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Mad Men or Mad Math? The Decline and Rebirth of Online Advertising 

Ad-AgenciesVeteran-Madison-Avenue-advertising-executive-Jerry-Della

by Satish Polisetti - adsnative.com

As more sites like Facebook, Twitter and Buzzfeed blend ads directly into a user’s content stream, the future of online advertising is quickly shifting. It’s a brave new world defined by content, not dimensions; mad math, not mad men. Science and data, not merely creative endeavors.

Where are we today? Currently, online ads are defined primarily by size and dimensions — with IAB ad unit guidelines describing leaderboards (728 x 90 pixels), skyscrapers (160 x 600), and full banners (468 x 60), to name a few.

These very basic but widely accepted standards are based on the artistic perspectives of a previous generation – from the minds of creative geniuses you might see on Mad Men. These have more to do with traditional ad buys, and print ad dimensions, ones that have not really changed much in the past few decades since the swinging 60′s of Don Draper.  When we jumped into internet advertising, the look and feel of advertising changed, but standards failed to get with the times.

And then there were banners:

The history of the online banner ad can be traced back to Yahoo! and a nascent online advertising ecosystem. These are where the leaderboards, skyscrapers and full banners really claimed their moment. A full decade later, tech giant Google was using AdWords and text based advertising to push a new kind of content-based advertising that set the tone for the next stage in ads: Facebook and the news feed.

Facebook, which quickly conquered the world’s attention – and their data, figured out how to actually use the massive amount of user data they had at their fingertips to makes ads better — by creating editorial-based stories on your news feed.

So if the online ad has experienced so much growth, why are we still living in a world where the standards are based in the era of the Yahoo! banner ad?

Luckily there’s a new set of standards gaining traction within our industry, which are semantic rather than dimensions based.

Core content, API’s, and the future of online advertising

It’s a game-changing question: What if this old idea of an ad being defined  by its size was replaced by editorial content and a description? What if ads were essentially the same as content? That’s what API’s and semantic standards are here for.

These new advertising standards make banners work like chameleons – blending into and adjusting to any type of website design.  What’s more, they take just 1/10 of the time to integrate than a traditional ad, they’re easy to implement, and they increase user engagement.

If this massive shift in direction continues – which I am confident it will – banners as a branding mechanism will start to fade away and a new ads standard will be fully accepted into the fold. Soon, all online ad experiences will be seamlessly integrated into your newsfeed or mobile experience. Already major budgets are being shifted to Facebook and Twitter advertising, and these shifts will make new API-based dimensions for banner ads the new standard. Entire industries will be changed accordingly. Companies that don’t make the transition will simply die a slow death – like the old advertising standards themselves.

Satish Polisetti Bio:

Native advertising expert and founder of AdsNative (www.adsnative.com). He’s a TechStars 2013 graduate, Mayfield Fund Fellow and 30 under 30 alumni of India’s #1 private university.

 

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Criminals Target Stubhub with New ‘Cyber Scalping’ Tactics

stubhub-hit-by-intense-network-of-cyber-fraudstersThe recent hacking of the world’s largest ticket marketplace, StubHub, points to new lengths in which criminals will go to turn their online capabilities and opportunities into illegal monetary gain. Seven criminals from around the world turned the San Francisco-based vendor’s online customers against them by hacking 1,600 accounts and laundering $1.6 million in fraudulent wire transfers and PayPal transactions.

“The assault on StubHub showcases the creativity of the cybercriminal underground,” said Trend Micro vice president of technology and solutions JD Sherry.  “They have taken ticket scalping to the next level in the form of ‘Cyber Scalping.’ Any event with a social aspect such as concerts or sports that conduct commerce with a large online community are primary targets for these sophisticated crime syndicates.  The sick twist on this form of scalping is that they are acquiring the tickets at no cost and garnering 100% profit.”

Trend Micro, a global leader in cloud security, also warns that cybercriminals are not yet done with the pilfered accounts and system information obtained illegally by the thieves. Rather, StubHub and its customers should be on the lookout for more fraudulent activity as the stolen content is more than likely making the rounds within the underground markets for purchase.

