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CEO Daily: Friday, April 17th

April 17, 2015, 10:45 AM UTC

More news today highlighting the growing disconnect between the world inhabited by public companies – where activist investors put managers on ever-shorter leashes – and the world of startups – where investors throw themselves at unprofitable companies with surprising abandon.

The common thread in these two divergent trends, of course, is abundant money in search of a decent return. We aren’t sure where it all ends, but it’s clear the unintended consequences of the last decade’s loose money experiment are piling up.

We recommend two reads from Fortune related to the trends. One is by Stephen Gandel on what has happened to mining company Cliffs Natural Resources since activists won control eight months ago. The other is by our new reporter Jonathan Vanian – formerly of Gigaom – on the $95 million funding round valuing cloud company Docker, which gives most of its services away for free, at nearly $1 billion.

Our story selections for you are below. Enjoy the day, and the weekend. And please, let us know how we can make this daily newsletter serve you better.

Alan Murray

Top News

 Activist turnaround not working at Cliffs Natural

Activist investors are known to swoop in and promise shareholders they can turn around a troubled company more effectively than existing management. But the jury on activism is still out. Take the case of mining company Cliffs Natural Resources, which Casablanca Capital won control of last summer. Eight-and-a-half months later, Cliffs’ stock has plunged 69%. Cliff’s new CEO put in place a plan to sell off assets to generate cash or close mines that have been losing money. But such sales have gone slowly, and many of the deals haven’t generated a lot of cash.  Fortune

 Verizon responds to the Netflix threat

TV viewers have long demanded more choice and flexibility for the channels they are willing to pay for, even as some observers argue that unbundling cable packages could actually cost more in the long run. Verizon Communications is finally heeding the call by announcing new TV packages that will allow consumers to sign up for a slim group of channels, as well as an ability to add on "channel packs" covering genres like sports or pop culture. FiOS’s cheapest plan will cost $55 a month and will include two channel packs. The announcement comes less than 48 hours after Netflix said the company's subscriber base that topped 60 million worldwide.  WSJ

Why invest in an unprofitable startup? 

Eventually, a company has to figure out a way to make money. That's a statement that almost always comes up when startups raise funding rounds, but an unprofitable business doesn't deter investors, especially if there is "momentum." Cloud company Docker landed a $95 million funding round that values the business at nearly $1 billion (putting it just a tad under Fortune "Unicorn" status). But Docker hasn't yet found a way to make money from its core product — though it is quickly adding users, and in startup land, that's enough for now.  Fortune

 E-cigarettes too popular with teens

Electronic cigarettes have caught the attention of all major U.S. tobacco firms and a ton of independent companies. What's problematic is who they are increasingly selling to: teens. Among high school students, e-cigarette use jumped to 13.4% in 2014 from 4.5% in 2013, according to the Centers for Disease Control and Prevention. That's raising alarm among tobacco control advocates and also problematic for big companies like Altria and Lorillard, which have entered the e-cigarette market and see it as a growth opportunity. The Food and Drug Administration, which already regulates cigarettes and many other tobacco products, is expected to publish a rule extending its authority to e-cigarette in June.  Reuters

Around the Water Cooler

 Heinz wants to sell mustard too

Private-equity backed Heinz has been selling ketchup for nearly 140 years. Efforts to sell ketchup's sibling condiment, mustard, hasn't been met with nearly as much success. That won't deter Heinz from trying to squeeze into the mustard aisle with a new retail version that Heinz says uses all-natural ingredients and stone-ground mustard seeds. The question that needs to be asked is this: is it worth the effort? U.S. mustard sales fell to $429.6 million last year from $445 million in 2010.  WSJ

 The med school entrance exam got 3 hours longer

Can you imagine taking an exam that takes seven and a half hours to complete? That's the length of the new test for wannabe doctors taking the newest Medical College Admission Text (MCAT). We found it interesting that the first significant overhaul of the exam in the past 25 years finally nodded to the growing role of technology in health care. Another change that intrigued us was that the test tries to relate better to the changing nature of health care delivery, which requires doctors to develop more therapeutic relationships with patients to combat sensitive medical issues like obesity and diabetes.  Fortune

Australians finally learn to love Mexican food

With major restaurant chains like Chipotle and Taco Bell, Americans are well aware of how tasty a taco can be. Australians are just catching up, with the amount of Mexican and Tex-Mex restaurants listed on Urbanspoon more than doubling over the past two years. It is hard to pin down why this trend is happening, but the trend is so strong that Taco Bell, which failed at a prior expansion in the market, could be mulling a comeback.  Quartz

 How states vary in tax revenue collection

The nation's Tax Day has passed but that doesn't mean we can't stop obsessing about new data from the Census Bureau that shows just how states collect. Last year, states collected an average of about $2,700 per person in tax revenue. But there was a huge range on a state-by-state basis: $1,700 per person in New Hampshire on the low end and more than $8,000 per person in North Dakota at the top. Why? Well states like North Dakota and Alaska pull in a lot of cash from oil production, while other states like Washington collect no income tax but generate a majority of revenue on sales taxes.  Fivethirtyeight

CEO spotlight: Adam Aron, Starwood Hotels & Resorts

What advice does Adam Aron give to executives that could get a limited tenure at the top? “Three words: Listen, learn and act,” Aron tells Fortune. A member of Starwood’s board, Aron says he has talked to almost 150 Starwood hotel owners and interacted with roughly two thirds of general managers globally to distill what actions must be implemented right away. He has only been in the job for two months, but said he spent a lot of time listening.

Aron had a clear advantage: he has served on the hotel company’s board for over eight years, “so it isn’t a new company to me. Although when stepping into the role of CEO, you look at it differently than you do as a director.”

Starwood is looking at both internal and external candidates. Aron won’t confirm if he’s thrown his hat in the ring, saying he is focusing on the task at hand. Still, the board has given him a lot of flexibility.

“When the board asked me to step in, we agreed this was not going to be a passive caretaker role even though the appointment is on an interim basis,” Aron says. To learn more about what Aron's been working on, read this Fortune story.