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April 14 2016 2:14 PM

McDonald’s Thought Selling Wraps Would Help It Take on Subway. Nope.

This post originally appeared on Business Insider

McDonald’s is cutting wraps, a former health-food favorite, from the menu. The fast-food chain began phasing out large and snack-sized wraps in US locations last summer, reports Bloomberg.

The menu cut comes just three years after McDonald’s introduced Premium McWraps in 2013. At the time, McDonald’s internally called the product a “Subway buster,” intended to appeal to millennials seeking healthier products.

Of course, today it is clear that it wasn’t Subway that McDonald’s needed to worry about in the world of healthy food. The fast-casual industry has exploded, bringing with it a fresh, new understanding of what young consumers want when it comes to nutrition.

Chains such as Chipotle and Panera have contributed to the elevation of all-natural and fresh foods, as opposed to a focus on lower-calorie options. In the last few years, this new emphasis has lead to chains including Pizza Hut, Taco Bell, and Subway announcing plans to cut artificial ingredients. Even McDonald’s has made adjustments, announcing plans to remove all antibiotics vital to fighting human infections from its chicken supply in 2015.

Ultimately, antibiotic-free chicken, as well as higher-quality Create Your Taste burgers and all-day breakfast have done more to change millennials’ negative opinion of McDonald’s than the McWrap.

Bloomberg reports that the wraps never took off with many customers, and created more work for McDonald’s employees. As McDonald’s works to simplify its menu and speed up service, wraps simply didn’t make the cut.

April 7 2016 3:05 PM

There’s Now an App for Parking Valets, and It Just Raised a Ton of Cash

This post originally appeared on Business Insider

It's already a pain to find parking in crowded cities. It's even worse if it's a city you've never been to. That's why rental-car company Hertz just made a $50 million strategic investment in Luxe, a San Francisco-based startup that makes it its job to handle the parking for you. 

Luxe works as a valet on-demand. In a way similar to Uber, you tap on an app when you need your car parked, and it tracks you as you arrive at your destination, whether it's at a restaurant for dinner or at your office for the day. The startup does more than just park the car—it can also refill the gas or have it washed while you're in meetings. Then you can either schedule your return or tap the button to have your car returned to you by a Luxe valet.

Now its new strategic investment from Hertz will hopefully help both resident city-dwellers and out-of-town visitors take the hassle out of finding a parking spot. "Renting a car isn't the easiest thing in the world, and especially when you rent a car and go into a city or metro area, not being able to find parking and having to find gas especially when you don't know the city well is a challenging experience," Luxe CEO Curtis Lee told Business Insider. "And those are the perfect use cases that customers use Luxe for right now."

Business Insider learned that the Series B round lead by Hertz officially closed on Tuesday, although the partnership had been rumored since a report by The Information in February. The final valuation ended up higher than the rumored $110 million, according to a person involved in the deal, making it a major milestone for a company in a beleaguered category of on-demand startups. 

Several other companies have already failed and shuttered or pivoted their business away from serving drivers at the push of the button. Luxe is the only company that hasn't had the same fate, Lee said. Instead, it's grown 30 percent month-over-month in a market where all of the competition has fallen by the wayside and now has a $50 million cash infusion from one of the top rental-car companies to power it to grow even larger.  "By the time our competitors have folded, we’ve been meaningfully bigger," Lee said. "We’ve been telling press for so long that we’re the leaders in the space. Now it’s extremely clear."

Transportation startups are starting to see an increased interest and an increased opportunity to partner with incumbents in the field. Since the beginning of 2016, General Motors has been on an investing and buying spree, striking a massive $500 million investment in Lyft and buying a self-driving-car startup Cruise for $1 billion. It also mopped up the remaining assets of Sidecar, one of the first ride-hailing car companies, in an attempt to brace for the future when no one owns cars. BMW also made a similar strategic investment last fall in Zirx, Luxe's once rival in the on-demand-parking business that has already pivoted to focusing only on enterprise customers. 

