Thursday, March 31, 2016

Apple Doesn’t Know How the FBI Hacked a Terrorist’s iPhone - TIME Tech

Posted: 30 Mar 2016 03:52 AM PDT

(WASHINGTON) — The FBI’s announcement that it mysteriously hacked into an iPhone is a public setback for Apple Inc., as consumers learned that they can’t keep the government out of even an encrypted device that U.S. officials had claimed was impossible to crack. Apple, meanwhile, remains in the dark about how to restore the security of its flagship product.
The government said it was able to break into an iPhone used by a gunman in a mass shooting in California, but it didn’t say how. That puzzled Apple software engineers — and outside experts — about how the FBI broke the digital locks on the phone without Apple’s help. It also complicated Apple’s job repairing flaws that jeopardize its software.

The Justice Department’s announcement that it was dropping a legal fight to compel Apple to help it access the phone also took away any obvious legal avenues Apple might have used to learn how the FBI did it. Magistrate Judge Sheri Pym on Tuesday vacated her Feb. 16 order, which compelled Apple to assist the FBI in hacking their phone.
The Justice Department declined through a spokeswoman to comment Tuesday.
A few clues have emerged. A senior law enforcement official told The Associated Press that the FBI managed to defeat an Apple security feature that threatened to delete the phone’s contents if the FBI failed to enter the correct passcode combination after 10 tries. That allowed the government to repeatedly and continuously test passcodes in what’s known as a brute-force attack until the right code is entered and the phone is unlocked.
It wasn’t clear how the FBI dealt with a related Apple security feature that introduces increasing time delays between guesses. The official spoke on condition of anonymity because this person was not authorized to discuss the technique publicly.
FBI Director James Comey has said with those features removed, the FBI could break into the phone in 26 minutes.
The FBI hacked into the iPhone used by gunman Syed Farook, who died with his wife in a gun battle with police after they killed 14 people in December in San Bernardino. The iPhone, issued to Farook by his employer, the county health department, was found in a vehicle the day after the shooting.
The FBI is reviewing information from the iPhone, and it is unclear whether anything useful can be found.
Apple said that the legal case to force its cooperation “should never have been brought,” and it promised to increase the security of its products. CEO Tim Cook has said the Cupertino-based company is constantly trying to improve security for its users. The company declined to comment more Tuesday.
The FBI’s announcement — even without revealing precise details — that it had hacked the iPhone was at odds with the government’s firm recommendations for nearly two decades that security researchers always work cooperatively and confidentially with software manufacturers before revealing that a product might be susceptible to hackers.
The aim is to ensure that American consumers stay as safe online as possible and prevent premature disclosures that might damage a U.S. company or the economy.
As far back as 2002, the Homeland Security Department ran a working group that included leading technology industry executives to advise the president on how to keep confidential discoveries by independent researchers that a company’s software could be hacked until it was already fixed. Even now, the Commerce Department has been trying to fine-tune those rules. The next meeting of a conference on the subject is April 8 in Chicago and it’s unclear how the FBI’s behavior in the current case might influence the government’s fragile relationship with technology companies or researchers.
The industry’s rules are not legally binding, but the government’s top intelligence agency said in 2014 that such vulnerabilities should be reported to companies and the Obama administration put forward an interagency process to do so.
“When federal agencies discover a new vulnerability in commercial and open source software — a so-called ‘zero day’ vulnerability because the developers of the vulnerable software have had zero days to fix it — it is in the national interest to responsibly disclose the vulnerability rather than to hold it for an investigative or intelligence purpose,” the Office of the Director of National Intelligence said in a statement in April 2014.
The statement recommended generally divulging such flaws to manufacturers “unless there is a clear national security or law enforcement need.”
Last week a team from Johns Hopkins University said it had found a security bug in Apple’s iMessage service that would allow hackers under certain circumstances to decrypt some text messages. The team reported its findings to Apple in November and published an academic paper after Apple fixed it.
“That’s the way the research community handles the situation. And that’s appropriate,” said Susan Landau, professor of cybersecurity policy at Worcester Polytechnic Institute. She said it was acceptable for the government to find a way to unlock the phone but said it should reveal its method to Apple.
Mobile phones are frequently used to improve cybersecurity, for example, as a place to send a backup code to access a website or authenticate a user.
The chief technologist at the Center for Democracy and Technology, Joseph Lorenzo Hall, said keeping details secret about a flaw affecting millions of iPhone users “is exactly opposite the disclosure practices of the security research community. The FBI and Apple have a common goal here: to keep people safe and secure. This is the FBI prioritizing an investigation over the interests of hundreds of millions of people worldwide.”

Wednesday, March 30, 2016

Xiaomi Exec: ‘We’re Playing a Completely Different Game’ - TIME

Posted: 28 Mar 2016 09:54 AM PDT

In 2013, former Google executive Hugo Barra made a move that stunned Silicon Valley observers: He left his high-ranking job at the search giant’s Android unit to take a post at Xiaomi. At the time, few in the U.S. had heard of the upstart Chinese smartphone firm. But Barra saw the company’s potential. Investors now value it at $45 billion; some call it the “Apple of China.”
Today, there are signs that Xiaomi’s rocket ship is heading back to earth. The company failed to meet smartphone sales expectations last year, leading some to voice concerns it was facing slower growth.

Barra, now Vice President of International at Xiaomi, spoke with TIME to make the case that the company’s best days are ahead. What follows is a transcript, edited for length, of our discussion.
What does innovation mean for Xiaomi and where is its impact being seen the most?
Xiaomi is a software company that innovates. A Xiaomi phone is the phone that has a magic selfie camera which guesses your age and makes you look better. We’ve been successful particularly in China by offering software services that don’t normally come with phones. It’s not just about the phone, it’s about the software experience. We’ve also become pretty widely recognized as innovators on the hardware side. People are recognizing Xiaomi as a company that launches features that they haven’t seen before and they expect this from us.
Our business model is another innovation that has gotten us ahead in this market. We don’t advertise and we don’t sell in stores. People come directly to us. They hear directly from us in social media like they would from their friends, as opposed to being talked at from a brand. This gives the brand a feel that is dramatically different from other brands that you would see in this industry.
One of the fastest-growing areas of our business is the smart home and the Internet of Things business, which is essentially launching a new consumer electronics product every month. When we have a great product idea, we ask our users, “What do you guys think of this? Would you buy it? Are you in fact willing to make a deposit to buy this product?”
The one we launched this week was a high-performance bicycle that was made by one of our portfolio companies and sold through our e-commerce store. It’s potentially the most expensive product we’ve ever made, which is about $3,000, but it quickly exceeded the crowdfunding bar on our e-commerce store. By not being here you don’t experience some of this daily innovation, but the company is extraordinarily well-regarded as an innovator.
What are some of the biggest misperceptions in North America and Europe concerning the company?
One of the biggest misperceptions is that people don’t understand that we’re so different, that we’re trying to get a very different place. Think about it this way. Xiaomi entered a market that is extremely competitive, which is the smartphone industry. Our goal in this market is not to play the same game as everybody else. Why would we enter such a competitive market and play the same game as everyone else?
We’re in a market where our goal is to acquire Internet users, people who are young and who use their phone a ton for a variety of different things, and to extract revenue through a bunch of different services that they want to use. If we succeed, it means we could even sell a phone for zero profit — which we don’t do today, to be clear — and that would wipe out the competition because we would have completely changed the game.
Today we ship about 50 apps on all of our phones in China, which already have at least 10 million monthly active users each. If you were to use any reasonable investor [venture capital] metric, you would quickly conclude that pretty much any one of these 50 apps could be a pretty successful startup on its own with numbers like this. We have 20 apps that have over 10 million daily actives, which is a much higher engagement level.
By having this level of engagement, we have essentially created a massive platform of user engagement that’s highly monetizable. People spend on average four and a half hours a day using our devices, meaning they are actively doing something on their phone. A very high percentage of the time they are using an app that we developed. We are the number three app store in China. We’re in the top two or three video content apps on phones. We have the largest video content library, with over 400,000 hours of content.
So we’re playing a completely different game. If you look at our revenue per user per month last year compared to the year before, it nearly doubled. And there’s still extraordinary room for growth considering we’re just beginning to push the envelope on monetization. We make profits on phones today, but for us what matters is not selling a phone. What matters is acquiring an Internet user, which is why we live in the online channel. We’re the third largest e-commerce company in China by GMV [gross merchandise value]. We’re going after people who buy a phone online, so these are naturally more engaged users than the average guy who buys a phone in a shop on the street.


