TIME China

Meet Alibaba’s Jack Ma

The man leading China’s online shopping giant to America

Ma’s Alibaba, China’s online-shopping giant, completed the largest initial public offering in history–$25 billion–on the New York Stock Exchange. The shares started trading on Sept. 19, and the value of the company exceeded that of Facebook, Coca-Cola or IBM.

• CLAIMS TO FAME

Fifteen years ago, Ma, a former English teacher, started Alibaba in an apartment in the Chinese city of Hangzhou. Today Alibaba is the undisputed champion of online retailing, handling twice as much merchandise as Amazon. An indifferent student, Ma built his empire without the top diploma or political connections usually needed to succeed in China.

• BIGGEST CHALLENGES

Ma will be under pressure from his new investors to deliver ever larger profits. He must expand outside his home market while also fighting off opponents at home. Chinese Internet giants Baidu and Tencent and property group Wanda recently joined forces to start a rival e-commerce firm.

• BIGGEST THREAT

China’s authoritarian rulers still wield tremendous control over business. A big wild card in Alibaba’s future will be Ma’s ability to stay in the good graces of the Communist Party while building trust with consumers in the West.

• BIGGEST CRITIC

The investor Peter Thiel passed on Alibaba’s IPO, arguing that a bet on the company was ultimately a bet on Beijing–with the political uncertainty that implied.

• CAN HE DO IT?

Ma has a proven track record of competing with global e-commerce titans–and winning. He’s shoved aside eBay and Amazon in China. And with his post-IPO war chest, Ma has the financial muscle to invest heavily and acquire other firms. The question is, Will he shop wisely?

–MICHAEL SCHUMAN


This appears in the October 06, 2014 issue of TIME.
TIME Economy

The 3% Economy

Yes, 3% growth is better than 2%. But, for most Americans, it’s actually more worrisome

A little over three years ago, I wrote a column titled “The 2% Economy,” explaining how a recovery with only 2% GDP growth, no new middle-class jobs and stagnant wages wasn’t really a recovery after all. Like everyone, I hoped that once growth kicked up to about 3%, middle-class jobs and wages would finally revive.

But we’re now in a 3% economy, and I’m writing the same column. Only this time, the message is more disturbing. Growth is back. Unemployment is down. But only a fraction of the jobs lost during the Great Recession that pay more than $15 per hour have been found. And wage growth is still hovering near zero, where it’s been for the past decade. Something is very, very broken in our economy.

It’s a change that’s been coming for 20 years. From World War II to the 1980s, according to data from the McKinsey Global Institute, it took roughly six months after GDP rebounded from a recession for employment to recovery fully. But in the 1990–91 recession and recovery, it took 15 months, and in 2001 it took 39 months. This time around, it’s taken 41 months–more than three years–to replace the jobs lost in the Great Recession. And while the quantity has come back, the quality hasn’t. The job market, as everyone knows, is extremely bifurcated: there are jobs for Ph.D.s and burger flippers but not enough in between. That’s a problem in an economy that’s made up chiefly of consumer spending. When the majority of people don’t have more money, they can’t spend more, and companies can’t create more jobs higher up the food chain. This backstory is laid out in an interim Organisation for Economic Co-operation and Development report cautioning that poor job creation and flat wages are “holding back a stronger recovery in consumer spending.” If this trend is left unchecked, we are looking at a generation that will be permanently less well off than their parents.

There are so many signs of this around us already. The decline in August home sales–a result of wealthy cash buyers and investors stepping back from the market–shows how what little recovery in housing we’ve seen so far has been driven by the rich; anyone who actually needs a mortgage has been slower to jump in. The real estate recovery too is very bifurcated, with much of the gains concentrated in a few more affluent, fast-growing cities. (Plenty of places in the Rust and Sun Belts are still underwater.) While overall consumer debt is down, it is still high by international standards, and student debt is off the charts. When I asked one smart investor where he expected the next financial crisis to come from, he said, “Student debt.” Interest rates on tuition loans are high and fixed, and the loans can’t be refinanced, meaning they’re a trap that’s hard to escape. And student debt continues to grow fast. History shows that the speed of increase in debt, more than the sheer amount, is a predictor of bubbles. By that measure, student debt is blinking red: it has tripled over the past decade and now outstrips credit-card debt and auto loans.

