Start Up No.1,058: Silicon Valley’s new money worries, Apple’s big Watch, the trouble with Slack, the unprivate lock, and more

Every catastrophe has its deniers: the latest suggests Notre Dame’s fire wasn’t an accident. CC-licensed photo by Bradley Weber on Flickr

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A selection of 10 links for you. Isn’t that enough? I’m @charlesarthur on Twitter. Observations and links welcome.

Silicon valley is awash in Chinese and Saudi cash — and no one is paying attention (except Trump) • Vox

Theodore Schleifer:


This is Silicon Valley in 2019 — a playground for foreign countries eager to fulfill their grand strategies. To some extent, this is to be embraced: If the United States has a comparative advantage in tech companies — and if capitalism is global — then it should welcome the transformation of Silicon Valley. America welcomes foreign money in the New York Stock Exchange and Nasdaq; so, too, should it welcome foreign money in US private companies, especially from close partners like Singapore.

But the rise of foreign money has turned Silicon Valley into a geopolitical minefield for venture capitalists and startups, requiring American startups to make judgment calls and react to crosscurrents that would’ve been strange to the industry decades ago.

Who in Saudi Arabia exactly was directly liable for the murder of Jamal Khashoggi?

Was Huawei actually a threat to America’s national security?

“It’s the world of geopolitics coming to venture,” Rob Ackerman, a venture capitalist active in cybersecurity, said. “It’s got a lot more gray than black and white — and we’re all trying to figure that out.”

Or as an American investor now living in Israel, Mike Eisenberg, recalled telling an entrepreneur recently: “You thought you’re in business. You’re actually in politics.”

This was all true even before the force that has reshaped every American industry over the past two years — Donald Trump — exacerbated that reality. Foreign money courses through the Silicon Valley bloodstream, and his administration isn’t happy about it.

But for too long, most people in Silicon Valley have treated foreign cash with a collective shrug, seeing money as money and not truly considering the ethical and regulatory challenges of taking investment from certain foreign countries, Recode interviews with more than 50 venture capitalists, startups, lawyers, and others involved in cross-border investing reveal. Now Silicon Valley is scrambling to assess its own exposure in this new world order.

Money from two countries in particular has ignited a debate in Silicon Valley about the responsibilities of startups and their investors: China and Saudi Arabia.


It’s all changed a hell of a lot from the days when it was a few VCs on Sand Hill Drive.
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America’s favorite door-locking app has a data privacy problem • OneZero

Sage Lazzaro:


Latch is on a mission to digitize the front door, offering apartment entry systems that forgo traditional keys in favor of being able to unlock entries with a smartphone. The company touts convenience — who wants to fiddle with a metal key? — and has a partnership with UPS, so you can get packages delivered inside your lobby without a doorman. But while it may keep homes private and secure, the same can’t be said about tenants’ personal data.

Latch — which has raised $96m in venture capital funding since launching in 2014, including $70m in its Series B last year — offers three products. Two are entry systems for specific units, and one is for lobbies and other common areas like elevators and garages. The company claims one in 10 new apartment buildings in the U.S. is being built with its products, with leading real estate developers like Brookfield and Alliance Residential now installing them across the country.

Experts say they’re concerned about the app’s privacy policy, which allows Latch to collect, store, and share sensitive personally identifiable information (PII) with its partners and, in some cases, landlords. And while Latch is far from the only tech company with questionable data practices, it’s harder for a tenant to decouple from their building’s door than, say, Instagram: If your landlord installs a product like the keyhole-free Latch R, you’re stuck. The issue of tenant consent is currently coming to a head in New York City, where residents of a Manhattan building are suing their landlord in part over privacy concerns related to the app.


Latch wouldn’t be interviewed but said that it offers smartphone app unlocking, Bluetooth proximity, or keycard. But the problem is still about controlling where the information goes.
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Facebook users are posting videos of themselves lighting wood on fire to spread hoaxes about the Notre Dame fire • Poynter

Daniel Funke:


To debunk the viral beam-burning videos, Les Décodeurs and AFP didn’t use standard digital verification tools like InVid and Google’s reverse image search. The videos are false, but they’re real.