Because Xiaomi is private and didn’t disclose revenue or profit figures last year, there’s kind of a black-box effect, where people will interpolate about how it’s doing. How can you you show Xiaomi is growing and meeting its goals?
We are not and will not be in the business of disclosing financial data because it really isn’t a healthy practice for a private company. First of all, we are growing smartphone sales in a market that has already flattened. And we’re doing this because we’re continuing to gain share as retail shifts from offline to online. We have nearly 50% of the online market share in China, so we completely dominate and nearly monopolize the online market here because there’s such a strong preference for phones online.
Second, we continue to have more engagement in terms of people using our apps and our services, including the ones that generate revenue — particularly the app store, our video subscription service, and many other things.
Third, I would point to our international business. We entered India in the third quarter of 2014. Today, we’re the number three player in smartphone sales via e-commerce there. In the third quarter of 2015, we sold more than 1 million phones, and we grew last year at a 45% average, quarter-on-quarter. We broke a massive record last week when we received close to 1 million registrations for one device, the RedMi Note 3. We’re essentially reproducing the exact same recipe that we built here in China. We are going to enter the Internet services business in India with the same model we have in China.
What have you learned as you’ve entered India? What surprised you and what were some unexpected obstacles?
India has turned out to have one of the most sophisticated and demanding consumers that we’ve ever seen. I get emails from Indian users every other day. They tell us all the time what we should do and how we should price things. They dictate features that they think should be part of the next device. They have a well-informed and strong opinion about our products.
When we launch a product in India, I spend more time explaining the technical details than I have ever done in any type of presentation for my entire career. And I used to do a lot of presentations when I was at Google. So that was a pleasant surprise. Consumers in India care about details more than we ever expected. That’s a good thing, and it’s actually a competitive advantage for us because we’re well positioned to cater to them.
One thing that surprised us is how much Indian customers care about after-sales service. They will decide which phones to buy based on whether they can get it repaired in case the phone has a problem. Because we can’t build hundreds of repair centers from one day to the next, we had to come up with a new approach to repairs, which is to pick up the device at the customer’s house or office. Anywhere in India, they can just call us or email us and we’ll come by bicycle and return it the next day repaired. This is something new we’ve never done before. It was an innovative response to a new customer demand.
In Brazil, we also rolled out the same pickup service. Which is a huge country and so it was a big operational challenge. The customers there are not as demanding as the Indian customers but we still thought the pickup service was a good idea and it saved us time and money in rolling out physical repair centers.
What are some of your other goals for 2016 in terms of markets, products, and areas of growth?
A big goal for us in China this year is to continue to build a bigger business on the TV side. Our business model for TVs in China is very similar to our business model for phones, which is to sell extremely high-quality hardware, which is essentially a gateway into Internet services. Just this week we announced our 65-inch curved-display TV. It’s the most expensive TV we’ve ever sold and yet is just over $1,000.
We also announced our first annual subscription plan for 299 RMB, discounted to 199 RMB if you purchase it with the TV, so that’s about $50. It has unlimited content. The business model is to sell the TV at a price that’s pretty close to cost and then make money on content. This TV will surely be sold out for the next few months as people try to get their hands on it. We also hope to bring the same business model to other countries, most likely starting with India.
Another area that will be big this year is the Xiaomi ecosystem. We have about 55 or so portfolio companies that we funded, which design and manufacture consumer electronics products that we sell: Our wearable fitness band, air purifier, and the high-performance bicycle I mentioned. These companies are starting to roll out Xiaomi-branded products, which are smart in the sense that they have [Internet of Things] chips in them. These products carry a significant margin relative to phones, so they’re very profitable products.
We consider these products as part of our recurring revenue strategy. People spend money on apps, games, and video content on our phones. But they also buy these devices directly on their phones. As soon as there’s a new product, we notify them so they know right away, and a fairly large number of these users are buying a new product every few months. These are profitable products so it contributes to this idea of selling well beyond what they get when they buy the phone. Most of these companies have not released their first product, but they will this year. It’s a pretty exciting roadmap ahead.
How do Xiaomi’s investments in these companies work?
Most of these companies we seeded or did a Series A. In many cases we put the founders together ourselves, we kind of created the company. We give them money and we take a stake as an investor just like any other investor would. We don’t get a discount or anything. We just take a stake early on as a strategic investment. And then we connect them to our supply chain and our manufacturing partners.
We have a team of 200 people today who essentially take care of these portfolio companies. They help them with engineering here and there when necessary, get them off the ground to launch their first product, and handhold them through the process. And over the time they grow. A few of these companies have already raised several subsequent rounds of funding. A few of them are already over $1 billion in valuations. So they’re “Xiaomi ecosystem unicorns.”
One example is the company that makes power banks. Xiaomi is the most popular and largest power-bank brand in the world. Another is the wearable company [Huami], already the second largest in the world in terms of shipments. Another is our audio-products company called 1More. They’re already recognized for making some of the best audio products in the world. They’ve been winning both design and audiophile awards around the world.
How much cash does Xiaomi have today and how is it going to be used?
We raised $1.1 billion in our last round of funding in December 2014. Our operations are self-sufficient and have been profitable for quite a while. We raised the round of funding because we wanted to increase our investment firepower.
We invested about $300 million in iQiyi and we invested a significant quantity in Youku, both of which are leading video content providers in China. We invested close to $200 million in Midea, which is one of the largest domestic appliance manufacturers here in China. The strategic investment was the result of an agreement that they would start building our [Internet of Things] chips into their products.
We’ve also been investing in content licenses as well, which we often do through prepayments. We’ve invested close to $1 billion in video content licenses alone, which of course is building a business for the next few years. We still have plenty of cash left in the bank — I think our CEO recently said $1.5 billion dollars. It’s really investment firepower for new strategic efforts in China and outside.

Monday, March 28, 2016

No, the Stock Market Won’t Crash if Trump Is Elected President - TIME Business

Posted: 24 Mar 2016 03:30 AM PDT

As Donald J. Trump marches toward the GOP nomination — with a resounding victory in Arizona’s winner-take-all primary Tuesday and with favorable states like New York, Connecticut, and New Jersey on the horizon — the world is responding with a collective freakout.
Conservatives are considering a third-party candidate, the U.K. Parliament debated banning Trump, and now financial analysts are predicting that trillions of dollars in stock market wealth could be lost should the real estate mogul occupy 1600 Pennsylvania Ave.
Investors, already queasy due to slumping oil prices and a weakening global economy, do not need another shock to the system any more than they need ridiculous claims that the stock market will crash to financial crisis levels simply because someone is or isn’t elected president.
Why do some experts think the potential election of Trump — an ardent capitalist with legions of friends on Wall Street — would wreak havoc in the market?
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The most recent warning of an epic market crash comes from Wedbush analyst Ian Winer, who bases his assertions on some of Trump’s economic proposals. They include Trump’s call for significant tax cuts on high earners coupled with increased military spending.
Winer, talking with CNBC last week, said the U.S. economy would have to grow “somewhere between 8 and 9 percent…just to make us neutral.” That means greater deficits and increased financing costs, even as the Federal Reserve will likely keep rates below historic levels for the near future.
Add to that Trump’s plan to deport undocumented immigrants, which comprises roughly 11 million people. This mass exodus would not only be expensive to execute, but also costly to the bottom lines of companies that depend on cheap labor. Replacing undocumented immigrants with American citizens would, likely, increase payroll and cut into profit margins.
Lastly, he argues that Trump’s plan to impose tariffs on trading partners such as China and Mexico would simply make imported goods more expensive for average American consumers, thereby limiting available dollars to spend elsewhere.
Put together these policies would cause such economic hardship, Winer claims, that the price/earnings ratio of the S&P 500 would drop to nearly 11, and “that’s how you get to 1,000 on the S&P,” Winer says. The S&P 500, right now, is slightly above 2,000. Hence stock market Armageddon.
So, why exactly is Winer wrong?
Well for one thing, there is no complex algorithm he’s relying on to conclude that rising deficits, 11 million deportations, and rising tariffs must equal a market P/E ratio of 11. The stock market simply doesn’t work that way. It’s merely his guess.
Also, even if Trump is elected, there’s no guarantee he will be able to persuade Congress to take an axe to tax rates or dramatically increase spending on military (however that manifests itself), even if the GOP retains control of both chambers.
He has found just as much support for deporting 11 million people, as he has convincing Mexico to pay for a “beautiful” wall along the border, which is to say, none at all. And while anti-free trade rhetoric has found sympathetic ears among the electorate, there’s little chance the country will turn to isolationist economic policies as the world becomes only more integrated.
Of course, this could be Winer’s point.
He might simply be putting another number on Trump’s increasing list of impractical positions to illustrate its implausibility and potential harm. Fair enough. But using stock prices to make this point is problematic.
After all, since Trump won the New Hampshire primary on Feb. 9 and took the delegate lead in the GOP, the stock market has climbed 10%. So it’s difficult to assume that the stock market — which is supposed to be a forward-looking gauge — would all of a sudden collapse should Trump win it all.
Which brings us to a key point: Investors are better off if they don’t let their politics interfere with their investing behavior. (The same is true for conservatives who fear a Clinton or Sanders presidency.)
When it comes to the short-term performance of equities, no one knows what’s going to happen. Little did anyone expect that in 2015, 401(k)s would be battered by the confused Shanghai exchange.
Don’t sell your investments and pile cash underneath your pillow if Trump wins the next few primaries, the nomination or even the election. This too shall pass.

Saturday, March 26, 2016

This Theory Explains Why the U.S. Economy Might Never Get Better - TIME

Posted: 25 Mar 2016 05:00 AM PDT

In the wake of the 2008 financial crisis, conventional wisdom among economists, business leaders, and policy makers was fairly straightforward: Once the banks were bailed out, the stimulus spent, and businesses had a few years to recover, the U.S. economy would return to its usual healthy growth. Time, in other words, would heal the wounds of the subprime collapse and subsequent turbulence. But if any recovery has turned conventional wisdom on its head, it’s this one.
Over the last eight years, America’s economic prospects have lagged even the most pessimistic early predictions. In 2011, the Federal Reserve predicted that U.S. real GDP would, at worst, grow by 3.5% in 2013 and that the economy would expand between 2.5% and 2.8% annually in the long run. In every year since, the Fed has revised its predictions downward. (The most recent estimate predicts 2.2% annual growth in 2016, and 2% growth in the long run—a rate more than one-third lower than the post-war average.) Even employment, a source of uplifting headlines in recent weeks, is deceptively weak. The unemployment rate—which ignores those who gave up looking for a job—has hit new lows, but the percentage of Americans (between ages 25 and 54) who are actually working is over three points lower than its pre-crisis peak.