It’s easy to understand why. Much of the population is desperately trying to educate its way out of a terrifying cycle of downward mobility. But students are fighting strong structural shifts in the economy. While technology-driven productivity used to be what economists said would save us from jobless recoveries, technology these days removes jobs from the economy. Just think of companies like Facebook and Twitter, which create a fraction of the jobs the last generation of big tech firms like Apple or Microsoft did, not to mention the multitude of middle-class positions created by the industrial giants of old.

And we’re just getting started: consider the outcry in certain cities over companies like Zillow, Uber and Airbnb, which are fostering “creative destruction” in new sectors like real estate, transportation and hotels. McKinsey estimates that new technologies will put up to 140 million service jobs at risk in the next decade. Critics of this estimate say we’re underestimating the opportunities that will come with everyone having a smartphone. All I can say is, I hope so. What’s clear is that development isn’t yet reflected in stronger consumption or official economic statistics.

What I do see is growing discontent with the economic status quo. In my 2011 column I wrote, “It’s clear that the 2% economy heralds an era of even more divisive, populist politics–at home and abroad.” Ditto the 3% economy. Witness outrage over displaced lower-income workers in the Bay Area, or the fact that the Fed is keeping interest rates low in part because gridlock has prevented Washington from doing more to stimulate the real economy, or the Treasury Department’s new rules limiting American companies’ ability to move outside U.S. tax jurisdiction. Whatever number you put on growth, a recovery that doesn’t feel like a recovery is, yet again, no recovery at all.


This appears in the October 06, 2014 issue of TIME.
TIME Companies

Apple Has an iPhone Headache, but It Won’t Last Long

Apple's stock is recovering after it took a sub-100 dip on reports of a faulty software update and bendable hardware

Updated Saturay 9/27

After launching two new iPhones and a new mobile operating system, iOS 8, last week, Apple had a rough few days. Sure, it sold a record 10 million of its new iPhone 6 and iPhone 6 Plus models over the weekend, setting them up to be its most successful phones ever. But no company can escape the headaches that come with almost every new launch, and Apple had three problems marring an otherwise spectacular introduction.

First, iOS 8, Apple’s new mobile operating system, inexplicably launched late last week without promised apps that used a health and fitness feature called HealthKit. Then, early this week, reports flew around social media and tech blogs showing the iPhone 6 Plus, the big 5.5-in. granddaddy of the two iPhone 6 models, was easy to bend — some people claimed the phone bent when sitting in their pockets for extended periods, others bent the phones on purpose to prove it was possible, and everybody loved calling the whole thing “bendgazi.” Finally, Apple rolled out an iOS 8 update Wednesday intended to fix that HealthKit problem and other minor issues, only to quickly pull it after users complained the update had caused their iPhones to lose the ability to make phone calls.

“We are actively investigating these reports and will provide information as quickly as we can,” an Apple spokesperson told several tech blogs in a rare public statement about the iOS 8 update problems. Several days later, Apple rolled out iOS 8.0.2, which took care of the bugs iOS 8.0.1 was supposed to fix, plus patched up the brand new bugs that update introduced. Apple later said only about 40,000 of the millions of iPhones out there in the world were affected by the iOS 8 update problems. Still, the company apologized “for the great inconvenience experienced by users” related to the issue.

While initially mum on the bending issue, late this week Apple said only a small handful of iPhone users formally complained about bent devices. Still, in a rare move, it decided to lift the veil on on its testing process, showing the world the rigorous quality control testing it conducts on every new device. That’s the latest sign the typically tight-lipped Apple is opening up: Apple also recently directly addressed an iCloud security flaw that led to the exposure of celebrities’ nude photos. Those minor moves toward transparency show an Apple that’s taking a different tack from years prior — back in 2010, late CEO Steve Jobs infamously made a nonapology apology for an iPhone 4 problem that prevented the device from making calls when it was held a certain way. While Apple acknowledged the issue and sent customers a special “bumper” case to fix it, Jobs still said the problem had been “blown so out of proportion it’s incredible.” That’s not the kind of language we’re hearing from the company under Cook, who also issued a public apology after the company replaced the widely-liked Google Maps app with its own Apple Maps back in 2012, a move met with much scorn from users and tech writers.

