Business Insider
Analyzing the top news stories across the web

June 3 2015 3:15 PM

How to Manage an Organization the Sepp Blatter Way

This post originally appeared on Inc.

For at least a decade, soccer's biggest nations have carped about the scandal-tainted leadership of Sepp Blatter as the head of FIFA. But the leadership failure is as much theirs as it was his. Blatter's resignation on Tuesday comes not because the membership finally rose up—heck, he was re-elected as president last week—it comes because the ongoing investigation by the Justice Department and the indictments of top-ranking FIFA officials made it untenable for FIFA's sponsors such as Adidas, Coca-Cola, and McDonald's.

They were being poisoned by Seppticemia. "I appreciate and love FIFA more than anything else," Blatter said in announcing his resignation. "And I only want to do the best for FIFA."

That is, after he did everything that was best for Sepp Blatter. He resisted reform even after Swiss police, acting on DOJ's behalf, arrested and hauled off his own officials  prior to the presidential election. The man is a blueprint for how an underwhelming intellect can seize and expand power. He isn't the first, yet does provide some interesting leadership lessons.

1. Dilute the power of the powerful.

The World Cup takes place every four years and is open to all member nations. But in the end, the 32-team tournament is dominated by European powers such as Germany, Italy, Holland, and France, plus the South American giants Argentina and Brazil. Fans aren't clamoring to see the Togo play, yet under FIFA's one nation, one vote system, a country like Dominica has as much power as England. And Blatter worked to extend memberships to outfits such as Malta, with each new member owing allegiance to him. As assertions and then evidence—everything from bungling World Cup marketing to out-and out bribes—Blatter marshaled African nations and the many small nations in FIFA's 209-member community behind him.

2. Spread the wealth, even if it isn't yours to spread.

Sepp has outmaneuvered the mighty Europeans by running FIFA the way Chicago Mayor Bill Daley used to run Chicago—by having his ward heelers dole out jobs and other patronage in return for votes. Daley may have been great at it, but the art form had been established well before him. Blatter took the billions that FIFA earned from the World Cup—funds largely provided by fans of the big soccer nations like Germany, Argentina, Italy, Brazil, and France—and distributed them across Africa and Asia. If Papua New Guinea wanted a soccer field, Sepp was there to roll one out.

3. Declare victory and move on. Repeat as necessary.

Blatter is the kind of monomaniacal leader who believed he is the game. So any criticism or allegation could be addressed with a combination of imperiousness and incredulity. "Neither FIFA nor its President have anything to hide, nor do they wish to," he said in a statement, according to the website That was in 2003.

Blatter had an exasperating ability to ride over the tops of direct questions like they were waves. You'd leave an interview with that guy just shaking your head. It's instructive that Blatter wasn't brought down by investigative journalism—and there's been a ton of it. He was brought down by the FBI and the IRS, and the ability to flip witnesses under threat of long jail terms. We've seen this movie before in the rise and ultimate demise of Juan Antonio Samaranch as head of the International Olympic Committee. Samaranch practically skipped his wife's funeral to show up at the Olympic Games in a desperate attempt to save his job. These guys traveled like heads of states and ruled like dictators in the name of sport.

4. If you have nothing to hide, then hide it in Switzerland.

Transparency is the enemy of hegemony. FIFA's books have been open to no one, a situation that drove people such as U.S. Soccer Federation head Sunil Gulati to distraction. But under the umbrella of Swiss law, Blatter could not only get away with it, he would lament the fact that he couldn't share the data with anyone, as much as he would like to. That's the reason a critical report about FIFA by U.S. investigator Michael Garcia—one FIFA had commissioned—was buried by Blatter. FIFA released a 41-page summary clearing the organization of any wrongdoing. Garcia resigned in protest.

The good news is that the secrecy game is ending. Over the last five years, Switzerland has been forced to rethink and ultimately remake its famous privacy laws. And once again DOJ was the agitator. The arrest of a single Swiss banker in Florida would eventually lead to the discovery that hundreds of thousands of Americans were hiding funds there illegally. Blatter and crew took advantage of the same laws to completely obfuscate FIFA's finances. The next president won't.

5. Weak partners are your most powerful friends.

Being a World Cup sponsor is a sales platform that few other events can match. It's also an excuse for corporate schmoozing at a grand scale. American corporations have long recognized its value, which is why Coca-Cola, McDonald's, Budweiser, and Visa have re-upped. But they probably recognized that if FIFA was forced to apply the same accounting and social responsibility principles as they do, the cops would have been there years ago. Instead, the corporations figured that fans would look past FIFA's policies and focus on the games themselves. This was largely correct in the pre-social media days. Last week, as parody logos of Coke and McD's began to appear all over the Web, it became a huge liability.