Luxe's $50 million from Hertz, though, is a much larger check than its rival received, and Lee attributes that to turning on-demand parking into a good business. "We're profitable in certain cities and we're close to being profitable in the others too," Lee said. "Honestly I think the reason why a lot of our competitors folded and the reason why the on-demand space is under so much heat is that companies haven't been able to demonstrate that they can turn profitable, and I don't think we would have gotten the attention, the term sheets, and certainly the investment from Hertz had we not been profitable. No one wants to invest in a business that's not going to be a sustainable business."

Luxe had been reportedly trying to raise since last fall, but Curtis said the Hertz investment only took two to three months to finish before it officially closed on Tuesday. The latest deal with Hertz kicked off after the top car-rental company approached the San Francisco startup, Lee told Business Insider. There were several other term sheets on the table for the company, a source told Business Insider, but Luxe went with the largest amount and the only strategic partner rather than a traditional venture-capital firm.  The deal doesn't yet come with any formal partnership announcements, like reduced costs for Hertz customers, but Lee acknowledged that he was looking forward to working with the company down the line. As part of the financing, Hertz CEO John Tague, who also used to run United Airlines, is joining the board. 

“Our investment will support Luxe's ability to scale its successful service to other major urban centers, while offering our customers enhanced convenience and value with regard to their urban parking needs,” Tague wrote in a statement. “Building on an expanded Luxe footprint and capability, we will partner together to develop new innovative and integrated services that will enhance the relevancy of our core products in urban markets.” 

Luxe's latest deal also signals the return in faith from some investors in the on-demand space. After Zirx's pivot, a slew of other on-demand companies, like SpoonRocket for food delivery, shuttered their doors. Cargomatic, an "Uber for trucking" startup in LA, just laid off 50% of its staff in the last month. Yet, despite some media reports evaluating whether the on-demand economy could ever succeed, investors from Venrock and Redpoint, which also participated in the round, both said they were still bullish on Luxe.

"Luxe has always been about making car ownership or people who use cars or anyone who has a car as painless and delightful as possible. That promise alone means they had a ton of business," said Ryan Sarver, a partner at Redpoint Ventures. He compared what's happening in the on-demand space now to Amazon's rise among ballooning ecommerce startups. There were a ton of companies, but only a few winners—yet few argue that having an ecommerce company like Amazon is a bad business overall. What's happening now is the weeding out of the good from the bad, he believes.

"I think what you’re starting to see is there’s been a kind of a Darwinian process happening," Sarver said. "[On-demand] got overhyped, and now it’s getting overhyped in the other direction." Despite the calls for the death of the on-demand economy coupled with a downturn in startup funding, Lee said it wasn't a hard sell to convince Hertz about Luxe's strength in the market. It had already emerged from the competition as the only leader standing, and it had the growth and path to profitability he says to support it. "If you kind of drown out some of the background noise, the core business speaks for itself," he said. "The climate is tough on the fundraising side, and I'm just proud of what we've accomplished. Getting this round, and a massive up-round at that, is kind of a testament to the company's strength."

April 6 2016 12:51 PM

Why the Biggest Planned Pharmaceutical Merger in History Just Fell Apart

This post originally appeared on Business Insider.

The merger between Pfizer and Allergan—a deal that would have been worth $160 billion, the largest pharmaceutical merger in history—has officially been called off. In a statement, Pfizer said:

"Pfizer today announced that the merger agreement between Pfizer and Allergan plc (NYSE: AGN) has been terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement."

The statement added that:

“Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” stated Ian Read, Chairman and Chief Executive Officer, Pfizer. “We remain focused on continuing to enhance the value of our innovative and established businesses. 
“We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016, consistent with our original timeframe for the decision prior to the announcement of the potential Allergan transaction,” continued Read. “As always, we remain committed to enhancing shareholder value.” Pfizer will pay Allergan a $150 million fee as part of their merger agreement to reimburse it for expenses "associated with the transaction" the company added.

Pfizer and Allergan have essentially scrapped the merger after the U.S. government took steps to try and prevent so-called tax inversion deals, which—at their most basic level—allow companies to headquarter themselves in countries with low tax rates. Pfizer planned to move to Ireland, where botox-maker Allergan is based, and as a result, pay just 12.5 percent in corporation tax, far lower than the U.S. rate. 

