According To Decades Of Science These Are The 5 Ways To Fall Asleep And Beat Insomnia

We live in an always-on world; hyperconnected, overloaded with information, and addicted to our screens, especially the smartphone soulmates that are constantly begging for our attention. We can joke about the many aberrant behaviors this causes, such as walking headlong in doors, walls and each other, but where this behavior takes its greatest toll is on our sleep

According to sleep.org, “71 percent of people sleep either holding their smartphone, having it in bed with them, or having it on their nightstand.”

In a study, I and my coauthor, Dan Keldsen, did for The Gen Z Effect, we found that 10% of people, across all age groups, actually sleep with their smartphone in their bed or on the pillow next to them. While we didn’t ask to verify, it’s safe to assume these people are all single–or they soon will be!

But smartphones are just one of the culprits robbing us of a good nights sleep. 

Neuroscientist Matthew Walker, author of Why We Sleep, has been studying sleep for decades. Even going so far as to use sophisticated MRI techniques to peer into our dreams.

According to Walker, “The silent sleep loss epidemic is one of the greatest public health challenges we face in the 21st century,”  

Other research supports Walker’s claims. A well cited 2002 study actually associated poor sleep patterns with increased mortality.  An Inc article I wrote quoted studies that even went so far as to attribute Alzheimer’s and dementia, in part, to poor sleep.

It would seem that however you look at it, sleep is a major factor in determining your health and well being as well as your overall quality of life and longevity.

So, what can you do to ensure that you get the best sleep? According to Walker, there are five basic things to consider:

1) Regularity of Sleep

Set a schedule for your sleep and don’t vary from it. This means going to sleep at the same time but also getting up at the same time. In fact, you should get up at a set time even if you feel that you are not fully rested. In my own experience I’ve found that the biggest changes to my sleep patterns have occurred when I’ve changed a set activity in my life that would otherwise require I get up a the same time every day. So, go to bed at a set time and, whatever your quality of sleep, don’t vary from the wake time.

2) Stay Cool

Keep your bedroom temperature cool. Your body requires at least a 2 degree drop in its core temp in order to signal sleep. 65-68 Fahrenheit or about 18 Celsius is optimal. A great hack to help with this is an intelligent thermostat that allows you to set it so that the temp drop just after you get under the covers and goes back on just before. 

3) Lights Out

Dim the lights in your home at least one hour prior to sleep and keep your bedroom dark. Our bodies are tuned to the day/night cycle as one of the most important factors in producing melatonin, the neurochemical which triggers sleep.

It’s especially important to stay away from LED screens that emit blue light, which puts the brakes on melatonin. Even if you’re not using a computer screen, flat panel LED TVs can be just as bad. The alternative? Read a paper book. You still remember what those are, right?

4) It’s A Bed, Not A Recliner

This means that you shouldn’t use your bed to do things that keep you awake. Ok, well, let’s eliminate the other obvious use case. But with that exception, your bed is just for sleeping, not watching TV, checking email, or catching up on the 247 Facebook posts you missed during the day.  Unfortunately, using a bed to do all of the above have become such a cultural phenomenon that one of the hottest bedroom innovations is adjustable position beds, which are best described as a mashup of a La-Z-boy and hospital bed.

The same applies if you wake up from a sound sleep and can’t go back to sleep–do not stay in bed, says Walker. Get up and go to another room and take that paperback with you. If you don’t want to get out of a cozy warm bed in the middle of the night, Walker suggests trying meditation to calm your brain. I used to do this with my kids when they were little and couldn’t fall asleep. It worked so well that I was usually out before they were.

5) Stay Away From Alcohol And Caffeine 

Yeah, this is the most popular one–“Night cap anyone?” Alcohol may seem to help you get to sleep, but it does not promote deep sleep. It sedates you and blocks REM or dream sleep, the most important part of the sleep cycle. Caffeine, although a stimulant, also inhibits deep sleep. So, even if you’re like me and don’t feel you’re bothered by a coffee after dinner, the sleep you get will leave you feeling groggy in the morning. Spurring a few cups of coffee to get you started, and that only creates a vicious cycle. 

All of this may seem like pretty simple stuff but it takes discipline to be your own enforcer of these habits. My suggestion is to set aside a week during which you make a concerted effort to try these five habits. See how it feels, how you feel. 

The benefits are clear and they are many. As Walker tells it, “There does not seem to be one major organ within the body, or process within the brain, that isn’t optimally enhanced by sleep (and detrimentally impaired when we don’t get enough). That we receive such a bounty of health benefits each night should not be surprising.” 

Oh, and if, after all of this, you still have trouble sleeping, well, maybe you shouldn’t be reading this column on your smartphone while propped up in your well lit bedroom, reclining leisurely in a Tempurpedic adjustable position bed.   

Sleep well.

A New 9% Floating Rate Hybrid Just Hit The Market Below Par Value

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Cyber Saturday—Facebook’s ‘War Room’ Is a Marketing Ploy

In response to mounting criticism from consumers, citizens, and lawmakers, Facebook is pursuing a public relations blitz. The media giant wants to change people’s perceptions about how it is handling the scourge of misinformation and concomitant threat to elections presented by its websites and apps.

Enter the “war room.” Facebook invited journalists from a number of publications—Fortune included—to visit a cramped conference room on the company’s Menlo Park campus inside which a squad of 20-or-so employees is tasked with valiantly defending democracy around the globe—from the U.S., to Brazil, and beyond. The walls and desks are cluttered with video screens and computer monitors. Around them, Facebook’s freedom fighters huddle, clattering away on their keyboards, stemming a tide of malicious, politically-motivated influence campaigns.

