Start Up: Mr Zuckerberg goes to Washington, Theranos circles the drain, the bitcoin infection, and more

It’s not true, at least in the US, and the FTC says so. Photo by Eirik Solheim on Flickr.

A selection of 12 links for you. Do not sell separately. I’m @charlesarthur on Twitter. Observations and links welcome.

FTC says ‘Warranty Void If Removed’ stickers are bullshit, warns manufacturers they’re breaking the law • Motherboard

Matthew Gault:


As we’ve reported before, it is bullshit and illegal under federal law for electronics manufacturers to put “Warranty Void if Removed” stickers on their gadgets, and it’s also illegal for companies to void your warranty if you fix your device yourself or via a third party.

The Federal Trade Commission put six companies on notice today, telling them in a warning letter that their warranty practices violate federal law. If you buy a car with a warranty, take it a repair shop to fix it, then have to return the car to the manufacturer, the car company isn’t legally allowed to deny the return because you took your car to another shop. The same is true of any consumer device that costs more than $15, though many manufacturers want you to think otherwise.

Companies such as Sony and Microsoft pepper the edges of their game consoles with warning labels telling customers that breaking the seal voids the warranty. That’s illegal. Thanks to the 1975 Magnuson-Moss Warranty Act, no manufacturer is allowed to put repair restrictions on a device it offers a warranty on. Dozens of companies do it anyway, and the FTC has put them on notice. Apple, meanwhile, routinely tells customers not to use third party repair companies, and aftermarket parts regularly break iPhones due to software updates.


I’d like to know what the UK position is on this. Now, just on that last point…
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The new iOS update killed touch functionality on iPhone 8s repaired with aftermarket screens • Motherboard

Matthew Gault:


“This has caused my company over 2,000 reshipments,” Aakshay Kripalani, CEO of Injured Gadgets, a Georgia-based retailer and repair shop, told me in a Facebook message. “Customers are annoyed and it seems like Apple is doing this to prevent customers from doing 3rd party repair.”

According to [Michael] Oberdick [owner and occupier of iOutlet, based in Ohio, which fixes iPhones etc], every iPhone screen is powered by a small microchip, and that chip is what the repair community believes to be causing the issue. For the past six months, shops have been able to replace busted iPhone 8 screens with no problem, but something in the update killed touch functionality. According to several people I spoke to, third-party screen suppliers have already worked out the issue, but fixing the busted phones means re-opening up the phone and upgrading the chip.

It remains to be seen whether Apple will issue a new software update that will suddenly fix these screens, but that is part of the problem: Many phones repaired by third parties are ticking timebombs; it’s impossible for anyone to know if or when Apple will do something that breaks devices fixed with aftermarket parts.


It’s the Error 53 thing, which goes back to February 2016 (though that was about replacing the TouchID button).

One point is that Apple won’t be trying to hobble legitimate third-party screen repairs; people break their phones so much that it can’t be that grasping. Just as with Error 53, there will be some subtle reason around this. The fact to me that the problem can be ended by “upgrading the chip” suggests to me that someone at Apple overlooked that update, and so it hasn’t been applied, but the rest of the system needs it. Hanlon’s Law at work. (If this applied to the iPhone 7 or others too, then it would be a conspiracy against third-party repairs; the fact it’s only the iPhone 8 – not 8 Plus? Not earlier? – suggests to me that’s the problem.)
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Zuckerberg faces day of reckoning as Congress threatens Facebook with regulation • The Guardian

David Smith:


Looking pale and tense, the 33-year-old billionaire, who has enjoyed a career of unalloyed success, sat humbled and silent as senator after senator expressed deep concerns about the company’s mishandling of users’ personal information.

“Let me just cut to the chase,” said Senator Bill Nelson, a Democrat, before Zuckerberg started giving evidence. “If you and other social media companies do not get your act in order, none of us are going to have any privacy any more. If Facebook and other online companies will not or cannot fix the privacy invasions, then we are going to have to. We, the Congress.”

Senator John Thune, a Republican and the chairman of the Senate commerce committee, noted that Facebook’s business model offers free service in exchange for personal data. “For this model to persist, both sides of the bargain need to know what’s involved,” he said. “I’m not convinced Facebook’s users have the information they need to make decisions.”