Even still , Apple investors initially balked at the news of the update problems and bending issues, sending the company’s stock dipping below $98 by Thursday’s closing bell. That’s a decent little dip for the world’s most cash-rich company, but there isn’t much reason to fret. Apple is still selling its new iPhones hand over fist, and it appears poised to sell its upcoming Apple Watch hand over wrist in just a few months. The company may have a little headache now, but it’s got plenty of aspirin in the medicine cabinet. Indeed, by the end of the day Friday, it seemed Wall Street got over it: Apple climbed nearly 3% on the week’s last day of trading action, ending back above $100.

TIME Business

9 Rules For Emailing From Google Exec Eric Schmidt

In a new book out this week chock full of Google-flavored business wisdom, How Google Works, Google executive chairman and former CEO Eric Schmidt and former Senior Vice President of Products Jonathan Rosenberg share nine insightful rules for emailing (or gmailing!) like a professional

Communication in the Internet Century usually means using email, and email, despite being remarkably useful and powerful, often inspires momentous dread in otherwise optimistic, happy humans. Here are our personal rules for mitigating that sense of foreboding:

How Google WorksCover of ‘How Google Works,’ by Eric Schmidt and Jonathan Rosenberg

1. Respond quickly. There are people who can be relied upon to respond promptly to emails, and those who can’t. Strive to be one of the former. Most of the best—and busiest—people we know act quickly on their emails, not just to us or to a select few senders, but to everyone. Being responsive sets up a positive communications feedback loop whereby your team and colleagues will be more likely to include you in important discussions and decisions, and being responsive to everyone reinforces the flat, meritocratic culture you are trying to establish. These responses can be quite short—“got it” is a favorite of ours. And when you are confident in your ability to respond quickly, you can tell people exactly what a non-​response means. In our case it’s usually “got it and proceed.” Which is better than what a non-​response means from most people: “I’m overwhelmed and don’t know when or if I’ll get to your note, so if you needed my feedback you’ll just have to wait in limbo a while longer. Plus I don’t like you.”

2. When writing an email, every word matters, and useless prose doesn’t. Be crisp in your delivery. If you are describing a problem, define it clearly. Doing this well requires more time, not less. You have to write a draft then go through it and eliminate any words that aren’t necessary. Think about the late novelist Elmore Leonard’s response to a question about his success as a writer: “I leave out the parts that people skip.” Most emails are full of stuff that people can skip.

3. Clean out your inbox constantly. How much time do you spend looking at your inbox, just trying to decide which email to answer next? How much time do you spend opening and reading emails that you have already read? Any time you spend thinking about which items in your inbox you should attack next is a waste of time. Same with any time you spend rereading a message that you have already read (and failed to act upon).

When you open a new message, you have a few options: Read enough of it to realize that you don’t need to read it, read it and act right away, read it and act later, or read it later (worth reading but not urgent and too long to read at the moment). Choose among these options right away, with a strong bias toward the first two. Remember the old OHIO acronym: Only Hold It Once. If you read the note and know what needs doing, do it right away. Otherwise you are dooming yourself to rereading it, which is 100 percent wasted time.

If you do this well, then your inbox becomes a to‑do list of only the complex issues, things that require deeper thought (label these emails “take action,” or in Gmail mark them as starred), with a few “to read” items that you can take care of later.

To make sure that the bloat doesn’t simply transfer from your inbox to your “take action” folder, you must clean out the action items every day. This is a good evening activity. Zero items is the goal, but anything less than five is reasonable. Otherwise you will waste time later trying to figure out which of the long list of things to look at.