An attack of this magnitude can start with as little as the click of a link or the opening of a weaponized attachment. Another possibility would be popular watering hole sites or drive-by downloads that prove difficult to avoid and even more complicated to detect. Vendors who provide goods and services online to customers are increasingly becoming the target for these sorts of attacks, and should take a serious look at what anti-fraud capabilities they have in place.

 

 

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U.S. leads in number of people unconcerned about climate change and environmental disaster

The poll, conducted by U.K. research organization Ipsos MORI, was conducted in 20 countries across the globe, and gathered feedback from over 16,000 people. The poll asked eight climate change and environment-related questions.

When asked the question, “To what extent do you agree or disagree? We are heading for environmental disaster unless we change our habits quickly,” only 57.3% of the respondents in the U.S. said that they agree. Of the countries surveyed, the U.S. came in last in the number of respondents who agreed with that statement.

The ranking of countries surveyed when asked the question: To what extent do you agree or disagree? We are heading for environmental disaster unless we change our habits quickly. China had the most number of respondents to agree with that statement. The U.S. had the least. (Ipsos MORI)

China, which has been the leading emitter of carbon dioxide according to the Environmental Protection Agency, had the most number of respondents agree with the statement that the world is heading for a disaster. The Unites States is the second largest emitter of carbon dioxide, and comes in 13th in energy efficiency, according to ascorecard released by the American Council for an Energy-Efficient Economy.

Air quality issues in China might have played a role in these results. The smog problem is notoriously bad in the country, and could be in the forefront of peoples’ minds as they answer questions about the environment. The U.S., on the other hand, has seen a marked improvement in air quality since the mid-20th century, when some regions’ pollution rivaled China’s current levels.

In another survey question, respondents were asked if they agree that the climate change we are currently seeing is largely the result of human activity. 54% of U.S. respondents said that they agree — the lowest agreement ratio of the 20 countries polled. In China, 93% agree that human activity is to blame.

In America, climate change often seems to boil down to party lines. The Yale Project on Climate Change Communication suggests there is a way to communicate the scientific consensus without triggering political polarization. They offer the solution of “using short, simple, declarative sentences or simple pie charts” when communicating the science to the public. They also note that while metaphors and analogies can be proven successful, it’s important to remember that “simple, sticky messages” are most effective.

 

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Algorithms in the Mist: How researchers try to decode Facebook’s newsfeed

Algorithms in the Mist

The algorithms used by Facebook and others are murky at best. Researchers are working to understand them.Andrew Harrer/Bloomberg


by Alex Dalenberg
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The UpTake: Algorithms are a fact of digital life, but the inner-workings of the likes of Facebook’s newsfeed and Google Search are famously opaque. These researchers are working to change that.

The algorithms that power applications likeFacebook‘s newsfeed and GoogleSearch shape the contours of our digital lives, but only a handful of engineers know how they actually work.

That was the upshot at a luncheon forum this week at Harvard’s Berkman Center Internet and Society in which three researchers described their efforts to decipher Facebook’s newsfeed from the outside.

Even the most technically savvy can only make educated guesses at how these tools function. Silicon Valley companies zealously guard their algorithms as proprietary secrets. They’re also constantly changing (here’s an interactive showing how Google Search worked in 2007).

For most Web users they remain out of sight, out of mind. A recent study of Facebook users suggests that a lot of us aren’t even aware of their existence.

When Karrie Karahalios, an associate professor in computer science at theUniversity of Illinois, and her colleagues went to test how Facebook chooses what to display on its newsfeed, the majority of their 40 study participants (about 62 percent) had no idea that Facebook was even making choices about what they saw or didn’t see in their newsfeed.

To do this, Karahalios and her team built an app using Facebook’s API showing everything happening in a user’s network, no filter, placed alongside the regular, filtered newsfeed that users see when they log into Facebook.

In short, it was the first time many of the participants realized they weren’t getting updates from certain friends, family members or other pages because of choices made by Facebook algorithms.

The MIT Center for Civic Media has a nice play-by-play breakdown of the entire presentation here. The Berkman Center website hasn’t posted the video of it yet, but when they do, it should show up here.