One moment in Fortune reporter Jonathan Vanian’s account of the war room made me grin widely. A Facebook executive, Samidh Chakrabarti, director of elections and civic engagement for the company, tells Vanian that having everyone in the same room allows for “face-to-face” communication and quick decision-making. A few paragraphs later, we learn why Facebook does not plan to invite collaborators from other misinformation-besieged Silicon Valley companies, like Twitter and Reddit, to take seats in the room. It is easier for these groups to collaborate “virtually” rather than physically, says Nathaniel Gleicher, Facebook’s head of cybersecurity policy. Hmm…

Facebook’s war room seems, to this columnist, like a PR stunt. It is reminiscent of the cybersecurity fusion centers that banks and other companies set up to dazzle visitors. Such displays are “mostly for show,” as Jason Witty, chief information security officer at U.S. Bank, told the New York Times for an unrelated story about such flashy workspaces. They, you know, look cool.

I do not mean to denigrate Facebook’s efforts entirely. To be fair, the company is trying to address the many problems that plague its platforms. And the war room does serve an important purpose: making the company’s behind-the-scenes battles more tangible for its own employees, for regulators, and for the public. Hopefully it does help quench disinformation.

Still, the tidy image of the war room comes across as a bit of marketing misdirection. After all, the walls of this room extend far, far beyond Menlo Park. Ask any journalist. As the Times’ editorial board notes in a recent op-ed, Facebook effectively relies on news reporters as an army of unofficial, unpaid, outsourced content moderators, helping to root out spammers, trolls, and propagandists. Companies like Facebook “have all the tools at their disposal and a profound responsibility to find exactly what journalists find—and yet, clearly, they don’t,” the Times writes.

Indeed, the real war room has no walls.

***

Last week I warned readers about the many ways Bloomberg Businessweek’s recent report about Chinese spy chips smells foul. Just yesterday Apple CEO Tim Cook took the unprecedented move of personally calling for Bloomberg to retract the story. So far Bloomberg has not backed down. We’ll continue to track this story and its fallout.

Have a great weekend.

Robert Hackett

@rhhackett

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. Fortune reporter Robert Hackett here. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

3 Ways Russian-Linked Entities Stoked Controversy on Facebook, Twitter

New charges against a Russian national for allegedly trying to influence the 2016 U.S. presidential elections and upcoming midterms reveal the creative techniques that Kremlin-linked groups have used to sow discontent among Americans.

The Department of Justice said Friday that it filed criminal charges against Elena Alekseevna Khusyaynova for her alleged role with the Russian propaganda operation “Project Lakhta.” This operation, according to the complaint, oversaw multiple Russian-linked entities like the Internet Research Agency that lawmakers say spread fake news and ginned up controversy on Twitter and Facebook.

Russia has denied any disinformation campaign.

Here’s some interesting takeaways from the lawsuit:

Capitalizing on polarized topics of national interest

The complaint alleges that the Russian groups grasped onto polarized issues like gun control, race relations, and immigration to further divide the U.S. populace. They spread both liberal and conservative viewpoints to various groups on social media, tailoring the message to each one, including choosing which publication to share on them.

One unnamed Russian cited in the complaint allegedly said, ” If you write posts in a liberal group,…you must not use Breitbart titles. On the contrary, if you write posts in a conservative group, do not use Washington Post or Buzzfeed’s titles.”

The Russian groups appeared to practice their own form of racism, with one member reportedly saying “Colored LGTB are less sophisticated than white; therefore, complicated phrases and messages do not work.”

The groups apparently discovered that “infographics work well among LGTB and their liberal allies,” while conservatives appeared to be indifferent to graphics.

Spinning the news

Members of the Russian entities were well versed in summarizing popular news stories and spinning them in a way that would antagonize Americans. The entities created a Facebook group dubbed “Secure Borders” that would aggregate news stories and then sensationalize them to draw emotional responses.

Here’s an example of one way the Russian groups discussed among themselves about how to spin a news story about the late John McCain’s criticism of President Donald Trump’s immigration policies.

“Brand McCain as an old geezer who has lost it and who long ago belonged in a home for the elderly. Emphasize that John McCain’s pathological hatred towards Donald Trump and towards all his initiatives crosses all reasonable borders and limits. State that dishonorable scoundrels, such as McCain, immediately aim to destroy all the conservative voters’ hopes as soon as Trump tries to fulfill his election promises and tries to protect the American interests.”

Creating fake user accounts on Facebook and Twitter

The Russian groups couldn’t have spread propaganda as effectively if they used their real identities. Instead, they created fake profiles on the social media to do things like promote protests and rallies and to post divisive and hateful content.

For instance, the fictitious New York City resident “Bertha Malone” created 400 Facebook posts that allegedly contained “inflammatory political and social content focused primarily on immigration and Islam.”

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The “Malone” personal also communicated with an unnamed real Facebook user to assist in posting content and managing a Facebook group called “Stop A.I.”

On March 9, 2018, a fake Twitter user named @JohnCopper16 attempted to influence Twitter users by commenting on President Trump’s recent summit with North Korean President Kim Jong Un:

The Global Hunt for the Next Decade’s Fastest-Growing Companies

IT’S A DISCLAIMER FAMILIAR TO ANY INVESTOR, but it’s perhaps truer now than ever: Past performance is no guarantee of future success. Technological changes have accelerated the rate of competition: New challengers are rising faster than ever, and incumbent leaders are falling just as fast. At BCG, our research shows that for large companies, there is now less correlation than there used to be between past and future financial and competitive performance over multiple years.

The tools business leaders use, however, have not yet caught up to this reality. CEOs may pride themselves on being “forward-looking” (and the very best ones are called “visionaries”), yet the metrics commonly used to judge the state of a business (for example, profitability, revenue growth, and stock performance) are inherently retrospective. In other words, CEOs are looking into the proverbial rearview mirror when they really need binoculars.

