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Feb. 26 2015 4:29 PM

Convince Millennials to Pay for Tinder? Please.

This post originally appeared on Business Insider.

Morgan Stanley isn't crazy about Tinder, the dating app that allows users to approve or reject potential mates by swiping left or right. A big reason why is that the app's user base is young people, and young people don't like paying for dating apps.

"First, given the young age of the target demo and frequent unwillingness to pay monthly recurring fees for social services, we believe Tinder will not have much success monetizing with a high-cost recurring monthly subscription offering," Morgan Stanley wrote in a note to clients on Wednesday.

The firm added:

The challenge with freemium (charging for re-swipes, undos, read-receipts) is that a very small percentage of single people have shown an interest in paying for online dating. We think Tinder's 'casual dating' offering will see a similarly low take-up rate of willing payers ... In our models, we assume that 5–6 percent of Tinder users become paying members.

Tinder is set to launch a paid version of its app in March.

In a note to clients on Wednesday, Morgan Stanley initiated research coverage on IAC/InterActive, Barry Diller's internet and media company that owns more than half of Tinder, and said the stock's upside was not what some bullish analysts think it could be.

The firm wrote that the market saw Tinder as under-monetized—meaning there was a huge opportunity to sell more ads or get people using the app to pay, either through a subscription or in-app purchases—and that the growth of Tinder would power IAC shares higher.

In Morgan Stanley's view, IAC's Tinder stake provides the stock with no upside. The firm has an "Underweight" rating on shares and thinks they can fall 29 percent from current levels.

The firm acknowledges, however, that Tinder's user growth has been explosive, rising at a compounded annual growth rate of 125 percent over the past two years to reach 55 million.

But there might not be as much of an untapped market as other analysts expect.

Morgan Stanley writes that Tinder has already reached 40 percent of its core addressable market in the U.S., and while it sees the app having 111 million users by 2018, its growth rate will fall to 8 percent.

The firm also thinks Tinder could have a repeat user problem:

We view Tinder's unique 'casual dating' use case being primarily aimed at single people from 18-34. While there could be some growth in older demos, we think it will be limited ... We also believe there are limits to the percentage of single people who will become active Tinder users and repeating 'casual daters.' And in our view, Tinder is reaching those limits in the U.S. and Europe (30 percent–40 percent).

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Feb. 25 2015 5:37 PM

When It Comes to Greece's Massive Tax-Evasion Problem, Don't Blame the Super Rich

This post originally appeared in Business Insider.

Greece's reform plans have been released, and one of the big things the new government wants to tackle is the country's endemic tax avoidance and evasion.

Despite recent headlines suggesting the super-wealthy were the main offenders, there is an amazing academic paper that shows just how much Greece's upper-middle-class professionals are dodging taxes. 

Thanks to Twitter's Pseudoerasmus for bringing this to our attention in his longer and excellent blog on Greece's long-term problems. Here is a section from the 2012 University of Chicago paper:

On average, self-employed Greeks spend 82 percent of their monthly reported income servicing debt. To put this number in perspective, the standard practice in consumer finance (in the United States as well as Greece) is to never lend to borrowers such that loan payments are greater than 30 percent of monthly income. And that is the upper limit...

A number of banks in southern Europe told us point blank that they have adaptation formulas to adjust clients' reported income to the bank's best estimate of true income, and furthermore, that these adjustments are specific to occupations ... Take the examples of lawyers, doctors, financial services, and accountants. In all of these occupations, the self-employed are paying over 100% of their reported income flows to debt servicing on consumer loans.

You read that right: More than 100 percent of the self-reported income of Greece's professional classes is going toward paying off consumer debts. Not, we suspect, because they have massive unbearable repayments to make, but because they're colossally underreporting their income. About a third of Greeks are self-employed, nearly twice the European average and the highest rate in the EU.

A lot has been made of tackling Greece's oligarch tax evaders, but there has been less discussion about cracking down on the white-collar, high-income professional classes that are really rinsing their country's tax system. If Greek Finance Minister Yanis Varoufakis wants to be successful in cracking down on tax evasion, these are the people he needs to put the screws on.