4. Handle email in LIFO order (Last In First Out). Sometimes the older stuff gets taken care of by someone else.

5. Remember, you’re a router. When you get a note with useful information, consider who else would find it useful. At the end of the day, make a mental pass through the mail you received and ask yourself, “What should I have forwarded but didn’t?”

6. When you use the bcc (blind copy) feature, ask yourself why. The answer is almost always that you are trying to hide something, which is counterproductive and potentially knavish in a transparent culture. When that is your answer, copy the person openly or don’t copy them at all. The only time we recommend using the bcc feature is when you are removing someone from an email thread. When you “reply all” to a lengthy series of emails, move the people who are no longer relevant to the thread to the bcc field, and state in the text of the note that you are doing this. They will be relieved to have one less irrelevant note cluttering up their inbox.

7. Don’t yell. If you need to yell, do it in person. It is FAR TOO EASY to do it electronically.

8. Make it easy to follow up on requests. When you send a note to someone with an action item that you want to track, copy yourself, then label the note “follow up.” That makes it easy to find and follow up on the things that haven’t been done; just resend the original note with a new intro asking “Is this done?”

9. Help your future self search for stuff. If you get something you think you may want to recall later, forward it to yourself along with a few keywords that describe its content. Think to yourself, How will I search for this later? Then, when you search for it later, you’ll probably use those same search terms. This isn’t just handy for emails, but important documents too. Jonathan scans his family’s passports, licenses, and health insurance cards and emails them to himself along with descriptive keywords. Should any of those things go missing during a trip, the copies are easy to retrieve from any browsers.

Excerpted from the book HOW GOOGLE WORKS by Eric Schmidt and Jonathan Rosenberg, with Alan Eagle. © 2014 by Google, Inc. Reprinted by permission of Grand Central Publishing. All rights reserved.

Read next: 11 Google Tricks That Will Change the Way You Search

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TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME iPhone 6

Apple’s $649 iPhone 6 Reportedly Costs $200 to Make

Consumer With Apple's iPhone 6
Colin McConnell—Toronto Star/Getty Images 24-year-old Dani Winters lined up since Wednesday at 6pm to get his 128GB iPhone 6.

Apple is renowned for its innovative products, its sleek hardware design, and, of course, its fat profit margins. That last point is as true as ever with its new iPhone 6, for which Apple is charging more than three times the cost of components and manufacturing.

According to a teardown report from research firm IHS, the components and manufacturing cost of a 16GB iPhone 6 cost Apple $200.10. The device is selling for $649 in the U.S. without a contract with a wireless carrier. That gives the device a profit margin of about 69%. The iPhone 6 Plus, which costs $100 more than its smaller cousin, costs just $15.50 more for components and manufacutring, according to IHS. That’s a 71% margin.

The biggest expense for both devices is the touchscreen, which costs $45 on the 4.7-inch iPhone 6 and $52.50 on the 5.5-inch iPhone 6 Plus. The iPhone 6 Plus’s other main selling point besides size is its fancier camera featuring optical image stabilization. That costs $12.50, compared to $11 for the iPhone 6’s camera.

An Apple spokeswoman did not respond to an email seeking comment.

The figures don’t give a complete picture of the costs that go into the iPhone. Apple also spends money on research and development, software, shipping, marketing, licensing and other costs. But even with all expenses included, Apple’s margins are huge. The company had gross margins of 39.4% in the most recent fiscal quarter, an improvement from 36.9% the year prior.

Many customers aren’t aware of the iPhones’ true retail cost. In the U.S., most customers buy smartphones at a steep discount in exchange for signing two-year contracts with wireless carriers. The iPhone 6 costs $199 with a contract and can currently be had for free from many of the carriers if customers trade in an old iPhone toward its purchase. In markets where pricing is more transparent, like in China, Apple has faced stiffer competition.

TIME medicine

Look Up Your Meds On This Massive New Drug Database

Iodine

The Yelp of medicine is here

Iodine, a new health start-up from a former Wired editor and Google engineer offers an easy-to-use database of drug information.