6. You may be horrible, but your enemies still fear regime change.

Blatter has something in common with everyone from Syria's Bashar al-Assad to any number of the world's current and past despots. Killing the king is risky, and nobody is eager to volunteer. It's the reason why bad managers tend to hang around too. The big soccer nations could have ended Blatter's reign whenever they wanted to, but they lacked the um, balls. Germany, Brazil, Italy, France, England, and Argentina could have said, "Either Sepp goes, or we won't be showing up at the World Cup." Instead, there were years of silence that empowered Blatter to be more imperious. Only England verbalized that threat last week, the ironic part being that it is no longer much of a soccer power. Blatter had already marginalized the English.  

Instead, the soccer world has suffered from a decade of Seppticemia. Let's hope there's a lasting cure.

Video Advertisement

June 1 2015 1:32 PM

Goldman Sachs Doubles Paid Paternity Leave to Four Weeks

This post originally appeared on Business Insider.

Goldman Sachs is making life better for new dads. The investment bank just increased its paid parenting leave for non-primary parents, according to an internal announcement obtained by Business Insider.

Non-primary caregivers will now be offered four weeks of paid leave to bond with their babies. The bank had been offering two weeks paid leave.

"We looked at increasing the paid parenting leave for a number of reasons. Mainly, we realized that we have a number of employees where both spouses or partners are working and in order to provide opportunities for them to balance both their work and personal lives, it was important to provide individuals the opportunities to spend more time with their families," Laura Young, a vice president in human capital management and head of Goldman's wellness programs, told Business Insider.

Here's the full announcement: 

As part of the firm’s ongoing commitment to working families, we are pleased to announce a global enhancement to our existing two-week parenting leave policy for non-primary caregivers.

Beginning Monday, June 1, non-primary caregivers will be offered four weeks of paid leave following the birth or legal adoption of a child, either by their spouses or domestic partners. The four weeks of paid parenting leave may be taken in increments of one week or more, or as otherwise approved by your business manager, and must be taken within 12 months of the birth or adoption of the child. The enhanced parental leave policy is the newest addition to our existing leave policies which include 16 weeks of paid maternity, adoption and surrogacy leave for primary caregivers.

According to Goldman's leave policies, the four weeks can be taken non-consecutively within the first year of the child's birth. Meanwhile, the bank currently offers 16 weeks of paid maternity leave. The first 12 weeks must be taken consecutively, while the last four can be considered paid parenting leave.

Same-sex partners are eligible for the parenting leave policies. 

Other Wall Street firms leading the paid paternity leave movement include Bank of America (12 weeks) and Citigroup (2 weeks). Silicon Valley remains way ahead of Wall Street on this perk. Companies including Yahoo, Google, Facebook, and Twitter all offer two to six months leave for both new mothers, fathers, and adopting parents.

May 29 2015 12:31 PM

Fancy Gyms in the U.K. Have an Unstoppable Enemy: Really Cheap Gyms

This post originally appeared on Business Insider.

Pure Gym just bought LA Fitness. That may seem like a normal industry acquisition, but there's something more interesting going on here. Upmarket and mid-market gyms in the UK such as LA Fitness (which is not related to the American chain of the same name) are being destroyed by budget rivals.

In the same way budget airlines revolutionised air travel 20 years ago, budget gyms have changed the fitness market in the UK since the recession. New players like Pure, PayasUgym, and TheGym have flipped the traditional business model on its head, forcing the incumbent players to fight their corner.

UK operators such as Fitness First, David Lloyd, LA Fitness, and Virgin Active typically lock you in to a long-term contract at a pretty high monthly rate—about £40 ($61) as a basic—but promise premium service in return. There are pools and saunas, as well as top-of-the-line equipment and plenty of TV screens.

On the other hand, the new breed of gym lets you cancel your contract at any time and offers membership typically costing about £20 ($30) a month. The gyms keep small staffs and include only basic equipment.

Full disclosure, I'm a member of the Pure Gym near my house. It's in a warehouse that looks like an air hanger and is about as no-frills as you could get—I feel lucky there's a shower. But it's just so cheap. I would never have signed up to a deal amounting to £40 ($61) a month, but at this price point I think why not.

Pure Gym and its rivals are having huge success pitching to consumers like me whose needs had been unmet. Most started life around the time of the 2008 recession, when money was tight. The first Pure Gym opened in 2009, but the brand is already the UK's biggest gym operator, with 130 outlets across the country.

By contrast LA Fitness, which has been around since 1990, has only 43 clubs and at its height had about 80 gyms. Pure Gym says it plans to open another 30 gyms next year—nearly reaching LA Fitness' entire footprint in just one year.

These budget gyms are cheap to set up and cheap to run. Pure's founder, Peter Roberts, told The Telegraph in January that each gym typically employed just two full-time staff members, with self-employed personal trainers also on site. Most of the administrative work is done online and automated.

The popularity of budget gyms shows no signs of slowing. Pure Gym CEO Humphrey Cobbold said Friday in a statement: "Overall demand for affordable, high-quality, and no-contract fitness centres is continuing to grow, served by a range of providers in a highly competitive marketplace."

