Category Archives: Legal

Lawmakers Demand Social Network Execs Reveal What They Spend to Fight Terrorism


Photo: Sean Gallup (Getty)

By Dell Cameron, Staff Reporter at Gizmodo  April 11, 2019

The head of the House subcommittee on intelligence and counterterrorism is on a quest to find out precisely how much money YouTube, Microsoft, Facebook, and Twitter are spending each to combat extremism across their myriad platforms. Since representatives of the companies seemed unequipped to answer that question during a briefing late last month, their CEOs are now being asked to cough up those figures.

Representative Max Rose, who chairs the subcommittee, sent a letter on Thursday to each of the four companies asking for among other details their annual budgets for counter-terrorism efforts and related programs, “expressed as absolute numbers as well as percentages of your company’s total annual operating budget.”

“We’ve seen in graphic detail the extent that terrorist organizations and extremists have used social media to amplify their reach and message in recent years,” he said. “While social media companies tell us they’re taking this seriously, I want to see the numbers to back that up—and won’t stop until we get answers.”

The letter also requests the number of employees dedicated solely to countering terrorists, including, it says, domestic terrorists, far-right extremists, and white supremacists, who’ve “made use of online platforms to connect with like-minded individuals and spread their ideologies.”

The letter is cosigned by Representatives Shiela Jackson Lee, James, Langevin, and Elissa Slotkin, each of whom also serves on the subcommittee.

“As you all know, a budget is a statement of values,” the letter continues. “We believe that the level of resources your companies allocate to containing and combating online terrorist content is a reflection of the seriousness with which you are approaching this issue.”

The letter also cites a number of incidents involving acts of terrorism committed by people who first posted hateful content online, including the terrorist behind the Christchurch massacres in New Zealand that resulted in 50 dead, another 50 injured; the far-right extremist who mailed pipebombs to Democratic politicians and journalists last year; and an anti-Semitic terrorist who murdered 11 worshipers at a synagogue in Pittsburgh, who regularly posted on the alt-right platform Gab.

“From the rise and spread of ISIS, to the recent attack in Christchurch, New Zealand which was livestreamed live on Facebook, serious questions remain as to how and what the companies are doing to combat the spread of terrorism and extremism,” Rose said.

Texting or chatting while walking, the new phone addiction you need to stop

James Wanzala , Reporter for the Standard Group (StandardMedia, StandardDigital News)
20th Jan 2019 00:00:00 GMT +0300

You might have been hit by a person busy chatting or texting as he or she walked along the street. Or, you might have seen someone hitting a pole, a transparent window or falling into a pool of water while using the phone while walking. This is the new smartphone addiction that experts are warning is costing people their lives or leaving them with injuries. Experts now say distracted walking is a growing problem around the globe, as people of all ages become more dependent on electronic devices for social and professional engagements. The advent of smartphones that comes with social media sites like Facebook, Twitter and Instagram has accelerated this problem. Multitasking is common, and can be dangerous if one is not careful. “The phone distracts you from minding your safety while walking. We used to call out the youth for this behaviour but now it spans nearly all age groups,” says Sam Wambugu, an information specialist. Authorities in some countries have come up with laws to curb texting or chatting while walking. In South Australia for instance, the Under the Road Traffic Act states that a person “must not walk without due care or attention or without reasonable consideration for other persons using the road,” lest they face a $105 (Sh10,500) fine.