Here's a chart below for the professions. In at least five sectors, including doctors and accountants, self-employed people are supposedly paying more than they earn on debt repayments every month:


Feb. 24 2015 4:15 PM

Out of This World? Plumbing the Depths of Super Mario’s Physics.

This post originally appeared on Business Insider.

Nintendo's Mario series is the best-selling video game franchise in history. And with moves like Mario's, it's no mystery why so many people enjoy navigating the little Italian plumber through his fantasy world of princesses, castles, and magical mushrooms. But there's a fundamental flaw in the game: In our universe, Mario World physically couldn't exist.

This tiny yet surprising flaw in the game was recently discovered by the PBS video series Space Time, which used some simple math and basic physics to determine what kind of planet Mario lives on. At first you might think Mario can jump so high because he is on a planet that is smaller than Earth and, therefore, that has lower gravity.

The moon, for example, has about one-sixth Earth's gravity, which means you can jump six times higher on the moon than on Earth using the same leg power. But that's not the full story.

Super Mario

The crucial detail is not how high Mario jumps but how fast he falls. Although you can jump six times higher on the moon, it would take six times longer to fall back to the ground than it would on Earth. If Mario fell that slowly, it would make for some pretty boring gameplay.

Because Mario moves relatively quickly through the air, he must be on a planet that has pretty strong gravity. You can easily calculate how strong the gravity in Mario World is with two simple parameters: how high Mario jumps, and how long it takes Mario to fall to the ground.

By crudely measuring these factors, Gabe from Space Time determined that in the Mario World game on the Super Nintendo Entertainment System from 1991, Mario jumps about 2¼ times his own height and takes approximately 0.3 seconds to fall to the ground.

After crunching the numbers, Gabe calculates that Mario is on a world whose gravity is eight times as strong as Earth's. Keep in mind that most humans can't withstand anything stronger than five times Earth's gravity before passing out.

To put this into better perspective: If you weigh 150 pounds on Earth, you would weigh 1,200 pounds on Mario's planet.

So how does Mario jump so high with all of those pounds weighing him down? Pure leg strength, Gabe concludes. He must do a lot of dead lifts off screen.

In fact, if Mario were on Earth, his strength would allow him to jump more than 90 feet off the ground. To achieve that kind of height, he would have a lift off speed of more than 50 miles-per-hour.

Now, Mario's jumping ability slightly varies between different games, so the G-value will also vary. But, in general, people have found that this value is between five and 10 times Earth's gravity — stronger than anything we experience on a daily basis. You might reach five G's when you're speeding through a 360-degree loop on a roller coaster.

There's no planet in our solar system that even comes close to the kind of gravity on Mario's many worlds. Jupiter, the largest planet orbiting our sun, has about 2.5 times Earth's gravity. So, if you weighed 150 pounds on Earth, you would weigh weigh 355 pounds on Jupiter. That's not even close to the gravity on Mario World.

While Mario might not be in our solar system, there's a possibility he might be outside of it—in another star system far from Earth. Because of our search for exoplanets outside of our solar system, we know that there are plenty of weird planets out there. But are they weird enough?

Through NASA's Kepler Space Telescope, we've found more than 1,800 planets orbiting stars other than the sun, thousands of light years from Earth. Could one of them have conditions similar to those on Mario World?

First, Mario clearly lives on a rocky planet with an atmosphere similar to Earth's. But it also has eight times the gravity of Earth—is such a planet possible?

Unfortunately, a planet like this doesn't seem likely to exist in our universe because of how we think large planets form. In order to have a lot of gravity the planet must have a lot of mass, and the exoplanets that even get close to large enough seem to be gas giants, like Jupiter and Saturn, with no ground to speak of.

Even the planet with the strongest gravity known so far is around four G's — about half the gravity that Gabe calculated on Mario World. So, as Earthlike as his world may appear on screen, there's no planet in the universe that would give us moves like Mario.

Check out the PBS video below:

Feb. 23 2015 12:27 PM

Moscow’s Shiny, Empty Finance District Tells You Everything You Need to Know About Russia’s Financial Crisis  

This post originally appeared in Business Insider.