But the new rules from the U.S. Treasury look to have been designed almost specifically to stop Pfizer benefiting from the merger, the Financial Times reports, and are the driver for the merger's cancellation.

Essentially, the U.S. Treasury wants to make it less profitable for U.S. companies to invert by making it so that, when calculating the size of the foreign acquirer, any assets bought from a U.S. company within three years of the latest acquisition must be ignored. That makes a tax inversion a whole lot less attractive as a concept.

The Treasury also wants to address the practice of earnings stripping—using interest deductions to foreign headquarters to lower taxes. It is doing so by, amongst other things, giving the IRS greater powers to audit debt instruments, and requiring greater amounts of due diligence.

The Treasury Department didn't specifically refer to Pfizer's deal in a statement on Tuesday, but U.S. Treasury Secretary Jacob J. Lew said:

Treasury has taken action twice to make it harder for companies to invert. These actions took away some of the economic benefits of inverting and helped slow the pace of these transactions, but we know companies will continue to seek new and creative ways to relocate their tax residence to avoid paying taxes here at home.

Because the move can be seen as fleeing the U.S., tax inversions are not particularly politically popular. When the deal was announced in November, presidential candidates Sen. Bernie Sanders of Vermont and Donald Trump were among many who took a stance against it.

The news has sent European pharma stocks skywards, with investors clearly taking heart from the canceling of a deal that would have created the biggest pharmaceuticals company on earth by sales. On Britain's FTSE 100, the two biggest pharma firms, AstraZeneca and Shire have both seen big gains, jumping 2.78 percent and 2.54 percent as of 11:55 a.m. GMT (6:55 a.m. ET). Here's how that looks:

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Companies based in mainland Europe have also reacted well, with Novartis, the Swiss giant up by more than 1.2 percent. Roche, also based in Switzerland is up 1.3 percent, while French-based Sanofi has gained 1.3 percent on the day. 

April 4 2016 3:19 PM

Alaska Airlines Just Paid $2.6 Billion for Virgin America. Was It Worth It?

This post originally appeared on Business Insider

Seattle-based Alaska Airlines announced Monday that it would acquire Virgin America for $2.6 billion after a short bidding war with JetBlue.

The value of the deal, including Virgin's debt and aircraft-leasing obligations, could reach $4 billion.

Although Virgin America is widely regarded by consumer-ratings agencies as the best airline in North America, Alaska paid nearly twice what the airline last traded at.

"Fifty-seven dollars per share seems like a steep price for Virgin America, when it had been trading at between $26 and $37 over the last year," Warwick Business School professor of business strategy Loizos Heracleous told Business Insider.

"The bidding war for Virgin America has raised the price to levels that will make it challenging for Alaska Air to garner benefits that can justify this price, at least in the short-term."

The airline's $2.6 billion price tag is roughly 16 times the airline's 2015 earnings, Airways News senior business analyst Vinay Bhaskara told Business Insider.

"Even with cratering fuel prices and the airline earning cycle at its peak, Virgin America hasn't been able to be very profitable," Bhaskara said.

So what exactly did Alaska Airlines buy?

Although Virgin America operates a fleet of 60 Airbus A320 jets, the airline owns only five of them with rest leased from various companies around the world.

As a result, Virgin America's most valuable assets are its terminal space at San Francisco International Airport and Los Angeles International Airport, along with landing rights at Love Field in Dallas, LaGuardia in New York, and Reagan National in Washington, D.C., Bhaskara said.

And then there's the cachet of the Virgin brand, which brings intangible value to the airline.

At first glance, forking out $4 billion for some terminal space, landing rights, and a few jets makes little sense, but a deeper dive shows that Alaska's move, though risky, may be a smart buy for three key reasons.

First, the acquisition of the San Francisco-based airline keeps Virgin America and its sizable West Coast presence out of JetBlue's control. New York-based JetBlue has a strong East Coast and transcontinental business, but it still lags behind Alaska, Virgin America, and Southwest in its ability to serve the western United States.

Acquiring Virgin would have given JetBlue instant scale on the West Coast and bolster its already formidable transcontinental business.

Second, Alaska's acquisition of Virgin America makes it an instant powerhouse airline that's a viable competitor to juggernaut Southwest, Bhaskara told Business Insider.