There’s a lot to unpack in this presentation–far more than in a short post–but I thought it was worth pointing out as part of a growing trend of academics, journalists and other advocates calling for what might be described as algorithmic transparency. For example, Nick Diakopoulos, a Tow Fellow at the Columbia Journalism School, has argued that poking and prodding at algorithms should be its own journalism beat.

Why is it important? For one thing, algorithms determine what gets an airing in the marketplace of ideas. The companies that build these algorithms also have their prerogatives, and they don’t necessarily line up with the user’s when it comes to what they see and when.Christian Sandvig of the University of Michigan, who also presented at the Berkman Center, writes in detail about this here.

Recall the firestorm over the news that Facebook experimented on users by making newsfeed changes to test its impact on their emotions as well as the company’s tepid response. This conversation isn’t going away.

 

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Gangs, guns and Judas Priest: the secret history of a US-inflicted border crisis

Central America didn’t always have a gang epidemic. We exported that

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central america gangs
Children and migrants are fleeing rival gangs from the northern triangle of Central America, but the cycle of violence began further north than that. Photograph: Luis Romero / AP

Visiting El Salvador over the past year, it was hard not to think the country’s number-one job is standing around outside with a gun. In the region from which child migrants are fleeing to the US, personal security is largely a question of what you can afford to pay. El Salvador has, by one estimate, 25,000 private guards in a country with 20,000 police officers. In Honduras, which boasts the highest murder rate in the world and has seen the largest exodus of young people to the American border this year, guards outnumber cops five to one.

Wealthy Salvadorans can retreat to residential compounds that resemble a militarized version of a Palm Beach retirement community, complete with golf carts. Behind high walls and even higher voltage wires, one economist gushed to me: “This place has everything – we never have to go outside!” For the rest, those who stay and those who get sent back, gangland drama is a fact of life.

For Americans behind our own wall, there is a sense of bewilderment. We wonder why these young people are showing up at our borders, if they are enticed by some false promise of amnesty. And then we send them back.

But child migrants escaping north are not so irrational, and the current wave is neither new nor terribly mystifying. The factors that push and pull them – extreme violence, extortion, forced gang recruitment and a desire to reunite with family – are rooted in the United States’s heavy hand in the region.

Central America didn’t always have a gang epidemic. That was exported there by us. And the current immigration crisis is as much a United States legacy as it has become a local tragedy – a consequence of US-financed civil wars from the 1980s that sparked the first migration wave, and of US policies toward those migrants after they arrived.

ms 13 devil horns hand
The origin of MS-13′s trademark devil-horns hand sign comes from an English-language metal band and the streets of Los Angeles Photograph: Ulises Rodriguez / EPA

Both major gangs now plaguing the region originated in Los Angeles. The gang that became MS-13 was originally an informal collection of teenage civil war refugees and metal-heads who borrowed their devil-horns hand sign from Judas Priest. Their onetime ally-turned-rival, Mara 18, traces back to the 1940s but shared with the newer gang an open-door membership for Central Americans that put them both at odds with the area’s more established, exclusively Mexican gangs. When those gangs began to terrorize the new immigrants, MS-13 and Mara 18 fought back. Only later would they spread to the countries which their parents had left, through deportations, and contribute to today’s migration wave.

In time, MS-13 and Mara 18 came to surpass their oppressors, thanks in part to a citywide police sweep that preceded the 1984 LA Summer Olympics, busting up the known Angeleno gangs but overlooking the new Central American rivals – and also their propensity for violence, notoriously favoring machetes for attacks.

These street battles would have been of little concern to most Americans were it not for President Clinton and his desire to triangulate Republicans on crime. In 1996, he signed a law that ratcheted up deportations of immigrants with criminal records – including those with citizenship – by making things like drunk driving and petty theft deportable offenses.

Shipping off undesirable immigrants proved enormously popular among Democrats and Republicans alike, and mass deportations continued apace under Presidents Bush and Obama – overwhelmingly to Mexico and Central America. According to Homeland Security data, annual criminal deportations to El Salvador, Honduras and Guatemala have since jumped more than five-fold, from 1,987 in 1995 to 106,420 in 2013. Add the non-criminal deportation boom that will explode this year should Obama get the expedited deportation authority he’s currently seeking, and you’ll have the makings of yet another migration crisis just down the road.