Banned texting

In 2012, Fort Lee, a municipality in New Jersey, banned texting while walking. Violations come with an $85 (Sh8,500) ticket. Back home, the National Transport and Safety Authority (NTSA) traffic rules only prohibit a driver from using a phone while driving, which sets him back Sh2,000. According to a study published in 2012 by researchers from New York’s Stony Brook University, 60 per cent of people texting while walking veered off their walking path. Over a decade’s time, texting and walking has caused more than 11,100 injuries. In fact, according to the National Highway Traffic Safety Administration, pedestrian deaths numbered 5,376 — and were the only group of road users whose fatality numbers increased. A report from the American Academy of Orthopedic Surgeons also revealed that 78 per cent of American adults believe that distracted walking is a serious issue — but only 29 per cent owned up to doing it themselves. Our brains have evolved to focus attention on primarily one task at a time, a phenomenon psychologists refer to as inattention blindness. Wambugu adds: “People get carried away while texting and miss their flight at the airport because they become oblivious of their surroundings despite repeated calls to board the plane. Some people text while riding on a fast-moving boda boda, possibly another reason for increased road accidents.” Sociologist Kiemo Karatu agrees that chatting and texting while walking is a life risk and a solution must be found. “A lot of us are oblivious of the dangers we are exposing ourselves to. Inability to know when to stop doing two things at the same time is the challenge,” says Karatu. He proposes creating awareness probably through posters on the dangers of using one’s phone while walking. The Washington DC-based Safe Kids Worldwide organisation report dubbed Walking Safely, A Report to the Nation in 2012 found that pedestrian deaths among teens aged 15 to 19 now account for about 50 per cent of pedestrian fatalities. The study discovered that one in five high school students were found crossing the street distracted either by texting, playing video games or listening to music. “We suspect one cause of this disturbing trend is distraction; since the increase in teen injuries seems to correlate with the prevalence of cell phone use, both among walkers and drivers,” says Kate Carr, president and CEO of Safe Kids Worldwide. Just like children at school are taught how to wash their hands regularly to stay healthy, Wambugu says healthy use of the now ubiquitous mobile phones and other hand held devices may be an important addition.

Is Mark Zuckerberg the Achilles’ heel of Facebook?


Facebook CEO Mark Zuckerberg. Mariene Awaad/Bloomberg

 

Commentary
By Bill Owen – TechNewsBlog.net – April 4, 2019

I would like to preface this commentary by saying that I would like nothing more that to be able to say to Mark Zuckerberg: “Way to go. Keep up the great work.” But I can’t, at least right now, and holding out for that day is probably a useless exercise, unfortunately. Many others feel the same way and this commentary will address some of the reasons why. Each section will address a key issue, with additional links to articles that documents questionable activities. Comments and links have been distilled down through quite a bit of material, which should bring a lot of varied information into focus.

Note: Other companies will be discussed in an upcoming commentary soon. We will start off with the long-standing and ever-present circus that is Facebook.

Introduction

The premise and essential purpose of Facebook was somewhat novel and had a lot of potential. Mark Zuckerberg ran with his concept/vision. Once the momentum started to build, Facebook became a runaway freight train, and successful in many ways. However, it was never presented as a company that had any concern for your privacy. Quite the opposite. Mark Zuckerberg (referenced as MZ for the remainder of this commentary) DISDAINS privacy. A little too arrogant and intrusive of an approach, to be sure. He does not have a very becoming history of integrity, which is why the Facebook ship may eventually run onto rocky shores at some point, as impossible as that seems right now, of course. A lot of smoke and mirrors from the fearless leader, from the early days right up to today, and no doubt continuing into the future. The following sections of the commentary discusses and documents various areas of importance and concern.

[For details and a chronology of Facebook from the beginning, see the following link]: Facebook

Integrity


Chip Somodevilla/Getty Images

There will be quite a few compelling examples of the impact that Facebook has had over time, what it has gone through legally, and where it is headed. It may be fair to say that a lot of the drama that Facebook has gone through to date was unnecessary and did not have to happen. There is one main reason why it did, and something is going to give eventually. As stated in a previous posting recently, MZ is without a doubt a loose cannon of a leader. Irresponsible in many areas, where responsibility is revered and expected from a leader. This expectation comes from other executives and employees in the company, investors/stakeholders, peers at other technology companies and companies in general. It doesn’t seem to come up much, but there are many embarrassed Chairpersons, CEO’s and Presidents of other corporations around the world, and especially in the U.S., when one of their own, no matter what age or generation, is conducting the loose cannon approach to business. What most people recognize is that Facebook took off and went viral despite Mark Zuckerberg at a certain point. Credit needs to go to all of the dedicated staff/employees, and last, but not least, the general public and businesses that buy in to the platform. If it was not for them, there would not be a Facebook.

Despite the fact that you are buying into the program by joining and clicking on “I Accept” without reading the entire, if any, of the legal details/disclaimers on what you are signing up for, Facebook needs to be responsible in how it conducts its business. Sure, it’s covered by its legal clauses, but are they conducting their business with the member’s best interests in mind, or only their own interests? That’s the ethical question we need to ask ourselves. Many large corporations have been brought to their knees due to mismanagement. That result was due to people that were, or were not, in a management position, let alone at the lofty Chairman, CEO or President level.