LA Fitness and gyms like it, meanwhile, look to be on the way out. The company was valued at £90.3 million ($138.22 million) in a private-equity deal in 2005, but last year its lenders took control of the loss-making chain and had to pull off a major restructure. At the time it blamed competition from the likes of Pure Gym. Terms of Friday's sale were not disclosed.

Pure is set to turn all LA Fitness branches into its own brand budget offering as part of plans to expand in London and the South East. That makes one upmarket gym chain that has fallen at the sword of its budget rival. Others could follow.

May 27 2015 5:54 PM

Uber and Lyft Treat Workers Like FedEx and Strip Clubs, Says Lawyer Who Successfully Sued FedEx and Strip Clubs

This post originally appeared on Business Insider.

Shannon Liss-Riordan was having dinner in San Francisco when a friend insisted he show her this life-changing app. He opened up Uber and walked her through the process: you set your location and a driver in their own car comes and picks you up. Everyone's private driver, as the company first advertised.

The app would change Liss-Riordan's life, but not for the reasons her friend was thinking. Instead of being awed by its car-summoning abilities, Liss-Riordan's brain, like always, was focused on the people powering the business.

"I’m standing there looking at him, and he looks up at me and realizes what’s going through my head. And he says 'No, don’t you dare. You’re going to put this company out of business, aren’t you?" Liss-Riordan told Business Insider. "That was my first introduction to Uber. I didn’t actually sue them until a year or more after that."

Liss-Riordan, a Boston-based employment rights lawyer, waited until August 16, 2013, to be exact. She later filed a similar suit against Lyft. Both suits have since been whittled down to workers in California.

At the heart of the matter is a how these companies classify their workforce.

Uber and Lyft drivers claim their drivers are independent contractors, not employees. Seen through Silicon Valley's rose-colored lenses, these are self-fulfilling entrepreneurs sitting behind the wheel, taking control of their own destinies and filling their schedules with as little or as much work as they want.

These folks make up the backbone of what's known as the "1099 economy," because these flexible workers fill out the tax form known as the 1099 MISC, used for freelancers and contractors, rather than a W2, used for full-time employees. They do the labor at most of the "Uber for X" companies that have proliferated in the last few years, particularly in the San Francisco Bay Area. 

By using contractors instead of employees, companies are not responsible for things like payroll taxes, job expenses, anti-discrimination protections or overtime pay. For bootstrapped startups, it's a cost-saving measure that can mean life or death. 

But Liss-Riordan isn't drinking the same venture-capital bought kool-aid as the startups who have built businesses around the 1099 economy. Rather, she views it as another example of companies using contract workers as a way to skirt their obligations as an employers.

"I don’t believe this industry needs to be built on a system whereby the workers don’t need to receive any of the protections that we have a society that workers need to receive," she said. "I just don’t know how Uber can argue with a straight face that as a $40 billion dollar company it can’t afford to insure its drivers, pay minimum wage or pay overtime, or be reimbursed for their expenses. This is not going to put Uber out of business."

Liss-Riordan said she can see through Uber's smoke and mirrors because she has seen companies try to do the same thing before, whether it was FedEx misclassifying their drivers or night clubs doing the same with their exotic dancers.

"They try to claim that because they’re providing services through an app they’re somehow different from all these companies I’ve been suing for all these years," Liss-Riordan said. "I just don’t believe that."

She first started looking into employment law after she worked with outspoken lawyer and former congresswoman Bella Abzug right out of college. After graduating from Harvard Law, she went to a labor union in Boston where she ended up embroiled in wage and hour disputes. Shannon Liss-RiordanLichten & Liss-RiordanShannon Liss-Riordan at her office in Boston.

"One case led to another and before I knew it I had spent a decade representing wait staff against restaurants and hotels and country clubs," Liss-Riordan said. One particular case even led Liss-Riordan to buy part of a pizzeria and split the ownership with the employees. The pizzeria opened in 2013 with a new name: The Just Crust. 

It wasn't just wait staff that came to Liss-Riordan and her law firm, Lichten & Liss-Riordan. 

Take the case of exotic dancers. Like Uber, the night clubs were arguing they were just a platform for dancers, despite keeping a percentage of the earnings and charging the dancers for each shift. Liss-Riordan won the case for the strippers. One of her most famous wins was a case against FedEx.

Like Uber, it had been classifying its delivery drivers as independent contractors and not employees, even though they wore FedEx uniforms and drove trucks with the FedEx logo. A Massachusetts judged ruled in Liss-Riordan's favor, and the case has been repeated in several other states. (FedEx has now successfully appealed, and it is back in court.)

While Uber drivers don't wear uniforms or drive logo-emblazoned trucks around, they are arguably more monitored than the FedEx drivers are because of the constant rating system and the threat of termination if it drops too low, Liss-Riordan argued.

"Uber, like I have seen in a lot of these cases, is trying to argue that they are something different, that their drivers are something different. Just like FedEx tried to tell its drivers that. Just like strip clubs tried to tell their entertainers that," Liss-Riordan said. "But the truth is that they’re not. They get in, they do the work and they’re told how to do it and they have these rules they have to follow and they’re evaluated on a real-time basis."

