Some things I read this week: 22/7/18

What is the GDPR?

  • The GDPR refers to regulation concerning privacy and security of user data in EU-operating businesses. It stands for the General Data Protection Regulation.
  • For now, detailed standards for company policy and systems regarding the use and protection of user data remains loosely-defined, however will be a key consideration for any company seeking to continue or build operations in EU-member states.
  • An Ovum report suggests that the majority of U.S. companies surveyed will need to rethink their digital strategies and believe they will be at a competitive disadvantage as a result of GDPR.
  • Data protection will include basic ID information, web data (location, IP address, cookie information), biometric, health and genetic data, racial data, and more.

How Operations Research and Artificial Intelligence Overlap

  • Operations Research draws on math, CS and business to make decisions, and was proliferated during WWII to solve high-cost, high-risk problems.
  • The article posits that OR and AI are incredibly similar: they are centered upon the automation of decisions through the codification of decision making.

When Dividends are a Problem

  • Dividends allow companies to redistribute capital to investors; however, since the early 2000s, dynamics of the financial markets should be taken into account when choosing so-called “dividend stocks.”
    • The ’08 crisis saw many dividends sharply cut, including many that were once considered sacred
    • Increasing pace of innovation and technological disruption continues to spread across industries, challenging legacy moats, and by extension, dividends
    • Boards and management teams are looking to share buybacks for capital redistribution as a preferred alternative to cash dividends
  • Ensemble Capital uses FCF Payout Ratio (I’ve usually seen Dividend Payout as a % of Earnings, though the FCF metric might be more telling) to demonstrate that CPG Dividend Aristocrats like Colgate, Kimberly Clark and P&G are constrained by their legacy of dividend growth and therefore are left with little cash available for acquisitions and innovations.

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