Instead, the fact-checkers did what many outlets call “triangulating the truth” — speaking to a variety of different experts in order to prove whether or not a claim without obvious concrete evidence is true or false. In this case, AFP and Les Décodeurs spoke to scientists, fire safety experts and engineers, all of whom told them that it’s difficult to set anything on fire in the open air.

That’s no reason to conclude the Notre Dame fire, which started inside the cathedral — not in the open air — was set intentionally, the fact-checkers reported.

The viral, do-it-yourself beam-burning videos are part of a larger effort to spread misinformation about the cause of the Notre Dame fire April 15. That effort has been amplified extensively by the American right, Laurent said.

The goal is to continue pushing the false, Islamophobic narrative that Muslim terrorists were somehow behind the Notre Dame fire.


The article also has a graphic showing the reach of the viral nonsense, and of the fact-checking. The latter pales into insignificance.
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Apple Watch has record breaking quarter and it’s not letting up • Wareable

James Stables:


“The [Apple Watch business] is now about the size of a Fortune 200 company, an amazing statistic when you consider it’s only been four years since we delivered the very first Apple Watch,” said Tim Cook, Apple CEO.

Impressive stuff, as Apple CFO Luca Maestri explained:

“Wearables, home and accessories revenue set a new March quarter revenue record at 5.1 billion, fuelled primarily by the strong performance of our wearables business, which grew close to 50%.

“Within this category, Apple Watch is the best-selling and most loved smartwatch in the world, and produced its best results ever for a non-holiday quarter. It’s reaching many new customers, with three-quarters of purchases going to customers who have never owned an Apple Watch before,”

This confirms what we already know – that Apple is totally bossing the smartwatch market.

But it shows how much appetite there is for this segment, and that’s good news for everyone. The walled garden of iOS and high ticket price means there’s always room for other companies to play, which explains the success of the Fitbit Versa and Samsung Galaxy Watch.

However, as CCS Insight’s Ben Wood tweeted, it’s also a great lock-in. The Apple Watch can only be used with iPhones, so those millions of people who are investing are far more likely to stay within the iOS ecosystem with a new iPhone.


Since you’re wondering, Fortune 200 companies in 2018 had annual revenues of more than $14.6bn. If you assume a $400 ASP, that’s 36.5m Watches sold in the 12-month period. Meanwhile, everyone in London seems to have AirPods.
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The productivity pit: how Slack is ruining work • Vox

Rani Molla:


Consulting firm McKinsey said back in 2012 that workplace communications technologies have the potential to increase employee productivity by up to 25%.

“The average interaction worker spends an estimated 28% of the workweek managing email and nearly 20% looking for internal information or tracking down colleagues who can help with specific tasks,” according to the study. McKinsey figured people would be able to more easily and quickly accomplish these task using new workplace software.

That’s happened to an extent, but other problems have arisen.

Much like the ubiquitous open-floor plan, this type of software is meant to get different parts of a company working together, to break down hierarchies, to spark chance interactions and innovations.

In practice it can be hell.

The addition of yet another communications tool can result in a surfeit of information.

On average, employees at large companies are each sending more than 200 Slack messages per week, according to Time Is Ltd., a productivity-analytics company that taps into workplace programs — including Slack, calendar apps, and the Office Suite — in order to give companies recommendations on how to be more productive. Power users sending out more than 1,000 messages per day are “not an exception.”

Keeping up with these conversations can seem like a full-time job. After a while, the software goes from helping you work to making it impossible to get work done.


“Power users” are the curse of these, and many other systems. They dominate conversations, flood the zone, and make it hard to feel you’re keeping up. Similarly on social media, they’re the ones who drag the conversation around to what they want to talk about – not necessarily what it should be about.
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Feds just seized part of Bitfinex’s ‘missing’ $850m, arrest made • Modern Consensus

Leo Jakobson:


Funds seized by the feds from an HSBC Bank account were allegedly used to commit bank fraud by secretly transferring U.S. dollars to and from customers of cryptocurrency exchanges, according to an indictment issued Tuesday.

That same bank account was reportedly used by Bitfinex to transfer money to its customers when it was having trouble finding a mainstream bank willing to work with after Wells Fargo ceased doing business with it.

In an indictment announced on April 30, the U.S. Department of Justice said that funds were seized from HSBC Bank USA account 141000147, among others. That account is notable because on Oct. 6 , 2018, The Block Managing Editor Larry Cermak tweeted a screenshot of instructions from Bitfinex showing customers how to wire U.S. dollars to their wallets via HSBC Bank N.A. account 141000147, identified as belonging to Global Trading Solution, LLC.

Bitfinex appears to have gotten caught up in the case after the payment processor it was using as a bank, Crypto Capital, told them in August 2018 that $850m the exchange had on account with them had been seized by authorities. Those governments were identified by Bitfinex General Counsel Stuart Hoegner as the US, Portugal, and Poland. Crypto Capital is owned by Global Trading Solution, LLC.


It’s not clear if this is money laundering, outright scamming, trying to evade the authorities, or what, but Bitfinex and Tether are starting to unravel: Tether is now apparently “only 74% backed” by actual money.
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Smartphone shipments experience deeper decline in Q1 2019 with a clear shakeup among the market leaders • IDC

Worldwide volumes down 6.6%; stagnation rules the day:


“The less than stellar first quarter in the United States can be attributed to the continued slowdown we are witnessing at the high end of the market,” said Anthony Scarsella, research manager with IDC’s Worldwide Quarterly Mobile Phone Tracker. “Consumers continue to hold on to their phones longer than before as newer higher priced models offer little incentive to shell out top dollar to upgrade. Moreover, the pending arrival of 5G handsets could have consumers waiting until both the networks and devices are ready for prime time in 2020.”

Samsung saw volumes drop 8.1% in 1Q19 with shipments of 71.9m. The results were enough to keep Samsung in the top spot of the market, but Huawei is continuing to close the gap between the two smartphone leaders. Despite challenging earnings in terms of profits, Samsung did say that the recently launched Galaxy S10 series did sell well during the quarter. With the 5G variant now launched in its home market of Korea and plans to bring this device and other 5G SKUs to other important markets in 2019, it will be equally crucial for Samsung not to lose focus on its mid-tier product strategy to fend off Huawei.

Huawei moved its way into a clear number two spot as the only smartphone vendor at the top of the market that saw volumes grow during 1Q19. Impressively, the company had year-over-year growth of 50.3% in 1Q19 with volumes of 59.1m units and a 19.0% market share. Huawei is now within striking distance of Samsung at the top of the global market. In China, Huawei continued its positive momentum with a well-rounded portfolio targeting all segments from low to high. Huawei’s high-end models continued to create a strong affiliation for the mid to low-end models, which are supporting the company’s overall shipment performance.

Apple had a challenging first quarter as shipments dropped to 36.4m units representing a staggering 30.2% decline from last year. The iPhone struggled to win over conusmers in most major markets as competitors continue to eat away at Apple’s market share. Price cuts in China throughout the quarter along with favorable trade-in deals in many markets were still not enough to encourage consumers to upgrade. Combine this with the fact that most competitors will shortly launch 5G phones and new foldable devices, the iPhone could face a difficult remainder of the year. Despite the lackluster quarter, Apple’s strong installed base along with its recent agreement with Qualcomm will be viewed as the light at the end of the tunnel heading into 2020 for the Cupertino-based giant.


Neil Cybart, a former sell-side analyst who has his own model for how Apple’s numbers fit together, reckons IDC is lowballing by a mile with its 36m figure; reckons it sold “way more”. The unit figure sales are all over the place, depending which analyst company you go to.
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How taxpayers covered a $1,000 liquor bill for Trump staffers (and more) at Trump’s club • Pro Publica

Derek Kravitz:


At some point later that evening [during Chinese president Xi’s visit to Mar-a-Lago], a group repaired to Mar-a-Lago’s Library Bar, a wood-paneled study with a portrait of Trump in tennis whites (titled “The Visionary”) hanging nearby. The group asked the bartender to leave the room so it “could speak confidentially,” according to an email written by Mar-a-Lago’s catering director, Brooke Watson.

The Secret Service guarded the door, according to the email. The bartender wasn’t allowed to return. And members of the group began pouring themselves drinks. No one paid.