Moscow's financial district is a little like the Russian government's international stature: on the surface gleaming and new and perhaps even a little intimidating. But scratch just below the surface and it's mostly empty, with a lot of money wasted.

The Moskva City complex contains Europe's tallest building, Mercury City Tower. London's Shard comes in second place, but Moskva City also contains the next three tallest. It's just a shame that most of them are half-empty.

There's a great report in CityMetric on this: The real estate consultancy Blackwood says a dismal 45 percent of the district is vacant, up from a third just a few months ago when the New York Times wrote about it. That's not the worst of it. Offices are still being built, so the vacancy rate doesn't seem likely to go down anytime soon.

At the end of last year the Times called the district "a $12 billion reminder of the nation's economic woes."

Russia's economic crisis is hitting its financial centre hard. Banks have been particularly damaged by the crumbling ruble and the sudden slump in oil prices. And that slump is coming at the worst possible time, when there are more buildings being completed than ever. Six are meant to be completed this year, followed by another two in 2016.

The government first started planning the district in the early 1990s, when Russian was just emerging from the Soviet system, but the first building was not finished until 2001. Last year the Times report listed the other firms moving in, suggesting that the area was barely even a financial center anymore: 58 percent of new entrants aren't financial firms.

City, the management company for the development in the neighborhood, says financial services companies are no longer the majority of its new tenants. Of the new Russian occupants signing leases this year, 58 percent were nonfinancial companies as well as local small and midsize businesses, like High Level Hostel, according to the management company.

New buildings are also being repurposed at the development stage. One low-rise will become a 6,000-seat movie theater. In finished towers, various nonfinancial ventures are renting space. One company sells Cambodian citizenship to Russians wanting a second passport. A culinary school and restaurant are opening.

Maybe there is time for Moskva City yet. After all, in 1991—10 years after it began—London's Canary Wharf didn't look like such a great project. The usually reliably conservative Times of London called it "an ill-conceived act of Tory social engineering."

Feb. 19 2015 1:29 PM

AmEx Users Should Expect Higher Fees, Fewer Rewards

This post originally appeared in Business Insider.

Get ready to get rid of your American Express card. 

News broke Thursday that the credit-card company lost an antitrust lawsuit over whether it could stop merchants from asking customers to use other credit cards. Other credit-card companies, particularly Visa and Mastercard, typically charge merchants that accept their credit cards lower fees than AmEx does.

The higher fees that AmEx charges merchants allow AmEx to offer better rewards to the customers who use its cards, so Thursday's ruling means cardholders' rewards are likely to worsen over time.

In addition to losing the antitrust lawsuit, AmEx also just lost two lucrative partnerships, first with Costco, and then with JetBlue. It also announced 4,000 job cuts in January.

None of these things would necessarily force the company to cut its high merchant fees. However, this lawsuit means restaurants and shops are free to ask customers to use other credit cards (this is in addition to the many that already refuse to accept AmEx).

That will put pressure on AmEx to lower its fees to be more competitive with Visa and Mastercard. Lower fees most likely mean fewer rewards for consumers, and, for American Express card members, potentially higher annual fees. 

So if rewards got you to sign up for an AmEx, you might as well apply for that Visa card today.

Feb. 18 2015 2:00 PM

Hungary Just Signed on to Russia’s Bid to Redraw Europe’s Gas Map

This post originally appeared in Business Insider.

Last month, Russia announced that it would shift all its flows of natural gas to Europe via Turkey, instead of Ukraine, in an effort to counter its decreasing influence over the European gas market.

"Our European partners have been informed of this and now their task is to create the necessary gas transport infrastructure from the Greek and Turkish border," Alexei Miller, head of the Russian state oil giant Gazprom, said in a statement.

And now Hungary, a European Union (and NATO) member, has bolstered Moscow's push to redraw the European gas map.

