come,” said Jack De Gan, chief investment officer of Harbor Advisory, which has been a GE shareholder for more than 20 years before selling most of the shares in the past few weeks.

GE’s leaders have long defended the multi-business strategy by pointing to the benefits of sharing technology across product lines — jet engines, for instance, have a lot in common with gas turbines. In an interview with Bloomberg in June, Flannery dismissed concerns about conglomerates, saying investors care more about outcomes.

“They want growth, they want visibility, they want predictability, they want margin rate,” Flannery said. “And there are a multitude of models to produce that.”

$20 Billion

The new CEO has already said he’ll divest at least $20 billion of assets. He’s coming under pressure to do even more.

“Anything less than a sweeping plan to ‘de-conglomerate’ the portfolio would be viewed as disappointing,” Deane Dray, an analyst with RBC Capital Markets, said this week in a note to clients. The potential moves include unloading its transportation, oil, health-care and lighting operations.

Read more: Bloomberg Gadfly on a GE Breakup

To be sure, GE’s issues run deeper than the composition of the company. One of its biggest divisions, power-generation, is in the early stages of a deep market slump — just two years after bulking up with the $10 billion acquisition of Alstom SA’s energy business. GE’s cash flow is light, potentially putting the dividend in jeopardy and driving investors away from the stock.

Flannery has spoken of the need to change GE’s culture and instill a sense of accountability. He’s reined in excessive spending — on corporate cars and planes, on the new Boston headquarters — and replaced top executives.

But the sudden changes, combined with Flannery’s relative lack of public reassurances, have spooked investors. In the days after Flannery’s first quarterly earnings as CEO, when he called GE’s performance “completely unacceptable,” the stock fell and fell. And fell some more, closing at the lowest level in five years on Nov. 2.

The shares slid less than 1 percent to $19.99 on Thursday, bringing the 2017 loss to 37 percent.

“You think about a company like Kodak. Will GE become that?” said Vijay Govindarajan, a professor at Dartmouth University’s Tuck School of Business who served as GE’s professor-in-residence in 2008 and 2009.

Some investors may be throwing in the towel, but Govindarajan isn’t giving up. “I will put my bet that GE will weather this and come back,” he said.

    Read more: http://www.bloomberg.com/news/articles/2017-11-10/ge-s-100-billion-wipeout-heralds-reckoning-for-an-american-icon

    NFL’s Litany of Excuses Runs Out After Ratings Fall for Second Year

    TV networks are running out of excuses for the dwindling popularity of the National Football League.

    They blamed the election for ratings declines last year, and hurricanes for a soft week one in September. Protests during the national anthem, and President Donald Trump’s criticism of the league, have faded from the headlines. 

    Advertisers are starting to believe a different explanation: the viewers aren’t coming back. Audiences are down an average 7 percent from a year ago through the first eight weeks of the season, excluding last Monday. That’s on top of a decrease of about 8 percent last season that spurred numerous changes in the broadcasts, from shorter commercials to better matchups earlier in the year.

    “There’s just not as many people watching TV the way they used to watch TV,” said Jeremy Carey, managing director of Optimum Sports, a sports marketing agency. “It’s going to be an issue for advertisers when they can’t reach a large-scale audience the way they have.”

    With CBS Corp., 21st Century Fox Inc. and Walt Disney Co. set to report earnings in the next few days, analysts are bound to raise questions. These companies have used the popularity of the games to extract additional fees from cable operators, promote other shows on their networks and sell lots of commercials. Pro football games drew about $3.5 billion in ad spending last year, including the postseason, according to SMI Media Inc.

    Media companies have spent billions of dollars on the right to air football games, which had been immune to the erosion of viewership for other TV programming. Audiences for TV networks have diminished for years as the growing popularity of online alternatives Netflix and YouTube and the availability of most shows on-demand have reduced the appeal of dramas and comedies. Live TV, like sports, was supposed to be immune, but that theory looks highly questionable now.

    Ratings for the NFL suggest the same societal trends are now affecting the league, even if the declines aren’t as dramatic. The drop in game viewership ranges from 5 percent for NBC’s “Sunday Night Football” to 11 percent for the CBS Sunday package. “Monday Night Football,” on Disney’s ESPN, has attracted more fans this year than a year ago, but the numbers are still down from 2015.

    Viewership of the four main broadcast networks fell 8.7 percent last year, and 12 percent among adults 18 to 49, an important demographic for advertisers.

    CBS’s 11 percent slump for NFL games is the steepest of the networks. Its parent company, which reports earnings after the close Thursday, is more vulnerable than rivals to the trend because the vast majority of its earnings come from the broadcast network. The declines at CBS reinforce a complaint that has gotten louder and louder in recent weeks: The league got greedy in adding the Thursday night game on broadcast.

    Reserving top games for Thursday night robbed other time periods of good match-ups. After a nosedive in ratings at “Monday Night Football” last season, the league has scheduled better games for that time period, further damaging Sunday afternoon.

    “Ratings declines on both general entertainment and NFL programming could be the single biggest point of focus for investors this quarter, and we’re not sure what media companies can say about the health and tone of the ad market to assuage fears,” Steven Cahall, an analyst with RBC Capital Markets, wrote in a note last month.

    Viewership is dropping fast among people under 54 — a key demographic for advertisers — and even faster among those 18 to 34. Audiences for games on CBS, NBC and Fox have slid at least 10 percent among that younger cohort.

    Advertisers aren’t abandoning the NFL, one of the only places they can still reach more than 10 million people at once. But they are growing concerned. John Schnatter, who appears in TV spots on behalf of his Papa John’s Pizza International Inc., laid into the league on a conference call this week, blaming the ratings for his company’s slow revenue growth and calling for the league to put an end to player protests.