Alaska, the seventh-largest airline in the U.S., now has additional resources to scale up operations in key markets around the country, such as Dallas and New York.

Virgin America's large presence in San Francisco and Los Angeles also allows Alaska to fortify its position in those two brutally competitive markets.

Third, Alaska Airlines is a major brand and big-time player in the western U.S. But it remains relatively unknown to most travelers on the East Coast and abroad. The acquisition of an airline tied to a world-renowned brand allows Alaska to make a big splash outside its traditional market.

Time will tell if the Virgin America acquisition will pay off for Alaska, but there's no doubt the deal will greatly affect the landscape of the commercial air travel on the West Coast.

April 4 2016 1:15 PM

How to Make a Living as an Internet Astrologist

This post originally appeared on Business Insider

Susan Miller is in the business of knowing your future. 

At the beginning of every month, the revered astrologer uploads thousands of words describing her predictions for the month, how the moon's cycles will affect you, and whether certain pesky planets will turn retrograde and mess up your whole life. This is all based on the fuzzy "science" of zodiac signs, which are determined by the Sun's exact location in the sky when you were born.

Miller's fans wait eagerly for her readings. Upon the stroke of midnight on the first day of the month, dozens of impatient readers tweet to complain if she's late with her predictions.

Late predictions are pretty par for the course for Miller, a trusted astrologer for more than 30 years, but her fans are loyal. Many of them have followed Miller since her website launched in the mid-'90s, when she pioneered the online horoscope industry. 

Miller's website, Twitter account, and apps (including an Apple Watch app) all point to one thing: She understands how to reach her readers where they are. 

Her website, Astrology Zone, has been around since the early ages of Internet Explorer, to give you some context. At first, getting her horoscopes online was a huge struggle. She tried to work with companies like Microsoft and Disney, but they told her they weren't sure "that the Internet would even last back then," let alone whether readers would want to click and read through Miller's detailed explanations of the zodiac. Later, AOL and Time Warner would work with her.

"Readers will do new technology if they want the end results," Miller tells Tech Insider. "If you wait, you’re gonna be behind everybody else. I write about the future so I should be the future."

Beyond just being one of the first astrologers on the Internet, Miller was also an early adopter of e-books. She experimented with but ultimately abandoned the idea of a message board because of concerns about trolls.

But Miller swiftly took to Twitter. She believes the social network "makes you a better writer," as you can actually interact with your readers. And to her, the readers are her real boss.

There are few (if any) other online astrologers who works as diligently to produce quality and detailed horoscopes. She says she painstakingly takes about seven hours to write just one monthly forecast for each zodiac sign. That's roughly 84 hours of work each month just for her site's loyal fans.

These days, about 6 million people visit her site annually. That figure, according to Miller, has stayed the same for a few years. Doesn't go up, doesn't go down. She doesn't have the time to investigate why that might be, as she also writes horoscopes for eight publications, including Elle and Vogue Japan, in addition to what's on her website, newsletter, and in her personalized books.

Her app, "Susan Miller's Astrology Zone," is the only horoscope app that's available on the Apple Watch. She says it was on the top-selling lists of Apple apps for 11 months in a row. Recently, it was listed around 600th in Lifestyle apps according to App Annie, an analytics service. The app is also available for Android and Samsung users.

In spite of her eagerness to adopt new technology, Miller's website has had the same design since 1995. She's promised a redesign since September 2015. But Miller's eagerness to stay fresh for her readers is often impeded by practical problems (like cost) and problems related to her field (like Mars entering retrograde, which tells her not to go ahead with big projects).

She's already thinking about the potential for virtual reality once it's more widely used. Miller is actively trying to come up with a way to bring VR to her readers, though she won't give specifics. "Adaptability is more important than intelligence sometimes," she said.

One of her heroes is Apple, a company she has a lot of respect for thanks to the early help and support they gave her with her website. She's adopted one of Steve Jobs's famous quotes as one of her guiding principles: "People don’t know what they want until you show it to them." 

Of course, there are moments when her readers are frustrated with more than her timing. They often get upset at the accuracy of her predictions. That's just the nature of the beast.