There's no easy litmus test, though, as to determine who is an employee and who is an independent contractor. The California Department of Industrial Relations says on its website that there is "no clear definition" of the term independent contractor — signing a 1099 form doesn't mean you are one.

In cases of misclassification, its up to the courts to decide. In March, two judges ruled Liss-Riordan's Uber and Lyft cases will go to a trial by jury. Uber had been asking for a summary judgement because it argued that it was a technology company, not a transportation company.

U.S. District Judge Edward Chen didn't buy it. "The idea that Uber is simply a software platform, I don’t find that a very persuasive argument," he said in court.

In the Lyft case, U.S. District Judge Vince Chhabria said in his decision that he's not sure if Lyft drivers fit in either category of California's "outdated" employment codes.

“The jury in this case will be handed a square peg and asked to choose between two round holes,” he wrote. “The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”

Liss-Riordan doesn't buy that argument though. 

"It’s a new more convenient way to provide services," she said. "But it doesn’t change anything about the basic fact that they are a company that provide a service and workers that provide a service are under their control.

Liss-Riordan isn't out to take Uber down. Despite her friend's initial worry that she was going to put them out of business, she doesn't think she will.

"I think Uber will do just fine if they have to play by the rules. Silicon Valley will do just fine as well. Maybe some won’t make it, but the market will figure it out," Liss-Riordan said. "It’s important that we have these laws, and I still think they’re good laws."

If Liss-Riordan wins, it also won't mean that the positions will evaporate, although it will take some "rejiggering" of the companies business models to convert everyone to employees, she said. 

There are examples of on-demand companies who already hire part-time and full-time employees in what are normally contract worker positions.

Managed By Q, a New York-based office management startup, hired a full staff of cleaners because it was looking to retain happy employees and knew it wanted a W-2 workforce. It had to build a sophisticated labor planning model to build in flexibility and different hours, especially since office cleaning is normally an off peak job, said co-founder Dan Teran at the On Demand conference. 

Munchery, a food delivery startup in San Francisco, hires its drivers as employees and schedules them in delivery shifts. Because they are employees, it also means it pays out overtime when needed—something it happily advertises on its job page.

"Employers across the country are providing flexibility to employees because a lot of employees are demanding it. Just because we win the case doesn’t mean that will go away. It doesn’t mean people will have to work on a 9-5 schedule," Liss-Riordan said. "Our point is that if you are working and you are subject to rules that employees are subject to, then you are also need to have the rights that our legislature has said employees should have as well."

May 27 2015 12:03 PM

Czech Startup Uses Ticket-Buying Algorithms to Let You Mix and Match the Cheapest Flights 

This post originally appeared on Business Insider.

You probably book airline tickets through a travel aggregation website such as Expedia or Travelocity. Or maybe you go direct to the website of the airline itself. Those sites actually contain hundreds of cheap, "hidden" flights that airlines don't show to consumers, and consumers can't find them.

Some of these flights can be priced 50 percent to 90 percent lower than those booked via a regular flight ticket, according to Lucie Bresova, the CFO of the Czech Republic-based Skypicker. Skypicker is a flight-booking app that blew our minds when Business Insider discovered it on a visit to Prague last week.

When Bresova first made that claim, I scoffed: 90 percent cheaper? Sure. Dream on.

But Skypicker is so clever that once you understand how it works—and once you know that Skypicker has a ticket-buying algorithm that finds the cheap, unseen tickets and automates the buying process—you cannot help but be impressed.

Before learning how the app works, it is worth knowing the story of why the app exists in the first place. Three years ago, Skypicker's founder, Oliver Dlouhy, was trying to book a flight for a vacation with his girlfriend. He wanted to save money on a flight from Prague to Portugal. All the direct flights were expensive. And there were very few connecting flights through other cities. But then Dlouhy noticed that if he booked a ticket from Prague to a random European city, like Oslo, on one airline, and then a ticket from Oslo to Portugal on a competing airline, the combined price of the two "unconnected" connecting flights came to less than the price of a direct flight.

But finding this information took Dlouhy an entire day of manually searching individual flight websites.

This is the key problem: Airlines don't list possible connections with rival airlines, or "noncooperating" airlines (those that aren’t in an international alliance). They do list their own flights, but they don't indicate whether those flights might link up with a flight offered by another company. Similarly, travel websites such as Expedia and Travelocity don't list all flights from each carrier, because they either don't have that information or are withholding it.

Most consumers don't know that these flights might actually connect because it is not obvious that the best flight from Prague to Portugal might go through Oslo. Sure, it might take longer, but adding a daylong stopover in somewhere like Barcelona isn't a hardship if you're on vacation. Knowing whether the flights link up can mean the difference between buying a €500 ticket to fly direct between two major cities or getting two €25 tickets from discount airlines and connecting the flights yourself via Skypicker—a 90 percent difference in price, at the extreme end of the discounts.