These confounding circumstances have led many economists to rally behind the concept of so-called “secular stagnation.” As a diagnosis, secular stagnation is simple: It’s the idea that the economic problems the U.S. continues to face aren’t a product of the “business cycle,” the ebb and flow of boom times and recession (hence the “secular” part), but may well be permanent drags on the modern economy. “It’s a kind of long term and sustained slow-down in economic growth,” says Larry Summers, who served as Bill Clinton’s treasury secretary and is widely credited with dusting off the concept of secular stagnation and bringing it into the mainstream.
The phrase was originally coined in a 1938 address by economist Alvin Hansen to the American Economic Association. Grappling with the sluggish recovery that followed the Great Depression, Hansen predicted that slower population growth and a lower speed of technological progress would combine to thwart full employment, wage increases, and general economic expansion. In both cases, Hansen’s reasoning was the same: without new people entering the work force and new inventions coming onto the market, there would be less investment in new goods, employees and services. Without investment, fewer businesses would open or expand, growth would slow, and more workers would be unable to find jobs.
Hansen painted an eerily familiar picture: “This is the essence of secular stagnation,” he explained, “sick recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment.” He could have been describing 1938 or 2016.
World War II effectively solved at least one of Hansen’s concerns. The U.S. population exploded, thanks to a post-war baby boom. Meanwhile, high government spending during the conflict boosted the economy, and new inventions jet airplanes, interstate highways, and eventually computers kept productivity and growth churning. Hansen’s theory was mothballed—until 2013 when Summers reintroduced the idea as an explanation to America’s sluggish economic recovery in a speech at the International Monetary Fund.
Since Summers’ IMF address, economists have piled on with many different ideas on exactly what is causing America’s current growth crisis—so much so that Berkeley professor Barry Eichengreen has referred to secular stagnation as “an economist’s Rorchach Test.”
Though the consensus around what secular stagnation means is loose, one factor almost everyone agrees on is the lack of population growth that concerned Hansen has re-emerged as a problem. Population growth means people need more stuff—especially capital-intensive things like housing that require especially large expenditures—and businesses invest in new workers and equipment to provide that stuff. The reverse is also true: as U.S. population growth has fallen and the baby boom generation approaches retirement age, the number of new consumers and workers who can produce and buy things has dropped off. “Slow or negative growth in the working-age population means low demand for new investments,” Nobel prize winner Paul Krugman explained in a 2014 article.
Changing technological trends have also been blamed for discouraging investment. Summers notes that this has happened in two ways: first, the internet revolution has allowed companies like WhatsApp—which had just 55 employees when it was acquired for $19 billion by Facebook in 2014—to reach a higher market valuation than Sony. Growing a multi-billion dollar company used to require hiring lots of workers, constructing offices and factories and so on. Nowadays, all you need is a loft and a couple of Macbooks.
Summers also identifies a related problem: the types of capital companies actually do need to invest in—computers and software—have gotten drastically cheaper. The result is that as businesses open or expand, they no longer need to spread their wealth around by purchasing costly machinery. Eichengreen, who considers himself a secular stagnation agnostic, finds this argument particularly persuasive. He adds that all types of capital goods, not just computers, have fallen in price over time as manufacturing has gotten increasingly efficient. “The one factor I’m most convinced by is the relative price of capital goods has being going down for 30 to 40 years,” the professor says. “Firms can do the same things spending less.”
Beyond demographics and technological change, there are a myriad of other explanations for lack of investment. Growing inequality means those most likely to spend their money, the middle class and people with lower incomes, have seen their wages grow the least. That means less spending and less demand, which ultimately means less production and hiring. Another proposed factor is high levels of consumer debt, which depresses spending as consumers divert money they would have used at the mall, say, toward paying their credit card interest.
Some, like Northwestern economics professor Robert J. Gordon, place less emphasis on lack of investment and more on Hansen’s other idea: that technological innovation has faltered—for real this time. Gordon agrees with many of Summers’ concerns, but blames much of the slowdown over the last fifty years on a lack of important new inventions. “We had a complete transformation of human life in the special century between 1870 and 1970,” Gordon says. “Since then we’ve had plenty of innovation, but in a narrower sphere; in entertainment, communication, and information technology.” Gordon argues those recent innovations have failed to increase productivity in the same way running water, the combustion engine, and indoor plumbing did for the previous generation. As a result, economic growth has been comparatively sluggish—especially now that the gains from the internet boom have largely been absorbed.
Secular stagnation also has its fair share of prominent skeptics. Harvard Professor Kenneth Rogoff agrees with some of the stagnation theory, such as lower population growth hurting output, but attributes most of the slowdown to a passing “debt supercycle” where post-recession economies are dragged down by high levels of debt that hold back growth until deleveraging is complete. Former Federal Reserve Chair Ben Bernanke chalks up slow post-recession growth to a global savings glut where investment is held back by various trade and economic policies, such as the decision by some countries to build large hoards of foreign currency reserves. If Bernanke is right, there is nothing fundamentally wrong with the economy and those bad policies must simply be reversed.
What makes secular stagnation so disconcerting for economists who do believe in the theory is that it defies traditional remedies for poor growth. In the past, if the economy had too little investment and growth stalled, the Federal Reserve could simply lower interest rates, which reduces returns on savings and makes borrowing and investing cheaper. If interest rates go low enough, business owners often decide that spending on expanding their business or research and development will yield higher returns than saving. At the same time, individuals are more inclined to spend or invest than to let their money sit in a bank. That typically kicked the economy back into gear.
Ideally, a central bank like the Fed can fine tune the interest rate so that investment is sufficiently desirable that the economy reaches full employment—a point know as the “full employment real interest rate,” or the moderately catchier “FERIR.” Summers and his colleagues suspect all the factors behind secular stagnation make investment so unattractive that, in order to get enough spending to reach full employment, the FERIR would have to be well below zero. In other words, companies would have to be losing money on savings to have an incentive to spend it on creating jobs.
If negative rates are necessary to reach full employment, that could pose a major problem. Economists generally think there is a limit to how negative the U.S. Federal Reserve can push interest rates before it triggers a financial revolt. If rates drop low enough, banks would theoretically pass on those costs to customers, charging people for depositing funds. In response, businesses and consumers might withdraw their cash and store it themselves, neutralizing any impact negative rates might have in stimulating spending. In Japan, where negative interest rates were recently introduced, there has been a surge in demand for home safes.
Even if the Federal Reserve could successfully take real interest rates to historical lows, Summers says that essentially forcing firms to invest in something could create a host of “adverse consequences,” ranging from dangerous financial schemes to more asset bubbles like housing booms that end with excruciating busts. “The investments that firms would undertake at a quarter of a percent that they wouldn’t undertake at half of a percent are probably not likely to be that good,” Summers warns. Secular stagnation has essentially forced America to choose between dangerous financial instability and painfully sluggish growth. Either way, average consumers seem to lose.
This gloomy prospectus hasn’t stopped economists from working on solutions. One possible fix: instead of lowering rates, have the government fill in the investment gap with its own spending. “I think there’s an overwhelming case for increased public investment, which I think is likely to raise economic growth,” Summers says. He recommends a massive, 10-year infrastructure renewal program that would upgrade existing infrastructure like roads, bridges, and airports and build new capacity in areas like broadband, green technology and health care.
One downside to that plan is it’s unclear exactly when the economy would stop having to use government spending as a crutch for growth. “In the secular stagnation environment, [the need for high public investment or debt] is a permanent state of affairs as long as the slow moving factors are not reverting,” says Gauti Eggertsson, an associate professor of economics at Brown University. The good news is high government investment may improve at least some of the dismal economic fundamentals that power stagnation. For example, better infrastructure and more spending on education could increase productivity and stimulate growth. Investments in green technology and health innovations could likewise produce new inventions and new industries.
Moreover, some of the factors dragging at the economy could actually power a government spending-based recovery. Low interest rates make borrowing money historically cheap, meaning the U.S. would be able to upgrade its infrastructure for relatively bargain prices. If Summers’ plan works and growth rebounds, tax revenues would also increase, lowering America’s overall debt-to-GDP ratio.
Will politicians find the political will to follow such a program? Summers is optimistic, but only cautiously so. “Eventually policy makers get around to doing the right thing, but I think it’s a slow process,” he says. “It certainly doesn’t seem like it’s going to happen this year. I’m hopeful that with the next president it will.”
In the meantime, his only advice to Americans affected by stagnation is to accept the reality and plan for a long, slow recovery. “Major economic forces are like hurricanes or droughts,” Summers says. “They’re something to which individuals have to adapt, but which they can’t control.”

Thursday, March 24, 2016

Here’s the Major Crisis the Airlines Are Facing Now - TIME Business

Posted: 22 Mar 2016 07:31 AM PDT

It’s been seven years since Adam Niewood’s father, a professional musician, was killed in an airplane crash. But Niewood is still wracked with guilt. The night before the flight, his father asked him if he wanted to drive together instead. Niewood declined.
“He traveled my entire life,” says Niewood, 38. “He was gone sometimes 300 days a year. He left and he came back. And he left and he came back. And that was what I was used to. He asked me if I wanted to take a road trip with him, and had I said yes, we would have driven to Buffalo and he would have been alive.”

Niewood’s father, Gerry Niewood, was killed when Colgan Air Flight 3407 plummeted into a house just outside Buffalo, New York on a snowy February night in 2009. Some 49 other people, including all on board and one in the home, also died. Government investigators found the leading cause of the crash was the pilots’ incorrect response to an aerodynamic stall, a condition in which an airplane’s wings aren’t generating enough lift. Stalls are tricky. Like turning into a spin in a careening car, the right move is unintuitive.
Lawmakers and regulators responded to Flight 3407 by dramatically increasing the number of hours required of first officers, from 250 to 1,500. The idea was to boost safety. But the change is helping fuel a pilot shortage the airline industry continues to grapple with as well as travelers across the country.
Colgan Air, now defunct, was a regional airline. So-called “regionals” typically shuttle travelers from smaller airports to bigger ones, where they can transfer to the major carriers’ bigger airplanes and on to further destinations. Think of the air travel system like a giant network, connecting thousands of airports. For many travelers, regionals serve as a vital link to that network. More than 200 airports in the U.S. were served only by regional airlines in 2014, according to the Regional Airline Association, a trade group.
These regional airlines now have a big problem: many can’t find qualified people to fly their planes.
The new hourly requirements made it more expensive to become a pilot in the first place. Prospective pilots pay roughly $150,000 for the requisite training, hours and college degree. Entry-level salaries at regional carriers, a popular jumping-off point for new pilots, hover around $20,000. That difficult financial calculus is increasingly keeping would-be pilots out of the cockpit.
How much the pilot shortage is already affecting you depends on where you live—or where you fly. “If I’m a small community dependent on regional aircraft for access to the air transportation grid, I would give it a nine [out of 10],” says William Swelbar, executive vice president of aviation consulting firm Intervistas. Swelbar has been predicting the shortage for years. When Republic Airways, a top regional airline, filed for bankruptcy in February, it in part blamed a lack of pilots.
Swelbar and other experts say the shortage won’t hurt the major airlines right away, because they have plenty of pilots. But the regionals serve as a critical source of pilots for the majors. If that pipeline dries up, there could be a shortage.
An obvious solution: paying pilots more. “It’s incredible you can still have a job where you’re flying 50 people around and you’re responsible for their lives and you’re getting paid $20,000, with lousy hours and minimal to none in terms of benefits,” says Daniel Rose, aviation lawyer and former U.S. Navy pilot. Rose represented some of Flight 3407 victims’ families.
But Rose says there’s another force at work keeping pilots’ pay grounded. Regional airlines count on deals with the major carriers to shuttle passengers to and from smaller airports to hubs. Regionals that keep their costs down (say, by paying crew less) are better able to compete for those deals.
With little chance of pilots getting a pay boost, the aviation industry and regulators have started contemplating a more radical idea. There is mounting evidence that it’s time to reconsider whether a pilot’s total hours is representative of their skill level. One recent study called that link into serious question. “Hours can reflect experience, but they’re not a good yardstick to measure pilots’ abilities,” says Dr. Dan Macchiarella, dean of the College of Aviation Studies at Embry-Riddle Aeronautical University. “Somebody could go tow banners for 10,000 hours and be less prepared to be a first officer than a graduate that came out of a program like ours that perhaps had 500 or 750 hours.”
As lawmakers debate new aviation rules, regional airlines have been trying to convince them it’s time to rethink the 1,500 hour requirement. But the idea will be a tough sell with passengers, many of whom are bound to feel safer with a more experienced pilot, regardless of what the academics say. “If I’m going to pay top dollar from New York City to wherever, I want to know that the person flying the aircraft actually has the experience to know how to land properly in inclement weather,” says Niewood. “Before the crash, I had a very tight, close-knit family. And now I don’t.”