He told Zuckerberg that to many he embodies the American dream, but that could become “a privacy nightmare for the scores of people who used Facebook”.

In a calm and steady voice, Zuckerberg read from a prepared statement first released on Monday. “We didn’t take a broad enough view of our responsibility, and that was a big mistake,” he said. “It was my mistake, and I’m sorry. I started Facebook, I run it, and I’m responsible for what happens here.”

Then, under questioning, he promised that Facebook is conducting a “full investigation” into every app that has access to users’ information, numbering tens of thousands. “If we find they’re doing anything improper, we’ll ban them from Facebook,” he said.


Not sure that we expected much from Zuckerberg; it’s the politicians who have to act now.

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Facebook’s Mark Zuckerberg to testify before House and Senate panels that got Facebook money • USA Today

Herb Jackson:


The congressional panel that got the most Facebook contributions is the House Energy and Commerce Committee, which announced Wednesday morning it would question Zuckerberg on April 11.

Members of the committee, whose jurisdiction gives it regulatory power over Internet companies, received nearly $381,000 in contributions tied to Facebook since 2007, according to the Center for Responsive Politics. The center is a non-partisan, non-profit group that compiles and analyzes disclosures made to the Federal Election Commission.

The second-highest total, $369,000, went to members of the Senate Commerce, Science and Transportation Committee, which announced later that it would have a joint hearing with the Senate Judiciary Committee to question Zuckerberg on Tuesday. Judiciary Committee members have received $235,000 in Facebook contributions.

On the House committee, Republicans got roughly twice as much as Democrats, counter to the broader trend in Facebook campaign gifts. Of the $7m in contributions to all federal candidates tied to the Menlo Park, Calif.-based social network, Democrats got 65% to Republicans’ 33%.


American politics.
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Facebook may stop the data leaks, but it’s too late: Cambridge Analytica’s models live on • MIT Technology Review

Jacob Metcalf:


There has been plenty of skeptical analysis of just how useful SCL’s psychographic tools were. In contrast to Nix’s flamboyant salesmanship of the method, critics have routinely responded by calling it snake oil. Where Cambridge Analytica was hired to run digital campaigns, it bungled some basic operations (especially for Ted Cruz, whose website it failed to launch on time). And SCL staff often rubbed others working on Trump’s digital campaign the wrong way.

The models may have helped in constructing Trump’s lose-the-electorate, win-the-electoral-college strategy.

However, none of Cambridge Analytica’s many Republican critics has yet said its models were not useful. Moreover, some reporting indicates that the models were used primarily to target voters in swing states and to hone Trump’s stump speeches in those states. That shows that the campaign understood that these models are most useful when applied in a focused manner. They may have helped in constructing Trump’s lose-the-electorate, win-the-electoral-college strategy.

And while they have their limitations, behavioral profiles are very good at estimating demographics, including political leanings, gender, location, and ethnicity. A behavioral profile of seemingly innocuous “likes” paired with other data sets is both a good-enough map to far more information about a potential voter, and a way to predict what types of content they might find engaging.

Ultimately, then, if we strip out the context of the 2016 election and the odd correlations that these algorithms find in Facebook behavioral data, the role that psychometrics plays is actually fairly straightforward: it is another criterion among many by which to create tranches of voters and learn from iterative feedback about how those tranches respond to ads.


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Theranos lays off most of its remaining workforce • WSJ

John Carreyrou (who wrote the original blockbuster story that began Theranos’s downfall):


Blood-testing firm Theranos Inc. laid off most of its remaining workforce in a last-ditch effort to preserve cash and avert or at least delay bankruptcy for a few more months, according to people familiar with the matter.

The layoffs take the company’s head count from about 125 employees to two dozen or fewer, according to people familiar with the matter. As recently as late 2015, Theranos had about 800 employees.

Elizabeth Holmes, the Silicon Valley firm’s founder and chief executive officer, announced the layoffs at an all-employee a meeting at Theranos’s offices in Newark, Calif. on Tuesday, less than a month after settling civil fraud charges with the U.S. Securities and Exchange Commission.