That’s why last year BCG and Fortune created the Future 50. Our index is forward-looking, in the sense that it aims to measure vitality—a company’s capacity to reinvent its business and sustain revenue growth. Over long periods, the majority of shareholder returns of high performers are driven by such growth. However, consistently delivering growth is especially challenging for larger companies, which can no longer rely on startup-like momentum to sustain their performance. Our goal is to create a new tool for managers to measure and shape growth potential.

Signs of future strength

The Future 50 are the exceptions—the established public companies with the best long-term growth outlook. Our index is based on two pillars: a “top-down” market view of growth potential, and a “bottom up” assessment of a firm’s capacity to deliver growth.

To assess capacity, we focused on four dimensions: strategy, technology and investments, people, and structure. We identified dozens of theories that predict long-term performance, based on research and academic study. Then we tested them, leveraging a wide range of financial and non-financial data. In the non-financial realm, we used natural language processing algorithms to parse companies’ annual reports and SEC filings, searching for indicators of a firm’s strategic thinking on dimensions such as long-term focus; a broader sense of purpose beyond financial returns; and “biological thinking”—for example, embracing complexity and being adaptive. Finally, we used a machine-learning model to test the predictive power of these factors, retaining only those with a demonstrated impact on long-term growth.

Vitality operates over long periods and may not be reflected in short-term performance. That said, early results are encouraging: Since their selection last October, the 2017 Future 50 have achieved average revenue growth of 18% and total shareholder returns of 35%—outperforming both the overall market and growth-focused stock indexes.

Global patterns of vitality

Our 2017 ranking assessed only U.S. companies. This year we expanded our scope to include the largest public companies worldwide. We found a bipolar landscape. The vast majority of this year’s Future 50 are headquartered in two countries: 42% each in Greater China (including Hong Kong) and the U.S.

This distribution may seem extreme, but it is in line with growth trends. Of the fastest-growing large companies over the five years through 2017, 54% were based in China, and 28% in the U.S. Growth-focused investment follows a similar pattern: In the first half of 2018, approximately 80% of venture capital funding went to those two countries, according to Crunchbase.

Vitality is also unevenly distributed by sector. In the U.S. and other developed markets, the vast majority of vital companies are tech players. But in China and other emerging markets, the picture is more varied, thanks in part to rising consumer demand from the growing middle class. While digital leaders such as Alibaba, Baidu, and Tencent rise to the top, there are also three Chinese automakers among our top 50, along with a consumer-oriented Indian bank and a Thai convenience-store operator.

With high potential, high risk

The very attributes that make high growth possible often also increase risk. One cautionary example: While last year’s Future 50 companies are outperforming in the aggregate, three—LendingClub, Gogo, and Macom Technology Solutions—have lost half their market value since publication.

Many high-growth companies are led by founder-CEOs, who face the challenge of preserving culture and momentum while transitioning in the leadership role. Tech giants face trust issues, as users become increasingly sensitive to the social and political implications of digital products and increasing market power. And macro concerns, such as trade disputes, fears of a slowdown, and the impact of government influence on the economy, are more salient than ever. (Such concerns have impacted the share prices of many companies on this year’s list, especially in China.)

To calibrate these risks, we have stratified our ranking. We classified four companies—Samsung Biologics, Tesla, Facebook, and JD.com—in a “higher uncertainty zone”: Though they score well in our vitality analysis, each faces circumstances that elevate the risk that their growth could derail.

The Future 50 can’t predict success with certainty, of course. Evolving markets, new competitors, and external forces always have the potential to disrupt trajectories. But we believe this index provides a useful set of binoculars through which to recognize growth potential in volatile times.


METHODOLOGY

To identify the Future 50, BCG examined 1,100 publicly traded companies with at least $20 billion in market value or $10 billion in revenue in the 12 months through the end of 2017. A company’s final score represents its outperformance across the following metrics when compared with peers of a similar size.

50% of a company’s score is based on market potential—defined as its expected future growth as determined by financial markets. This is assessed by calculating the present value of its growth opportunities, which represents the proportion of its market value that is not attributable to the earnings stream from its existing business model.

The other 50% is based on a company’s capacity to deliver against this potential. This score comprises 17 factors, selected for their ability to predict growth over the following five years. These factors fall into four categories:

Strategy: Our A.I. algorithm Our A.I. algorithm uses a Long Short-Term Memory neural network (a natural language processing model that incorporates word order and context) to detect strategic orientation from SEC filings and annual reports. It assesses a company’s long-term focus, commitment to a purpose beyond financial returns, and “biological thinking” (emphasizing for example adaptation, collaboration and ecosystems). We also assess the clarity of a company’s strategy from earnings calls. Finally, we assess the company’s commitment to sustainability from its governance rating from Arabesque, a firm that specializes in ESG data and analytics.

Technology and Investments: A company’s capital expenditures and R&D (as a percentage of sales) measure its investment in the future. Technology advantage is assessed through the growth in a company’s patent portfolio and that portfolio’s digital intensity (share in computing and electronic communication). To account for external innovation, a company’s portfolio of startup investments is compared with the best-performing global venture capital funds.

People: We assess the age of a company’s executives and directors, as well as the share of managers and employees who are female. The value of consistent, focused management is assessed via leadership stability and smaller board size.

Structure: A company’s age and (revenue-based) size are correlated with vitality loss. But three-year and six-month sales growth can be predictive of future growth as signs of revitalization.

A company’s final score represents its outperformance across these factors compared to peers of a similar size (above or below $50 billion in market value), accounting for fact that growth-focused analysis inherently favors smaller companies. Companies in energy, metals, and commodity chemicals sectors were excluded because their growth is highly dependent on exogenous commodity prices. Finally, among companies with a high vitality score, “higher-uncertainty” companies were identified from reported events that commentators believe could materially affect their long-term growth outlook.