And, Bresova says, a series of connecting flights on noncooperating airlines on a long-haul route can sometimes be quicker than taking the "official" route.

So Dlouhy found a developer, and they built a search engine to scrape flight data from other travel sites in the hope of putting these flights together in a way that makes sense for consumers. Needless to say, scraping other companies' data isn't ideal, so Skypicker acquired a small meta-search engine, Tripomatic, for $500,000 in January 2014—more than value of Skypicker at the time.

Skypicker also persuaded 150 airlines to allow the company to list their data. Airlines were reluctant at first, Bresova said. "We are tiny, and we say, 'Give us your tickets and data,' and they say, 'No we don't need this.'

"It looks like we are just a travel app, but we work with huge amounts of data," Bresova added. We met Bresova at Socialbakers' Engage 2015 social-media conference, along with about a dozen companies on the Czech tech startup scene. 

Part of the challenge Skypicker had in the beginning was that from the airlines' point of view, every ticket sold for a cheaper, disjointed connecting flight is a ticket not being sold on a pricey direct flight—the kind of flights on which airlines make their biggest profit margins. But Bresova argues that those big direct routes like London to New York will always be full because certain passengers just need to get from A to B on deadline. Skypicker actually adds extra ticket sales across the system, she says, by exposing flights that consumers don't know exist and that airlines don't know they can sell.

The company is already successful. It had revenue of €4 million through April, up fourfold from 2014. The company has 80 employees and is booking about $175,000 a day in sales, Bresova said. In fact, the company just had a record €200,000 sales day. Not bad for an app that only really launched last year, whose oldest employee is Bresova, at 31. "Next month will be even crazier in growth," she says.

Skypicker's unique hoard of flight data will soon be displayed in the ticket-search engines Kayak, Momondo, and Skyscanner.

May 22 2015 5:00 PM

Elon Musk Didn't Like His Kids' School—So He Opened His Own

This post originally appeared on Business Insider.

Elon Musk didn't like his kids' school, so he started his own, the inventor and entrepreneur said in an interview on Beijing Television. The school is called Ad Astra—which means "To the stars"—and is small and relatively secretive. It doesn't have its own website or a social media presence.

Christina Simon, who writes about private elementary schools in Los Angeles, has done some digging around Ad Astra. She says she's been in contact with a mother whose child attends Musk's school. The mother told Simon that the relatively new Ad Astra School is "very small and experimental," and caters to a small group of children whose parents are primarily SpaceX employees.

Musk says in the interview that Ad Astra, which is a year old, currently has 14 kids and will increase to 20 in September. His grand vision for the school involves removing grade levels, so there's no distinction between students in 1st grade and 3rd. Musk is "making all the children go through the same grade at the same time, like an assembly line," he says in the interview.

"Some people love English or languages. Some people love math. Some people love music. Different abilities, different times," he says. "It makes more sense to cater the education to match their aptitudes and abilities."

Musk pulled his kids out of their school and even hired one of their teachers away to start Ad Astra. "I didn't see the regular schools doing the things I thought should be done," he says.

Musk sees a fundamental flaw in how schools teach problem solving. "It's important to teach problem solving, or teach to the problem and not the tools," Musk says. "Let's say you're trying to teach people about how engines work. A more traditional approach would be saying, 'we're going to teach all about screwdrivers and wrenches.' This is a very difficult way to do it."

Instead, Musk says it makes more sense to give students an engine and then work to disassemble it. "How are we going to take it apart? You need a screwdriver. That's what the screwdriver is for," Musk explains. "And then a very important thing happens: The relevance of the tools becomes apparent."

So far, Ad Astra "seems to be going pretty well," according to Musk. "The kids really love going to school."

"I hated going to school when I was a kid," Musk told his interviewer. "It was torture." When Musk was a child living in Pretoria, South Africa, he was viciously bullied as a student. His classmates pushed him down a concrete stairwell. In one instance, he was beaten so badly that he needed to go to the hospital.

“They got my best [expletive] friend to lure me out of hiding so they could beat me up. And that [expletive] hurt. For some reason they decided that I was it, and they were going to go after me nonstop. That’s what made growing up difficult. For a number of years there was no respite. You get chased around by gangs at school who tried to beat the [expletive] out of me, and then I’d come home, and it would just be awful there as well.” 

His difficult experiences both at home—where he had a strained relationship with his father—and at school would eventually lead Musk to leave South Africa for the United States. You can watch Musk's full video interview here.

May 21 2015 5:11 PM

LG Just Unveiled a Bendy TV That You Stick to Your Wall

This post originally appeared on Business Insider.

LG wants to make mounting your TV just as easy as sticking a magnet onto your refrigerator. At an event earlier this week, the South Korean electronics giant showcased an incredibly thin 55-inch television with a flexible screen that you can press onto your wall using magnets.

It's just a concept, though—there's no indication when or if a product like this will actually come to market. The purpose of the announcement was really to announce LG's plans to focus on making OLED screens for products moving forward. 