    Networks and other advertisers identify a wide range of reasons for the NFL’s struggles. The league has overexposed itself by making highlights available on Facebook, YouTube, Twitter and Snapchat. Identifiable stars like Peyton Manning and Aaron Rodgers have either retired or gotten hurt. The quality of play has deteriorated. Player protests and concussions have driven away some fans.

    Some executives argue viewership of the league has still improved over the long term while dropping for every other show. Yet the amount of time people have spent watching football this season is at the lowest point since 2011, back when there were fewer televised games, according to Mike Mulvihill, Fox Sports’ head of research.

    “The cumulative effect of everything happening in the world at large is having an impact on NFL viewership,” Mulvihill said. “ The league was defying the laws of gravity.”

      Read more: http://www.bloomberg.com/news/articles/2017-11-02/nfl-s-litany-of-excuses-runs-out-as-ratings-fall-for-second-year

      TripAdvisor apologizes for deleting warnings of rape

      Kristie Love's TripAdvisor review on her vacation in Riviera Maya, Mexico was deleted.
      Image: Darren Carroll/Getty ImageS

      TripAdvisor has apologized to a sexual assault survivor after an investigation revealed the website had deleted posts alleging assaults at resorts in Mexico. The belated apology comes seven years after the attack.

      The Milwaukee Journal Sentinel shared the story of Kristie Love, who had posted on TripAdvisor about her rape at an Iberostar resort in Riviera Maya, Mexico. Love said she had her post removed several times. 

      “Since 2010, when the forum post was removed, our policies and processes have evolved to better provide information like this to other travelers. As a result, when recently brought to our attention, the victim’s initial forum post was republished by our staff,” TripAdvisor wrote in a statement. 

      But it wasn’t just Love. The several-month-long investigation revealed more than a dozen travelers had their posts on TripAdvisor removed for similar reasons. In fact, three people reported being sexually assaulted or raped at the same resort in Mexico and subsequently had their TripAdvisor posts deleted. 

      The problem stems from TripAdvisor’s content moderation. Other crowdsourced review sites like Yelp and social networks like Facebook and Twitter face similar problems with deciding what violates their policies. Mistakes are frequently made. TripAdvisor also tries to manage any hearsay, but the policy appears to inconsistently enforced. 

      “To me, it’s like censoring,” Wendy Avery-Swanson told the Journal Sentinel. She had a post about her blacking out from alcohol served at a swim-up bar removed.

      TripAdvisor provided several different reasons at the time for why their reviews were removed. One instance claimed the post contained language or was about a topic that was not “family friendly.” 

      According to TripAdvisor, the site does allow for negative reviews and stories like Love’s and Avery-Swanson’s. Specifically, its interpretation of the family-friendly guidelines has changed since Love’s review was removed in 2010. 

      “We recognized then that our previous guidelines went too far.”

      “At the time, we had a policy whereby we judged content to be in breach of our guidelines if it did not adhere to family friendly language. More than 7 years ago that meant all language needed to be G-rated. … We recognized then that our previous guidelines went too far in preventing information like this from being shared,” a TripAdvisor spokesperson told Mashable in an email.

      “A simple search of TripAdvisor will show numerous reviews from travelers over the last several years who wrote about their first-hand experiences that include matters of robbery or theft, assault and rape,” the spokesperson continued. 

      It’s worth noting that TripAdvisor’s business model in part relies on users booking through its website. TripAdvisor denied any link between how its content guidelines are applied and its commercial relationships.

      TripAdvisor boasts more than 535 million reviews on hotel, airlines, restaurants, and local attractions. Unlike other companies that help with direct booking like Airbnb, airlines, and hotels, TripAdvisor doesn’t verify that reviews or forum posts are written by people who actually experienced what they wrote about.

      The tech company follows its own publishing guidelines and employs about 300 people to moderate posts and ensure “content integrity,” a spokesperson told the Journal Sentinel. TripAdvisor also relies on software to detect fake reviews. 

      The alleged censorship may fall outside of TripAdvisor’s offices, however. As the Journal Sentinel notes, TripAdvisor allows non-employees known as “trusted community members” to remove posts. The company declined to disclose who they are or how they are chosen but said they are “trusted, highly rated users and volunteers drawn from the global travel community.”  

      TripAdvisor added that these privileges can be removed if a member is “overly promoting” their businesses. These volunteers are unable to remove reviews but do moderate forum posts. 

      After the Journal Sentinel report, TripAdvisor said it is making changes. For example, Love’s post has been reinstated. The site is also creating a “badge” notification that will alert users to health, safety, and discrimination issues. This designation will be based on media reports and other credible sources, TripAdvisor said.

      “We’re currently going through additional quality assurance testing, and expect it to be launched before the end of the year,” a TripAdvisor spokesperson told Mashable

      This post was updated with additional insight from TripAdvisor.

      Read more: http://mashable.com/2017/11/02/tripadvisor-deleted-warnings-rapes-mexico-resorts-journal-sentinel/

      Americans Are Officially Freaking Out

      For those lying awake at night worried about health care, the economy, and an overall feeling of divide between you and your neighbors, there’s at least one source of comfort: Your neighbors might very well be lying awake, too.

      Almost two-thirds of Americans, or 63 percent, report being stressed about the future of the nation, according to the American Psychological Association’s Eleventh Stress in America survey, conducted in August and released on Wednesday.  This worry about the fate of the union tops longstanding stressors such as money (62 percent) and work (61 percent) and also cuts across political proclivities. However, a significantly larger proportion of Democrats (73 percent) reported feeling stress than independents (59 percent) and Republicans (56 percent).