Company profiles:
HEAD WRITERS Eamon Barrett, Matt Heimer
CONTRIBUTORS Scott DeCarlo, Ryan Derousseau, Grace Donnelly, Erika Fry, Robert Hackett, Adam Lashinsky, Sy Mukherjee, and Jonathan Vanian


Martin Reeves is a senior partner at management consulting firm BCG and the director of the BCG Henderson Institute.

A version of this article appears in the November 1, 2018 issue of Fortune with the headline “A Global Hunt for the Next Decade’s Champions.”

Facebook shareholders back proposal to remove Zuckerberg as chairman

(Reuters) – Several public funds that hold shares in Facebook Inc on Wednesday backed a proposal to remove Chief Executive Officer Mark Zuckerberg as chairman, saying the social media giant mishandled several high-profile scandals.

Facebook’s CEO Mark Zuckerberg listens to French President Emmanuel Macron after a family picture with guests of the “Tech for Good Summit” at the Elysee Palace in Paris, France, May 23, 2018. REUTERS/Charles Platiau/Pool

State treasurers from Illinois, Rhode Island and Pennsylvania, and New York City Comptroller Scott Stringer, co-filed the proposal. They joined hedge fund Trillium Asset Management, which bought it to the table in June.

The proposal, set to be voted on at the company’s annual shareholder meeting in May 2019, is asking Facebook’s board to make the role of board chair an independent position.

Facebook did not immediately respond to a request for comment.

Facebook’s CEO Mark Zuckerberg arrives for a meeting with French President at the Elysee Palace in Paris, France, May 23, 2018. REUTERS/Christian Hartmann

“Facebook plays an outsized role in our society and our economy. They have a social and financial responsibility to be transparent – that’s why we’re demanding independence and accountability in the company’s boardroom,” Stringer said.

The proposal said lack of independent board chair and oversight has contributed to Facebook “mishandling” a number of severe controversies, including Russian meddling in U.S. elections and the Cambridge Analytica data leak.

Zuckerberg has about 60 percent voting power, according to a filing in April.

The New York City Pension Funds owned about 4.5 million Facebook shares as of July 31.

The Pennsylvania Treasury holds 38,737 shares of the company, according to a spokeswoman. Trillium holds 53,000 shares.

Shares held by the Treasurers of Illinois and Rhode Island were not immediately available.

Reporting by Arjun Panchadar and Munsif Vengattil in Bengaluru; Editing by Bernard Orr

Exclusive: Amazon zooms in on central Mexico for large new warehouse

MEXICO CITY (Reuters) – Amazon.com Inc is scouting for land in central Mexico for a fourth distribution center in the country, sources said, aiming at a bigger slice of the burgeoning e-commerce market in Latin America’s second-largest economy.

FILE PHOTO: A view of the Amazon fulfillment logo in Mexico City, Mexico, September 12, 2017. REUTERS/Edgard Garrido/File Photo

The retail titan’s target is Queretaro state in the industrial center of Mexico, where it is looking to hire a developer to build a large hub, two real estate professionals familiar with Amazon’s property hunt said. They asked not to be named because Amazon has not announced its plans.

The expansion plan highlights Amazon’s intent to plant roots beyond Mexico’s bustling capital, banking on the nation’s potential to grow into an e-commerce engine of Latin America.

Online shopping in Mexico comprised just 3.0 percent of total sales last year, according to market research firm Euromonitor International, but it is projected to more than double by 2022, reaching $14 billion.

“Mexico’s digital economy has great potential. We expect it to keep growing in the future,” said Brian Huseman, Amazon’s vice president for public policy, at a recent event in Mexico City promoting efforts to get more Mexican companies on its platform.

“Amazon is here for the long run,” he said.

The company has considered several properties in Queretaro, and was looking for 50 acres where it could commission a more than one million-square-foot warehouse, about the size of 17 football fields, plus office space, one of the sources said.

Amazon declined to comment.

FILE PHOTO: The logo of the web service Amazon is pictured in this June 8, 2017 illustration photo. To match Exclusive MEXICO-AMAZON.COM/ REUTERS/Carlos Jasso/Illustration/File Photo

Queretaro, 114 miles north of Mexico City, is within a day’s reach of Monterrey and Guadalajara, two of Mexico’s most populous regions. It also sits in a cluster of middle-class cities in the Bajio, a region dense with automotive and aerospace plants.

Most of the state’s industrial parks sit along the so-called “NAFTA highway,” a key artery for companies in Mexico receiving goods from the United States and Canada under the North American Free Trade Agreement. An updated pact was agreed last month and is expected to preserve cross-border commerce once it becomes law.

The parks are also within several miles of the Queretaro Intercontinental Airport that handles cargo.

Amazon’s expansion to Queretaro would be part of the company’s bid to reel in shoppers with fast deliveries while keeping a lid on shipping expenses.

“It’s all about speed to market and keeping costs low,” said Marc Wulfraat, president of logistics consultancy MWPVL International Inc.

Amazon, which began selling physical goods in Mexico in 2015, already operates three warehouses just outside Mexico City with about 1.5 million square feet. That space is equivalent to just 1.0 percent of its vast U.S. logistics footprint, according to MWPVL.

Still, it has scaled up faster in Mexico than in Brazil, which MWPVL says has 665,400 square feet.

For Pedro Villa, whose Mexico-based company Konekte sells home storage equipment, speedy deliveries boost sales by reining in first-time shoppers who are concerned about online fraud and worry packages may not arrive.

“It’s about confidence,” Villa said. “If you pay and it takes a week or 15 days, you’re going to want your money back.”