"It would be a good investment for Hungary if it makes sure that Turkish gas goes through Greece, Macedonia, and Serbia to Hungary," Hungarian Prime Minister Viktor Orbán said after negotiations with Russian President Vladimir Putin in Budapest on Tuesday.

screenshot 2015-02-18 09.18.15

Russia Today via Business Insider

The Moscow Times reports that a deal hasn't been signed and that the price of gas hasn't been disclosed. Nevertheless, Orbán said the agreement had been made in principle, and Putin seemed to agree.

"If they don't hinder us, then in essence we could realize part of the former South Stream project via Turkey," Putin said, referring to the European Commission.

The move makes economic sense to Budapest because Russia is Hungary's biggest trading partner outside the EU and supplies most of its gas. Politically, it's the latest win for Putin near Ukraine's borders and a blow to a unified European response to Russian aggression.

"We are convinced that locking Russia out of Europe is not rational," Orbán said. "Whoever thinks that Europe can be competitive, that the European economy can be competitive without economic cooperation with Russia, whoever thinks that energy security can exist in Europe without the energy that comes from Russia, is chasing ghosts."

Furthermore, the countries prospectively involved in the pipeline plan have increasingly cozy relationships with Putin. (The canceled South Stream pipeline had been slated to pass through both Serbia and Macedonia, which are not in the EU.)

Last February, Macedonian President Gjorge Ivanov told Russian media "the partnership with the Russian Federation is crucial for us" because the South Stream pipeline was "expected to provide the country's energy stability in the coming decades."

"The only thing I love more than Russia is Serbia," Serbian President Tomislav Nikolic said on a visit to Moscow in December. 

Serbian President Tomislav Nikolic with Putin during a military parade in October in Belgrade to mark 70 years since the city's liberation by the Red Army.

REUTERS/Vasily Maximov

And geopolitical expert Ian Bremmer recently noted that the signals from the new government in Greece, including comments by Greek Prime Minister Alexis Tsipras regarding sanctions over Ukraine, "as well as his meeting with the Russian ambassador to Greece within hours of taking office—demonstrate that he is willing to engage differently with Moscow."

Politics in Europe are the top global risk for 2015, and Putin's emerging gas plan is making the situation even more difficult for EU leaders.

Elena Holodny contributed to this report

Feb. 13 2015 3:45 PM

Is Apple Looking Into Making Cars?

This post originally appeared in Business Insider.

It looks like Apple is developing a car, as hard as that might be to believe.

Tim Bradshaw and Andy Sharman at the Financial Times are reporting the following:

Apple is recruiting experts in automotive technology and vehicle design to work at a new top-secret research lab, according to several people familiar with the company, pointing to ambitions that go beyond the dashboard.
Dozens of Apple employees, led by experienced managers from its iPhone unit, are researching automotive products at a confidential Silicon Valley location outside the company’s Cupertino campus, the people said.
Sir Jonathan Ive’s team of Apple designers has held regular meetings with automotive executives and creators in recent months, in some cases trying to hire them. Recent recruits to Apple’s team include the head of Mercedes-Benz’s Silicon Valley R&D unit.

This is just the latest report to bolster the idea Apple is developing its own car. Here's a quick recap of the story to date:

And now, the FT quotes someone who has worked closely with Apple in the past on car systems saying the following: "Three months ago I would have said it was CarPlay ... Today I think it’s a car."

It would be surprising if Apple made a car since Apple makes its money selling personal computers like the iPhone, the iPad, and the Mac. It will be selling the Apple Watch, it's most personal computer ever, as the company calls it.

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Robert Galbraith / Reuters via Business Insider

A car is not a computer. And unlike those other gadgets, a car has a longer upgrade cycle, and crappier margins. 

However, Steve Jobs had expressed interest in building a car. He told a New York Times reporter he would have loved to take on Detroit with an Apple car. Former Apple board member Mickey Drexler said Jobs wanted to make a car.

Apple's current executives have a deep interest in cars.

Eddy Cue, Apple's SVP of internet services, is on the board of Ferrari. Phil Schiller, Apple's SVP of marketing, is really into cars. His Twitter bio reads, "Apple, Sports, Cars, Science, Scuba, Drums, Photography. It's racing season!" The tweet he has pinned to the top of his profile isn't an Apple product, but a photo of a Porsche. 