Six days later, on April 13, Mar-a-Lago created a bill for those drinks, tallying $838 worth of alcohol plus a 20% service charge. It covered 54 drinks (making for an average price of $18.62 each) of premium liquor: Chopin vodka, Patron and Don Julio Blanco tequilas and Woodford Reserve bourbon. Watson’s email did not specify how many people consumed the alcohol or who the participants were. (It stated that she “was told” the participants included then-strategist Steve Bannon and then-deputy chief of staff Joe Hagin. Bannon, who has said he stopped drinking years ago, said he didn’t drink at Mar-a-Lago and didn’t recall the episode. Hagin did not respond to requests for comment.)

The bill was sent to the State Department, which objected to covering it. It was then forwarded to the White House, which paid the tab.

The unusual cocktail hour underscores a unique push and pull in the current administration: Donald Trump’s White House pays a bill and Donald Trump’s club reaps the revenue. (It’s unclear if the White House asked any of those drinking to reimburse the government; the White House declined to comment.)


Still astonished that this behaviour is countenanced; there’s plenty similar in the story. It would be like Jimmy Carter insisting that the White House serve peanuts with every meal and at every function, sourced from his peanut farm – which he’d handed to his kids. (Carter was forced to sell his peanut farm on becoming president in 1976.)
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Amazon’s facial-recognition technology is supercharging local police • Washington Post

Drew Harwell:


A grainy picture of someone’s face — captured by a security camera, a social-media account or a deputy’s smartphone — can quickly become a link to their identity, including their name, family and address. More than 1,000 facial-recognition searches were logged last year, said deputies, who sometimes used the results to find a suspect’s Facebook page, visit their home or make an arrest.

But Washington County [where Amazon’s system has been used since late 2017] also became ground zero for a high-stakes battle over the unregulated growth of policing by algorithm. Defense attorneys, artificial-intelligence researchers and civil rights experts argue that the technology could lead to the wrongful arrest of innocent people who bear only a resemblance to a video image. [Amazon’s system] Rekognition’s accuracy is also hotly disputed, and some experts worry that a case of mistaken identity by armed deputies could have dangerous implications, threatening privacy and people’s lives.

Some police agencies have in recent years run facial-recognition searches against state or FBI databases using systems built by contractors such as Cognitec, IDEMIA and NEC. But the rollout by Amazon has marked perhaps the biggest step in making the controversial face-scanning technology mainstream. Rekognition is easy to activate, requires no major technical infrastructure, and is offered to virtually anyone at bargain-barrel prices. Washington County spent about $700 to upload its first big haul of photos, and now, for all its searches, pays about $7 a month.

It’s impossible to tell, though, just how accurate or effective the technology has been during its first 18 months of real-world tests.


That last bit feels like it ought to have a lot more emphasis, doesn’t it? But wow, that is cheap. $7, compared with all the shoe leather and time of hunting down and going through photos.
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A weather tech startup wants to do forecasts based on cell phone signals • MIT Technology Review

Douglas Heaven:


Other forecasters use proxies, such as radar signals. But by using information from millions of everyday wireless devices [ie mobile phones], ClimaCell claims it has a far more fine-grained view of most of the globe than other forecasters get from the existing network of weather sensors, which range from ground-based devices to satellites. (ClimaCell taps into those, too.)

The company has now opened a new research center in Boulder, Colorado, where it is developing a new mathematical model that turns cell phone observations into weather data that can be plugged into a simulation. The more accurate your picture of the weather today, the more accurate your forecast for tomorrow.

The model can be tweaked to focus on the region, the type of weather, and the frequency of updates a subscriber wants. That would help renewable-energy companies know how much sunshine is going to hit their solar panels or how much wind will hit their turbines, for example. Better forecasting lets power providers match up supply and demand.

“There’s always a need for better forecasting,” says weather scientist Ken Mylne at the Met Office, the UK’s national weather service. “It’s impossible to do perfect forecasts, but we keep trying to narrow that gap between impossibility and perfection.”


What isn’t made clear in the story is quite what data gets collected – barometric? (Not all phones do that.) Temperature? (Very few phones do that, if any.) It seems promising yet also hand-wavy.
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Errata, corrigenda and ai no corrida: none notified.

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