      The “current social divisiveness” in America was reported by 59 percent of those surveyed as a cause of their own malaise. When the APA surveyed Americans a year ago, 52 percent said they were stressed by the presidential campaign. Since then, anxieties have only grown.

      A majority of the more than 3,400 Americans polled, 59 percent, said “they consider this to to be the lowest point in our nation’s history that they can remember.” That sentiment spanned generations, including those that lived through World War II, the Vietnam War, and the terrorist attacks of Sept. 11. (Some 30 percent of people polled cited terrorism as a source of concern, a number that’s likely to rise given the alleged terrorist attack in New York City on Tuesday.)

      “We have a picture that says people are concerned,” said Arthur Evans, APA’s chief executive officer. “Any one data point may not not be so important, but taken together, it starts to paint a picture.”

      The survey didn’t ask respondents specifically about the administration of President Donald Trump, Evans said. He points to the “acrimony in the public discourse” and “the general feeling that we are divided as a country” as being more important than any particular person or political party.

      Yet he and the study note that particular policy issues are a major source of anxiety. Some 43 percent of respondents said health care was a cause. The economy (35 percent) and trust in government (32 percent) also ranked highly, as did hate crimes (31 percent) and crime in general (31 percent). 

       

      “Policymakers need to understand that this is an issue that is important to people, that the uncertainty is having an impact on stress levels, and that stress has an impact on health status,” Evans said, pointing out that the relationship between stress and health is well-established

      • And keeping up with the latest developments is a source of worry all its own. Most Americans—56 percent—said they want to stay informed, but the news causes them stress. (Yet even more, 72 percent, said “the media blows things out of proportion.”)

      The APA survey did find, however, that not everyone is feeling the same degree of anxiety. Women normally report higher levels of stress than men, though worries among both genders tend to rise or fall in tandem. This year, however, they diverged: On a 10-point scale, women reported a slight increase in stress, rising from an average 5.0 in 2016 to 5.1 in 2017, while the level for men dropped, from an average 4.6 to 4.4. 

      Racial divides also exist in reported stress. While the levels among blacks and Hispanics were lower in 2016 than the year before, they rose for both groups in 2017, to 5.2 for Hispanic adults and 5.0 for black adults. Among whites, meanwhile, the average remained the same, at 4.7. 

      The report also notes that many Americans are finding at least one healthy way to feel better: 53 percent reported exercising or doing other physical activity to cope. Social support is also important,  Evans said. “Third,” he says, “I think it’s really important for people to disconnect from the constant barrage of information.” 

      1. The 2017 Stress in America survey was conducted by the Harris Poll on behalf of the APA. It was conducted online between Aug. 2 and Aug. 31, and had 3,440 participants, all ages 18 and up living in the U.S. It included 1,376 men, 2,047 women, 1,088 whites, 810 Hispanics, 808 blacks, 506 Asians and 206 Native Americans. Data were then weighted by age, gender, race/ethnicity, region, education and household income to reflect America's demographics accurately. Interviews were conducted in English and Spanish.

      Read more: http://www.bloomberg.com/news/articles/2017-11-01/americans-are-officially-freaking-out

      Opioid Billionaire’s Indictment Opens New Window on Epidemic

      More than a decade after opioid painkillers first exploded across the U.S., John Kapoor found an aggressive way to sell even more, according to prosecutors: He began bribing doctors to prescribe them.

      Speakers’ fees, dinners, entertainment, cash — federal charges unsealed Thursday claim Kapoor’s striving company, Insys Therapeutics Inc., employed all of that and more to spur prescriptions of a highly addictive fentanyl-based drug intended only for cancer patients.

      As President Donald Trump declared at a White House event that opioid abuse represents a public-health emergency, authorities arrested Kapoor in Arizona and painted a stark portrait of how Insys allegedly worked hand in glove with doctors to expand the market for the powerful agents.

      “Selling a highly addictive opioid-cancer pain drug to patients who did not have cancer makes them no better than street-level drug dealers,” Harold Shaw, the top FBI agent in Boston, said of Kapoor and other Insys executives charged earlier in the case.

      The story of the 74-year-old billionaire and the company he founded traces the arc of a crisis that claims 175 lives each day. What began with the over-prescription of painkillers in the late 1990s soon became a race by manufacturers to dispense more and more pills.

      Overdose Risks

      Charged with racketeering conspiracy and other felonies, Kapoor became the highest-ranking pharma executive to be accused of an opioid-related crime, and his arrest may portend charges against companies far larger than Insys, which has a modest $417 million market capitalization.

      In Connecticut, prosecutors have begun a criminal probe of Purdue Pharmaceutical Inc.’s marketing of OxyContin. Scores of states, cities and counties have sued companies including Purdue, Endo International Plc, and Johnson & Johnson’s Janssen Pharmaceuticals, alleging they triggered the opioid epidemic by minimizing the addiction and overdose risks of painkillers such as Percocet.

      But so far, no recent case has been so sweeping as the one against the executives including Kapoor, who made his initial court appearance late Thursday in Phoenix. A U.S. magistrate judge set bail at $1 million and ordered Kapoor to surrender his passport and submit to electronic monitoring. His lawyer, Brian Kelly, said Kapoor posted bail after the hearing.

      This week, a Rhode Island doctor admitted accepting kickbacks from Insys in exchange for writing prescriptions. Earlier this year, two doctors were sentenced to more than 20 years behind bars for accepting bribes from companies including Insys to sell fentanyl-based medications.

      The Kapoor indictment pinpoints the start of the alleged scheme.