The database, which launched on Wednesday, uses Google surveys to get consumer information on a wide variety of both over-the-counter and prescription drugs. Users can search a specific drug from Aleve to Xanax and see how people generally feel about its efficacy, about the side effects from actual users, tradeoffs, comments from users, warnings, costs, and a readable versions of the drug’s package insert.

And the database will continue to grow. According to the New York Times, Iodine uses Google Consumer Surveys, of which they have 100,000 ones completed, and they add to their website every day. Iodine also uses data from clinical research, pharmacist surveys, adverse event reports made to the Food and Drug Administration (FDA) and the National Average Drug Acquisition Cost (NADAC)–which reports the average wholesale price pharmacies pay for over 20,000 drugs.

Thomas Goetz, the former Wired editor and co-founder of Iodine told the Times that Iodine is developing the largest survey of American’s drug use and experiences which could not just help consumers but help impact policy.

The folks behind Iodine may have actually succeeded in making Big Data useable—and helpful.

MONEY online shopping

Amazon Wants to Invade Your Home With Its One-Click Buying Button

Amazon boxes in front of door
Goss Images—Alamy

If Amazon has its way, one day our homes will be equipped with devices that detect when we're running low on household supplies and let us order more—from Amazon, of course—with one touch of a button.

According to Reuters, Amazon is developing a device that would be installed in a house—perhaps tucked away on a kitchen counter, or inside a closet or pantry—and enable customers to order detergent, toothpaste, paper towels, and other home supplies by simply pressing a button.

Amazon, which tends to be notoriously tight-lipped about its innovations and experiments until Jeff Bezos feels like blowing everyone’s minds (see the “60 Minutes” story on drone deliveries last year), isn’t talking publicly about the one-button device it reportedly has in the works. It’s also unclear if and when such a device would be ready to be tested in actual homes. Anonymous sources cited by Reuters say that the device is being developed by Lab 126, the secretive outfit owned by Amazon that has helped design and engineer gadgets such as the Kindle and Amazon Fire Phone.

In theory, the device would be installed in an Internet-connected home, in which various appliances would “talk” to each other via wi-fi. Sensors would be able to detect when the home is, say, in need of a new air-conditioning filter, or when you’re due to buy more laundry detergent, and it would prompt the customer to order new supplies with one press of a button.

In addition to the one-button device, Amazon is also looking into developing wearable gadgets that might allow customers to place orders for home supplies and other items with a single touch. The potential of such innovations follows right in line with Amazon’s ongoing efforts to be the destination of consumers seeking to purchase, well, pretty much anything and everything you can imagine.

Amazon Prime is brilliant not only because it gets customers to fork over $99 upfront annually in exchange for two-day shipping, but more importantly because it results in members making far more of their everyday purchases at Amazon. The online shopping giant’s forays into same-day delivery, groceries, and a household supply service called Prime Pantry are all part of its mission to eliminate tedious shopping errands by allowing customers to handle them via Amazon and one-click buying. Amazon thereby has been systematically horning in on the everyday sales of its competitors, which include players ranging from Best Buy to Costco, and CVS pharmacies to Kroger supermarkets.

Then there’s the Fire Phone, which hit the market this past summer and stood out from the pack most significantly thanks to Firefly—a feature that scans the barcodes of items and lets you purchase them instantly, via Amazon of course. Anyone buying the phone also got a free year of Amazon Prime, which brings customers further into the Amazon purchase-sphere. Less than two months after the Fire Phone entered the market at a minimum price of $199 (with a two-year contract), it was discounted to 99¢ (a price drop that some had predicted the moment the device was introduced).

Nonetheless, the Fire Phone flop isn’t going to slow Amazon’s pursuit of innovations—and a larger and larger portion of our purchases. Earlier this year, the Wall Street Journal spread the word that Amazon was a developing a service dubbed “anticipatory shipping,” in which the company would anticipate customer needs before any order had been placed, and it would ship what it felt you needed before anyone ever clicked “buy.” Now it looks like Amazon wants to have devices installed in customer homes, so that it can anticipate our shopping needs at a deeper, more invasive level and sell us stuff before anyone even considers other shopping possibilities, let alone actually leaving the home to make a run to a store.

The goals for Amazon in such developments is to ease any friction and slowdown in the purchase transaction, to eliminate hassles and save time for customers—and to sell us more and more stuff.

MONEY Investing

Why We Feel So Good About the Markets—and So Bad—at the Same Time

Investor and retirement optimism is at a seven-year high. Yet most people believe their personal income has topped out. What gives?

Investors are feeling better about the markets than at any time since the financial crisis, a new poll shows. But most also believe they have topped out in terms of earning power, and that the Great Recession continues to weigh on their finances.

Buoyed by stronger GDP growth, record high stock prices, and a falling unemployment rate, investors in the third quarter pushed the Wells Fargo/Gallup Investor and Retirement Optimism index to its highest mark since December 2007. Yet 56% of workers expect only inflation-rate pay raises the rest of their career, and half believe they are destined to end up living on Social Security benefits.

“At the macro level, people are feeling pretty good,” says Karen Wimbish, director of Retail Retirement at Wells Fargo. “But at the personal level, the Great Recession left a deeper wound than a lot of us realize.” The average worker believes that wage growth, which has been stagnant for decades, won’t rebound before they retire. This feeling is especially acute among the upper middle class, those making more than $100,000 a year.

The gloom is partly attributable to the national discussion about wage inequality and some evidence that only the top 1% is getting ahead. It may also reflect a sense that the U.S. is losing ground to the faster growing developing world and experiencing an inevitable relative decline in standard of living.

The Federal Reserve has been battling anemic growth for seven years through an aggressive stimulus program that includes rock-bottom short-term interest rates. This week, the two Fed governors most outspoken and critical of this policy confirmed that they would retire next year, essentially putting the Fed all-in on a growth and jobs agenda with diminishing concern over inflation and underscoring the sense of stagnation so many feel.

Most investors polled (58%) said they are doing about as well or worse than five years ago. Similarly, 63% said they are saving about the same or less than five years ago. These figures are essentially unchanged from two years ago, suggesting that investors have not made much financial headway in the recovery. Roughly half said they are still feeling the effects of the recession.

“Is it real?” Wimbish says. “Or is it emotional?” If our prospects are really so dire, how do you explain record high stock prices, strong quarterly growth, a pickup in consumer borrowing, and an improving jobs picture?

Whatever is causing the gloom, one result is that nearly a third of investors continue to shun the stock market. Those with less than $100,000 in assets avoid stocks at twice the rate as those with more than that level of savings. Arguably, those with fewer assets are precisely the ones who need to be in stocks to take advantage of their superior long-run gains and build a nest egg.

They may be worried that they have missed the rally and that it is too late to get in. But the overriding concern—expressed by 60%—is that stocks are just too risky. So as the average stock has more than doubled from the bottom and recovered all its losses, and as those who remained true to their 401(k) contribution plan through thick and thin have become flush with gains, the truly risk averse have lost valuable time. Seeing this now may be part of what makes them so glum.

TIME Workplace & Careers

1 in 5 U.S. Workers Say They Were Laid Off in Last 5 Years: Poll

New York Job Fair Offers Services For Chronically Unemployed
John Moore—Getty Images People stand in a line that stretched around the block to enter a job fair held at the Jewish Community Center (JCC), on March 21, 2012 in New York City.

Total of 30 million say they received pink slips since 2009

One in five American workers say they have lost their jobs at some point within the last five years, according to a new survey that reveals that the recession, which technically ended in 2009, has continued to rattle the labor market.

The survey findings, released by Rutgers University’s John J. Heldrch Center for Workforce Development, exposes the lingering costs of lay-offs, both for those who cannot find work and those who have. Nearly 4 out of 10 laid-off workers say they spent more than seven months searching for a new job and nearly half of those who managed to find work said their new job was a step lower on the payscale.

Regardless of employment status, two-thirds of all adults in the survey say the recession negatively impacted their own standard of living, but the workers that took the hardest hits to income and savings were those who had been unemployed for a period longer than 6 months, whose struggles the authors called “among the most persistent, negative effects of the Great Recession.”

 

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