Accountability


AP Photo/Pablo Martinez Monsivais

Where has all of the accountability gone? If the people that carry out activities that could eventually land them in hot water have an overwhelming sense that they can’t be touched, what then? We are unfortunately, for the time being, experiencing that right now. Our legal system has become a shell of what it once was, and was designed to be. Stiff fines and a slap on the wrist is status quo. For some corporations, it’s a mosquito bite. In an unrelated example,right now, I’m putting this together and shaking my head, as a well known person who completely fabricated an incident at the felony-level was let go on all 16 counts. Literally no explanation, just let go. A two-tiered judicial system. What happened to “If you do the crime, you do the time”? The legal system plays favorites and is corrupt on a lot of levels. They are influenced further by certain “behind the scenes” entities to bring about judicial/legal outcomes that are pretty outrageous. Just a bigger picture of accountability that is expected by all of us, not to mention business. If you or I had done the same thing, you know the outcome.

Facebook could eventually be in peril, despite its current success, valuation, etc., much to the dismay of hard working employees who may have a vision themselves. They may be “all in” and absorbed in the current Facebook culture, but just what is that culture? Is the vision espoused by MZ the best for Facebook, its employees and its followers?  Accountability is one of the most admired qualities of a leader. So is integrity. MZ seems to lack both. That should be a red flag for all involved. Documented quotes throughout Facebook’s history reveals a “leader” that thinks a little too highly of himself. The following link is also at the end of this posting with other select links: WikiQuotes – Mark Zuckerberg (link to “Dumb F***s” quote, etc. at top of his WikiQuotes page). Many say that one particular quote will haunt him for a long time. I would say that it is etched-in stone and not going away. That is one of many examples of MZ’s arrogance and lack of leadership attitude that he displays on a regular basis. Whether he is before Congress or talking with the press over allegations of any sort, MZ talks from both sides of his mouth. He would like us to believe that he will changes things. He always says that he will, but never does.

Even as this commentary is released, MZ is hard at work saying all the right things to the media about changes to come, etc. Based on his past comments and a consistent lack of results on promises made, none of us should believe anything he says at this point. He will have to put his money where his mouth is and prove it.

Governance/Company Policy

MZ is riding the gravy train and momentum of Facebook with impunity. Even the mighty Facebook has an Achilles’ Heel, maybe multiple Achilles’ Heels. It does not help that the most prominent risk is running the company. In an ideal world, the Board at Facebook would seriously look at their leader and make sure that there is an understanding between them and him. Unless that Board and group of executives signed their lives away to Mark Zuckerberg, they would be able to leverage a sane and responsible approach to their business. As a group of executive leaders, and as a company in general, they could be so much more, but they are not. Can MZ be booted from Facebook? Most corporations have a provision built into the company rules of corporate governance that allows for the forced exiting of a leading executive should the current circumstances warrant it. Was MZ able to insert some kind of clause to prevent that? He sure acts like he did. Here is a link that explains that very topic and why MZ cannot be touched internally right now, while others can get the swift axe from him at any time: No matter how bad things get at Facebook, Mark Zuckerberg will be Chairman for as long as he wants, experts agree . The arrangement has just added more arrogance to someone that was never short on arrogance.   

Leadership style and some cleaning up of the internal culture need to happen. But, of course, as explained in the link above, arrangements were made where MZ has complete control, even to the point that if any executive even hints of a focus on needed change and working with MZ on it, or a potential coup, he can kick them out immediately, and they know it. Their hands are tied. “My way or the highway”. That is one of the main reasons why corporate Boards are set up: to prevent unwise and/or impulsive decisions that may impact the company in a negative way. Things are discussed, viewpoints are laid out on the table, and any agreed-upon changes are made, understanding the implications of any unwise moves. Could that policy change at Facebook? Maybe. Changes that occur will more than likely come from outside of the company looking in, and those institutions will have every legal right to address specific issues with MZ and others, when the time comes. And it is rapidly approaching. There have been a few warning shots fired over MZ’s bow fairly recently, the Congressional Hearings in April 2018 and others. Details of those encounters will be provided in the following links below. MZ will no doubt have to “Face” the music in the future many times.

MZ should not be exempt from the typical company rules of corporate governance that help keep companies moving along responsibly. Just because he and his lawyers are legally allowed to add wording that completely keeps him safe, does that make it right to do so? As mentioned, corporate executives and the Boards at other companies are holding themselves to a much higher level of responsibility and integrity. What makes MZ so special?  That internal provision designed to protect MZ completely needs to be changed, and no one, no matter who they think they are, should be above it. Certain areas of corporate law need to be reexamined and updated, and put in place to protect those very corporations, their executive staff, all employees and members of the public joining up on the platforms.