Wednesday, March 23, 2016

Here’s What ‘iPhone SE’ Stands For - Fortune

Posted: 22 Mar 2016 11:32 AM PDT

Leading up to Monday’s Apple event, the normal hype and hysteria that accompanies the tech-giant’s special events was all but missing.
The rumor mill had spent months covering and churning out every detail of the event, and as has been the case as of late, Mark Gurman’s reporting was once again spot on.
As promised, Apple announced a 4-inch iPhone SE, identical in looks to the iPhone 5S with upgraded internals. A smaller iPad Pro also made its debut, complete with Apple Pencil support. And, of course, Apple released new colors of existing Apple Watch bands and an entirely new line out of nylon.

The announcements surprised no one at the event.
Instead, the surprise arrived when I visited the demo room set up across the hall. As I picked up the iPhone SE for the first time, ready to scoff at its lack a fresh design, I was instantly taken back to 2013 when the iPhone 5S was announced.
Nostalgia aside, the revelation was that Apple’s release of a modernized 4-inch iPhone is about more than just finding success in emerging markets. It’s about lowering the entry cost to Apple’s ecosystem.
Apple’s iPhone lineup once carried a $650 premium for entry. But now with a starting price of $399, the iPhone SE means Apple customers no longer have to sacrifice performance for price by buying an already obsolete device. At last, parents have an inexpensive option that has just as much oomph for their Snapchat obsessed teens (or those who’ve yet to get a smartphone at all, which is admittedly a dwindling number). And the entry-level iPhone comes at a price that directly competes with Android smartphones from the likes of Google and Motorola.
But that’s just in the pocketbook. In the hand, the iPhone SE is everything we—okay, I—loved about the iPhone 5S, only it’s just as fast and powerful as the more expensive iPhone 6S I now carry daily. It puts the same camera, performance, and reliability of Apple’s most cutting-edge products into a new form factor with old familiarity.
Similarly, Apple’s 9.7-inch iPad Pro looked identical to the 12.9-inch iPad Pro the company released last year, only smaller. The addition of Apple Pencil support and a dedicated keyboard add more to the iPad line than a simple processor upgrade or minor cosmetic changes (as has been the case with the last few models). And as result, for the first time in years, Apple has given consumers a real reason to upgrade from their older, yet still fully capable iPads.
While reception to the new iPad Pro may have been cool at the event and online, anyone looking to upgrade should have that familiar, pulse-quickening feeling of Apple-related anticipation. It’s the kind of flutter that once filled Apple’s Town Hall amphitheater.
And as Apple CEO Tim Cook ended the event, the announcement took a sentimental turn, when he revealed that this was likely the last product announcement the company will make on this stage; the same place where Steve Jobs announced the iPod. This is the hallowed ground where the App Store was launched—not to mention the 1.5 million apps that sprang from it. And five years ago, the iPhone 4S was launched here, the day before Jobs died.
From this spot, Apple moves forward. Next year, the company’s new campus will open, complete with a theater that is much bigger than Apple’s current venue. That’s where the company will likely make its future product announcements.
Jobs was never a fan of spending too much time thinking at the past, as noted in his own words just outside the Town Hall’s entrance: “If you do something and it turns out pretty good, then you should go and do something else wonderful, not dwell on it for too long. Just figure out what’s next,” the quote reads.
But maybe it’s okay to dwell, ever so briefly at times. Perhaps dwelling can help ease the inevitable fear of change; the fear that surely comes with leaving the halls Jobs once roamed, for a place where his presence will only be felt in words and photos.
I was able to grab two-seconds of Phil Schiller’s attention on the demo floor. In that time, I asked him perhaps the most important question of the day: What does “SE” stand for? “Special Edition,” he told me. For him, the name pays homage to the Macintosh SE; a computer the company released in 1987.
With the iPhone SE being a tribute to the past in more than one way, the only question that’s left for Apple is: What’s next?
This article originally appeared on Fortune.com

Monday, March 21, 2016

This Is the Future of Work and What It Means for Your Career - LinkedIn


Posted: 18 Mar 2016 05:00 AM PDT

In my 20s, I was an investment banker; in my 30s, a research analyst; in my 40s, I managed and led large, complex businesses; and now that I’ve entered my 50s, I’m an entrepreneur. Four decades; four separate – but related – careers, each building on what came before.
I can’t say I exactly planned it this way. Nor did it “just happen” to me. But instead it was some combination of my working in an industry undergoing almost constant change and my active search for interesting work. And, as I’ve advanced, it’s also because I’ve sought out work that can have an impact.
The types of transitions I’ve had may be unusual among my peers. But I believe careers marked by transitions, pivots and reinventions are more likely to become the norm going forward – and particularly so for women, given that we tend to take more career breaks. Whereas historically, a career-well-worked has been characterized by a steady upward progression – in title, in responsibility, in pay – going forward it will be more about proactively constructing an interesting career through building one’s skill base and making more lateral moves.
This is because business is changing…fast…and the pace of that change is only going to accelerate. The forces of technology and globalization are fundamentally altering any number of industries; that means that what worked for decades won’t be a given any longer. (Sure, this is true for the tech industry, but also for print media, for financial services, and any number of others….and much more to come.)
This type of dislocation can feel like a negative…and indeed, it does mean you’re more likely to lose your job, as strategies and bosses shift to keep up. But it also means that our career options are increasing, if we’re open to them. For example, it may not be easy to start a business today, but it’s certainly easier – and less expensive – than it has been historically. Think cloud-based computing instead of buying servers, shared workspaces instead of multi-year leases, video-conferencing instead of business travel, crowdfunding instead of venture capital money or bank loans, freelancers instead of full-time hires….everywhere you look, the infrastructure for starting and funding businesses is exploding.
So what is involved in these types of successful career transitions?
First, get past the mourning for the comfortable hierarchy, the big office, the heavy-stock cream-colored stationery, the sense of understanding the “rules of the game,” the singular view of what success looks like.
And get past the old view of what successful leadership looks like: strong, decisive, certain. Instead, the key traits for success will be curiosity, an open-mindedness, an intellectual flexibility, an interest in understanding others’ perspectives. (In my old world, people ran from tech projects…almost literally; they were viewed as always-over-budget time sinks. In the new world, the skillsets for managing them are almost essential.)
Secondly, to successfully navigate a world of such change, you have to embrace a certain intellectual discomfort and a willingness to fail. This one can be tough because we females tend to take a failure harder than men do, personalizing it. For me, being a research analyst was great training, because I had to get comfortable being “out there” and making non-consensus calls…even though I was brought up, like most southern young ladies were, not to rock the boat.

Part and parcel of this is getting comfortable being criticized. This can be another tough one for us ladies, because so many of us were socialized to prioritize relationships. But change can make people uncomfortable, and so many people fight it; if you’re moving in a different direction from them, it can feel like a rebuke. I will never forget, after the announcement that I was working on Ellevest (a digital investment platform focused on women), being asked to get on a call with a group of Financial Advisors from my old industry, who expressed disappointment that I was launching this project rather than operating with them in the more traditional part of the market. The tone of the conversation was that I had hurt them in some indefinable way.
Another insight: even though one might imagine there is a sense of urgency with reinvention, I was very careful not to lurch from one thing to another. Instead I gave myself the time to really think things through, try the change on a bit, feel my way into it. I spent about nine months working through my transition to research analyst, thinking about whether I would like it, thinking about whether I would be any good at it. While many facets of it were similar to investment banking, a key difference was the greater responsibility by the individual in making the “calls,” as compared to the teamwork and deal orientation of an investment banker.
On my transition to entrepreneur, it took me a couple of years (my husband might say forever) to work it through, during which I advised a number of start-ups and start-up CEOs….really trying to get a feel for what it’s like and whether I could be successful at such a significant change in career direction. And the outcome wasn’t a foregone conclusion; I compared it with other options, such as moving into a regulatory role or into consulting or board work, all of which at the time left me feeling pretty meh.
Implicit in this is that it’s important to “play in traffic.” By that, I mean, getting out there, engaging with people, getting a feel for a new industry or position. This type of transition very likely isn’t going to happen as the result of a headhunter’s call, or even a colleague picking up the phone. It’s important to be proactive here, rather than wait for it to come to you. It won’t.

Which gets me to: You have to prepare financially. You have to prepare in case the shifting business environment knocks you on the head and you lose your job. And you have to prepare for the transitions that you may want to drive. This is where the guys have a leg up on us women: not only do they on average make $1 to a woman’s 77 cents, but they also tend to invest those earnings to a greater degree in the stock market. Over the course of a career, those two things can add up to literally millions of dollars more in earnings.
But for us women taking on what can feel like more risk – asking for the raise (which so many of us dread) and investing in the markets – can pay off in greater career flexibility…and therefore less risk….down the road.
Sallie Krawcheck is the CEO and Co-Founder of Ellevest, a digital investment platform for women, to be launched in 2016. You can sign up for early access here. She is also the Chair of Ellevate Network, the global professional women’s network. She is a Wall Street refugee, having run Merrill Lynch Wealth Management and Smith Barney
This article originally appeared on LinkedIn

Sunday, March 20, 2016

The Apple TV Is About To Be Much Easier To Use - Fortune

Posted: 18 Mar 2016 08:37 AM PDT

Rumors of a new iPhone, iPad, and accessories for Apple Watch have dominated the conversation leading up to Apple’s special event on Monday.
However, as the date for Apple’s “Let us loop you in” unveiling approaches, little has been said about what changes are coming to Apple TV.
Apple’s fourth version of its set-top box that streams video from providers such as Netflix or Hulu and allows users to play games on the television using apps premiered near the end of 2015. The vision for the future of the living rooms showed promise, but users ultimately grew frustrated by the lack of an easy way to enter usernames and passwords—or text in general.
Since then, Apple has updated the iOS Remote app to give users the ability to enter text with an iPhone or iPad keyboard. The change has succeeded in easing some of the frustration.
But with tvOS 9.2 expected to debut in the days after the Apple’s event, it’s time we take a look at how Apple is improving the user experience of Apple TV, which starts at $149 The upcoming software update has been available to developers as a preview since January, and some details of what’s included have since slowly leaked out.
Perhaps the biggest addition to tvOS 9.2 is the addition of Siri dictation in text fields. Users will soon have the option to use the Siri Remote’s voice capabilities to enter queries, usernames, and passwords by voice instead of having to type them out using the remote’s trackpad that requires hunting and pecking letters using the on-screen keyboard.
For example, with the new feature you can open the YouTube app, go to the search tab, and use your voice to search for a channel or video, such as “John Oliver.” Apple news site MacRumors created a video detailing how the feature works, and it looks rather simple.
Additionally, users will be able to use Siri from any Apple TV screen to search the App Store for specific apps or categories. Just hold in the Siri button on the remote and request a search like “Show me March Madness apps.” Or you can search for a specific category such as “Games.” Previously, users had to open the App Store app and then enter a search query.
If using voice to enter commands isn’t something that interests you, tech news site iLounge reports that Bluetooth keyboard support will be new in tvOS 9.2. With a Bluetooth keyboard paired to your Apple TV, you can enter passwords or search terms without fear of someone listening in on your conversation with Siri.
Another feature that is sure to make users who have numerous Apple TV apps installed happy is the addition of folders, which helps users organize apps in an easy to navigate manner, instead having to scroll through of a large grid of icons. For example, users can create a folder for games, and another for educational apps, and so on. Creating a folder on the Apple TV follows the same process as iOS, whereby users can highlight and drag an app icon and then place it atop another app’s icon to create a folder.
While there’s sure to be more features included in the update, the addition of an easier way to enter text by voice and better organization using folders are both steps in the right direction for Apple’s bid to take over our living rooms.
You can tune in to Apple’s event on Monday using an Apple device including—you guessed it—the Apple TV.
This article originally appeared on Fortune.com

Saturday, March 19, 2016

Steve Wozniak: Donald Trump Made Me ‘Cry Out Loud’ - TIME

Posted: 17 Mar 2016 07:48 AM PDT

On March 18, San Jose, Calif., will host its first-ever comic convention, putting a technologist’s spin on the costume-laden, celebrity-spattered, fantasy-drenched fanfest that another part of California has become so famous for hosting every year. The driving force behind Silicon Valley Comic Con is none other than Apple co-founder Steve Wozniak.
Before the three-day celebration—which will include appearances from the likes of William Shatner and The Martian author Andy Weir, as well as a “big VR zone” and a panel about the greatest threat to humanity—TIME spoke to the Superman of computer geeks.
Below follows a lightly edited transcript, covering everything from artificial intelligence to Donald Trump to why he thinks there’s no problem with kids having loads of screen time. (Note: If you meet Woz, don’t pitch him your business plan.)
Why is Silicon Valley having its first comic con and how is it different from other ones out there?
The question we ask is: why is it happening so late in time? When you’re around the tech community, so many of them are into the comics and the fantasy it invokes and the superhero movies. It’s like nobody thought of it until now. We want to be a little bit distinct and special, so we’re going to include [technologists] in Silicon Valley and San Francisco. We’re going to include a little bit of that carryover, where science interacts with popular culture. We know that it allows the effects to be made in the movies and all that.
Why do you think people in tech tend to be really into this stuff? 
Probably because we spend our lives turning little ideas that are in our head, which is like science fiction, into things that are real. Having discussions at a dinner, saying ‘Wouldn’t it be neat if somebody could do this?’ And then saying, ‘Oh my gosh, I might even try to find a way. It might be possible!’ That’s what a lot of these movies do for us. Primarily it’s still an entertainment-based show based around pop culture. But we’re making an appearance that we technologists are significant in that world.
Speaking of technologists, I know you have said that you side with Tim Cook in the Apple vs. FBI fight. But what do you think Steve Jobs would have done? 
It’s unfair for someone to guess what Steve Jobs would have done. He’s such a hero to so many people. I just know from being around him—for a lot of things in his life, he really cared about people, the end users, regular people. One time I was with him and the FBI came into Apple, and there were just a few of us, maybe a dozen executives. And they explained how to watch for Chinese people that are trying to get into computers and steal our IP and stuff. There’s was no Internet back then. And Steve Jobs, intelligently, said to the FBI, “Well, we do the same thing right?” And the FBI guy said, “No, we don’t.” In my life I always put honesty above everything else, and it’s just a lie. Why bother to tell it?
I just lose faith in, especially, administrators. I think there’s evidence that Steve Jobs would have been thoughtful on this issue but I can’t say for sure, because people change over time. And I do not know what he would have said, say, at the end of his life. He just really wanted good products for people. And that’s a different issue than whether they should they be totally secure or insecure.
Personal security is an important thing in our lives. Look at all these movies, the stuff you’re going to see at Comic Con. Keeping those things secret is so critical to them. I mean, just look what’s happened to Sony. Steve Jobs, he realized, when you introduce a product, it has to be so secret that it just blows people away—grabs their mind! Just leaves them in awe, just thinking, ‘Whoa, I gotta have that.’ That’s the same thing for popular culture. You’ve got to come out with surprises so people say, ‘Oh my gosh, I gotta buy that comic, just based on the front cover. I gotta buy it today.’ Or, ‘I gotta see this movie.’ It might be as simple as who’s in it.
Secrets are part of security and privacy. If you build a product and it’s very secure, and you’re the one company in the world that keeps your word, then you made a secure product. And encryption. The bad guys, they can always just go and buy 20 different encryption programs. Remember in this case with the FBI versus Apple, they’ve already got all the metadata, every single phone call the phones made, who they were to, what the SMS messages were. They got all the metadata. I don’t know what else they’re going to get. Maybe a loose word in a phone that wasn’t even the person’s real phone, it was their work phone?
What is harder: creating that security or defending that security? 
Well, creating and defending are kind of the same thing. If you asked whether creating or breaking it was harder, I’d say they’re both about equal. You need very, very smart people to get through it. But creating good security is very, very tough. Look how many companies get a hundred thousand records accessed by hackers. A million records accessed by hackers. Twelve million accessed by hackers. You just hear about this over and over and over.
Having a new festival to at least partly celebrate technologists is a reminder of how prominent that culture has become in the Bay Area. There’s been a lot of angst toward tech workers that middle-class people blame for rising rents, the gentrification in the area. Angst toward the Google buses. What’s your take on all that? 
All my life, for different reasons—I kind of grew up during Vietnam War days and opposing authority—I’m always for the little guy and against the big guy who has power and money being able to buy their way. When I grew up, just a normal engineer—engineers don’t make the money that lawyers do—could have a home and cars and school and clothing and food and books, everything for the family, one person working. Now two people in Silicon Valley have to work full-time, stressful jobs just to maybe afford a home. So we lost a lot and where did it all go? We developed computers! My gosh, they made us so much more productive. Where did all that wealth go?
It didn’t really go to us, like ‘Oh, we got it easy. Now we only have to work four days a week.’ Some places in Europe might have gone that way, but we went the opposite. The powers of money control how money makes more money and doesn’t get taxed, whereas those of us who work with our muscles or our brains do get taxed. The money kind of went to the one-percenters and those are the guys who are saying they’re going to save America and bring back the middle class. They’re the ones that took it away.
So you mentioned some political issues. What are your thoughts about Donald Trump? 
Donald Trump is a very rude person. Donald Trump is a very rude person. Would I ever want a child of mine to grow up talking that nastily about other people? Absolutely not. It just offends me. I watched what’s going to be an ad, I guess, of him making comments about women and I was just crying out loud, right here in this chair in my office, just crying out loud at the things that he said. Sometimes people do those things [that make you think], ‘How can that be a human-being person?’ Some of his ideas might be okay but I probably don’t agree with most of them. The Republicans to me just don’t match my own personal ethics. But, you know, if I voted, I would vote for somebody who can’t win. If I do vote, it’ll probably be for Bernie Sanders.
What do you like about Bernie Sanders?
The way he talks, these values. I have friends in those countries in Scandinavia and Western Europe that email me all the time and tell me how wonderful it is what they have, and they can’t believe the U.S. And Bernie Sanders proposes things like getting college paid for. You seen that movie Ivory Tower? So many people are so worried about starting life with such huge debt. He’s for some good things for people, for the people to have benefits, universal healthcare. We have the most privatized healthcare system of all the developed nations, through insurance companies and all. And we have the highest costs and the lowest performance. So it’s time to get more socialistic like the ones that outdo us.
There’s a lot of talk about trying to create more diversity in tech. Is that something you’ve tried to incorporate into Comic Con?
The person who is going to come to Comic Con is an interesting person to me. I hang around just normal workers and engineers in companies. I don’t hang around the higher-up people who make decisions about who they’re going to hire. And I never, ever want to hire and fire. I’ve always been at the bottom of Apple’s org chart, to this day. Most of the people I deal with, everyone I ever run into, thinks ‘Oh my gosh, we should do everything we can to be equal as far as both ethnicity and gender.’ And it doesn’t turn out that way.
A lot of that goes on in the schools. I taught how to use computers in elementary and middle schools. I taught for eight years. I was teaching seven days a week. No press allowed. And let’s look at the gender. The girls and the boys had equal answers. They understood what was going on in the computer at every stage and how to get things done. And by about seventh grade, when they’re getting into the little social problems that teenagers have, the girls who knew the answers wouldn’t raise their hand. And I noticed that.
When I took computer science—I went back to get my college degree after 10 years, at Berkeley—the computer science classes were filled with people from Southeast Asia because they’re very mathematics-smart, they’re very heavily trained in that. And they were 50-50 on gender, whereas we Caucasians were something like 90-10. Different cultures are just different. It’s just how it is in a culture. And it doesn’t mean that it’s good or bad even. As far as pay goes, I have never heard anyone who speaks common sense say that the pay shouldn’t be equal. So the fact that it isn’t is offensive.
What do you think we can do, as a culture, to make it so the girls who stop raising their hands decide to keep them raised up instead? 
It’s way too hard to change in school and education. Almost all the exciting things that took me places were outside of school. The academic institutions have a problem, which is often 30 students in a class, and they’ve all got to do all these different subjects. You can’t even go off and excel at anything, because you don’t have time. You gotta do the reading and the homework. And there’s gonna be a quiz on Friday. I was hoping computers would fix it. But maybe in the future a computer will be like a human being. We’re now talking to our phones. We’re talking to our Amazon Echoes. We ask a question and it speaks back an answer, like another human being. And kids are carrying around their phones like, ‘This is my best friend in the world now. My little portal to the world.’ And if it could ever become a good enough friend to guide them in education, we could have one low-cost teacher per student and really rethink education.
What do you think about people worrying that kids get too much screen time, too attached to those friends in their pockets? 
‘There ain’t no good guy, there ain’t no bad guy. There’s only you and me. We just disagree.’ It’s not bad or good. What we had was good for us, and they’re missing it, so we think they don’t have good, they must have bad. No, they just have something different. It’s their future. It’s the world they live in. It’s their status quo. And I never, ever look at that sort of change in people and society as bad. It’s just the direction of the day. And you know what? Every generation sort of gets accused of that by their parents, no matter what, because they aren’t living the way the parents lived. But that doesn’t make us bad.
What are your thoughts on artificial intelligence? Do you fall more on the side of ‘It will make us immortal’ or ‘It will kill us all’?
We’re going to have a session on this at our comic con: what’s the greatest threat to mankind, artificial intelligence or super babies? I got very worried at one point. I got negative for a while, realizing that these machines are going up and up the scale, from muscles to brains, of what they’re doing better than a human. And why would you want a human, if you’re going to lose money in a company, over a computer? And then I rethought it, and I changed my mind quite a bit for reasons I won’t get into now. I hope a lot of it comes out in our panel.
What are you most excited about seeing a Comic Con? 
Seeing interesting people, just saying a word to them, chatting, looking. The ones that are dressed up in costumes are going to be interesting. And attending the sessions. Looking into some of the sets and casts and movie company presentations. You’re part of a big huge crowd and you can’t go meet 30,000 people. But you might bump into one or two who think like you do, and are like you. Maybe they like the same products or maybe they’re deep, deep fans of one certain genre or one certain movie.
When you meet people, what do they tend to ask you? What are they most curious about? 
Funnily enough most of them just want to say thank you, because they’re so delighted with where technology has gotten us. We are the superheroes as much as the movies used to be. Some of them will talk about how they grew up. Some of them will remind me of a time that we met, which is always good. But I can’t spend forever on people. ‘Here’s my idea. I got this idea for a company. Gosh. Oh, gosh.’ I get 12 of those a day in email and that can take up a lot of time. Don’t waste other people’s time. Be polite. Enjoy the show.
And for the most important question, will you be wearing a costume? 
I will not be wearing a costume. When I was young I’d wear costumes and I’d even win contests sometimes. I was so shy, but behind a costume, it’s like the early days of computers. A shy person who couldn’t talk to people could go in and be anyone they wanted online in chat rooms, on AOL, even before the Internet. And it could really bring a lot out of them. No, I will just be totally normal and comfortable. When I put any clothes on, I sweat and sweat and sweat. So if I put a costume on . . . that’s one of my aversions to it. And why would I hide out when there are people who do want to meet me? Why would I deny them that? All I have to do is smile.

Thursday, March 17, 2016

Inside Apple CEO Tim Cook’s Fight With the FBI - TIME Tech

In an exclusive interview with TIME, Cook discusses your privacy, America’s security, and what’s at stake in the battle over encryption

The day after the massacre in San Bernardino, Calif., where Syed Rizwan Farook and Tashfeen Malik shot to death 14 people and wounded 22 others at a holiday luncheon for the county department of public health, an FBI Evidence Response Team descended on the couple’s townhouse in nearby Redlands.
They recovered, among other things, 12 pipe bombs, thousands of rounds of ammunition of severaldifferent calibers, and three cell phones: two from a dumpster behind the townhouse and one from the center console of a black Lexus IS 300 parked outside. The two phones in the trash had been crushed by the terrorists, but for whatever reason–maybe an oversight, maybe there was nothing useful on it, who knows–the third phone was intact. It was placed in the care of the Orange County Regional Computer Forensics Laboratory. When investigators booted it up–it was an iPhone 5c running iOS 9, on the Verizon network, serial number FFMNQ3MTG2DJ–the phone asked them for a four-digit pass code.
What followed was like a kid’s game of fortunately-unfortunately. Unfortunately, they didn’t have the pass code, and the person who did was dead. (Farook and Malik were killed in a shoot-out with police a few hours after the attack.) They could have tried to guess it, but the phone was set up to erase itself after 10 wrong guesses. Fortunately, the phone was Farook’s work phone, so technically it belonged to San Bernardino County. Unfortunately, the county didn’t have the pass code either, nor did it have the password for the iCloud account associated with the phone, which in the Apple security ecosystem is different from the phone’s pass code.
But the county did have the power to reset the iCloud password, which it did. That iCloud account turned out to contain several full, unencrypted backups of the phone. Unfortunately, Farook hadn’t backed up his phone to iCloud since Oct. 19, so the data was out of date. Further misfortune: not all the information on an iPhone is necessarily included in a backup.
All that data was still on the phone, but encrypted with a pass code that nobody had. Not even, amazingly, the company that made the phone: Apple.
different calibers, and three cell phones: two from a dumpster behind the townhouse and one from the center console of a black Lexus IS 300 parked outside. The two phones in the trash had been crushed by the terrorists, but for whatever reason–maybe an oversight, maybe there was nothing useful on it, who knows–the third phone was intact. It was placed in the care of the Orange County Regional Computer Forensics Laboratory. When investigators booted it up–it was an iPhone 5c running iOS 9, on the Verizon network, serial number FFMNQ3MTG2DJ–the phone asked them for a four-digit pass code.
What followed was like a kid’s game of fortunately-unfortunately. Unfortunately, they didn’t have the pass code, and the person who did was dead. (Farook and Malik were killed in a shoot-out with police a few hours after the attack.) They could have tried to guess it, but the phone was set up to erase itself after 10 wrong guesses. Fortunately, the phone was Farook’s work phone, so technically it belonged to San Bernardino County. Unfortunately, the county didn’t have the pass code either, nor did it have the password for the iCloud account associated with the phone, which in the Apple security ecosystem is different from the phone’s pass code.
But the county did have the power to reset the iCloud password, which it did. That iCloud account turned out to contain several full, unencrypted backups of the phone. Unfortunately, Farook hadn’t backed up his phone to iCloud since Oct. 19, so the data was out of date. Further misfortune: not all the information on an iPhone is necessarily included in a backup.
All that data was still on the phone, but encrypted with a pass code that nobody had. Not even, amazingly, the company that made the phone: Apple.
different calibers, and three cell phones: two from a dumpster behind the townhouse and one from the center console of a black Lexus IS 300 parked outside. The two phones in the trash had been crushed by the terrorists, but for whatever reason–maybe an oversight, maybe there was nothing useful on it, who knows–the third phone was intact. It was placed in the care of the Orange County Regional Computer Forensics Laboratory. When investigators booted it up–it was an iPhone 5c running iOS 9, on the Verizon network, serial number FFMNQ3MTG2DJ–the phone asked them for a four-digit pass code.
What followed was like a kid’s game of fortunately-unfortunately. Unfortunately, they didn’t have the pass code, and the person who did was dead. (Farook and Malik were killed in a shoot-out with police a few hours after the attack.) They could have tried to guess it, but the phone was set up to erase itself after 10 wrong guesses. Fortunately, the phone was Farook’s work phone, so technically it belonged to San Bernardino County. Unfortunately, the county didn’t have the pass code either, nor did it have the password for the iCloud account associated with the phone, which in the Apple security ecosystem is different from the phone’s pass code.
But the county did have the power to reset the iCloud password, which it did. That iCloud account turned out to contain several full, unencrypted backups of the phone. Unfortunately, Farook hadn’t backed up his phone to iCloud since Oct. 19, so the data was out of date. Further misfortune: not all the information on an iPhone is necessarily included in a backup.
All that data was still on the phone, but encrypted with a pass code that nobody had. Not even, amazingly, the company that made the phone: Apple.
The FBI did ask. “We didn’t hear anything for a few days,” says Tim Cook, Apple’s CEO and the successor to the late Steve Jobs. “I think it was Saturday before we were contacted. We have a desk, if you will, set up to take requests from government. It’s set up 24/7–not as a result of this, it’s been going for a while–and the call came in to that desk, and they presented us with a warrant as it relates to this specific phone.”

At 55, Cook is wiry and silver-haired, with an Alabama accent that he has carefully transplanted to Silicon Valley. We spoke in his office at Apple’s headquarters in Cupertino–the address, famously, is 1 Infinite Loop. It’s a modest office, an askew trapezoid, almost ostentatiously unostentatious, with a few framed “Think Different” posters on the walls, some arty photographs of Apple stores and a large wooden plaque with a quote from Theodore Roosevelt on it (the “daring greatly” one). Jobs’ office is next door. It’s dark, with curtains drawn, but the nameplate is still there.
To be clear: Apple complied with, and actively assisted, the FBI’s investigation, right up until it didn’t. There was plenty of cordial back-and-forth, exchanges of information and know-how. “We gave them some unsolicited advice–we said, take the phone to the home or apartment and power it, plug it in and let it back up. And as it turned out, they came back and said, Well, that didn’t work.” It emerged that resetting the iCloud password had been a serious tactical error: they could’ve gotten the phone to make a fresh backup of itself automatically, but once you change the iCloud password, it won’t back itself up without the pass code.
That’s when the FBI made a further request: O.K., Apple didn’t have the pass code, but maybe it could code up a new version of iOS 9 without the 10-guess limit (and without enforced pauses between guesses, another security measure) and then persuade the San Bernardino phone to install it? A four-digit pass code has only 10,000 possibilities. The FBI could brute-force that in a day and everybody could go home.
Inside Apple this idea is nicknamed, not affectionately, GovtOS. “We had long discussions about that internally, when they asked us,” Cook says. “Lots of people were involved. It wasn’t just me sitting in a room somewhere deciding that way, it was a labored decision. We thought about all the things you would think we would think about.” The decision, when it came, was no.
Cook actually thought that might be the end of it. It wasn’t: on Feb. 16 the FBI both escalated and went public, obtaining a court order from a federal judge that required Apple to create GovtOS under something called the All Writs Act. Cook took deep, Alabaman umbrage at the manner in which he learned about the court order, which was in the press: “If I’m working with you for several months on things, if I have a relationship with you, and I decide one day I’m going to sue you, I’m a country boy at the end of the day: I’m going to pick up the phone and tell you I’m going to sue you.”
It also wasn’t lost on Cook that the FBI chose not to file the order under seal: if Apple wasn’t going to help with a case of domestic terrorism, the FBI wanted Apple to do it under the full glare of public opinion.
The spectacle of Apple, the most admired company in the world, refusing to aid the FBI in a domestic-terrorism investigation has inflamed public passions in a way that, it’s safe to say, nothing involving encryption algorithms and the All Writs Act ever has before. Donald Trump asked, “Who do they think they are?” and called for a boycott of Apple. A Florida sheriff said he would “lock the rascal up,” the rascal meaning Cook. Even President Obama, whose relations with the technorati of Silicon Valley have historically been warm, spoke out about the issue at South by Southwest: “It’s fetishizing our phones above every other value. And that can’t be the right answer.”
As against that, Apple has been smothered in amicus briefs from technology firms supporting its position, including AT&T, Airbnb, eBay, Kickstarter, LinkedIn, Reddit, Square, Twitter, Cisco, Snapchat, WhatsApp and every one of its biggest, bitterest rivals: Amazon, Facebook, Google and Microsoft. Zeid Ra’ad al-Hussein, the U.N. High Commissioner for Human Rights, spoke out in Apple’s defense. So did retired general Michael Hayden, former head of both the NSA and the CIA. The notoriously hawkish Senator Lindsey Graham, who started out lambasting Apple, switched sides after a briefing on the matter. Steve Dowling, Apple’s vice president of communications, showed me a check for $100 that somebody sent to support the world’s most valuable technology company in its legal fight. (Apple didn’t cash it.)
You can see what the fuss is about. The optics of Apple’s decision are pretty terrible, and the reasons for it aren’t obvious or simple. The main reason is technical: if Apple created what amounts to a tool for cracking open iPhones, Cook argues (and security experts tend to agree), and that tool got out into the wild, through hacking or carelessness, the security of every iPhone everywhere would be compromised. This is not an unlikely scenario: code, like the dinosaurs in Jurassic Park, often finds a way to get free. Under this scenario, GovtOS would be the holy grail for hackers everywhere and a gift to authoritarian governments willing and eager to pry into their citizens’ secrets. “To invent what they want me to invent,” Cook says, “puts millions of people at risk.”
To be clear, Cook doesn’t mean people are at risk of having their nude selfies put online. He sees the risks of hacking as real, real enough to weigh against the nightmare of a possible terrorist attack. “It’s not that one side has life and one side is your financial information or your photo or whatever,” he says. “Think about something that happens to the infrastructure, where there’s a power-grid issue. Think about the people who are on a medical device that depends on electricity … these aren’t fantasy things by any means.” (He also doesn’t think that GovtOS would help the FBI much anyway, but more on that later.)
The FBI has argued that the new code could be tailored to just that one phone in particular, but modifying the code to attack other phones would be relatively simple. Apple also maintains (and the FBI has as good as conceded) that this case isn’t a one-off: it will set a legal precedent. And even if Apple deleted the tool as soon as the FBI was done with it, there would be a line around the block of district attorneys clutching iPhones in evidence baggies demanding that Apple write it all over again. “It’s not about one phone,” Cook says. “It’s very much about the future. You have a guy in Manhattan saying, I’ve got 175 phones that I want to take through this process.” (The guy in question being New York County district attorney Cyrus Vance, who did in fact say that.)
This is the technical argument. Apple’s legal argument in the case hinges on the interpretation of the All Writs Act, which is something of a catchall: it authorizes federal courts to issue “all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” Apple’s lawyers argue that to compel the company to write, test, debug, deploy and document the necessary software would be excessively burdensome and exceed the bounds of the All Writs Act. (This isn’t the first time Apple has been on the business end of the All Writs Act, by a long chalk. In October a similar case came up in Brooklyn involving a meth dealer who claimed to have forgotten his iPhone pass code, and Apple made a similar argument. On Feb. 29 the judge ruled in Apple’s favor, though that ruling has no legal bearing on the San Bernardino case.) Apple also floated a slightly more fanciful claim to the effect that compelling Apple engineers to write code they objected to would violate their First Amendment rights.
But these arguments are just the legal and technical shadows cast by another, larger one, which is that people have a right to privacy, and devices like the iPhone, with which we live on terms of unprecedented intimacy, provide both hackers and law enforcement with a way of invading that privacy like never before. Encryption is the only possible countermeasure. “When I think of civil liberties, I think of the founding principles of this country,” Cook says. “The freedoms that are in the First Amendment, but also the fundamental right to privacy. And the way that we simply see this is, if this All Writs Act can be used to force us to do something that would make millions of people vulnerable, then you can begin to ask yourself, If that can happen, what else can happen? In the next Senate you might say, Well, maybe it should be a surveillance OS. Maybe law enforcement would like the ability to turn on the camera on your Mac.”
It’s an argument in favor not just of privacy but of a new kind of privacy, one forced on us by the utterly changed nature of the technological environment we now live in. Device by device, service by service, we have built over the past decade a world in which an amazing amount of what we do is recorded by our personal devices: our social lives, our health, our money, what we watch, who we talk to, where we go, what we look at. Ten years ago, if I went for a jog, any and all information relating to that jog would evaporate as soon as it happened. It would go uncaptured. Now that information is not only preserved–where I went, how far I went, how fast I went, what I listened to, what my heart rate was–it gets uploaded to the cloud and propagated across my social networks.
The legal scholars Peter Swire and Kenesa Ahmad have coined a phrase for this: the Golden Age of Surveillance. Idly and thoughtlessly, purely because we like the little conveniences and personal services that smart devices give us, we have comprehensively bugged ourselves but good. Devices like Amazon’s Alexa or Samsung’s smart TVs or even Mattel’s Hello Barbie not only monitor the conversation around them but stream it to the cloud to be run through speech-recognition algorithms. They listen and report.
George Orwell knew mass surveillance would invade our homes. The twist he didn’t see coming was that it wasn’t Big Brother who would do it. We did it to ourselves. “It wasn’t very long ago when you wouldn’t even think about there being health information on the smartphone,” Cook says. “There’s financial information. There’s your conversations, there’s business secrets. There’s probably more information about you on here than exists in your home.” The question is, now that we have this deeply, richly, intimately installed new surveillance infrastructure, should Big Brother be allowed to access it? And if so, when and how? Or should private citizens have the means to protect it, from hackers and thieves but also from the government?
Oddly enough, this particular fight has actually been fought before, more than 20 years ago, in what is known as the Crypto Wars. In 1993, jittery in the face of the growing power of encryption, the White House announced a device called the Clipper Chip that would encrypt digital communications while allowing the government to keep a key. Needless to say, the industry resisted the Clipper Chip on any number of grounds, including the fact that it would render American-made communications technology distinctly unattractive to foreign buyers. By 1996 it was effectively dead, and by 2000 the government had thrown up its hands at the whole quixotic business of trying to legislate encryption.
Strong encryption remained the exception rather than the rule, even as American cybersurveillance ramped up in the wake of Sept. 11. But by 2011 law enforcement was getting concerned again about its practical ability to monitor electronic communications. The FBI’s general counsel described them as “going dark,” a phrase that has become something of a rallying cry.
After the Edward Snowden revelations in 2013, some technology companies began integrating encryption more tightly and seamlessly into their products and enabling it as the default setting–Apple’s iOS 8, released in 2014, was a watershed in that respect. Google’s next release of Android did the same. There were already rumblings about encryption legislation long before lightning struck in San Bernardino. Last year, the Washington Post quoted an email from Robert S. Litt, second general counsel in the Office of the Director of National Intelligence, which speculated, presciently, that the general climate for such legislation “could turn in the event of a terrorist attack or criminal event where strong encryption can be shown to have hindered law enforcement.” And here we are.
Law enforcement has long been accustomed to obtaining warrants to search almost anything it wants, subject to the limits spelled out in the Fourth Amendment. (That’s the one about “unreasonable searches and seizures.”) But encryption creates a new kind of warrant-proof space, a virtual bolt-hole in which private citizens can put the vast amounts of sensitive personal data they generate. It’s still accessible to law enforcement in theory, but in practice it’s impenetrable without a pass code.
FBI Director James Comey put this new predicament starkly in a congressional hearing on the San Bernardino case in February. “Law enforcement, which I’m part of, really does save people’s lives, rescue kids, rescue neighborhoods from terrorists,” he said. “And we do that a whole lot through court orders that are search warrants. And we do it a whole lot through search warrants of mobile devices. So we’re gonna move to a world where that is not possible anymore? The world will not end, but it will be a different world than where we are today and where we were in 2014.”
Comey, who declined to be interviewed on this subject, has framed the conflict as a choice between privacy and security, a zero-sum trade-off. If it were that simple, Apple would have a steep battle indeed: whatever benefits we get from encryption would have to be weighed against the possibility of lives lost to acts of terrorism. But Cook flatly rejects this view as a red herring. “I think it’s very simplistic and incorrect,” he says. “Because the reality is, let’s say you just pulled encryption. Let’s you and I ban it tomorrow. And so we sit in Congress and we say, Thou shalt not have encryption. What happens then? Well, I would argue that the bad guys will use encryption from non-American companies, because they’re pretty smart, and Apple doesn’t own encryption.”
In other words, GovtOS wouldn’t help much, because there’s no legislating away encryption. The bad guys will remain encrypted as ever, no matter what. “The Internet doesn’t have boundaries,” Cook says. “You can wind up getting an app from Eastern Europe or Russia or wherever, it doesn’t matter which country, just outside the United States. And that app would give you end-to-end encryption.” Sure, you might get the data off Farook’s phone, but that’s the last one you’d get. Then you’re back where you started, except worse off, because everybody else’s crypto is now more vulnerable, with their data ripe for the pillaging. You’re only punishing the good guys.
The stakes are rising on both sides. In 2015 alone, the federal Office of Personnel Management was hacked to the tune of 22 million personal records; hackers released 32 million accounts from AshleyMadison.com, a site that facilitates adultery; and Anthem, the IRS and the director of the CIA got hit as well. “Think about the things that are on people’s phones,” Cook says. “Their kids’ locations are on there. You can see scenarios that are not far-fetched at all where you can take down power grids by going through a smartphone.” This isn’t entirely speculative: in December somebody managed to take down part of the power grid in western Ukraine, leaving 230,000 people without electricity. “We think the government should be pushing for more encryption,” he says. “That it’s a great thing. You know, it’s like the sun and the air and the water.”
Except that it protects terrorists as well as good guys. “We get that,” Cook says. “But you don’t take away the good for that sliver of bad. We’ve never been about that as a country. We make that decision every day, right? There are some times that freedom of speech, we might cringe a little when we hear that person saying this and wish they wouldn’t. This, to us, is like that. It’s at the core of who we are as a country.”
Encryption is one of those technological realities that are so ubiquitous and powerful that they alter political realities–it has a whiff of revolution about it. It changes the balance of power between government and governed.
Apple isn’t in the business of revolution, or not that kind anyway. Cook’s emphasis is on the extent to which encryption protects your data from the bad guys, the hackers and other malefactors, rather than from law enforcement–but at the same time he does convey a certain leeriness about the government’s unseemly eagerness to get at personal information. “I’m the FedEx guy,” Cook says. “I’m taking your package and I’m delivering it.” He doesn’t want Apple to be in the position of storing messages for the government to read. “I’m not saying that from a cost point of view or anything else, I’m saying it from an ethics and values point of view. You don’t want me to hold all that stuff. Right? I think you guys should have a reasonable expectation that your communication is private.”
He also points out that the All Writs Act doesn’t specify what kinds of criminal investigations it applies to. “This case was domestic terrorism, but a different court might view that robbery is one. A different one might view that a tax issue is one. A different one might view that a divorce issue would be O.K. And so we saw this huge thing opening and thought, You know, if this is where we’re going, somebody should pass a law that makes it very clear what the boundaries are. This thing shouldn’t be done court by court by court by court.” (Cook can’t completely conceal his irritation at the un-Apple-ish vagueness of the All Writs Act: “You can tell it was written over 200 years ago.” As if to say, they ought to let Jony Ive loose on that thing, get it milled to the proper tolerances, upgrade it to a respectable level of precision.)
Whether it will or won’t be decided by courts is an open question. The FBI, in a series of increasingly strident court filings, has accused Apple of undermining “the very institutions that are best able to safeguard our liberty and our rights: the courts, the Fourth Amendment, long-standing precedent and venerable laws, and the democratically elected branches of government.” It has also threatened, not very subtly, to unleash a nuclear option: subpoena the iOS source code and Apple’s “private electronic signature,” the certificate with which it identifies its code as valid to its devices, which is the software equivalent of the secret name of God.
As for Cook’s talk about privacy and civil liberties, the FBI dismisses it as “marketing.” It’s fair to say that emotions are running high on both sides. “Do I like their tactics?” Cook says. “No, I don’t. I’m seeing the government apparatus in a way I’ve never seen it before. Do I like finding out from the press about it? No, I don’t think it’s professional. Do I like them talking about or lying about our intentions? No. I’m offended by it. Deeply offended by it.”
To be sure, Cook has been positioning Apple as a defender of personal privacy for some time now, at the expense of several of his key rivals–Cook is fond of pointing out that Apple’s business model doesn’t involve harvesting and mining its users’ data the way that, say, Google, Facebook and Amazon do. (At Apple a lack of interest in customer information is practically gospel–Jobs used to claim that Apple didn’t even use focus groups.) Cook’s stance is also of a piece with Apple’s well-known obsession with top-down control of every detail of its products. For the government to come in and get its grubby, inky federal fingers on Apple’s perfect gleaming code must be excruciating at 1 Infinite Loop.
It’s ironic that Cook’s tough stand on privacy has forced him further into the spotlight. By nature he’s as intensely private as the CEO of Apple can be. It also represents another step in a curious trend that has Silicon Valley engineers increasingly acting like statesmen and policymakers, taking positions and making decisions on political and social issues. As more and more of our social and cultural fabric gets integrated into the Internet, power over that fabric is being siphoned off, through mysterious cross-country subterranean channels, from Washington to Northern California. “We’re in this bizarre position where we’re defending the civil liberties of the country against the government,” Cook says. “I mean, I never expected to be in this position. The government should always be the one defending civil liberties, and yet there’s a role reversal here. I still feel like I’m in another world, that I’m in this bad dream.”
Cook is doing his best to wake up. He says he doesn’t actually want to make this decision. What he’s pushing for is to get it out of the hands of a judge and into Congress; a commission could study the issue and presumably propose some sensible laws to clarify it. “We see that this is our moment to stand up and say, Stop and force a dialogue,” he says. “There’s been too many times that government is just so strong and so powerful and so loud that they really just limit or they don’t hear the discourse.” He stresses that whatever the outcome, when the law is handed down, Apple will follow it.
In the meantime, product development in Cupertino will continue to race ahead at the speed of technology, which is considerably faster than that of congressional commissions. It has been reported–though not confirmed–that Apple is evolving a version of the iPhone that even it couldn’t crack, not even with the help of GovtOS. It’s theoretically possible: if, just for example, the 10-guess requirement in iOS 9 could be incorporated into the phone’s hardware, rather than its software, then even modifying the operating system wouldn’t get rid of it. No one talks about future products at Apple–to do so would bring the ghost of Jobs howling back from Silicon Valhalla–but Cook says nothing that makes me think it’s not going to happen. “I would never do what you’re saying with the intention of doing that,” is how he puts it. “Our intention is never anything to do with government. It’s to protect people. Is it a consequence of it? Yes, I mean, over time you do more and more and more. That’s the road we’ve been on for a decade.” The effect would be to render controversies like the present one moot and remove Apple from the legal equation completely, bootstrapping it out like the Lorax.
Cook also suggests that with all those huge invisible billowing clouds of data we leave behind everywhere we go, the encrypted data on phones just isn’t that big a deal anymore. Law enforcement shouldn’t be whining about iPhones; it should be rolling around in all the other free information that criminals and terrorists are spewing through social networks and Nest thermostats, surveillance cameras and Hello Barbies. Apple even has the keys to iCloud backups, which are readily subpoenable, so why get hung up on the device itself? Which, by the way, 10 years ago didn’t even exist? “Going dark–this is a crock,” Cook says. “No one’s going dark. I mean really, it’s fair to say that if you send me a message and it’s encrypted, they can’t get that without going to you or to me, unless one of us has it in our cloud at this point. But we shouldn’t all be fixated just on what’s not available. We should take a step back and look at the total that’s available, because there’s a mountain of information about us.”
Its slightly exasperated tone aside, this argument echoes the findings of a report published in February by Harvard’s Berkman Center for Internet & Society and signed by an impressive roster of legal and security professionals. The report points out that there are powerful trends at work that balance the spread of encryption: the prevalence of business models that rely on mining users’ data; the growth of cloud computing, which puts data on central servers that are more easily accessible; and the proliferation of networked devices referred to collectively as the Internet of Things. “These are prime mechanisms for surveillance,” the report says, “alternative vectors for information-gathering that could more than fill many of the gaps left behind by sources that have gone dark–so much so that they raise troubling questions about how exposed to eavesdropping the general public is poised to become.”
In fact, we seem to be going through two equal and opposite crises at the same time, depending on who you listen to. On the one hand we’re going dark, and on the other we’re giving away our privacy left and right. These are local effects that need to be integrated into a bigger picture. Bottom line: the Internet is a vast, messy, porous place, and that same messiness that makes encryption impossible to regulate also means that however strong and seamless and pervasive encryption gets, it can only ever cover a fraction of the data that flows out of us all day, every day.
The next round in the shoving match between Apple and the FBI is set for March 22, when both sides will appear at a hearing in federal court in Riverside, Calif. Sooner or later, all that shoving will have to yield to a delicate balance, one that takes into account the realities of what encryption is and what it isn’t, and leaves us with a legal framework strong and clear enough to spare us from having to refight the Crypto Wars a third time. “You know as well as I do, sometimes the way we get somewhere, our journey is very ugly,” Cook says. “But I’m a big optimist that we ultimately arrive at the right thing.”

This appears in the March 28, 2016 issue of TIME.