Last year, Vogue profiled Ive. In that profile, it quoted Ive's good friend Marc Newson talking about cars: 

“Shit we hate,” says Newson, includes American cars. “It’s as if a giant stuck his straw in the exhaust pipe and inflated them,” he adds, “when you look at the beautiful proportions in other cars that have been lost.”

Newson now works part time at Apple, and he has designed cars in the past.

Apple CEO Tim Cook is not known as a car guy, but he did hint that Apple is working on things nobody was aware of. In September, he said , "There are products that we're working on that no one knows about. That haven't been rumored about yet."

Feb. 13 2015 8:43 AM

Some of the Oldest Companies in the Tech Industry Are Hitting Multiyear Highs

This post originally appeared in Business Insider.

The story of the tech industry is one of usurpation.

A company wins a market. It gets slow and complacent. It refuses to invest in new areas that might undercut its core and still-very-profitable businesses. Eventually, new upstarts come along that solve customers' problems better, cheaper, and faster. The dinosaurs are too slow to respond, and by the time they wake up and start to change, they're irrelevant. 

That's how it's supposed to go.

But three of the oldest and biggest companies in the tech industry have all seen their stocks hit multiyear highs in the last few months.

Take Cisco. On Thursday, it hit a seven-year high following a solid earnings report Wednesday.*


Courtesy of Yahoo Finance via Business Insider

Oracle almost touched its all-time high from July 2000 after its last earnings report in January.


Courtesy of Yahoo Finance via Business Insider

And Microsoft's stock almost touched $50 back in November—the highest it's been (split-adjusted) since the dot-com crash started in March 2000. It lost a few points after its most recent earnings report, but is still higher than any time since 2000:


Courtesy of Yahoo Finance via Business Insider

What's going on?

The specifics are a little different for each company, but in all three cases, investors believe that the companies have awakened to new threats and come up with strategies that will counter those threats.

For Cisco, the main threat is a newish technology called software-defined networking, or SDN, which lets companies move bits of their network around using software, instead of having to buy and install and replace a bunch of hardware. Cisco's main business is selling that networking hardware, so SDN was potentially a huge threat. 

But Cisco came out with its own SDN product, and it's apparently getting a lot of customers. Meanwhile, it's still selling plenty of hardware.

The threat facing Oracle is the cloud, where customers move workloads out of their own data centers and into a hosted service instead. This shift means that companies no longer need to buy as much Oracle software to run within their own data centers.

But Oracle has managed to acquire its way into becoming a credible cloud player, and says it will make more than $1 billion of cloud bookings next year.

Microsoft also faced a threat from the cloud but responded with services like Windows Azure (which lets companies run infrastructure on Microsoft's data centers rather than their own) and Office 365 (a cloud-based response to Google Apps). Those initiatives have been around for a few years now, but this year they really started to take off, and Microsoft says they are on track for $5.5 billion in revenues this year.

All three companies still face challenges, and all will have to smoothly transition as their older businesses eventually go into decline. And plenty of old tech companies are having more trouble adjusting, like IBM, whose stock has been down for the last two years. 

But there's a good lesson here—disruption isn't always a sure thing, particularly in enterprise computing.

A lot of big customers are skittish about buying products to run their business. They know they should move to newer and more efficient technology, but they don't always trust the startups or even companies that come from a different background, like Google, even if those vendors get there first.

So if the incumbents can respond quickly enough, at least some of their existing customers will stick with them because it seems like the safer choice.

Sometimes, the dinosaurs keep winning. For a while, at least.

*Correction, Feb. 13, 2015: This post originally misstated the dates on which Cisco stocks hit a seven-year high and the company released its earnings report. It hit the high on Thursday and released the report on Wednesday.

Feb. 11 2015 1:19 PM

Keeping Cash Under Your Mattress Is a Terrible Idea. Why Are So Many Americans Doing It?

This post originally appeared in Business Insider.

Usually, a reference to stashing money under the mattress or in a shoebox is a joke. Real adults who make smart choices keep their money in the bank.