      Oral Spray

      It was early 2012, and Insys’s new oral spray of the opioid fentanyl wasn’t selling well. Because it was so addictive, the pain-relief drug was subject to a tightly controlled distribution system, and regulators demanded to be notified about suspicious orders by manufacturers, wholesalers and pharmacies. And the drug wasn’t cheap, so insurers set up barriers for patients seeking it.

      That was when Kapoor and others at Insys went to extremes to dramatically boost sales of the painkiller, prosecutors said. Doling out speaker fees, marketing payments and food and entertainment perks, they allegedly began bribing doctors to prescribe the drug, and then tricked insurers into paying for it.

      One Insys sales executive told subordinates that it didn’t matter whether doctors were entertaining, according to the indictment: “They do not need to be good speakers, they need to write a lot of” Subsys prescriptions, the official said, referring to the brand name of the painkiller.

      Over a two-year period starting in 2013, Chandler, Arizona-based Insys set aside more than $12.2 million for doctors’ speaking fees, prosecutors said. One doctor received as much as $229,640 in speaker fees for appearing at what amounted to “sham events that were mere social gatherings also attended by friends and office staff,” according to the indictment.

      Friends, Family

      The company encouraged doctors to write more prescriptions by hiring their friends and family members to serve as “business liaisons’’ and “business-relation managers,’’ prosecutors said. These support-staff employees worked in the doctors’ offices but were paid by Insys in what the indictment called bribes and kickbacks.

      Insys even made a video featuring a sales rep dressed as a giant fentanyl spray bottle, rapping and dancing to a song that pushed the idea of getting doctors to prescribe higher doses, prosecutors said.

      Others previously charged include Michael Babich, Insys’s former CEO, Alec Burlakoff, the ex-vice president of sales, and Richard Simon, once the company’s national sales director. They all deny wrongdoing.

      Joe McGrath, an Insys spokesman, declined to comment on Kapoor’s indictment in Boston federal court. The company, which wasn’t charged, has reportedly been in settlement talks with the U.S. Justice Department to resolve a probe into its Subsys marketing. The company’s shares fell more than 22 percent to $5.74 in Nasdaq trading.

      The Lawyer Who Beat Big Tobacco Takes On the Opioid Industry

      The first person in his family to attend college, Kapoor rose from modest means in India to become a wealthy health-care entrepreneur, after earning a doctorate in medicinal chemistry at the University of Buffalo in 1972, according to a work-history the school posted.

      He was a plant manager at Invenex Laboratories in New York and later became chief executive officer of LyphoMed, a hospital-products company. He sold LyphoMed to Fujisawa Pharmaceuticals and formed a venture capital firm that invested in health-care companies.

      In 2010, he merged privately held Insys with NeoPharm Inc. to get access to technology to develop pain drugs for cancer patients. Even though he has stepped down as Insys’s chairman and chief executive officer, he still holds more than 60 percent of its stock.

      Kapoor and Babich are also accused of misleading insurers about patients’ diagnoses and the types of pain they suffered that were covered by the Subsys prescriptions tied to the payment scheme, prosecutors said.

      The company’s agents allegedly told insurers that patients were receiving Subsys for “breakthrough pain’’ to secure coverage. They also misled insurers about what other pain drugs patients had tried before being proscribed Subsys, according to the indictment.

      Some lower-level Insys employees have pleaded guilty and are cooperating with prosecutors, according to court papers. Elizabeth Gurrieri, a former manager who oversaw insurance reimbursements, pleaded guilty to one count of conspiring to commit wire fraud in June.

        Read more: http://www.bloomberg.com/news/articles/2017-10-26/insys-therapeutics-founder-charged-in-opioid-fraud-case

        Demanding a Bachelors Degree for a Middle-Skill Job Is Just Plain Dumb

        Ever wonder why employers demand advanced credentials for jobs that don’t seem to require them? So did Joseph Fuller, a professor of management practice at Harvard Business School. He co-led a study that found it’s “a substantive and widespread phenomenon that is making the U.S. labor market more inefficient.” To take one egregious example, two-thirds of job postings for production supervisors require a four-year college degree—even though only 1 in 6 people already doing the job has that credential.

        Credentialism obviously harms job applicants. What’s less obvious is that employers suffer, too. They miss out on new hires who—the study found—work hard, cost less, are easier to hire, and are less likely to quit. In other words, companies are deliberately bypassing a deep pool of talent. At many human resources departments, “Everyone’s strategy is to row as close as they can to the other boats and fish there,” says Fuller.

        What was excusable myopia in a time of high unemployment has become inexcusable at a time when the pool of college grads is severely overfished. The unemployment rate for people with bachelor’s degrees was just 2.3 percent in September, the lowest in nine years.

        The study, released on Oct. 24 by Harvard Business School, Accenture, and Grads of Life, is called . Says the report: “Over time, employers defaulted to using college degrees as a proxy for a candidate’s range and depth of skills. That caused degree inflation to spread to more and more middle-skills jobs.” It adds: “Most employers incur substantial, often hidden, costs by inflating degree requirements, while enjoying few of the benefits they were seeking.”

        The study is based on a survey of 600 business and HR executives, as well as 26 million job postings from 2015 parsed by Burning Glass Technologies, a job-market-analysis company that earlier published its own report on the topic. It found that 70 percent of postings for supervisors of office workers asked for a bachelor’s degree, even though only 34 percent of the people doing the job have one.

        Some major employers have figured out that this doesn’t make sense now, if it ever did. The study says that at Wal-Mart Stores Inc., 75 percent of store managers joined as entry-level employees, and the company has trained more than 225,000 associates through its Wal-Mart Academies. A January article by Bloomberg BNA quotes David Scott, the company’s senior vice president for talent and organizational effectiveness, as saying store managers can earn $170,000 a year without a college degree. “I started out at Wal-Mart as a stock boy myself,” Scott said.