Based on what we have seen so far, there is no way that MZ plans to relinquish his iron grip on Facebook and his vision of No Privacy For All. In the early days of Facebook, MZ alluded that our days of privacy are over, and that could be true, especially for those that have opted in to Facebook. When you consider that there are over 2.2 billion monthly active users on Facebook, that represents approximately one third of the population of the globe. Even if you take into account multiple personal and business accounts, it is very near 2 billion people. If you are reading this now, there is a very high probability that you have an account.

Privacy

The company has a policy, like many social media platforms, of having default account settings that have all sorts of implications. Unbeknownst to people signing up for the first time, it is very easy for someone signing up to bypass their “security” settings before they get rolling on the site. “I’ll take care of it later”. Especially when you are staring at the obligatory provisions of use/disclaimers of the site that goes on in tiny print for the equivalent of 4-5 pages. Most of the time, “later” never happens. Despite all the money-making reasons that Facebook has behind all of this, it would be refreshing to see these companies incorporate an “opt-in” policy vs. “opt-out”, which is the default setting now for many companies. You have to opt out of analytical functionalities within the platform: advantage company. Also, advantage for any of the third parties that are receiving loads of analytics data on your input, buying preferences, specific location, etc, through Facebook and other social sites. We have been given updates on what our specific personal information is being used for and by whom. But you can be sure that not all of that will be known. So it is a choice you need to make. Chances are very good that your personal data may not be going where you want or expect. Facebook is basically a digital diary of your life. What once used to be a diary or private notebook hidden or locked away somewhere to be pulled-out and written in for inspirational notations and posterity, is now open to the world. We have been so socially engineered that we do not give it a second thought.

Future of Facebook and corporate policy in general/Conclusion

The future of Facebook, as it stands now, is in the hands of Mark Zuckerberg. Don’t expect any significant changes to come through him personally, based on his past activities and overall attitude. There is a much better chance that it will stay the same or get much more interesting.

Regarding corporate policy rulings: It is not happening right away, but I feel confident that a number of far-reaching corporate internal policy rulings will be made on accountability issues and privacy issues for business. Hopefully rulings that will stick.
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Note on upcoming related future commentary

Commentary on other technology companies will be coming soon that reveals some similarities to how Facebook is run, regarding privacy issues primarily, but having overall responsible management at the same time. Most, if not all, of the other example companies hold themselves accountable in the boardroom, for starters. Working together as a truly cohesive executive Team is the glue that keeps it all together.

________________________________________________________________________________________________

Following are key links and references for your review. Links are in chronological order by date published, per category:

From last commentary – Related links (“Hundreds of millions of Facebook passwords exposed internally”, published on March 27, 2019)

Published April 11, 2018
Facebook’s Arrogance Crisis: Can Mark Zuckerberg Claw Back Control? | Opinion (Submitted on April 11, 2018 by Alex Pentland and David Shrier on the last of two days (April 10th – 11th) of the Senate Commerce, Science and Transportation Committee and Senate Judiciary Committee joint hearing about Facebook on Capitol Hill). Newsweek.com.

Published  February 18, 2019
Yes, Mark Zuckerberg Is a “Digital Gangster” Who Violates Your Privacy, but Here’s Why You Still Won’t Quit Facebook (By Ben Brown for CCN, a part of Hawkfish AS. CCN is an unbiased financial news site reporting on US Markets and Cryptocurrencies, based in Norway).

Accountability/Integrity related links

Published September 11, 2018
Mark Zuckerberg’s Truth Problem  Fortune.com  Commentary on Facebook. Includes 5 minute video of portions of question-grilling by key Congressionals. Fortune.com.

WikiQuotes – Mark Zuckerberg  Some choice quotes over the years. See his “Dumb F***s” quote from the early years, at the top of his WikiQuotes page. That quote also referenced in the Fortune.com link directly above.

Wikipedia – Mark Zuckerberg  Everything you want to know, or do not want to know, about the fearless leader of Facebook.