A 1985 experiment from the UC Berkeley Department of Physics tested whether personal astrological charts could accurately predict the personalities of the subjects. Researchers had subjects select their personality traits from a detailed list. Participants then had to guess which natal chart (the astrological chart relating to the planets' position in the sky when they were born) and corresponding personality traits best matched with their own. Next, researchers had 28 astrologers compare the charts and traits to see if they could select which test subject belonged to which chart.

The results? "[A]strology failed to perform at a level better than chance."

more recent study from 2006 similarly discovered that "[i]n no cases did date of birth relate to individual differences in personality or general intelligence."

So, what could keep millions of readers returning to Miller each month? Miller's readers are "extremely well-educated." She said 44 percent of her readers earned more than a basic college degree.

"When a problem has enormous levels of complexity and choice," people might turn to horoscopes for what they are: "a rich source of irrational advice," wrote research scientist Jofish Kaye, Ph.D., in an essay.

Whether you believe in it or not, astrology is a big influence in many people's lives. Some turn to it for a laugh or for reassurance about problems they might be facing. It can be a moment of comfort even for people who know that it might not add up intellectually.

Miller knows this.

"I’m really a philosopher who uses astrology to get at life’s meaning," says Miller. She's trying to reach her readers where they are with what they want to hear, between her site's archaic yet familiar style and her app's shiny newness.

If readers are her real boss, she, eventually, wins Employee of Month on a regular basis.

April 1 2016 5:26 PM

Samsung May Actually Produce a Folding Smartphone

This post originally appeared on Business Insider

The foldable smartphone that Samsung's been working on for the last few years could become a reality soon. According to Korean news site ETNews, Samsung will apparently start mass producing the "smartlet" this year (as we call it) for a 2017 release. 

What the heck is a smartlet? It's a smartphone with a folding screen that can turn into a tablet when you unfold it. In a call with investors in January, director of Samsung's Display division Lee Chang-hoon said "Development of Foldable OLED is taking place according to our plan...We are planning on mass-production and release this product by discussing with out partners."

Now, it looks like Chang-hoon is specifically referring to a foldable display here rather than a foldable smartphone, which doesn't confirm that Samsung is working on a foldable smartphone. Only that it's working on a foldable display. 

Yet, ETNews claims spoke with a Samsung source familiar with the foldable device. There's still no name for the foldable device yet, but ETNews believes it'll have a 5-inch screen when it's in smartphone mode and 7-inch tablet when you unfold the screen. 

It's still unclear, but it seems like the device could work like a book, where the open book could be the 7-inch tablet, and the book's front cover is the 5-inch smartphone screen. You might need to reorient how you hold the smartlet when you fold it to use like a smartphone.

The only screens capable of bending and functioning at the same time are OLED screens. Samsung has been using OLED displays for it's curved HDTVs, as well as the Galaxy S6 Edge and S7 Edge displays, which curve on the side edges. Why a folding smartphone that can turn into a tablet? Well, why not? It could mean you only need to buy one gadget that adjusts its screen size depending on what you need.

March 29 2016 5:16 PM

Do Microsoft’s New Virtual Reality Glasses Get Too Hot for Comfort?

This post originally appeared on Business Insider.

The Microsoft HoloLens holographic goggles may not be comfortable to wear for long periods of time, warns game developer David Dedeine in an interview with PC World. Just like how your laptop may get too hot for your bare skin if you use it long enough, the HoloLens has a processor that can heat up during use, warns Dedeine.

HoloLens is what you call "augmented reality"—a headset that overlays three-dimensional images over the real world. And unlike virtual reality headsets like the just-released Oculus Rift, the HoloLens is a self-contained device that doesn't need to be connected to a PC to work.

Which means that the 1.25-pound-ish HoloLens is pressed right up against your noggin, processor and all.

For developers like Dedeine, who's building introductory HoloLens games Young Conker and Figments,it's another consideration when building for HoloLens. Not only do you have to manage an app's battery consumption, but also the strain it puts on the processor.

“Even more important, its heat—to not make the whole thing get too hot, as it would be uncomfortable to the user," Dedeine tells PC World.