Or, at least, they should.

A new survey of more than 1,800 people from the American Express Spending and Savings Tracker found that 43 percent of Americans keep their savings in cash. An alarming 53 percent of those cash-hoarders “plan to hide bills in a secret location at home.”

While the survey itself doesn't explain why, it's reasonable to assume that at least some of these savers feel safer with money where they can see it, as opposed to hidden away in a bank that has played the bad guy since 2008. According to a 2014 Harris Poll, half of Americans say their trust in banks has declined in recent years.

Unless you have extenuating circumstances (although the only ones that come to mind immediately are running a drug cartel or operating as an international spy), avoiding the bank is usually a bad idea.

There are two primary reasons why:

It isn't safe: Keeping your money in literal, tangible cash makes it extremely vulnerable. You could be robbed or there could be a flood, a fire, or a pest infestation that snacks on your dollars. Your toddler could find it and use it for art projects, your teenager could siphon it for Friday night expenses, or someone working in your home could find it just too tempting to leave alone.

Arrested Development fans will remember this well.

On the other hand, money stored in a Federal Deposit Insurance Corporation–insured bank is insured up to $250,000 per person, meaning that money deposited in accounts like checking, savings, and retirement savings is guaranteed and protected by the FDIC, which says on its website that since its establishment in 1933, no depositor has lost a single cent of his or her funds.*

Note, however, that products like mutual funds and life insurance are not protected. Then again, mutual funds and life insurance don't exist in the shoebox in your closet.

It isn't growing: Money in your pocket—or dresser drawer, or safe under your desk—loses value as it sits there. Even the less than 1 percent interest it would earn in a standard savings account is better than the 0 percent you'd get by keeping your money at home.

Inflation alone historically rises about 3 percent a year, and although there are various options to keep your money ahead of the curve (like investing in even the most conservative mutual funds or investing your retirement savings), keeping your money under the mattress is the quickest way for your wealth to essentially go backward.

Barring a flood, fire, or sticky-fingered visitor, you might have your savings in 30 years ... but you won't be able to buy as much with them as you would today.

You could also argue that storing savings in cash around the house could lead to miscalculations or tax complications (for instance, deciding to put more than $10,000 of cash into the bank could raise red flags) and could complicate payments (what major purchases does anyone make with a duffel bag full of cash, outside of the movies?).

The only feasible situation in which someone might want to keep his savings close at hand is if he has virtually nothing saved and needs that cash for everyday transactions until his next paycheck. If you have bigger savings goals, however, you'll probably want to empty out the shoebox and head to the bank.

Correction, Feb. 11, 2015: This post originally misidentified the Federal Deposit Insurance Corporation as the Federal Insurance Deposit Corporation.

Feb. 11 2015 12:03 PM

The World Wants American Whiskey

This post originally appeared in Business Insider.

American whiskey is taking over the world. 

Vodka still has the biggest market share of the three big hard liquors in the U.S., but growth in whiskey is rapidly catching up.

Vodka sales, by volume, were up 1.6 percent in 2014. Tennessee whiskey and bourbon sales by volume were up 7.4 percent in the same period, according to the Distilled Spirits Council, the industry's trade association.

And when it comes to exports, all people really want is American whiskey.

Here's a chart from the DSC:


Distilled Spirits Industry via Business Insider

People in the U.S. and abroad are developing a greater taste for whiskey, but the exports also have to do with the weird naming rules that whiskey has. For instance, Champagne can only technically be made in the French region of Champagne; bourbon can only be made in the U.S. It's the same with Scotch in Scotland and Irish whiskey in Ireland.

Each of those kinds of whiskeys are made a little bit differently and have relatively distinctive tastes. At least that's what their producers will tell you. So there's less supply of each kind. As people around the world develop a taste for American whiskey, they have to import it from the U.S.

Vodka and rum, on the other hand, can be made anywhere in the world. They may taste a little bit different, but so far American producers haven't convinced the rest of the world that our spirits other than whiskey are really worth importing. Figuring out how to convince people of that is potentially worth billions.