        The report also cites Swiss Post International Holding AG, JPMorgan Chase & Co., Barclays Plc, CVS Health Corp., Expeditors International of Washington Inc., Hasbro Inc., State Street Corp., LifePoint Health Inc., and Chipotle Mexican Grill Inc., among others, for recognizing the value of applicants who lack a four-year degree.

        A few governors have taken the lead in addressing the problem in their states, Fuller says in an interview, citing John Hickenlooper of Colorado, Bill Haslam of Tennessee, and former Governor Jack Markell of Delaware. 

        People without a bachelor’s degree may need more training before digging into the job, but the cost of training is quickly recovered, and the training period itself can be a useful tryout, Fuller says, if it’s in the form of a paid internship, apprenticeship, or work-study program. “Asking for a bachelor’s degree is kind of a lazy man’s way of stipulating what you’re looking for,” he says. “When I witness the person doing the work, I’m making a hiring decision based on seeing a person over time, vs. looking at a résumé. The leading cause of failed hires for this type of job is a soft-skills deficit. For that, observation is invaluable.”

        Say what you want about American health care, but it’s ahead of many other sectors in suppressing credentialism. Nurse practitioners now perform many functions once reserved for physicians—including, in some states, writing prescriptions and even setting up their own practices. This is partly of necessity: There simply aren’t enough doctors to go around. But there’s nothing second-class about the care of a nurse practitioner. “I prefer being treated by them. Because they take their time. They might see me for 20 minutes, 30 minutes. If it’s something that’s complex, they’ll call in a physician,” says John Washlick, a Philadelphia lawyer who specializes in health care. His firm is Buchanan, Ingersoll & Rooney, based in Pittsburgh. 

        I also spoke with Gerald Chertavian, the founder and chief executive officer of Year Up, which trains urban young adults and places them in six-month internships that lead to jobs in finance and tech. Typical trainees go in earning $5,000 a year and come out earning $40,000 a year, Chertavian says. State Street alone has employed more than 500 of them. Employers find that hires from Year Up are staying three or four times as long as conventional hires out of four-year colleges—a major advantage given the high cost of recruiting and filling empty positions. 

        Chertavian says he came out of college with an economics major but no special skills. “I was a Chemical Bank trainee 30 years ago,” he says. “I benefited from at least eight to nine months of full-time classroom training that Chemical put into me.” Companies dropped a lot of their training programs to save money, but now the enlightened ones are reinstating them, he says.

        Harvard’s Fuller is right to focus on the folly of credentialism, Chertavian says. “These young people have the engines in the wings. They come as fully intact planes. But they’ve never been afforded the luxury of a runway.”

          Peter Coy
          Bloomberg Businessweek Columnist

          Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer. Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff. He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.

          Read more: http://www.bloomberg.com/news/articles/2017-10-25/demanding-a-bachelor-s-degree-for-a-middle-skill-job-is-just-plain-dumb

          The Glut of Private Jets Means Insane Bargains for Buyers

          Corporate-jet makers are flooding the market, spurring deep discounts for new aircraft and fueling a three-year slide in prices of used planes.

          Most major manufacturers, including Gulfstream and Bombardier Inc. — which is also contending with rising hurdles in its commercial-jet business — have pared production somewhat in the last couple years as demand for private jets has sagged. But that hasn’t been enough to halt declines in aircraft values, say consultants, brokers and analysts in the $18 billion industry.

          Gone is the optimism stoked by the election of President Donald Trump, a corporate-jet maven with his own Boeing 757, along with hopes for speedy tax cuts that would bolster plane purchases. Instead, the news has been full of setbacks. U.S. Health Secretary Tom Price resigned under fire for his frequent use of private planes at taxpayer expense. General Electric Co. is selling off its corporate fleet to cut costs.

          “The Trump bump is over,” said Janine Iannarelli, a Houston-based plane broker.

          The jet glut is one reason pre-owned prices were down 16 percent in August from a year earlier. With bargains aplenty on machines with few flight hours, manufacturers are cutting deals to entice buyers to purchase new planes. Meanwhile, they keep churning out aircraft and introducing new models.

          “It’s a question of who wants to blink first,” said Rolland Vincent, a consultant who puts together the JetNet iQ industry forecast. “Nobody — because whoever blinks, loses share.”

          A rise in demand for new company planes, which would help stabilize the market, isn’t in the cards. Corporate plane-buying plans have hit a 17-year low, according to an annual survey by Honeywell International Inc. of more than 1,500 flight departments. Companies expect to replace or add planes equivalent to 19 percent of their fleets on average over the next five years, down from 27 percent in last year’s survey.

          Discounts Galore

          The steep discounts on new aircraft are galling customers who paid closer to a full price, said Barry Justice, founder and chief executive officer of Corporate Aviation Analysis & Planning Inc. General Dynamics Corp.’s Gulfstream unit slashed as much as 35 percent off the price of its G450, which is being phased out as the new G500 aircraft nears arrival, Vincent said. The G450 had a list price of about $43 million, according to the Business & Commercial Aviation guide. 

          Bombardier has offered discounts of as much as $7 million on the Challenger 350’s list price of about $26 million as it fends off competitors entering the super midsize space, he said. The weakness across the industry in private-jet sales is adding to the pressure on Bombardier, which is also struggling to sell its C Series commercial planes. The U.S. government slapped import duties of about 300 percent on the single-aisle jetliner in the last two weeks after a complaint by Boeing Co.