Under the SEC settlement, Ms. Holmes was forced to relinquish her voting control over the company she founded 15 years ago as a 19-year-old Stanford dropout, give back a big chunk of her stock, and pay a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for 10 years.


So close, so close, to its final status as a footnote in VC history.
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Alibaba invests in Chinese facial-recognition startup • WSJ

Liza Lin:


Alibaba’s share in the $600m Series C funding round wasn’t disclosed. Other investors include Singapore state investment company Temasek Holdings Pte. Ltd. and Chinese electronics retailer Co.

Founded in 2014, SenseTime is among a handful of Chinese AI startups that got their start selling facial-recognition systems to local police agencies. With a vast network of surveillance cameras, China is using facial recognition to identify criminal suspects as well as to influence behavior, such as discouraging jaywalking.

The technology also has commercial applications, with some companies now using it instead of badges to grant employees access to their workplaces. Mr. Xu said SenseTime would use the new funding to focus on expanding the technology’s commercial applications and AI capabilities.

SenseTime is also developing algorithms for autonomous driving, as a partner with Honda Motor Co. , and is working with Shanghai’s government to use AI to ease traffic congestion.


SenseTime is quite creepy: the way the Chinese government is using it to monitor people in real time is really freaky.
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YouTube fake news rampant in Korea • Korea Times

Jung Min-ho:


“Samsung is behind the recent #MeToo allegations brought up against comedian Kim Saeng-min,” is one of many fake stories ― or “news” ― on YouTube, but the video-sharing website has taken no action to resolve the issue here.

From political conspiracies to false scientific knowledge, YouTube is becoming home to fake news and wrong information about almost everything. And naive teenagers are not the only consumers of such information.

After An Hee-jung offered to resign as South Chungcheong Province governor over rape accusations a month ago, Hong Joon-pyo, leader of the main opposition Liberty Korea Party, said he heard that presidential chief of staff Im Jong-seok “plotted” to remove his political rival ― fake news that was then being widely shared among conservative voters.

Video clips about the fake plot can still be found on YouTube.

So far, neither the Korean government nor the American company has tackled the problem properly. Given that more people here use YouTube as a search engine for everything, this could seriously hinder them from getting the right information ― a precondition for a healthy democracy.


Just in case you thought it was a western-only thing.
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Bitcoin’s soaring value was down to ‘infected’ buyers, economists say • The Guardian

Richard Partington:


Analysts at Barclays said the soaring value of the digital currency last year, when prices rose by more than 900%, was helped by new buyers being “infected” by the euphoria surrounding bitcoin. The price has since crashed from almost $20,000 before Christmas to less than $7,000.

Using studies from the world of epidemiology – the branch of medicine concerned with the occurrence, distribution and control of epidemic diseases – the bank’s economists built a model for bitcoin prices that assumed more people were now “immune” to the lure of making money on the new financial asset.

They said prices tend to rise when “infections” spread from one buyer to another, transmitted by word-of-mouth between friends – especially to those with a “fear of missing out” on a chance to get rich quick. The rate of new entrants to the market helps to set prices, while more people losing money will lead to immunity.

Arguing that the “susceptible” population for the bitcoin bug has now fallen, the economists said the peak reached just before Christmas was probably the ultimate price that could ever be achieved for the digital currency.

“This occurs with infectious diseases when the immunity threshold is reached; ie, the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections,” the economists said.

Using that logic and applying it to the plethora of other digital currencies, including the peers of bitcoin such as ethereum and ripple, Barclays said the overall value for all crypto assets may never surpass $780bn – roughly equivalent to the peak sum of all cryptocurrencies in early January.


Makes sense. Though that’s a lot of spare change that people found to put into cryptojunk. I wonder how all the “hodlers” (cryptocurrency fans) will feel about being represented essentially as extras in The Walking Dead? Hmm, I’m sure they’ll be just fine with it.
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Apple now runs on 100% green energy, and here’s how it got there • Fast Company

Mark Sullivan:


The closer Apple got to its 100% goal, the more the effort centered on some of its smallest, most remote offices and retail stores around the world to 100%. Over the past year, the company has been busy locating and signing power purchase agreements (PPAs) with renewable energy projects in places like Brazil, India, Israel, Mexico, and Turkey. The hardest part was finding renewable energy projects small enough to serve the limited power needs of operations such as tiny sales offices.