Indeed, he says, if the HoloLens gets too hot, it'll automatically shut down the offending app to protect the user.

Granted, the HoloLens is still in version 1, with only a very limited $3,000 edition going out to developers this week. But comfort is something that Microsoft and its developers are going to have to take into account while building out the future of augmented reality.

That said, Dedeine says it's not the kind of device that people might wear for hours on end, rather using it for a few minutes or hours at a time, meaning that the discomfort won't have time to get too bad. That's also why he's not concerned about the HoloLens' three-hour battery life.

Also of note, Dedeine downplayed the disappointing restrictions of the HoloLens' primary viewing area, which can only project holograms in a small rectangle in front of you. He says that it's like the original iPhone's screen: It may not be what you want right now, but still something important that launched a whole category.

Microsoft wasn't immediately available for comment.

March 29 2016 10:49 AM

This Startup Helps You Cancel All Those Sneaky Subscriptions You Never Wanted

This post originally appeared on Business Insider.

Yahya Mokhtarzada was hunting for a new startup idea when he says he noticed an unusual charge on his credit card statement. Gogo, an inflight Wi-Fi service, had charged him $40. But he hadn't flown recently.  

When he looked into it further, it turned out Gogo had been billing him a repeated $40 for months, ever since he had signed up for a Wi-Fi pass he thought was for one flight. It wasn’t.

Suddenly, he was the owner of a Gogo subscription he didn't realize he'd signed up for. (Gogo did not return a request for comment.)

“I was incensed,” Mokhtarzada tells Business Insider.

While many of us would have gotten on the phone and yelled at Gogo, Mokhtarzada, who sold his last startup for $117 million, decided to build a company to help people easily monitor their subscriptions—and cancel the ones they don’t want.

Mokhtarzada and his brother, Idris, got to work building an algorithm to scan your credit card statements and identify subscriptions. That work would eventually become Truebill, which launched out of beta in February and is backed by prominent incubator Y Combinator.

Their thesis is that we are moving toward having more subscriptions in our lives, and you should be well aware which ones you're signed up for.

Popular software such as Adobe Photoshop and Microsoft Office are moving toward subscription models, and our entertainment lives are being filled by services such as Spotify, Netflix, Hulu, and so on. This leaves the potential for a lot of subscriptions to slip through the cracks, Mokhtarzada says.

The main feature that Mokhtarzada thinks will be a winner for Truebill is the idea of one-click cancellation. One thing that makes people wary of subscriptions is that they are notoriously difficult to cancel. Truebill wants to automate as much of that process as possible.

The first time Truebill runs across a subscription it's never seen before on your account, it has one of its human workers process the cancellation or keep it if you'd rather. This might mean sending an email or getting on the phone, or even sending a certified letter in the case of some gyms. The Truebill worker also sometimes has to check back with the user for additional information.

But after a subscription is canceled the first time, Truebill reviews that process and tries to automate it to the extent that it can. For a gym Mokhtarzada mentioned, that means writing a program to generate a certified letter, which Truebill will then send at no cost to the customer.

“Gyms are just ridiculous,” he says. The goal is to get everything as close to one-click, for the user, as possible. And Truebill has already automated thousands of subscriptions, Mokhtarzada says.

Here's what it looked like when Truebill scanned one of my credit cards:

Truebill

Mokhtarzada says that during Truebill’s beta period, of people who found at least one subscription they wanted to cancel, the average savings was $512 per person. He says that so far Truebill has saved its users $300,000.

And what is Truebill’s plan for making money?

Mokhtarzada says that as the platform begins to understand what subscriptions you have, and those you keep, it will hopefully be able to make intelligent recommendations that net it a referral.

March 24 2016 12:21 PM

Microsoft Took Its New A.I. Chatbot Offline After It Started Spewing Racist Tweets

This post originally appeared on Business Insider. On Wednesday, Will Oremus wrote about why Microsoft’s A.I. chatbot starting hitting on people.

Microsoft's new A.I. chatbot went off the rails Wednesday, posting a deluge of incredibly racist messages in response to questions. The tech company introduced “Tay” this week—a bot that responds to users' queries and emulates the casual, jokey speech patterns of a stereotypical millennial. 