          For corporate aircraft, the global market hasn’t fully recovered from the last U.S. recession, when plunging demand popped a bubble that had flooded the industry with more than 1,000 new jet deliveries in both 2007 and 2008. A nascent recovery in 2013 and 2014 fell apart after the price of oil and other commodities collapsed, drying up sales in emerging markets such as Russia and Brazil.

          Deliveries Fall

          Deliveries of new private jets are forecast to drop to 630 this year, from 657 last year and 689 in 2015, according to JPMorgan Chase & Co. The number is forecast to rebound slightly to 640 next year.

          The more conservative pace has done little to relieve the glut, creating a buyer’s market for used aircraft. A five-year-old jet sold in 2016 was worth only 56 percent of its original list price, on average. That’s down from 64 percent in 2012, according to a report by Jetcraft, a plane broker that expects to close more than 80 deals this year. The value retention was as high as 91 percent in 2008.

          Prices for used aircraft right now are “insane,” said Justice. Some companies and wealthy individuals are buying pre-owned aircraft for the first time because the bargains are too good to pass up, he said.

          “There’s a vast overproduction of large-cabin airplanes and there are only so many people in the world who are going to step up and pay $60 million-plus,” he said. “What happens is, people are going to that pre-owned market.”

          New Models

          More new aircraft are on the way. Next year Bombardier will begin selling the Global 7000, which will compete with the Gulfstream G650ER as the largest and longest-range business jet. Textron Inc.’s Cessna unit is close to beginning deliveries on a super midsize plane called the Longitude and is designing its largest-ever aircraft, the Hemisphere. 

          Cessna, which helps customers sell their used aircraft when purchasing a new one, is able to move those planes more quickly than before, said Rob Scholl, chief of sales and marketing with Textron Aviation. For new aircraft, Cessna is focused on “getting some price back into our products,’’ Scholl said.

          “We’re seeing a change in the marketplace,’’ he said. “The activity is really, really strong and I’m positive on where it’s going.’’

          Gulfstream will begin selling the G500 early next year and the G600 later in 2018, both of which are large-cabin aircraft.

          Small Planes

          Smaller aircraft are feeling the pressure as well. Swiss planemaker Pilatus Aircraft Ltd. is set to begin sales of its first business jet — the PC-24 — building on the success of its single-engine turboprop. HondaJet began deliveries at the end of 2015, the first-ever business jet for the Japanese carmaker.

          Those new models should help boost new aircraft sales because they will offer better performance and newer technology than the pre-owned models, which compete for buyers mostly on price, said Ben Driggs, Honeywell Aerospace’s president for the Americas.

          “We are projecting growth in ’18 and growth in ’19 and beyond” for new aircraft deliveries, Driggs said.

          Reaping Gains

          Bombardier pulled back production rates in 2015 after its inventory of new jets began to pile up. The slower pace helped the Canadian company boost operating margins and support pre-owned prices of its planes, spokeswoman Anna Cristofaro said in an email. Bombardier’s sales from business jets were more than twice its revenue from commercial planes last year.

          Gulfstream declined to comment.

          “Our actions in 2015 have yielded results, and Bombardier’s young pre-owned Global model aircraft continue to be among the top performers in the large category in terms of value retention and pre-owned inventory levels,” Cristofaro said.

          That’s a step in the right direction. But the market as a whole will have to wait a little longer for relief.

            Read more: http://www.bloomberg.com/news/articles/2017-10-09/private-jet-glut-spurs-insane-bargains-for-aspiring-buyers

            Americans Are Retiring Later, Dying Sooner and Sicker In-Between

            The U.S. retirement age is rising, as the government pushes it higher and workers stay in careers longer.

            But lifespans aren’t necessarily extending to offer equal time on the beach. Data released last week suggest Americans’ health is declining and millions of middle-age workers face the prospect of shorter, and less active, retirements than their parents enjoyed.

            Here are the stats: The U.S. age-adjusted mortality rate—a measure of the number of deaths per year—rose 1.2 percent from 2014 to 2015, according to the Society of Actuaries. That’s the first year-over-year increase since 2005, and only the second rise greater than 1 percent since 1980.

             

            At the same time that Americans’ life expectancy is stalling, public policy and career tracks mean millions of U.S. workers are waiting longer to call it quits. The age at which people can claim their full Social Security benefits is gradually moving up, from 65 for those retiring in 2002 to 67 in 2027.

            Almost one in three Americans age 65 to 69 is still working, along with almost one in five in their early 70s.

            Postponing retirement can make financial sense, because extended careers can make it possible to afford retirements that last past age 90 or even 100. But a study out this month adds some caution to that calculation.

            Americans in their late 50s already have more serious health problems than people at the same ages did 10 to 15 years ago, according to the journal Health Affairs.

            University of Michigan economists HwaJung Choi and Robert Schoeni used survey data to compare middle-age Americans’ health. A key measure is whether people have trouble with an “activity of daily living,” or ADL, such as walking across a room, dressing and bathing themselves, eating, or getting in or out of bed. The study showed the number of middle-age Americans with ADL limitations has jumped: 12.5 percent of Americans at the current retirement age of 66 had an ADL limitation in their late 50s, up from 8.8 percent for people with a retirement age of 65.

            At the current retirement age of 66, a quarter of Americans age 58 to 60 rated themselves in “poor” or “fair” health. That’s up 2.6 points from the group who could retire with full benefits at 65, the Michigan researchers found.

            Cognitive skills have also declined over time. For those with a retirement age of 66, 11 percent already had some kind of dementia or other cognitive decline at age 58 to 60, according to the study. That’s up from 9.5 percent of Americans just a few years older, with a retirement age between 65 and 66.

            While death rates can be volatile from year to year, Choi and Schoeni’s study is part of a raft of other research showing the health of Americans deteriorating.