The TV screen itself is less than a millimeter thick, according to CNET. For context, that's about the same thickness as a paper clip. As shown in the image below, a magnetic pad holds the flexible TV screen up to the wall. The TV itself almost looks like paper. 

LG's new display marks yet another concept device that showcases how flexible screens could one day be implemented into everyday products.

Both LG and Samsung have been pioneering flexible display technologies over the past several years, but we have yet to really understand why gadgets with curved screens would even be necessary in the first place. A television such as the one LG showcased earlier this week begins to answer that question a little bit.

Samsung is believed to be capable of developing a fully flexible phone by 2016, a company executive said at an investor event in New York this past November, but it's unclear exactly what the advantages of a bendable phone would be. Both Samsung and LG have released phones with curved screens, but they haven't really caught on with consumers. 

May 19 2015 5:27 PM

People Will Actually Pay for Extremely Expensive Short-Distance Helicopter Flights That Come With Rosé in Sippy Cups 

This post originally appeared in Business Insider.

Getting a helicopter can be a pain. You call an operator, get the tail number, then have to email or call the operator back and forth until you get ushered on your flight. Often, you'd be better off driving. And chopper services certainly don't work like Uber, picking you up at convenient locations whenever you want.

Two years ago, Warner Music COO Rob Wiesenthal set out to change that. He had been at Sony Entertainment for 13 years when he got the idea to bring a mobile app like Uber's to the chopper industry. He partnered with Steve Martocci, the cofounder of the Skype-owned GroupMe and the music service Splice, to launch Blade last Memorial Day weekend. Like Uber, Blade is an operator and logistics manager; it doesn't own any aircraft. Instead, Martocci and Wiesenthal partnered with Liberty Helicopter and offered flights for New Yorkers to and from the Hamptons. Uber even partnered with Blade for a Fourth of July weekend promotion.

Blade was an instant hit among the 1 percent last summer; it powered 800 trips to the Hamptons in just 16 weeks. "Blade was launched with $50,000 and it was immediately profitable," a Blade representative tells Business Insider.

The app has since been downloaded more than 20,000 times. Bookers can either select a future flight that has already been scheduled (it's $575 per seat one way to the Hamptons or Fire Island from New York City) or create a flight for anytime they want. But those who book a whole new flight must pay to fill the entire aircraft up front. Blade will then try to fill extra seats with other Blade members who will offset the cost. A trip to the Hamptons, which normally takes a few hours, takes just under 45 minutes with Blade.

After its success last summer, Blade set out to launch new services and destinations, and it has raised $6 million at a $25 million valuation from some big names in business. Investors include Google chairman Eric Schmidt, Discover Communications CEO David Zaslav, IAC's Barry Diller, Alex von Furstenberg, Raine Ventures, and iHeart Media chairman Bob Pittman. Both Pittman and Schmidt have licenses to fly helicopters and jets.

Blade's service now extends beyond the Hamptons and Mohegan Sun. Its members can fly to Fire Island via a new seaplane service, Blade Aqua. Melissa Tomkiel, who was president of Fly the Whale—an aviation company Aqua partners with—is Aqua's new CEO. Wiesenthal and Martocci are advisers. Users can also book flights for about $650 a seat to Martha's Vineyard or Cape Cod from Manhattan.

And, if you have a flight taking off from or landing at any New York City airport, Blade's Bounce service can get you from your jet to the city in just five minutes. Blade Bounce will pick you up at JFK, Newark, Teterboro, Westchester, or LaGuardia and have the chopper waiting to bring you home within 20 minutes of booking for $800 to $900.

The price point may sound steep considering you can take a cab from the airport into New York City for just $50. But for Blade's affluent audience (the company advertises about 17 times a day on CNBC's local network, aiming its services as business executives), it could be considered a small price for convenience.

"For $895 we position it so the helicopter can land 40 feet from your jet," a Blade representative says. "It's a 45-min drive to JFK. If you're spending $100,000 on a jet, the extra $895 really isn't going to count."

Blade also prides itself on its luxury lounges and amenities onboard the choppers. It has lounges in Manhattan on West 30th Street, East 34th Street, and 23rd Street. It offers passengers rosé in sippy cups, and the company says customers will arrive early just to hang out in the boarding area. But Blade insists that just because customers are wealthy, that doesn't mean they're arrogant jerks.

"These people aren't assholes saying, 'I'm some banker flying above traffic and screw you,'" Blade says. "They're people who view it as a fun luxury to them. Seventy percent of people had never flown in a chopper before. We're making it really easy to do, and it's completely done from your app."

Blade says it is much different from BlackJet or Surf Air, which allow customers to fly as much as they want locally for a set monthly fee. Instead, Blade wants to own all flights for distances under 200 miles.

"Unlike things that have failed like BlackJet, you really don't want to have a swinging bathroom door hitting you; that's a little too intimate," Blade tells Business Insider. "The alternative is, 'Let's just fly first class and no one bothers me.' Blade can take a 3-1/2-hour trip and make it 30 minutes, and that could be worth $575 to somebody."