Of course, deporting hundreds of thousands of criminals has been far less popular in the countries to which deportees are sent “home” – to a place many left as toddlers and do not remember. Mostly unemployable, some speaking little to no Spanish, many reconstituted their maras in countries ill-prepared to deal with them, still in the midst of postwar reconstruction, with underequipped and easily corruptible police in only nominal control of public safety.

It’s a cycle: With each planeload of deportees, the gangs grew stronger, expanding their activities and recruiting younger members by force – taking a page from the armies Washington had backed a generation earlier – and it is precisely those children they target who await processing in our border detention facilities today.

Once again, migrants fleeing a conflict zone we helped create are showing up at our doorstep, and our solution, once again, is to send them back. Basic humanity dictates that we consider the plight that brought them here, and that we prioritize family reunification. So, too, does the law – one which Congressional Republicans, who routinely charge Obama with not enforcing immigration law, are now clamoring for him to ignore, and Obama remains just as eager to oblige them.

During El Salvador’s recent presidential elections, the opposition party posted billboards in regions from which the largest number of migrants are leaving. Under pictures of Salvadoran families in DC, California and New York read lines like I WANT TO RETURN TO A COUNTRY FREE OF GANGS. It’s an ambition unlikely to be realized as long as the US believes we can deport our problems away, because eventually, those problems tend to come back to haunt us.

 

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The benefits cliff: when minimum wage increases backfire on the people in need

For many Americans living in poverty, the real cost of higher minimum wage could be benefits lost by a few dollars gained

US Money upset woman benefits
A 50-cent raise could result in many Americans losing childcare benefits, thus plunging the family deeper into poverty. Photograph: Chris Rout/Alamy

Here’s the paradox of the minimum wage: even as the higher minimum wage attempts to lift low-wage workers out of poverty and help them get off benefits, it might actually leave them worse off than before. The reason? The few extra dollars tacked onto their pay checks cause them to lose their federal benefits, including food stamps or housing subsidies.

For example, a wage of about $11 to $12 can cost a single mother with two children their food stamps, also known as Snap benefits. A wage of about $15 to $16, similar to the minimum wage recently enacted in Seattle, can leave that same family without any childcare benefits.

“This is a big issue with deciding [social] programs, because you want the programs to be targeted towards the people that most need them,” explains Curtis Skinner, director of family economic security at National Center for Children in Poverty. “On the other hand, you don’t want to create this disincentive, which is possible, to earn more or to take a promotion.”

It’s the benefits cliff, and it’s very real.

“There is this issue of the benefits cliffs, where some programs are designed so just a very marginal increase in earnings can result in a loss of a very important benefit. And a lot of states, unfortunately, have structured their childcare subsidies programs that way,” explains Skinner.

“Typically, pay rises, income rises, but at some point you lose eligibility for a subsidies all together and it’s an abrupt reduction in that family’s resources,” Skinner says.

In the world of benefits, nuclear families are far from the norm. Very often, the benefits are calculated on the income of a single breadwinner – usually a mother.

A single mother with two children is “a common family type, it’s not an anomaly at all,” explains Derek Thomas, a senior policy analyst at the Indiana Institute for Working Families.

Minimum wage wars: $10.10 v $15

The current proposal in Washington to increase the national minimum wage to $10.10 would help families keep their benefits.

“Such families would retain these benefits at $10.10,” explains Skinner. “Families would also qualify, most importantly, for childcare subsidies at this level of income.”

Increasing minimum wage, however, affects the pay of all low-wage workers.

It’s the $11 to $11.50 hourly wage where families begin to lose their Snap benefits, says Thomas.

The higher the minimum wage gets, the less in benefits the family is eligible to receive.

“Raising minimum wage to $15 an hour, you also have the same problem with childcare in Indiana. Because going from $15 to $15.50, you lose almost $9,000 in childcare benefits in Indianapolis,” explains Thomas.

US Money benefit cliff Indiana
In Indiana, the most dramatic benefit ‘cliff’ occurs when child care subsidies are lost between the wages of $15.00 and $15.50 per hour – a total net resource loss of $8,454, and about 25% loss in annual resources. Photograph: Indiana Institute for Working Families

The problem is not unique to Indiana. A higher minimum wage improves a family’s financial situation, but too often, not by enough.

“In many places, $15 minimum wage would still be too low to make ends meet for a family of three in large cities,” says Skinner. “The big issue is that it could cause some families to lose childcare subsidies – well over $10,000 a year. The families would have to balance the tradeoff between the wage increase and losing the childcare subsidies if they need them.”

Childcare is the most expensive benefit to lose.

Living wage

How to fix this is the thorny issue.

“The minimum wage is not the way to go,” says Skinner, pointing out that by the time it’s finally implemented, it’s likely the wage will be once again outdated.

Considering all this, advocates have begun calling for a move away from the minimum wage and the adoption of something called a living wage. Or as Thomas puts it, a self-sufficient wage.

“Everyone likes the idea of self-sufficiency,” Thomas says. When earning a self-sufficient wage, a mom with two kids wouldn’t need to rely on any governmental assistance to make ends meet.

“The math is clear. We need to bring [minimum wage] up to living wage so that we spend less on benefits. That’s the goal,” says Susan J. Roll, an assistant professor at the School of Social work at the California State University in Chico. “No one wants to live on benefits.”

US money strike 15 minimum wage
Protesters hold ‘Strike for 15′ signs at the Brighton Park McDonald’s in Chicago during a protest for higher minimum wage. Photograph: Steve Rhodes/Demotix/Corbis

The last bill to increase the federal minimum wage was passed in 2007. Increasing minimum wage to the proposed $10.10 in the current US political climate seems difficult enough. Moving to a living wage might well be impossible.

Unfortunately, calculating a living wage is no easy task. A self-sufficient wage would not be the same for all areas in the US. It can also vary significantly across counties of any given state.

While the self-sufficient wage in Indianapolis is $19, there are other counties where it’s even higher, notes Thomas, adding that in some places it’s as high as $22 an hour.

There is a reason why the gap between the current minimum wage and the living wage is so high. “The wages have remained basically the same and the cost of goods has increased,” explains Thomas.

Bringing the issue back to the communities

As a result, many state and local governments have taken the matters into their own hands. Recently, Seattle raised their minimum wage to $15 an hourChicago is mulling doing the same.

When considering an increase in minimum wage, states should also revisit the issue of their benefit eligibility levels, says Thomas. “That’s a good time for states to deal with both issues at the same time.”

 

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BioSkin Facade Wins Tall Building Innovation Award

NBF Osaki Building uses BioSkin facade system

BioSkin facade, a system of water-filled ceramic pipes that cools the exterior surface of buildings and their surrounding micro-climates, has won the 2014 Tall Building Innovation Award from the Council on Tall Buildings and Urban Habitat (CTBUH).  The initial use of BioSkin was at the NBF Osaki Building in Tokyo, Japan.

BioSkin is a system of ceramic pipes, affixed to the side of a building, which absorbs heat through rainwater evaporation, mitigating the urban heat island effect by cooling the building as well as its immediate surroundings. Through this process, the surface temperature of the building enclosure can be reduced by as much as 12 degrees Celsius and its micro-climate by about 2 degrees.

The potential implications of this are substantial:

If a large number of buildings in a city used such a system, ambient air temperature could be reduced to the point thatcooling loads for many buildings, even those without the system installed, could be reduced.

The NBF Osaki Building uses BioSkin facade systemThe simplicity of the system is elegant. The BioSkin tubes are made of extruded aluminum cores, with a highly water-retentive terra-cotta shell attached to the aluminum core using an elastic adhesive. When rainwater collects on the rooftop, it is then drained to a subsurface storage tank, where it is filtered and sterilized. This water is then pumped up and circulated through the pipes, which in the live test case were incorporated as balcony railings on a Tokyo office building, reminiscent of the horizontal screens seen throughout Japan and known as sudare.

Rainwater penetrates outward through the porous ceramic, evaporating from the pipe’s surface, cooling the surrounding air. Excess water is then drained down to the soil of the premises to the extent possible, normalizing the water cycle and reducing the load on sewage infrastructure.

“BioSkin is a bold concept, suitably analyzed, elegantly integrated into the architectural form and beautifully detailed,” said 2014 Technical Awards Juror Paul Sloman, Principal and Buildings Group Leader at Arup, Sydney, Australia.

“This is a remarkable façade solution, both in its concept and how it has been beautifully detailed,” said David Scott, Technical Awards Jury Chair and lead structural director of the Engineering Excellence Group at Laing O’Rourke, London, UK. “I look forward to seeing this being proven by measurement. It is elegantly and delicately detailed, and it is quite outstanding, as it is combined with many other innovations in this remarkable building.”

The CTBUH Innovation Award recognizes a specific area of recent innovation in a tall building project that has been incorporated into the design, or implemented during construction, operation, or refurbishment. Unlike the CTBUH Best Tall Building awards, which consider each project holistically, this award is focused on one special area of innovation within the design, construction, or operation of the project – thus not the building overall. The areas of innovation can embrace any discipline, including but not limited to: technical breakthroughs, construction methods, design approaches, urban planning, building systems, façades, and the interior environment.

Source: Council on Tall Buildings and Urban Habitat

Photos: nikken.co.jp

 

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Germany Is Weltmeister

LONDON — A new nation won the World Cup. It was the first victory for a unified Germany, or a reunified Germany if you prefer. That country was more than a generation in the making. Germans do not believe in quick fixes.

Formal reunification occurred on Oct. 3, 1990, a few months after the previous 1-0 German victory over Argentina in a World Cup final, an ugly affair in Rome. But it has taken a quarter-century, and untold billions, to knit the post-Cold War nation together. When I lived in Berlin between 1998 and 2001, it was not just the countless cranes hovering over the city that told of a work in progress. It was the different mind-sets of Ossi and Wessi, Easterners and Westerners eyeing each other with resentment.

No matter, Germany had decided. It would pay the price to achieve reunification. It would work on the problem. It would move in the appointed direction, come what may.

This fine World Cup winning team was also the fruit of long-term planning. Over the past dozen years, the Deutscher Fussball-Bund (DFB), or German Football Association, has invested a fortune in new facilities, identifying youthful talent, nurturing that talent and ushering it to the national level. Two young players who emerged from that system, André Schürrle of Chelsea and Mario Götze of Bayern Munich, combined to conjure the beautiful goal that clinched victory.

It had been preceded by the 7-1 demolition of the hosts, Brazil, in the semi-final. Seldom has a soccer match so resembled an execution. It was not only Germans who felt the need to look away. Domination is not the modern German way. Brazilian agony was too explicit not to cringe.

BBC commentators could not resist the clichés. Germany was “clinical.” It was “efficient.” People tweeted, “Don’t mention the score.” With Germany there is always something unmentionable that rhymes with war. It is not easy to be German. But in that difficulty, as this team suggested, there lie strengths. Everything about this team, from its talent to its ethics, was admirable. The right team does not always win. In this case it did.

Germany, I said, does not believe in quick fixes. It is worth repeating because it is an idea that sets the country apart in an age where a quick killing, tomorrow’s share price, instant gratification and short-termism are the norm. Germans on the whole think what the rest of the world builds is flimsy. Anyone who has felt the weight of a German window, or the satisfying hermetic clunk of one closing, knows they have a point. The German time frame is longer.

Why Germany differs in this may be debated. Having plumbed the depths of destruction and evil, having understood the depravity into which a “civilized” country may descend, Germany had to rebuild from the “Stunde Null,” or “Zero Hour,” of 1945. It had to hoist itself up step by step; and it had to build into its reconstituted self the guarantees that ensured no relapse was possible. This took planning. It took persistence. It involved prudence. Even before all this the first German unity of 1871 came only after centuries of strife at the European crossroads. Geborgenheit is an untranslatable German word but no less important for that. It means roughly warmth, home, trust and security, everything that is so precious in part because it may go up in smoke.

Perhaps German success is the result of the immensity of past German failure. I think that has something to do with it, even a lot. Whatever its roots, German success is important and instructive.

If you talk to business leaders of the German Mittelstand, the small and medium-sized companies at the heart of the country’s economy, you are transported to another world. You sit in stark boardrooms, so devoid of indulgence they resemble classrooms, with unassuming people leading billion-dollar companies, and they speak of loyalty, 10-year plans, prudence and quality. If one word induces a look of horror, it is debt. The notion of making money with money, of financial engineering rather than engineering itself, is alien.

Joachim Löw, the German coach, spoke before the final of the careful building of his youthful side: “We can play on top of the world for a good few years yet, with some young players coming in to reinforce the team.” Inevitably, the idea of Germany “on top of the world” for a long time conjured up images the phrase would not evoke for another country. Even a victory dance by members of the German team turned into a national debate because it was seen by some as unseemly mocking of the gaucho Argentine. The president of the DFB apologized.

Germany is now soccer’s “Weltmeister,” a composite word composed of “world” and “master.” It deserves the honor. Its society has much to teach others. But restraint will be its watchword.

 

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Microsoft to slash 18,000 jobs in deepest cuts in tech giant’s history

Most of the job losses expected to come from firm’s Nokia unit, which Microsoft acquired in April for $7.2bn

Microsoft CEO Satya Nadella.
Microsoft CEO Satya Nadella outlined plans last week for a ‘leaner’ business. Photograph: Robert Galbraith/Reuters

Microsoft is embarking on the deepest cuts to its workforce in its 39 year history, axing 18,000 jobs over the next year, as it absorbs its newly acquired Nokia phone business and takes out layers of management.
The new boss of the US company is cutting one in seven of the tech giant’s 127,000 global workforce as it attempts to integrate the Finnish business it acquired in April for $7.2bn.
Satya Nadella, the firm’s chief executive for just five months, first hinted at job cuts last week when he outlined plans for a leaner business. That led to speculation about sweeping job cuts, but expectations underestimated the 18,000 job losses announced yesterday, which propelled the tech giant’s shares to their highest level since the dotcom boom in 2000, gaining 1.5% to $44.84.
The cuts will mostly come from Nokia, which added 25% more staff to the Microsoftworkforce. Until now, the largest round ofredundancies in Microsoft history was in 2009, when it cut 5,800 employees.
“My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” Nadella said in an open letter on Thursday.
Nokia’s former chief executive Stephen Elop, who is now vice-president for devices at Microsoft, sent a lengthy letter to staff which began with “hello there” and was peppered with management jargon such as “ramp down”, “right-size” and outlining a desire to “help people ‘do more’”.

It is only in the final paragraphs that Elop acknowledges 12,500 professional and factory workers will be axed from Nokia’s devices and services division. “These decisions are difficult for the team, and we plan to support departing team members with severance benefits,” said Elop, who received a controversial £16m payoff from Nokia before signing up to join Microsoft.
Nadella said 13,000 staff would receive redundancy notifications in the next six months. All will receive severance pay and some will receive job placement services.
It was not clear where in the world the axe will fall, but the cuts could begin with 1,350 redundancies in Seattle. When Nokia was acquired by Microsoft, the Finnish phonemaker operated 130 sites in 50 countries. Including those, Microsoft runs 717 sites across 114 countries.
Nadella said the cuts were caused by the absorption of Nokia into the larger organisation and because he intended to embark what as described as “work simplification”.
“It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas,” he said. He did not offer details about what new positions might be added.
“The overall result of these changes will be more productive, impactful teams across Microsoft … We will simplify the way we work to drive greater accountability, become more agile and move faster,” he said, indicating there would fewer layers of management.
The exercise will cost between $1.1bn and $1.6bn over the coming 12 months.
The Nokia deal had been set in train by the former Microsoft chief executive Steve Ballmer as a way to move into mobile devices, an area that has not traditionally been a strong one for Microsoft.
Other technology companies are also wielding the jobs axe to cut costs and focus on new internet-based technology. Hewlett Packard, for instance, is cutting 50,000 staff from its 250,000 workforce.
In April, Nadella and Elop emphasised growth in emerging markets, and aimed to provide the “next billion” people with their first phones – potentially worth $50bn a year.
“The vast majority of people do not have, nor will they ever have a personal computer,” Elop said. “And so there are literally billions of people who can be exposed to Microsoft for the very first time.”
Nadella took the reins from Steve Ballmer in February, and wrote last week’s 3,200-word letter to employees that emphasised the importance of cloud computing and mobile devices.
He is only the third boss of the business since it was created by Bill Gates, who was succeeded by Ballmer. Many saw the memo as foreshadowing cutbacks, but the size of the cuts was unexpected. Analysts had predicted more than 6,000 job cuts
Microsoft is due to publish its results on 22 July, when more details of the job cuts are expected.

 

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The 49ers’ ribbon cutting at Levi’s Stadium

The ribbon at Levi's Stadium in Santa Clara officially opened the 49ers' new home.

The ribbon at Levi’s Stadium in Santa Clara officially opened the 49ers’ new home.

Silicon Valley was a different place when the San Francisco 49ers were putting the final touches on the plan for their billion-dollar Levi’s Stadium in Santa Clara.

When local voters approved a ballot measure to lease the team the land for the venue in June 2010, unemployment in Santa Clara County was hovering around 11 percent. Tech startups weren’t getting nine-figure funding rounds, and average rents were nowhere near the current $2,000-a-month range.

But that was then.

On Thursday, 49ers leaders joined corporate sponsors, local politicians, and hordes of media to officially open the ultra high-end stadium with a ribbon cutting. The 49ers won’t take the field for a few more months, but the venue already has changed the sea of office parks, single-family homes and strip malls that is Santa Clara.

“Today we change the very trajectory of our city and our region,” said Santa Clara Mayor Jamie Matthews, who teared up as he recounted door-to-door campaigning on the 49ers ballot measure with his 80-something father, who has since passed away.

He said the stadium project “helped bridge the gap” for the city between the recession and the current tech boom.

Matthews cited a figure that the city now has $6.7 billion worth of private investment either approved or under construction, which he credited in large part to the buzz around the stadium. He also mentioned a more nascent proposal by Related California to build a colossal mixed-use development right across the street.

Niners CEO Jed York focused heavily on the fans.

“You guys deserve the best stadium in the world,” he said to the crowd populated by many local big wigs. “Now you have it.”

Still, amid all the nostalgia about the colossal effort of more than 7,000 workers to build the $1.3 billion, 68,500-seat stadium, it is impossible to ignore the fact that the structure also serves as a monument to the massive amount of money that is once again circulating in Silicon Valley.

The stadium holds no less than 10 club lounges, seven of them housed in a gleaming glass building running down the sideline. Without the context of the Bermuda grass field below, it looks more like brand new class-A office building than a place to guzzle some beer and slam some hotdogs during a football game.

Prices for admission at the new stadium have been contentious since they were announced, with many worrying that die-hard fans could be priced out.

At the swanky 50-yard line club sponsored by investment bank BNY Mellon, for instance, seat licenses alone went for $80,000. Seat licenses went for $20,000-$30,000 at the Levi’s 501 club on the second level of the stadium, plus $325-$350 per ticket.

The primary concourse level for those without club tickets or luxury box seats — where seat licenses started at $2,000 — also has sweeping views of the foothills around the Santa Clara Valley and unique features like a craft beer taproom and vegan hot dog stand.

National Football League Commissioner Roger Goodell, who also came to town for the ribbon cutting, demurred on a question about whether pro football is still accessible to all fans by emphasizing the upgrades at new stadiums.

“Prices for football tickets, like anything else, tend to go up, not down,” he said, stressing that teams now must create “more value” for those who do show up in person.

While the 49ers and many other pro sports teams do face huge financial pressure to compete with ever-improving home theatres, that doesn’t change the math for fans who don’t have thousands to spend on tickets (at least for future seasons, since the venue is already sold out for this year).

“Pity I will probably never be able to take my family to a game,” one fan said to me via Twitter. “I will say it is an amazing looking facility.”

During his remarks at a press conference, York told a story about a recent talk he saw billionaire Warren Buffett gave about why “getting rich slow” is the most effective way to gain wealth.

“I think Santa Clara really embraces that,” he said.

Though the city will have to wait to fully realize its returns on the $850 million stadium authority loan for Levi’s Stadium, the team has already cashed in by moving down Highway 101 to Silicon Valley.

 

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