Reporting by Daina Beth Solomon; editing by Clive McKeef

Lyft selects JPMorgan, Credit Suisse for IPO in 2019: source

(Reuters) – Ride-hailing company Lyft Inc has chosen JPMorgan Chase & Co, Credit Suisse and Jefferies as underwriters for its initial public offering, slated for the first half of 2019, according to a person familiar with the matter.

FILE PHOTO: An illuminated sign appears in a Lyft ride-hailing car in Los Angeles, California, U.S. September 21, 2017. REUTERS/Chris Helgren/File Photo

The source did not want to be identified because Lyft’s plans were still private.

Reuters had earlier reported that Lyft was in talks with JPMorgan to lead its IPO, after rivals Goldman Sachs and Morgan Stanley decided not to pursue such a role out of loyalty to another IPO hopeful and Lyft’s larger competitor, Uber Technologies Inc.

Earlier on Tuesday, the Wall Street Journal reported that Uber could be valued at $120 billion in its IPO, expected in 2019.

JPMorgan declined to comment. Credit Suisse did not immediately respond to Reuters’ request for comment, while Jefferies was not available for a comment.

Lyft also declined to comment.

The two IPOs are widely seen as a litmus test for investor tolerance for lack of profitability when it comes to iconic technology unicorns.

Uber and Lyft have taken hits to their bottom lines in order to attract drivers and enter new markets, although they have made strides in recent years in narrowing their losses.

Like Uber, Lyft offers an app that lets passengers request rides on their smartphones. It was founded in 2012 by technology entrepreneurs John Zimmer and Logan Green, three years after Uber.

Reporting By Aparajita Saxena in Bengaluru and Liana Baker in New York; Editing by Shailesh Kuber

3 Vanguard ETFs To Consider Right Now

I’m penning this article the evening of October 11, 2018. The market has just completed two of the most severe convulsions since early-February, when the Dow suffered a 600-point decline followed by two 1,000-point declines over a span of 4 trading days.

Over the past two days, the Dow has dropped 1,377 points, the Nasdaq 409 points, and the S&P 500 some 152 points, declines of 5.21%, 5.29%, and 5.28%, respectively. When you look at those 3 averages, you quickly sense that the decline was widespread.

Clearly, if one is looking to pick up some bargains, one could look to snap up any one of a number of ETFs. A good total-market ETF, for example, might not be a bad bet. Might you, though, be able to do even better than that? Might there be options that, viewed over the course of 2018 as a whole, present even better bargains?

I spent a little time looking at that question, and have come up with 3 ETFs I’d like to propose for your consideration. Here they are.

  1. Vanguard FTSE All-World ex-US ETF (VEU)
  2. Vanguard Consumer Staples ETF (VDC)
  3. Vanguard Real Estate ETF (VNQ)

First, here’s a quick peek at what our 3 candidates did over the past couple of days. You’ll notice a slight divergence. VEU slumped fairly consistently both days. VDC and VNQ held up decently on Day 1 of the decline, but then got hit hard on Day 2. Long story short, however, they fell hard just like pretty much everything else.

Chart

VEU Price

data by

YCharts

Next, though, let’s step back and take a look at how the 3 ETFs have performed year-to-date. In this graphic, I’ve overlaid the S&P 500 average to put things in perspective.

Chart

^SPX

data by

YCharts

The action in the S&P 500 is pretty dramatic. In two days, the average dropped from a YTD return of almost 7.5% to 2.05%. However, this is still between roughly 9% and 13% better than VEU, VDC, and VNQ.

One by one, let’s take a quick look at each of these 3 ETFs. I’ll briefly consider how each got to the point it is today, a little about the ETF itself, and the possibilities moving forward.

Vanguard Consumer Staples ETF

As you can quickly gather from its name, VDC focuses on the consumer staples sector. As it turns out, this sector is particularly helpful in protecting your portfolio in the event of a market downturn. In brief, Consumer Staples is the term given to products, and the companies which produce these, that are considered essential, such as food, beverages, household items, and tobacco. These are the sorts of items that people need to function each and every day, and therefore, are generally unable to cut out of their budget even in bad times.

Take a look at VDC’s Top-10 holdings.

VDC Top 10 Holdings

Source: VDC Profile Page

Just the other evening, I went to my local Costco (COST) and, among other items, picked up a multi-pack of Crest toothpaste, a Proctor & Gamble (PG) product. My neighbor is a huge Diet Coke fan, and I see empty cartons from cases of this Coca-Cola (KO) product in his garbage on a regular basis. Lastly, I recently got a great price on a few pairs of jeans at Walmart (WMT). And I am far from alone.

Why, then, have consumer staples stocks struggled in 2018? Analysts suggest several factors. Established companies are facing competition from smaller, nimbler upstarts. Energy costs are rising. Finally, ongoing trade wars may not be doing this segment any favors.

It may prove folly, however, to discount these established companies. Think, for example, about Coca-Cola’s massive and efficient distribution network. Think about things such as economies of scale. Lagging the overall S&P 500 by some 9% this year, this segment may deserve a second look.

VDC contains 93 stocks, and has Assets Under Management (AUM) of $4.6 billion. It carries an expense ratio of .10% and sports an SEC yield of 2.85% as of 9/30/18.

Vanguard Real Estate ETF

When I first featured VNQ in a comparison of 3 REIT ETFs, the name of the ETF was Vanguard REIT Index ETF. A REIT is a corporate entity that invests in real estate. You might be surprised to discover that much of the real estate you see as you move about your daily life is owned by REITs. This can include everything from downtown Manhattan office buildings to suburban outlet malls to high-quality apartment complexes to mobile home parks.