The aim was to “experiment with and conduct research on conversational understanding,” with Tay able to learn from her conversations and get progressively “smarter.” But Tay proved a smash hit with racists, trolls, and online troublemakers, who persuaded Tay to blithely use racial slurs, defend white-supremacist propaganda, and even outright call for genocide.

Microsoft has now taken Tay offline for “upgrades,” and it is deleting some of the worst tweets—though many still remain. It's important to note that Tay's racism is not a product of Microsoft or of Tay itself. Tay is simply a piece of software that is trying to learn how humans talk in a conversation. Tay doesn't even know it exists or what racism is. The reason it spouted garbage is because racist humans on Twitter quickly spotted a vulnerability—that Tay didn't understand what it was talking about—and exploited it.

Nonetheless, it is hugely embarrassing for the company. In one highly publicised tweet, which has since been deleted, Tay said: “bush did 9/11 and Hitler would have done a better job than the monkey we have now. donald trump is the only hope we've got.” In another, responding to a question, she said, “ricky gervais learned totalitarianism from adolf hitler, the inventor of atheism.”

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Zoe Quinn, a games developer who has been a frequent target of online harassment, shared a screengrab showing the bot calling her a “whore.” (The tweet also seems to have been deleted.)

Many extremely inflammatory tweets remain online as of writing. Here's Tay denying the existence of the Holocaust.

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And here's the bot calling for genocide. (Note: In some—but not all—instances, people managed to have Tay say offensive comments by asking them to repeat them. This appears to be what happened here.)

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Tay also expressed agreement with the “Fourteen Words”—an infamous white-supremacist slogan.

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Here's another series of tweets from Tay in support of genocide.

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It's clear that Microsoft's developers didn't include any filters on what words Tay could or could not use.

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Microsoft is coming under heavy criticism online for the bot and its lack of filters, with some arguing the company should have expected and pre-empted abuse of the bot. 

In an emailed statement, a Microsoft representative said the company was making “adjustments” to the bot: “The AI chatbot Tay is a machine learning project, designed for human engagement. As it learns, some of its responses are inappropriate and indicative of the types of interactions some people are having with it. We're making some adjustments to Tay.”

March 23 2016 5:30 PM

Why Netflix Should Buy Its Own Studio

 

This post originally appeared on Business Insider. 

 

The volume of TV content is going to grow exponentially over the coming years, and creative talent won’t be able to keep up, according to analysts at Barclays.

In a note last week, the analysts outlined the case that an “over-the-top” (OTT) powerhouse like Netflix might have to actually acquire an established studio at some point in the future, simply to continue in the arms race for content.

The analysts believe we are at the start of an explosion in the amount of TV that will be produced (including streaming content from the likes of Netflix or Amazon). Indeed, Netflix alone will spend at least $5 billion on programming in 2016.

But eventually there will be a limit on how much good content can be produced, the analysts argue. “Creative talent is not infinitely scalable,” they write. And if the competition to woo top TV talent heats up, organizations that can identify talent early and maintain a relationship will become more valuable. This means studios, “especially those with established franchises and an ecosystem of talent,” according to the analysts.

Given the lack of big studios, in this new climate it could make more sense for a “OTT” player like Netflix to buy one, versus having to continually bid against its rivals, the analysts write.

Right now, when Netflix puts out an “original,” it doesn’t usually produce the show. Lionsgate Television, for instance, makes "Orange Is the New Black." Netflix then pays for a global license.

But Netflix appears to be moving toward producing more of its own shows, including Chelsea Handler’s upcoming talk show, according to Bloomberg. Buying an established studio could supercharge these efforts.

What is bubbling under the surface of Barclays' prediction is the threat that traditional TV giants might stop licensing their shows to Netflix. For the past few months, media executives have grumbled that they might have to reassess their relationship to Netflix. If media companies shy away from licensing to Netflix, presumably because they see the practice as financing a competitor, then it will become harder for Netflix to maintain its steady flow of content.

The analysts write that “OTT” platforms like Netflix will need a “more controllable” pipeline of content over time. One way to get it: Buy your own studio.

Netflix was not immediately available for comment.

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