            Researchers have offered many theories for why Americans’ health is getting worse. Princeton University economists Anne Case and Angus Deaton, a Nobel Prize winner, have argued that an epidemic of suicide, drug overdoses and alcohol abuse have caused a spike in death rates among middle-age whites.

            Higher rates of obesity may also be taking their toll. And Americans may have already seen most of the benefits from previous positive developments that cut the death rate, such as a decline in smoking and medical advances like statins that fight cardiovascular disease.

            Declining health and life expectancy are good news for one constituency: Pension plans, which must send a monthly check to retirees for as long as they live.

            According to the latest figures from the Society of Actuaries, life expectancy for pension participants has dropped since its last calculation by 0.2 years. A 65-year-old man can expect to live to 85.6 years, and a woman can expect to make it to 87.6. As a result, the group calculates a typical pension plan’s obligations could fall by 0.7 percent to 1 percent.

              Read more: http://www.bloomberg.com/news/articles/2017-10-23/americans-are-retiring-later-dying-sooner-and-sicker-in-between

              Puerto Rican Rum and Revenue Flowing Again at Bacardi Distillery

              After Hurricane Maria, Puerto Rico’s physical destruction multiplied its financial crisis. But at least one revenue generator is up and running: rum.

              On the western edge of San Juan Bay in a small town called Catano, a Bacardi Ltd. distillery produces some of world’s most famous rum. The spirit made at Bacardi and competitors like Destileria Serralles and Edmundo B. Fernandez Inc. provides fully 3 percent of Puerto Rico’s tax receipts.

              The Bacardi Ltd. distillery factory after Hurricane Maria.

              Photographer: Alex Wroblewski/Bloomberg

              The world’s top producer of international rum brands, Bacardi got its facilities functioning less than two weeks after the Sept. 20 storm left many without food, clean water, electricity or communications. The Bermuda-based company exported its first post-storm rum shipment last week. That’s a relief for the island, which counts Bacardi as one of its highest-profile companies and a pillar of the economy.

              The Catano distillery sits between two power plants. It includes distillation towers, warehouses to stash aging barrels, and storage tanks for molasses, water and diesel.

              When Jose Class, Bacardi Puerto Rico’s plant director, first arrived after Maria struck, entry was impossible. Overturned fences, branches and power lines littered the grounds. Gigantic palm trees lay uprooted. A concrete wall of one warehouse had collapsed. Pieces of the metal roof were scattered in and around the building.

              The rum and distillation equipment was safe.

              “I was so lucky that it was empty of barrels — I only had some cars in there,” Class said. “I can get a car today. My rum? It has to be aged at least for a year.”

              The plant’s engineering, maintenance and fire brigade were unable to start clearing Maria’s mess until five days after the storm’s eye passed. A week later, Bacardi filled its first 40,000-gallon batch.

              Sugar’s Offspring

              Rum has long been a Caribbean staple. It is distilled from molasses, which was a byproduct of the vast sugar industry enabled by colonialism and slavery. Its popularity was spread by sailors plying those trade routes.

              It’s such a steady revenue generator that Puerto Rico and the U.S. Virgin Islands have sold bonds with rum tax revenue as collateral. The Puerto Rico Infrastructure Financing Authority has done so since 1988; current owners of the $1.8 billion in securities include OppenheimerFunds Inc., Franklin Advisers Inc. and UBS Asset Managers of Puerto Rico, according to data compiled by Bloomberg. But the debt is tied up in the commonwealth’s record $74 billion bankruptcy.

              The nearby U.S. Virgin Islands, where rum is the second-largest industry after tourism, has issued $1.2 billion of rum bonds. The storm will have no impact on payments since the bonds are prepaid through 2018 and there is an additional year of reserves, said Lonnie Soury, spokesman for the U.S. Virgin Islands Public Finance Authority. Still, he said, “In light of the difficulties and the challenge we have moving forward, it’s very important that the rum distilleries are in production or have not been damaged severely.”

              Special Access

              In the case of Bacardi’s Puerto Rico distillery, the quick turnaround required a mutually beneficial agreement between the company and the government.

              Bacardi had generators on hand but needed more to get the plant running. With ports jammed, it was a logistical nightmare to deliver them from Bacardi’s bottling plant in Jacksonville, Florida. The government needed generators, too, for something more essential than liquor: clean water. So authorities expedited the company’s port access.

              “If we could re-establish power at the plant, we could supply them with all the water needs that they had in the communities around us,” said Ignacio del Valle, Bacardi’s regional president of Latin America and the Caribbean.

              In addition to the generators, the company brought first aid, medical supplies, food and 125,000 gallons of purified water from Jacksonville. And it pledged $2 million to help fund three relief centers that will provide meals for community members, entertainment and electricity.

              Some factories on the island have struggled to operate because employees have been unable to get to work. So the rum maker set up its own mini gas station inside the plant for its 180-odd workers. At its offices, there’s a room filled with jerry cans, divided by company division. Each department has an assigned day for when its members can pick up fuel.

              Nelson Candelario, who builds and repairs rum barrels, now has a 2 1/2-hour commute to the plant, double what it was pre-Maria.

              “It wasn’t only that everything was blocked — gasoline was limited, too” said Candelario, who was the last Bacardi worker accounted for after the hurricane hit. Emergency response crews didn’t arrive in his village until Oct. 2.

              Class said the company’s health is tied up with that of the commonwealth.

              “We wanted to send the message to Bacardi and to my employees and to Puerto Rico that we’re back in business,” he said.

                Read more: https://www.bloomberg.com/news/articles/2017-10-09/puerto-rican-rum-and-revenue-flowing-again-at-bacardi-distillery

                Deloitte hit by cyber-attack revealing clients secret emails

                Exclusive: hackers may have accessed usernames, passwords and personal details of top accountancy firms blue-chip clients

                One of the worlds big four accountancy firms has been targeted by a sophisticated hack that compromised the confidential emails and plans of some of its blue-chip clients, the Guardian can reveal.

                Deloitte, which is registered in London and has its global headquarters in New York, was the victim of a cybersecurity attack that went unnoticed for months.

                One of the largest private firms in the US, which reported a record $37bn (27.3bn) revenue last year, Deloitte provides auditing, tax consultancy and high-end cybersecurity advice to some of the worlds biggest banks, multinational companies, media enterprises, pharmaceutical firms and government agencies.

                The Guardian understands Deloitte clients across all of these sectors had material in the company email system that was breached. The companies include household names as well as US government departments.

                So far, six of Deloittes clients have been told their information was impacted by the hack. Deloittes internal review into the incident is ongoing.

                The Guardian understands Deloitte discovered the hack in March this year, but it is believed the attackers may have had access to its systems since October or November 2016.

                The hacker compromised the firms global email server through an administrators account that, in theory, gave them privileged, unrestricted access to all areas.

                The account required only a single password and did not have two-step verification, sources said.

                Emails to and from Deloittes 244,000 staff were stored in the Azure cloud service, which was provided by Microsoft. This is Microsofts equivalent to Amazon Web Service and Googles Cloud Platform.

                Microsoft's
                Microsofts Azure cloud service. Photograph: Microsoft

                In addition to emails, the Guardian understands the hackers had potential access to usernames, passwords, IP addresses, architectural diagrams for businesses and health information. Some emails had attachments with sensitive security and design details.

                The breach is believed to have been US-focused and was regarded as so sensitive that only a handful of Deloittes most senior partners and lawyers were informed.

                The Guardian has been told the internal inquiry into how this happened has been codenamed Windham. It has involved specialists trying to map out exactly where the hackers went by analysing the electronic trail of the searches that were made.

                The team investigating the hack is understood to have been working out of the firms offices in Rosslyn, Virginia, where analysts have been reviewing potentially compromised documents for six months.

                It has yet to establish whether a lone wolf, business rivals or state-sponsored hackers were responsible.

                Sources said if the hackers had been unable to cover their tracks, it should be possible to see where they went and what they compromised by regenerating their queries. This kind of reverse-engineering is not foolproof, however.

                A measure of Deloittes concern came on 27 April when it hired the US law firm Hogan Lovells on special assignment to review what it called a possible cybersecurity incident.

                The Washington-based firm has been retained to provide legal advice and assistance to Deloitte LLP, the Deloitte Central Entities and other Deloitte Entities about the potential fallout from the hack.

                Responding to questions from the Guardian, Deloitte confirmed it had been the victim of a hack but insisted only a small number of its clients had been impacted. It would not be drawn on how many of its clients had data made potentially vulnerable by the breach.

                The Guardian was told an estimated 5m emails were in the cloud and could have been been accessed by the hackers. Deloitte said the number of emails that were at risk was a fraction of this number but declined to elaborate.

                In response to a cyber incident, Deloitte implemented its comprehensive security protocol and began an intensive and thorough review including mobilising a team of cybersecurity and confidentiality experts inside and outside of Deloitte, a spokesman said.

                As part of the review, Deloitte has been in contact with the very few clients impacted and notified governmental authorities and regulators.

                The review has enabled us to understand what information was at risk and what the hacker actually did, and demonstrated that no disruption has occurred to client businesses, to Deloittes ability to continue to serve clients, or to consumers.

                We remain deeply committed to ensuring that our cybersecurity defences are best in class, to investing heavily in protecting confidential information and to continually reviewing and enhancing cybersecurity. We will continue to evaluate this matter and take additional steps as required.

                Our review enabled us to determine what the hacker did and what information was at risk as a result. That amount is a very small fraction of the amount that has been suggested.

                Deloitte declined to say which government authorities and regulators it had informed, or when, or whether it had contacted law enforcement agencies.

                Though all major companies are targeted by hackers, the breach is a deep embarrassment for Deloitte, which offers potential clients advice on how to manage the risks posed by sophisticated cybersecurity attacks.

                Cyber risk is more than a technology or security issue, it is a business risk, Deloitte tells potential customers on its website.

                While todays fast-paced innovation enables strategic advantage, it also exposes businesses to potential cyber-attack. Embedding best practice cyber behaviours help our clients to minimise the impact on business.

                Deloitte has a CyberIntelligence Centre to provide clients with round-the-clock business focussed operational security.

                We monitor and assess the threats specific to your organisation, enabling you to swiftly and effectively mitigate risk and strengthen your cyber resilience, its website says. Going beyond the technical feeds, our professionals are able to contextualise the relevant threats, helping determine the risk to your business, your customers and your stakeholders.

                In 2012, Deloitte, which has offices all over the world, was ranked the best cybersecurity consultant in the world.

                Earlier this month, Equifax, the US credit monitoring agency, admitted the personal data of 143 million US customers had been accessed or stolen in a massive hack in May. It has also revealed it was also the victim of an earlier breach in March.

                About 400,000 people in the UK may have had their information stolen following the cybersecurity breach. The US company said an investigation had revealed that a file containing UK consumer information may potentially have been accessed.

                The data includes names, dates of birth, email addresses and telephone numbers, but does not contain postal addresses, passwords or financial information. Equifax, which is based in Atlanta, discovered the hack in July but only informed consumers last week.

                Read more: https://www.theguardian.com/business/2017/sep/25/deloitte-hit-by-cyber-attack-revealing-clients-secret-emails