May 18 2015 2:02 PM

Silicon Valley CEOs Just Want a Little Privacy. $100 million and 750 Acres of It.

This post originally appeared in Business Insider.

In October 2014, Facebook CEO Mark Zuckerberg paid more than $100 million for 750 acres of secluded land on the North Shore of Kauai. The purchase included two separate parcels: the Kahu'aina Plantation, a 357-acre former sugarcane plantation, and Pila'a Beach, a 393-acre property with bright white sand.

The property is large enough for a set of villas or even a resort. But Zuckerberg apparently plans to only build one home: an ultra-private island hideaway for himself and his inner circle. "When the whole thing is said and done, he might be approaching $200 million on total purchase price," Steve Hunt, a tax manager for Kauai County, said to the Pacific Business News. "This is someone who can afford to buy whatever he wants to buy and he’ll pay the price he needs to get, and privacy is a bigger issue to him than anything else."

Zuckerberg's desire to sequester his family is understandable, given Silicon Valley's generally stifling atmosphere, and, more specifically, a recent lawsuit involving his home in Palo Alto. The suit, filed by developer Mircea Voskerician in May 2014, centers around Zuckerberg's 2013 purchase of four houses adjacent to his home in Palo Alto's Crescent Park neighborhood. 

At the time, it seemed like an odd splurge, and many wondered if Zuckerberg was trying to assemble a compound of sorts. But there was a reason behind the purchase. Voskerician had reportedly told Zuckerberg that he planned to build a large, 9,600-square-foot house on one of the lots behind his property. The home, Voskerician allegedly said, would have a direct view into the master bedroom shared by Zuckerberg and wife Priscilla Chan. 

So Voskerician made Zuckerberg a deal: He would sell Zuckerberg the entire property at a discount if the Facebook billionaire would introduce the developer to his important Silicon Valley contacts. Zuckerberg paid Voskerician $1.7 million for the rights to the property, and then bought the lot from its owners for $4.8 million, according to county records.

But Voskerician says his interest in the property was worth far more than $1.7 million, and that he gave Zuckerberg a discount because of the business his referrals would potentially bring in. Apparently that never happened, hence the lawsuit.

Zuckerberg's lawyers have called Voskerician's tactics "extortive" and say that he is "going out of his way to embarrass Mr. Zuckerberg and pressure those around him at every turn."It’s stuff like this that makes me so sad and angry," Chan wrote in an email unearthed in the lawsuit.

Divesh Makan, Zuckerberg's financial adviser, later bought the three other homes around Zuckerberg's house, further guaranteeing his privacy. The homes were purchased for $10.5 million, $14 million, and $14.5 million, according to county records.

According to Arthur Sharif, a realtor who specializes in luxury real estate in Silicon Valley, it's not all that uncommon to see wealthy people scooping up multiple lots to assemble a bubble of isolation around their homes. "That happens all the time," Sharif told Business Insider. "Some people will say to us, 'I don’t care what’s on the market. Just go knock on the neighbor's door, say I like the house, and I’ll pay for the inconvenience of moving.'"

In fact, Sharif said, selling a home just to assemble it as part of larger property is actually somewhat easier than your typical home sale. A home that's meant to serve as a buffer doesn't require as much inspection and maintenance. The opportunity can even be attractive to people who are being bought out by wealthier neighbors. 

"Some people feel like they’ve won the lottery if that happens to them. Usually the house sells for over market value, and maybe they’d want to move in a few years anyway," Sharif said. "If someone is trying to do an assemblage, they don’t even need to see the house. They just need the property."

Acquiring extreme wealth means being able to provide for yourself, but family members usually reap the benefits, too. "For people like Mark Zuckerberg, maybe privacy is necessary, but that's not always the main reason for buying the home next door," realtor Eric Boyenga said. "Some do it to have family members close by, maybe so that the in-laws can watch the kids."

Yahoo CEO Marissa Mayer has deployed similar tactics. In October 2013, she paid a reported $11.2 million for the Roller & Hapgood & Tinney funeral home, located just a few doors down from her home in Palo Alto.

Though it's still unclear what exactly Mayer plans to do with the property, the mortuary proved to be the perfect location for her annual Halloween party last year. The former funeral parlor was transformed into a haunted house for the day, much to the chagrin of a neighbor who complained on a local web site.

Elon Musk has done a similar thing in Los Angeles. In November 2013, he paid $6.75 million for a teardown across the street from his $17 million Bel-Air mansion. 

Still, it's not as if Mayer and Musk are negotiating these kinds of deals themselves. Sharif says that it's very common to have his open houses attended by what he calls a "scout," someone hired by a wealthy individual for the sole purpose of scoping out potential real-estate investments. Homes are often bought and sold under LLCs linked to scouts or business managers. 

"This is from the very wealthiest people, like [Microsoft cofounder] Paul Allen, all the way down the spectrum. It's because they don't want people to know what they're buying," Sharif said. "That’s part of how we can tell it’s someone notable who's interested in the property.”