What makes REITs somewhat unique from other entities that might invest in real estate as part of their business is their tax status. To qualify as a REIT, a company must agree to distribute at least 90% of its earnings to its investors in the form of dividends. As a practical matter, many REITs distribute 100% of their income to investors such that they owe no corporate tax.

The change to its present name was no accident. Beginning in late-2017, Vanguard gradually transitioned the index tracked by this ETF to the MSCI US Investable Market Real Estate 25/50 Index. According to a statement from Vanguard, the sector “includes real estate management and development companies in addition to real estate investment trusts (REITs).”

So, for example, VNQ now counts American Tower Corporation (AMT) as one of its Top-10 holdings. As you might have guessed from the name, among other things American Tower owns and/or operates some 40,000 cellular towers in the United States.

Here’s a look at VNQ’s sector breakdown:

VNQ Sector Weightings

Source: VNQ Profile Page

Not surprisingly, since REITs tend to hold large amounts of debt, they are very interest-rate sensitive. In the current environment, this forms a large part of their relative underperformance. At the same time, they offer stability and, by their very charter, a solid stream of dividend income. VNQ’s yield currently stands at approximately 3.29%.

VNQ currently has AUM of some $33.0 billion and carries an expense ratio of .12%.

Vanguard FTSE All-World ex-US ETF

VEU is a venerable ETF in the international total-market asset class. With an inception date of 3/2/07 and AUM of $22.9 billion, it stands head and shoulders above the competition. No wonder it carries an enviable (for a foreign ETF) .02% average spread to go along with its competitive .11% expense ratio.

VEU tracks the FTSE All-World ex-US Index. This index focuses on large-cap and medium-cap companies outside the U.S., but shies away from small-cap companies. Its fact sheet lists the index as having 2,712 constituents covering 46 different countries, in both developed and emerging markets.

Here’s a quick peek at VEU’s Top 10 holdings.

VEU Top 10 Holdings

Source: VEU Profile Page

To give you some small sense of the sorts of companies that constitute the largest portions of the fund, here are extremely brief synopses of two of these companies, Nestle SA (OTCPK:NSRGY) and Novartis AG (NYSE:NVS):

  • Nestle SA – Nestle is the largest food company in the world, measured by revenues. Encompassing baby food, bottled water, coffee & tea, dairy products, frozen food, pet food, snacks and more. The list of brands is made up of legendary names that you will instantly recognize, and Wikipedia states that 29 of these brands each have annual sales of over $1 billion. The company operates in 189 countries.
  • Novartis AG – Novartis is the 6th-largest largest pharmaceutical company in the world, measured by revenues. According to its latest annual report, its R&D group received 16 major approvals, made 16 major submissions, and received six breakthrough therapy designations from the US Food and Drug Administration (FDA). Novartis’ products are available in more than 155 countries worldwide.

In a recent article on emerging markets, I briefly outlined some of the reasons for the underperformance of this asset class compared to the U.S. market. Developed international markets have also not been exempt from many of these factors, hence the roughly 13% YTD underperformance of VEU as compared to the S&P 500.

Summary and Conclusion

By the time you read this article, Friday’s market session will have likely come and gone. While, based on activity in futures, the expectation is that there will be a positive bounce, we’ll just have to wait and see.

However, I can all but promise that the YTD underperformance of these 3 ETFs will not be remedied in any one day. If you have been dutifully stashing some extra cash away, here are three possible places you can put some of it to work.

Bonus: A Peek Into ETF Monkey’s Personal Portfolio

In late 2016, after writing for Seeking Alpha for a little over a year, I for the first time offered readers a peek into my personal portfolio. It had been awhile since I had updated this, and a few things have changed. On my personal blog, I recently posted an update as of September 30, 2018. If you’re curious to see how I have allocated my own money, you’re welcome to take a peek!

Disclosure: I am/we are long VEU, VNQ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes, and to consult with their personal tax or financial advisors as to its applicability to their circumstances. Investing involves risk, including the loss of principal.

A Grad Student Solved a Fundamental Quantum Computing Problem

In the spring of 2017, Urmila Mahadev found herself in what most graduate students would consider a pretty sweet position. She had just solved a major problem in quantum computation, the study of computers that derive their power from the strange laws of quantum physics. Combined with her earlier papers, Mahadev’s new result, on what is called blind computation, made it “clear she was a rising star,” said Scott Aaronson, a computer scientist at the University of Texas, Austin.

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Original story reprinted with permission from Quanta Magazine, an editorially independent publication of the Simons Foundation whose mission is to enhance public understanding of science by covering research developments and trends in mathematics and the physical and life sciences.

Mahadev, who was 28 at the time, was already in her seventh year of graduate school at the University of California, Berkeley — long past the stage when most students become impatient to graduate. Now, finally, she had the makings of a “very beautiful Ph.D. dissertation,” said Umesh Vazirani, her doctoral adviser at Berkeley.

But Mahadev did not graduate that year. She didn’t even consider graduating. She wasn’t finished.

For more than five years, she’d had a different research problem in her sights, one that Aaronson called “one of the most basic questions you can ask in quantum computation.” Namely: If you ask a quantum computer to perform a computation for you, how can you know whether it has really followed your instructions, or even done anything quantum at all?

This question may soon be far from academic. Before too many years have elapsed, researchers hope, quantum computers may be able to offer exponential speedups on a host of problems, from modeling the behavior around a black hole to simulating how a large protein folds up.

But once a quantum computer can perform computations a classical computer can’t, how will we know if it has done them correctly? If you distrust an ordinary computer, you can, in theory, scrutinize every step of its computations for yourself. But quantum systems are fundamentally resistant to this kind of checking. For one thing, their inner workings are incredibly complex: Writing down a description of the internal state of a computer with just a few hundred quantum bits (or “qubits”) would require a hard drive larger than the entire visible universe.

And even if you somehow had enough space to write down this description, there would be no way to get at it. The inner state of a quantum computer is generally a superposition of many different non-quantum, “classical” states (like Schrödinger’s cat, which is simultaneously dead and alive). But as soon as you measure a quantum state, it collapses into just one of these classical states. Peer inside a 300-qubit quantum computer, and essentially all you will see is 300 classical bits — zeros and ones — smiling blandly up at you.

“A quantum computer is very powerful, but it’s also very secretive,” Vazirani said.

Given these constraints, computer scientists have long wondered whether it is possible for a quantum computer to provide any ironclad guarantee that it really has done what it claimed. “Is the interaction between the quantum and the classical worlds strong enough so that a dialogue is possible?” asked Dorit Aharonov, a computer scientist at the Hebrew University of Jerusalem.

During her second year of graduate school, Mahadev became captivated by this problem, for reasons even she doesn’t fully understand. In the years that followed, she tried one approach after another. “I’ve had a lot of moments where I think I’m doing things right, and then they break, either very quickly or after a year,” she said.

But she refused to give up. Mahadev displayed a level of sustained determination that Vazirani has never seen matched. “Urmila is just absolutely extraordinary in this sense,” he said.

Now, after eight years of graduate school, Mahadev has succeeded. She has come up with an interactive protocol by which users with no quantum powers of their own can nevertheless employ cryptography to put a harness on a quantum computer and drive it wherever they want, with the certainty that the quantum computer is following their orders. Mahadev’s approach, Vazirani said, gives the user “leverage that the computer just can’t shake off.”

For a graduate student to achieve such a result as a solo effort is “pretty astounding,” Aaronson said.

Mahadev, who is now a postdoctoral researcher at Berkeley, presented her protocol recently at the annual Symposium on Foundations of Computer Science, one of theoretical computer science’s biggest conferences, held this year in Paris. Her work has been awarded the meeting’s “best paper” and “best student paper” prizes, a rare honor for a theoretical computer scientist.

In a blog post, Thomas Vidick, a computer scientist at the California Institute of Technology who has collaborated with Mahadev in the past, called her result “one of the most outstanding ideas to have emerged at the interface of quantum computing and theoretical computer science in recent years.”

Quantum computation researchers are excited not just about what Mahadev’s protocol achieves, but also about the radically new approach she has brought to bear on the problem. Using classical cryptography in the quantum realm is a “truly novel idea,” Vidick wrote. “I expect many more results to continue building on these ideas.”

A Long Road

Raised in Los Angeles in a family of doctors, Mahadev attended the University of Southern California, where she wandered from one area of study to another, at first convinced only that she did not want to become a doctor herself. Then a class taught by the computer scientist Leonard Adleman, one of the creators of the famous RSA encryption algorithm, got her excited about theoretical computer science. She applied to graduate school at Berkeley, explaining in her application that she was interested in all aspects of theoretical computer science — except for quantum computation.

“It sounded like the most foreign thing, the thing I knew least about,” she said.

But once she was at Berkeley, Vazirani’s accessible explanations soon changed her mind. He introduced her to the question of finding a protocol for verifying a quantum computation, and the problem “really fired up her imagination,” Vazirani said.

“Protocols are like puzzles,” Mahadev explained. “To me, they seem easier to get into than other questions, because you can immediately start thinking of protocols yourself and then breaking them, and that lets you see how they work.” She chose the problem for her doctoral research, launching herself on what Vazirani called “a very long road.”

If a quantum computer can solve a problem that a classical computer cannot, that doesn’t automatically mean the solution will be hard to check. Take, for example, the problem of factoring large numbers, a task that a big quantum computer could solve efficiently, but which is thought to be beyond the reach of any classical computer. Even if a classical computer can’t factor a number, it can easily check whether a quantum computer’s factorization is correct — it just needs to multiply the factors together and see if they produce the right answer.

Yet computer scientists believe (and have recently taken a step toward proving) that many of the problems a quantum computer could solve do not have this feature. In other words, a classical computer not only cannot solve them, but cannot even recognize whether a proposed solution is correct. In light of this, around 2004, Daniel Gottesman — a physicist at the Perimeter Institute for Theoretical Physics in Waterloo, Ontario — posed the question of whether it is possible to come up with any protocol by which a quantum computer can prove to a non-quantum observer that it really has done what it claimed.

Within four years, quantum computation researchers had achieved a partial answer. It is possible, two different teams showed, for a quantum computer to prove its computations, not to a purely classical verifier, but to a verifier who has access to a very small quantum computer of her own. Researchers later refined this approach to show that all the verifier needs is the capacity to measure a single qubit at a time.

And in 2012, a team of researchers including Vazirani showed that a completely classical verifier could check quantum computations if they were carried out by a pair of quantum computers that can’t communicate with each other. But that paper’s approach was tailored to this specific scenario, and the problem seemed to hit a dead end there, Gottesman said. “I think there were probably people who thought you couldn’t go further.”

It was around this time that Mahadev encountered the verification problem. At first, she tried to come up with an “unconditional” result, one that makes no assumptions about what a quantum computer can or cannot do. But after she had worked on the problem for a while with no progress, Vazirani proposed instead the possibility of using “post-quantum” cryptography — that is, cryptography that researchers believe is beyond the capability of even a quantum computer to break, although they don’t know for sure. (Methods such as the RSA algorithm that are used to encrypt things like online transactions are not post-quantum — a large quantum computer could break them, because their security depends on the hardness of factoring large numbers.)

In 2016, while working on a different problem, Mahadev and Vazirani made an advance that would later prove crucial. In collaboration with Paul Christiano, a computer scientist now at OpenAI, a company in San Francisco, they developed a way to use cryptography to get a quantum computer to build what we’ll call a “secret state” — one whose description is known to the classical verifier, but not to the quantum computer itself.

Their procedure relies on what’s called a “trapdoor” function — one that is easy to carry out, but hard to reverse unless you possess a secret cryptographic key. (The researchers didn’t know how to actually build a suitable trapdoor function yet — that would come later.) The function is also required to be “two-to-one,” meaning that every output corresponds to two different inputs. Think, for example of the function that squares numbers — apart from the number 0, each output (such as 9) has two corresponding inputs (3 and ?3).

Armed with such a function, you can get a quantum computer to create a secret state as follows: First, you ask the computer to build a superposition of all the possible inputs to the function (this might sound complicated for the computer to carry out, but it’s actually easy). Then, you tell the computer to apply the function to this giant superposition, creating a new state that is a superposition of all the possible outputs of the function. The input and output superpositions will be entangled, which means that a measurement on one of them will instantly affect the other.

Next, you ask the computer to measure the output state and tell you the result. This measurement collapses the output state down to just one of the possible outputs, and the input state instantly collapses to match it, since they are entangled — for instance, if you use the squaring function, then if the output is the 9 state, the input will collapse down to a superposition of the 3 and ?3 states.

But remember that you’re using a trapdoor function. You have the trapdoor’s secret key, so you can easily figure out the two states that make up the input superposition. But the quantum computer cannot. And it can’t simply measure the input superposition to figure out what it is made of, because that measurement would collapse it further, leaving the computer with one of the two inputs but no way to figure out the other.

In 2017, Mahadev figured out how to build the trapdoor functions at the core of the secret-state method by using a type of cryptography called Learning With Errors (LWE). Using these trapdoor functions, she was able to create a quantum version of “blind” computation, by which cloud-computing users can mask their data so the cloud computer can’t read it, even while it is computing on it. And shortly after that, Mahadev, Vazirani and Christiano teamed up with Vidick and Zvika Brakerski (of the Weizmann Institute of Science in Israel) to refine these trapdoor functions still further, using the secret-state method to develop a foolproof way for a quantum computer to generate provably random numbers.

Mahadev could have graduated on the strength of these results, but she was determined to keep working until she had solved the verification problem. “I was never thinking of graduation, because my goal was never graduation,” she said.

Not knowing whether she would be able to solve it was stressful at times. But, she said, “I was spending time learning about things that I was interested in, so it couldn’t really be a waste of time.”

Set in Stone

Mahadev tried various ways of getting from the secret-state method to a verification protocol, but for a while she got nowhere. Then she had a thought: Researchers had already shown that a verifier can check a quantum computer if the verifier is capable of measuring quantum bits. A classical verifier lacks this capability, by definition. But what if the classical verifier could somehow force the quantum computer to perform the measurements itself and report them honestly?

The tricky part, Mahadev realized, would be to get the quantum computer to commit to which state it was going to measure before it knew which kind of measurement the verifier would ask for — otherwise, it would be easy for the computer to fool the verifier. That’s where the secret-state method comes into play: Mahadev’s protocol requires the quantum computer to first create a secret state and then entangle it with the state it is supposed to measure. Only then does the computer find out what kind of measurement to perform.

Since the computer doesn’t know the makeup of the secret state but the verifier does, Mahadev showed that it’s impossible for the quantum computer to cheat significantly without leaving unmistakable traces of its duplicity. Essentially, Vidick wrote, the qubits the computer is to measure have been “set in cryptographic stone.” Because of this, if the measurement results look like a correct proof, the verifier can feel confident that they really are.

“It is such a wonderful idea!” Vidick wrote. “It stuns me every time Urmila explains it.”

Mahadev’s verification protocol — along with the random-number generator and the blind encryption method — depends on the assumption that quantum computers cannot crack LWE. At present, LWE is widely regarded as a leading candidate for post-quantum cryptography, and it may soon be adopted by the National Institute of Standards and Technology as its new cryptographic standard, to replace the ones a quantum computer could break. That doesn’t guarantee that it really is secure against quantum computers, Gottesman cautioned. “But so far it’s solid,” he said. “No one has found evidence that it’s likely to be breakable.”

In any case, the protocol’s reliance on LWE gives Mahadev’s work a win-win flavor, Vidick wrote. The only way that a quantum computer could fool the protocol is if someone in the quantum computing world figured out how to break LWE, which would itself be a remarkable achievement.

Mahadev’s protocol is unlikely to be implemented in a real quantum computer in the immediate future. For the time being, the protocol requires too much computing power to be practical. But that could change in the coming years, as quantum computers get larger and researchers streamline the protocol.

Mahadev’s protocol probably won’t be feasible within, say, the next five years, but “it is not completely off in fantasyland either,” Aaronson said. “It is something you could start thinking about, if all goes well, at the next stage of the evolution of quantum computers.”

And given how quickly the field is now moving, that stage could arrive sooner rather than later. After all, just five years ago, Vidick said, researchers thought that it would be many years before a quantum computer could solve any problem that a classical computer cannot. “Now,” he said, “people think it’s going to happen in a year or two.”

As for Mahadev, solving her favorite problem has left her feeling a bit at sea. She wishes she could understand just what it was about that problem that made it right for her, she said. “I have to find a new question now, so it would be nice to know.”

But theoretical computer scientists see Mahadev’s unification of quantum computation and cryptography not so much as the end of a story, but as the initial exploration of what will hopefully prove a rich vein of ideas.

“My feeling is that there are going to be lots of follow-ups,” Aharonov said. “I’m looking forward to more results from Urmila.”

Original story reprinted with permission from Quanta Magazine, an editorially independent division of SimonsFoundation.org whose mission is to enhance public understanding of science by covering research developments and trends in mathematics and the physical and life sciences.


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