Earlier on, however, the company was able to get most of the way to 100% in big chunks. It did so by locating or creating renewable energy sources for the power-hungry data centers it was building as services such as Siri, iCloud, and Apple Music became increasingly key to its future. Apple now has data centers in Maiden, North Carolina; Reno, Nevada; Mesa, Arizona; Newark, California, and Prineville, Oregon. The company has announced plans for another data center in Waukee, Iowa, as well as one in Ireland, two in Denmark, and two in China.

These sprawling facilities require a lot of power to keep their thousands of servers humming along in their quiet corridors, and more power to keep them all cool. Before it began building any data centers, Apple made the decision that it would run them on renewable energy.

With its $285bn in cash reserves, Apple certainly has enough money to simply buy up existing green power to get to the 100% goal. But one of the strict standards which Jackson says Apple follows is something called “additionality,” or a preference for sponsoring the creation of new renewable power sources. “We want to put new, clean power on the grid so that we’re not sucking up all the clean energy that’s there,” she says.


It’s actually complicated: solar farms don’t work at night, so you need a green power source for that time. That means you need a renewable energy certificate (REC), which you buy. You can see how that can get messy.
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Touchless Control and the lessons of history • Ken Segall

Segall (an ex-Appler, some time back) notes that Apple doesn’t always progress perfectly:


It was in the third-generation iPod that Apple “improved” itself into a bit of a mess. What better way to streamline this thing, went Apple’s thinking, than by making the Control buttons (menu, play, next, previous) work by touch also?

It sounded good on paper and it demo’ed nicely, but it also made this super-lovable device less significantly less lovable. Touch on the Click Wheel required one to slide a finger. Touch on the control buttons required only a touch—even if that touch was ever so slight and unintentional.

It could be infuriating, especially if you reached for the iPod while driving and kept your eyes on the road. You’d end up skipping songs by accident.

It was one of those steps forward that was quickly seen as a step backward—even by Apple. One year later, new iPods eliminated the separate touch controls, re-integrating them into the Scroll Wheel and requiring a push instead of a touch. Apple would never deviate from this design again.

Which brings me to last week’s iPhone rumors [of a curved screen and “touchless” control]. On the surface, the idea of Touchless Control sounds intriguing. For certain functions, there would be no need to even touch the screen—simply bringing one’s finger close to the screen would be enough to initiate an action.

You can see why this idea brought back memories of the touch-control iPod. Making devices easier to use is and should be the never-ending quest, but Apple must never lose perspective.


When slickness trumps functionality, the natives get restless.
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AI will cut huge chunks out of banking compliance workforce and London high streets might die • Computer Weekly

Karl Flinders:


behind the scenes AI is increasingly being used to carry out important work in the background helping banks comply with regulations. When AI replaces people in compliance we could really see huge job cuts and cost savings for banks.

This takes me to an article I wrote yesterday about HSBC using software from a big data startup, which includes AI, to help it automate the monitoring of transactions to flush out money laundering. An example of how AI can replace compliance resources.

Lowering costs is becoming more and more important amid the fintech revolution.

At the recent Innovate Finance Global Summit in London Anne Boden, CEO at challenger bank Starling said the big battle in banking involves the cost base rather than innovation. All traditional banks can innovate. They have huge budgets so there is nothing stopping them creating the same fintech services as challengers. They are already doing it. But rather than having hundreds of staff they have tens of thousands. As a result the new players have a huge advantage in terms of cost base.

When John Cryan, who was sacked as CEO at Deutsche bank, said last year that AI will take over a large number of jobs at Deutsche Bank he was probably thinking about all those compliance bods.


Flinders argues that those compliance bods are the ones who keep the high street going, because they buy coffee and so on. I’m not convinced about that; and I think that compliance will find a way to grow, even with AI – or especially with AI. Just because you think you’ve identified money laundering doesn’t mean you have.
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Errata, corrigenda and ai no corrida: none notified

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