Governance/Company Policy related links

Published April 9, 2018
Investor groups call for Mark Zuckerberg to resign  TheVerge.com

Published October 18, 2018
A Push to Remove Facebook CEO Mark Zuckerberg as Chairman Has New Backers  BARRON’S

Published October 18, 2018
Tech Founders’ Absolute Power Is Destroying Company Culture  Wired.com

Published  December 5, 2018
No matter how bad things get at Facebook, Mark Zuckerberg will be Chairman for as long as he wants, experts agree  CNBC.com (Markets)

Privacy related links

Published September 25, 2018
Is Mark Zuckerberg Going to Ruin Instagram, the Last Fun Social Network?  Instagram’s co-founders quit yesterday amid reports of tension with Facebook.  Esquire.com.

Published March 27, 2019
Opinion: Big Tech, after years of watching us, is now being watched  (Good rundown on Amazon, Alphabet (Google) , Apple and Facebook). A number of the companies that will be discussed in the upcoming follow-up commentary on corporate responsibility and privacy. MarketWatch.com

Published April 3, 2019
Millions of Facebook Records Found on Amazon Cloud Servers  Latest news. Seriously, sketchy news about Facebook is so common, you have to be picky about which article links to share. Bloomberg.com

MISC (General background)

Published April 5, 2018
How to Prevent a Faltering CEO from Damaging Your Company  This link offers some insight into internal dealings with questionable leadership abilities and activities/attitudes by CEO’s. This article is largely focused on companies that did not act in time, but could have. As mentioned previously in this commentary and within links on this posting, Facebook’s situation is a bit different in that other executives and the Board’s hands are tied. A good overview of a typical scenario, however.  Strategy+Business.com

Deepfakes may try to ruin the world. But they can come for you too


Getty Images

Joan E. Solsman

By Joan E. Solsman, Senior Reporter for CNET | April 4, 2019 6:00 AM PDT

But — bright side! — videos with your face on somebody else’s body usually aren’t as tantalizing to bad guys as, say, creating political chaos.

Thinking about deepfakes tends to lead to philosophical head-scratchers. Here’s one: Should you worry about your face being grafted into hardcore pornography if deepfakes are bent on sabotaging global power?

Deepfakes are video forgeries that make people appear to be doing or saying things they never did. Similar to the way Photoshop made doctoring images a breeze, deepfake software has made this kind of manipulated video not only accessible but also harder and harder to detect as fake.

And chances are, unless you’ve scrupulously kept your image off the internet, a deepfake starring you is possible today.

“All of those images that you put of yourself online have exposed you,” said Hany Farid, a Dartmouth researcher who specializes in media forensics to root out things like deepfakes.  “And you gave it up freely. Nobody forced you to do it, it wasn’t even stolen from you — you gave it up.”

Facial recognition: Your face, your password
This is part of a CNET special report exploring the benefits and pitfalls of facial recognition.
CNET

Deepfakes represent a different, more malicious kind of facial recognition. Traditional facial recognition already plays a growing role in your life: It’s the technology that helps you find all the snapshots of a specific friend in Google Photos. But it also could scan your face at an airport or concert without your knowledge.

Unlike most facial recognition, which essentially turns the features of your face into a unique code for computers, deepfake software aims to mash up identity so well you don’t even question its truth. It poses a nightmare scenario not just of ruining your life, but also of manipulating the public’s perception of heads of states, powerful CEOs or political candidates.

That’s why media forensics experts like Farid, and even researchers for the Pentagon, are racing to find methods to detect deepfakes. But Matt Turek, the manager of Pentagon’s deepfakes program at DARPA, has said that its much easier to make a convincing deepfake today than it is to detect one.

Deepfake technology figures out how various points of a human face interact on camera to convincingly fabricate a moving, speaking human — think a photorealistic digital puppet. Artificial intelligence has fueled the rapid development of deepfakes, but it’s a technology that must also be fed a diet of facial images to produce a video.

Unfortunately, the rise of deepfakes has arrived after more than a decade of online social sharing put almost everyone’s face on the internet. But staying out of the public eye doesn’t inoculate anyone from deepfakes, because in today’s world, almost everyone is exposed.

Face swap

Here’s another fun deepfake headscratcher: How bad does something have to be for Reddit and Pornhub both to ban it?

Deepfakes come in different shapes, sizes and degrees of stomach-sinking monstrosity. There are three main types, but the simplest and most widely known is a face swap.

Face-swapping deepfakes can be harmless fun. One meme plasters actor Nicolas Cage‘s face into a potpourri of movies and shows he’s never starred in, with him as Indiana Jones or every actor on Friends. Tweets sticking Steve Buscemi’s mug on Jennifer Lawrence go viral for their weirdness.

But they can be insidious too, like the face of an unwitting victim grafted onto graphic pornography. This weaponized form of face swap has violated famous women, like Scarlett Johansson and Gal Gadot. But it’s also made victims of others who aren’t celebrities. This involuntary pornography is what’s prohibited by both Reddit and Pornhub.

The main asset that somebody needs to create a deepfake of you is a collection of a few hundred images of your face. Because deepfake software uses machine learning, it needs data sets of your face and another face in a destination video in order to swap them convincingly. That’s one reason celebrities and public figures are such easy targets: The internet is packed with source photos and videos to build these image stockpiles.

Your best protection against becoming the star of a deepfake depends on the lengths to which you’re willing to go to keep your image out of anyone else’s hands — including keeping it off the internet. (So, yeah, good luck with that.)

Scarlett Johansson
Actress Scarlett Johansson has characterized her fight against malicious deepfakes as a “lost cause,” telling the Washington Post: “Nothing can stop someone from cutting and pasting my image or anyone else’s onto a different body and making it look as eerily realistic as desired.”
Jay Maidment/Marvel

 

A few hundred images of you may sound like a lot to gather, but these don’t need to be individual still shots or selfies. Multiple frames pulled from one or more videos can fill in the gaps. Everytime an iPhone shot a video of you, it was capturing at least 30 frames per second.

And quality trumps quantity in a deepfake dataset. The ideal is a wide selection of facial images without blurring or obstructions, from a variety of angles and with a range of facial expressions. The quantity needed can decrease if the angles and facial expressions are well coordinated with the desired destination video.

These quirks of the data sets can yield bizarre advice about how to reduce your exposure. Wearing heavy makeup is good protection, especially if you change it up a lot.

Obstructions in front of a face, even brief ones, are particularly tricky for deepfake technology to work around. But the defenses that exploit that weakness aren’t necessarily helpful. Farid once joked about a potential defensive strategy with a politician. “When you’re talking with everyone around, every once and a while just wave your hand in front of your face to protect yourself,” he recounted telling him. The politician indicated that wasn’t a helpful idea.

Grim horizons

Deepfake programs for face-swapping are readily available free online, making the technology relatively accessible for anyone with motivation, some simple technological know-how and a powerful computer.

Other types of deepfake are more sophisticated. Thankfully, that means you’re less exposed to being a victim. Unfortunately, these are the ones that harbor more dangerous possibilities.

Comedian and filmmaker Jordan Peele publicized one of these kinds of deepfakes, called an impersonation or “puppet master” fake, by posing as President Barack Obama in a deepfake video a year ago. Peele impersonates Obama’s voice, but the deepfake video synthesized a new Obama mouth and jaw to be consistent with the audio track.

However, the creation of that video actually required a reassuring degree of practiced skill. Peele’s script was designed so his speech would match the ebbs and flow of Obama’s original head movements and gestures. And the success of the vocals was rooted in Peele’s well-honed Obama impersonation.

But a higher level of sophistication, termed deep video portraits, are like deepfakes on steroids. While most manipulation in deepfake videos is limited to facial expressions, an international team of researchers transferred three-dimensional head position and rotation, eye gaze and eye blinking from one source actor to another target actor.

Click

The result is a bit like a motion-capture sequence, without actually needing to capture motions when the videos were shot. With two ordinary videos, the researchers’ program synchronized the movements, blinks and eye direction onto somebody else’s face.

But the ultimate threat of deepfakes isn’t how sophisticated they can get. It’s how willingly the public will accept what’s fake for the truth — or believe somebody’s false denial because who even knows what’s true anymore?

“The public has to be aware that this stuff exists … but understand where we are with technology, what can and cannot be faked —  and just slow the hell down,” Farid said. “People get outraged in a nanosecond and start going crazy. Everybody’s got to just slow the f**k down.”

Originally published April 3.
Update, April 4: Adds background about DARPA.

The Strange Tech Wars of 2019

 

 

 

 

By Rob Enderle, Columnist and President, Principal Analyst, Enderle Group for TechNewsWorld
Mar 11, 2019  10:47AM PT

 

The tech market is defined by its battles: Microsoft vs. IBM; Apple vs. Microsoft; Netscape vs. Microsoft; Google vs. Microsoft. If Microsoft were a person, it likely would have PTSD. Then there was Apple vs. Google, and now the big one is Apple vs. Qualcomm.

The screwy thing for me is that Huawei represents a far greater threat to both companies than they represent to each other. In fact, I’m really starting to wonder if Qualcomm isn’t a proxy for Google in this fight, with Apple changing dramatically what its own real goal is.

I’ll focus on this battle royal this week, because Apple, which is in a jury trial in San Diego to determine damages to Qualcomm, apparently just attempted to influence the jury (tamper with?) and I just don’t think that is going to end well. Judges aren’t known for being stupid. Plus, I think Apple should be more worried about Huawei than Qualcomm right now anyway.

I’ll close with my product of the week: the first flying motorcycle you now can order.

Huawei’s Success

Currently Huawei is executing far better than Apple is. I say this because it passed Apple in market share, and its market continues to expand, while Apple’s apparently has started to contract. Currently Apple, which once dominated the smartphone market, is lagging behind both Samsung and Huawei.

Huawei’s success is largely because it builds a very competitive phone that provides more value than Apple’s iPhone does. Huawei also has developed more strategically, in that it builds both the phones and the switches that enable them, and it prices those switches very competitively.

This means that once it gets to critical mass in a market about switches and phones, it could enable unique features that neither its switch nor its phone competitors can match.

While both Apple and Huawei have been implementing lock-in strategies (where you capture the customers and keep them away from competitors), Apple focused on end users while Huawei focused on carriers. Since the carriers own their customers in most markets, this could make Huawei unbeatable, were it not for its one huge exposure.

That exposure is the Chinese government, which owns a significant part of the company and creates the fear that it eventually will take control and turn it into a spying tool. Although I have seen no evidence that this has happened, the company’s ownership structure implies it could, and that has led the U.S. government to blacklist the firm, not only in the U.S. but across the Western world.

However, law enforcement in most Western countries, and particularly in the U.S., isn’t based on whether someone could, or eventually will, break the law, but on whether they have broken it — and it doesn’t look as though Huawei has.

We don’t live in a Minority Report world, where you can hold people accountable for what they might do in the future. Huawei has been significantly hampered, but with proper legal help, it should be able to get off the blacklist. That would be a problem both for Apple and Qualcomm. Huawei has its own 5G technology and doesn’t need Qualcomm’s, and the company it is trying to take out appears to be Apple.

Apple (Is Qualcomm a Proxy for Google?)

What is very strange about Apple’s obvious attempts to put Qualcomm out of business is its rationale. Qualcomm isn’t a direct competitor. It provides much of the core technology that makes smartphones work — particularly high-end smartphones like the iPhone.

What if Qualcomm is a proxy for Google? Google is massively powerful, and Apple’s attempts to carry out Steve Jobs’ wish that Google be punished for violating his trust largely have failed.

However, the offending platform, Android, which Apple feels was stolen from it, depends on hardware technology — and the company that provides most of it is Qualcomm. Critical to this is that Qualcomm uses its revenue from licensing to do R&D, and that R&D is mostly carrying the high-end part of the Android platform.

If you could cripple that, you likely could reduce the competition for iPhones dramatically. Given that much of that competition is lower-priced, it would take a ton of price pressure off Apple while creating an opportunity — a strong opportunity — for Apple’s expansion.

Yet Huawei, as I noted above, doesn’t really need Qualcomm, and Huawei is a bigger threat to Apple than Samsung is, thanks to its position in China, which is the fastest-growing and arguably biggest potential market for smartphones.

Qualcomm could be a better defense against Huawei, since its technology significantly exceeds what Apple currently has. Apple is depending on Intel in the short term, and Intel has been running around a year behind Qualcomm. Intel doesn’t have the industry power, and it’s likely that Apple accidentally crippled Intel when it allegedly gave Intel Qualcomm’s technology so Intel could close the 4G/5G technology gap.

Qualcomm found out about it, and if Intel is found guilty, it may be knocked out of the cellular modem market. This is the danger when you steal technology; the downside to getting caught is that it can be catastrophic for the thief.

All of this benefits Huawei, which has Apple in its sites.

Unintended Consequences

Apple’s sales have been under pressure, and Apple has stopped reporting sales volume in an apparent attempt to conceal that volume sales are declining and revenue growth is mostly coming from price increases.

This is problematic, because there is undoubtedly a high limit to how much Apple can charge for its smartphones and related services. In other words, it can’t increase prices indefinitely, particularly as lower-cost vendors like Huawei continue to underprice it.

At some point, Apple’s customers will start to hold on to their phones longer, which appears to be the case now, and eventually jump to another vendor to avoid being on an ever-increasing and noncompetitive price cycle.

On top of that, the aggressive hostile actions against Qualcomm have cost the company millions, both in terms of legal costs and in lost iPhone sales, and the firm has been partially blocked from selling phones in China and Germany. As I write this, those blocks likely will be increased.

In addition, Huawei, thanks largely to the U.S.’s incessant attacks on the company, has become a hero to the Chinese people, and Apple effectively has been blacklisted in China.

If this trend continues, Apple could be locked out of China, the fastest-growing and biggest potential future market, , regardless of what Qualcomm does. That would crater Apple’s valuation and likely force an involuntary CEO change. In fact, I expect that if something doesn’t change, Tim Cook will be gone within 18 months.

Apple appears to be getting more and more desperate. The obvious attempt to influence the San Diego jury, which really has an incredibly high risk associated with it, is a case in point. Apple also appears to be behind the FTC challenge against Qualcomm. The FTC eventually will figure out it has been acting against the interests of the nation, particularly given that it has been approached by both the U.S. Defense Department and the Department of Energy on that topic.

Granted, the U.S. government does often seem to be at war against itself, but this seems unprecedented. Having Apple on the wrong side of the U.S. Defense Department is, in and of itself, problematic for the company.

Wrapping Up

Huawei represents a massive threat to U.S. technology dominance. Efforts to brand the company as a bad actor clearly have had an impact, but Huawei has plowed right through them, indicating that if it could get the U.S. to stop, it likely would be unbeatable.

Huawei appears to have a strong case for the U.S. to stop, and China could make leaving Huawei alone part of its deal to end the tariff war, which is going really badly for both countries at the moment (and could cost Trump the Presidency).

Given that Apple is the aggressor, it really should rethink its battle with Qualcomm/Google and focus on the bigger long-term threats: its inability to increase prices indefinitely; and Huawei/China, which together massively outresource Apple.

If something doesn’t change, tech market dominance likely will transition from the U.S. to China, with the Huawei/Apple battle being the harbinger of that change. Hopefully the next CEO at Apple will be able to intervene in time, but I doubt it.

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Rob Enderle's Product of the Week

OK, we are clearly in the world of science fiction, because last week Jetpack Aviation opened up preorders for its diesel/kerosene-powered flying motorcycle, the Speeder.

With a ceiling of 15,000 feet and a top speed of 150 mph and four turbojet engines, this thing is wicked cool. It only has 20 minutes of flying time, suggesting that if you are at 15,000 feet and a quarter tank you better like pancakes, because you are about to be one.


Jetpack Aviation's Speeder flying motorcycle
Jetpack Aviation’s Speeder

It is computer-operated, which means little or no training will be needed. (To me, that suggests you want to be watching one of these from a distance.) It even looks good — not like most flying vehicles in development, which are butt ugly.It doesn’t look like the most comfortable thing you could fly, but given the entire 20 minutes largely would be taken up with you saying to yourself “don’t crash, don’t crash, don’t crash, OMG I’m almost out of gas,” I don’t think that will be a huge problem. In fact, the lack of comfort might keep your mind off that whole pancake outcome thing.

There is even a commercial-like video of the thing. Granted, it is rendered, which suggests actually getting the product is a couple of years out, but it looks like it also will have the ability to fly autonomously.

At just under US$400K, this likely won’t have you trading in your Jet Ski or regular motorcycle anytime soon, but imagine pulling up to a party, campsite or event in this puppy. You’d be an instant celebrity, and $400K is pretty cheap for instant celebrity status.

While I think I’ll hold off personally on putting my name on the list to buy one of these, it pretty much floats to the top of my lust list, making the Jetpack Aviation Speeder my product of the week.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.

Rob Enderle has been an ECT News Network columnist since 2003. His areas of interest include AI, autonomous driving, drones, personal technology, emerging technology, regulation, litigation, M&E, and technology in politics. He has an MBA in human resources, marketing and computer science. He is also a certified management accountant. Enderle currently is president and principal analyst of the Enderle Group, a consultancy that serves the technology industry. He formerly served as a senior research fellow at Giga Information Group and Forrester. Email Rob.

 

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