Many wealthy executives buying luxury real estate have a very clear picture of what they want in a home, from custom-built home-automation systems to environmentally conscious sprinklers and pools. 

Peninsula Custom Homes is a construction firm that specializes in building custom luxury homes in the Bay Area. "These clients are very used to dreaming things up and saying, 'That’s how I want it,'" Bryan Murphy, president of Peninsula Custom Homes, said to Business Insider. "For architects, we have to more creative to accomplish what they want. There’s no manual for this."

As far as the company's clientele, Murphy said the company often builds homes for tech executives, many of whom work in biotech, as well as the VCs who fund startups and the bankers who finance the deals. "Most clients have a Tesla," he said.

Energy efficiency is one thing that PCH is consistently asked to consider by clients. As California suffers through a crippling drought, many clients ask what they can do to improve their irrigation systems. He couldn't speak more specifically than that, however, which is consistent across the industry. Most people working for the wealthiest in the tech community are asked to sign nondisclosure agreements that bar them from discussing the details of their employment. 

This includes everyone who might be involved with the remodeling of a home: architects, painters, carpenters, gardeners, and cleaners, just to name a few. "Privacy has definitely been more of a focus recently, especially with the easy access to information that comes with social media," Murphy said. "Some tech executives are having their own technology used against them in that way."

In addition to his homes in Palo Alto and Kauai, Zuckerberg also has a house in San Francisco.

It's currently undergoing an extensive renovation, including $65,000 worth of renovation work on the kitchen and bathrooms, $750,000 for an addition to the rear and side of the house, and $25,000 to make the fourth floor "habitable." There's an additional $720,000 for an office, media room, half bathroom, mudroom, laundry room, wine room, and wet bar, in addition to a new second-floor half bathroom and remodel of the second, third, and fourth floors.

Each of the construction workers has signed an NDA, according to The New York Times.

Parking in Zuckerberg's San Francisco neighborhood is notoriously difficult. To make sure construction workers would have somewhere to park in the morning—and, presumably, to prevent people from snooping around—the Facebook billionaire allegedly hired pairs of people to sit in cars parked near the house at night.

"This is nothing short of a fortress," one disgruntled neighbor told The San Francisco Chronicle in September. 

Tech billionaires who've accumulated a number of properties will most likely need help managing it. Family offices — companies that help the wealthy manage their money—have become big, secretive businesses.

Google cofounder Sergey Brin has employed as many as 47 people through Bayshore Global Management, a private company that manages his real-estate investments and personal affairs. 

Current and former Bayshore employees contacted by Business Insider declined to comment on their work. But a scan of LinkedIn profiles show that Bayshore employs a former Navy SEAL, an ex-Secret Service agent, and a former SWAT team leader for his security detail. 

Brin has a home in New York City's West Village, in addition to the family's Los Altos Hills residence. Each house has a staff managed by Bayshore, which was named for the part of Mountain View, California, where Google is based. He also employs property managers, domestic staff, and a personal shopper.

May 15 2015 4:56 PM

This Ridiculous Gang-Signing App Could Help Deaf People Use the Apple Watch

This post originally appeared on Business Insider.

Like a lot of Polish 17-year-olds, Mateusz Mach is into hip-hop. "It is something I identify with," Mach says. Unlike a lot of Polish 17-year-olds, he decided to turn his appreciation into an app business. 

After six months of work, he released Five, a messaging app for Android, iPhone, and Apple Watch that lets you and your friends throw one another custom hand signs, like the kind rappers throw. It's meant to be quick, easy, and above all, fun. 

Mach says his friends use the app to tell one another how far away they are, using a commonly accepted translation for each hand signal. You can even send your custom signs via Facebook Messenger.

"It's faster than typing," Mach says. It's a little bit like Yo. "We are better than Yo," Mach says. "Definitely better than Yo."

Mach and a team of two other contract coders spent the past six months working on Five, with the funding coming from a local investor for whom Mach had done some work before. His previous app,, which is currently down, had 10,000 users at its peak, Mach says.

The thing is that this silly app is finding some real-world use, according to the feedback Mach is getting from his users. On the Apple Watch, using hand signals lets you convey more meaning without an onlooker being able to guess what you're saying.

And perhaps more important, it's a really great engine for communicating in International Sign Language (ISL). Mach says he has heard from deaf users who are using it to quickly communicate in a way that makes sense to them.

To that end, Mach is working on building in an ISL dictionary into the Five app, to quickly select words and their equivalents. If that works out, Mach isn't ruling out the possibility of making Five into a more complete ISL translator. For now, Mach is splitting his time between working on Five and his time studying at an International Baccalaureate (IB) school—when I spoke to him, he was staying up late in his dorm.

In the future, Mach is taking Five on the road, preparing to show it off to customers and investors at the coming Bitspiration Festival in Warsaw, Poland. He knows he wants a career in technology, and he certainly wouldn't mind if Five is the engine that gets him there. "That might be cool, yeah," Mach says. "If only I can get money."

Read more: