Start Up No.1242: how the CIA spied on everyone, FTC to query past tech buyups, now wash your hands!, Razr reviewed, and more


Coronavirus concerns means Mobile World Congress in Barcelona might be this empty – or not happen at all. CC-licensed photo by Red.es on Flickr.

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A selection of 9 links for you. Unsanitised. I’m @charlesarthur on Twitter. Observations and links welcome.

How the CIA used Crypto AG encryption devices to spy on countries for decades • Washington Post

Greg Miller:

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For more than half a century, governments all over the world trusted a single company to keep the communications of their spies, soldiers and diplomats secret.

The company, Crypto AG, got its first break with a contract to build code-making machines for U.S. troops during World War II. Flush with cash, it became a dominant maker of encryption devices for decades, navigating waves of technology from mechanical gears to electronic circuits and, finally, silicon chips and software.

The Swiss firm made millions of dollars selling equipment to more than 120 countries well into the 21st century. Its clients included Iran, military juntas in Latin America, nuclear rivals India and Pakistan, and even the Vatican.

But what none of its customers ever knew was that Crypto AG was secretly owned by the CIA in a highly classified partnership with West German intelligence. These spy agencies rigged the company’s devices so they could easily break the codes that countries used to send encrypted messages.

The decades-long arrangement, among the most closely guarded secrets of the Cold War, is laid bare in a classified, comprehensive CIA history of the operation obtained by The Washington Post and ZDF, a German public broadcaster, in a joint reporting project.

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Stunning piece of reporting. The CIA only sold off its interests finally in 2018. That gave it nearly 50 years of listening. In its way, quite a strong negative for Huawei: after all, if the CIA could do this (as well as plant bugs in Cisco routers sent to China), what might China do to be able to listen to anyone’s phone calls or data transmission?
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I stumbled across a huge Airbnb scam that’s taking over London • WIRED UK

James Temperton with an in-depth, deeply researched piece:

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On Airbnb, it turns out, scams aren’t just the preserve of lone chancers. As the short-term rental goldrush gathers pace, Airbnb empires are being rapidly scaled and monetised, with professional operators creating scores of fake accounts, fake listings and fake reviews to run rings around Airbnb, local law enforcement and the guests who place their trust in the platform. Reviews from guests paint a grim picture of people who have been tricked into staying in accommodation with blocked drains, broken fixtures and fittings, filthy floors, dirty bed linen – or, in some cases, accommodation that they simply did not book.

To squeeze every penny out of these inner-city goldmines, scammers have started outsourcing property management to ill-equipped call centres in the Philippines. The scammers call it “systemising”, a process of grabbing as many apartments as possible, filling them with identikit furniture, taking professional-looking photographs and then using every trick in the book to turn them into lucrative investments. Some of these tricks, though morally dubious, are perfectly legal. But others breach both Airbnb’s policies and local planning laws, while also putting the safety of guests at risk. As Vice found in October 2019, Airbnb is littered with fake and downright dodgy listings. But in London, where Airbnb enforces an annual 90-day limit on all “entire homes” listed on its platform, scammers have made a mockery of lax enforcement both by regulators and Airbnb itself, by turning entire new-build apartment blocks into de facto hotels designed for the short-term rental market. And the problem is far worse than anyone realises.

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It’s basically a new form of the housing benefit scam, except it’s done with wealthier people. And this one – weirdly – also pulls in the Catholic church. Oh, and the artist married to the actor David Schwimmer. It’s quite the ride. And yes, Trading Standards, you should do something about it.
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Coronavirus: Facebook and Intel ditch MWC phone show • BBC News

Zoe Kleinman:

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Facebook and Intel have become the latest big tech firms to announce they are withdrawing from MWC in Barcelona, citing concerns about coronavirus.
Spanish media is reporting that trade body the GSMA, which organises MWC, will meet to decide whether to cancel the event entirely on Friday.

The GSMA declined to comment on “internal meetings”.

Amazon, Sony, LG Electronics, Ericsson and US chip company Nvidia have already pulled out.

Other big brands have told the BBC they are reviewing their plans. Facebook said “evolving public health risks” were behind its decision.

So far the GSMA has said MWC will still go ahead.

However, one contact in the telecoms sector told the BBC that today was likely to be “a decisive day” for other firms contemplating dropping out.

More than 100,000 people usually attend Mobile World Congress every year, and thousands of firms exhibit. Around 6,000 people travel from China, according to GSMA figures.

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Huawei “still evaluating”. TSMC, a big chipmaker and important for 5G, is out. As Francisco Jeronimo of IDC points out, the balancing act is: lose millions in revenue (GSMA, all of Barcelona); or win the horrorshow of having a confirmed case there and have to quarantine thousands of people. The narrow path through – hold the show, have no cases – looks increasingly fraught. Expectations seem to be that the GSMA will bite the bullet and cancel.
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FTC will examine prior acquisitions by Alphabet, Amazon, Apple, Facebook and Microsoft • CNBC

Lauren Feiner:

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The FTC will require the companies to provide information on acquisitions not previously reported to the antitrust agencies under the Hart-Scott-Rodino Act, according to a press release. Companies are required to submit merger and acquisition proposals that exceed a certain size for review by the FTC and Department of Justice, usually when a deal is valued at more than $90m, according to the FTC website. That means the special orders will be directed at smaller acquisitions and acqui-hires that might have been made quietly, rather than blockbuster deals like Facebook’s acquisitions of Instagram and WhatsApp that were formally reviewed by the antitrust agencies.

The FTC will likely examine discreet deals like those by Apple. CEO Tim Cook has previously told CNBC it acquires a company every two to three weeks on average, but it doesn’t announce the deals because the company is “primarily looking for talent and intellectual property.” Apple’s Big Tech peers regularly make small acquisitions as well.

“The orders will help the FTC deepen its understanding of large technology firms’ acquisition activity, including how these firms report their transactions to the federal antitrust agencies, and whether large tech companies are making potentially anticompetitive acquisitions of nascent or potential competitors that fall below HSR filing thresholds and therefore do not need to be reported to the antitrust agencies,” according to the release. “The orders will also contribute broadly to the FTC’s understanding of technology markets, and thereby support the FTC’s program of vigorous and effective enforcement to promote competition and protect consumers in digital markets.”

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Already investigating Facebook; now adding a little more kindling to that fire, it seems.
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A teacher did an experiment to show the power of handwashing, and you can’t stay unimpressed • Brightside

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At the beginning of winter, when flu season had just started, Jaralee Metcalf, a behavioral specialist from Idaho Falls Elementary School, shared that she was tired of always being sick. Although the spread of bacteria in her class was inevitable, she wanted to show the kids why they needed to wash their hands to kill germs.

To explain how bacteria spread and why it’s important to wash your hands well and often, Jaralee came up with a simple classroom activity with her students: she asked several kids with various levels of hand cleanliness to touch 5 pieces of white bread that were taken from the same loaf, at the same time. Then, they put the bread in individual plastic bags to observe what would happen over the course of one month.

The first piece was rubbed on all of the classroom laptops. The second one was a control piece — it wasn’t touched, it was placed immediately in the plastic bag and labeled “Fresh & untouched.” The third piece of bread was touched by the whole class using unwashed hands. For piece #4 the whole class washed their hands with warm water & soap and, again, touched the slice. And for bread piece #5, they cleaned their hands with hand sanitizer and then touched it.


© Jaralee Annice Metcalf / facebook

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Not so keen on hand sanitisers now, are you? (Side note: I’ve never come across Brightside before; it seems to be a site eager to emulate the content farm in the TV series Succession which deploys headlines like “5 Reasons Why Drinking Milk on the Toilet Is Kind of a Game-Changer” and “Wait, Is Every Taylor Swift Lyric Secretly Marxist?” Because I’d like to point out that I can stay unimpressed if I damn well want to.)
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Clearview AI’s Hoan Ton-That says he’s stockpiling billions of our photos • CNN

Donie O’Sullivan tested Clearview, and it recognised him, but he was in a challenge-the-guy mood:

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I wasn’t a random person Ton-That had pulled from a crowd. He knew he was coming to CNN to meet me and he knew I’d ask him to run my face through his system. He even admitted he had searched my images before we met. (And, it’s worth noting, though the photo [of Sullivan aged 15 from an Irish newspaper] is old and I’m almost unrecognizable, the page it’s on does include a caption with my name.)

So we surprised him and also asked him to run a search for my producer.

That at least appeared to make Ton-That a little nervous. “Can we cut this if it doesn’t work?” he quipped. We said no.

But it did work. As we scrolled through the images it had found, my producer noticed that Clearview had found pictures from her Instagram account, even though her account has been private, accessible only to her followers. Ton-That explained that Clearview had probably downloaded the photos from her account before she had made it private last year.

Ton-That’s representative had my producer’s name in advance of the interview but Ton-That said he had not run her face before the live demonstration. Both Clearview tests for my producer and I returned no false positives.

The parts of Ton-That’s demonstration that spooked my producer and me — his access to photos that are no longer publicly available online and his ability to find a photo of me as a minor — are likely among the things his law enforcement clients find appealing.

He said more than 600 law enforcement agencies in the US and Canada are using the tool, a number CNN Business has not independently verified, and when asked, he wouldn’t specify how many are paying customers versus those using free trials. He also said that a number of banks are using Clearview software for fraud investigations, but declined to name any of the banks. CNN Business reached out to America’s 20 largest bank chains. JPMorgan Chase, Bank of America, Wells Fargo, US Bank, Ally Bank and SunTrust all denied using the software. The others either declined to comment or didn’t respond to CNN Business’ request for comment.

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I’d bet that lots of companies are trying out Clearview with eagerness – to spot troublesome customers or ex-employees – and that pretty much none of them are going to admit it. They’ll let Clearview take the flak.
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Popular YouTube Kids’ channel Cocomelon gets into merch and toys • Bloomberg

Mark Bergen and Lucas Shaw:

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Jay Jeon is an unassuming mogul. No one takes notice of him as he slips into the corner booth at the Italian steakhouse steps from his Orange County office on a sunny Friday. Most any toddler who knew what the trim, soft-spoken 55-year-old does, however, would have gone nuts. Jeon runs Cocomelon, a YouTube channel dedicated to nursery rhymes and original songs, whose animated kids and creatures generate about 2.5 billion views in a typical month. That translates into as much as $11.3m in monthly ad revenue, according to estimates from industry analyst Social Blade. In terms of viewership, an average Cocomelon video dwarfs the turnout for most of the world’s sports leagues, pop stars, and scripted TV. It’s the second-most-watched YouTube channel, trailing only T-Series, India’s music king.

Cocomelon’s success has caught everyone off guard, including Jeon. For more than a decade, he and his wife ran their channel more or less by themselves, and he was happy that way. The steakhouse meeting is his first press interview ever, and one condition was that he not be photographed, for fear of paparazzi.

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They upload one new video a week; most of the rest of the views are on older content. If you wondered what happened to childrens’ TV, it’s this: it turned into YouTube channels that kids watch on their tablets.
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Marketplaces and scalability: lessons from Uber and Airbnb • Medium

Sameer Singh:

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Uber and Lyft are valued at roughly 2–3 times total equity funding raised (incl. funds raised in their IPO). Airbnb is far more capital efficient, with a valuation-to-funding multiple of 9–10x. In other words, Airbnb created 3–5 times more value than Uber or Lyft for every dollar of funding raised. This is critical for investors to understand as it directly affects returns.

Despite the common “sharing economy” tag applied to them, Uber and Airbnb are built on very different models. Both run marketplaces that connect underutilized assets (and later, professionals) to consumers, with a self-reinforcing network effect, i.e. the addition of a supplier makes the product more valuable for all customers, and vice versa. They were both founded in Silicon Valley and were venture capital funded. However, that is where the similarities end.

Uber’s model relies on hyperlocal network effects, i.e. the addition of a unit of supply (a driver) makes the product more valuable for the demand side (riders) within a small geographic radius. So when Uber acquired a driver in a city, it only helped it grow organically within that city (usually, within a small part of that city). And when Uber expanded to other cities, they had to re-invest in driver acquisition without the benefit of any latent demand. They had no drivers and so did not have riders to attract them organically (commonly called the “cold start” problem). This was complicated further by the fact that Uber’s success catalysed competitors in other markets who then created their own local driver networks before Uber could enter them (e.g. Didi in China, Ola in India, Careem in the Middle East, Grab in South East Asia, etc.). Since local competitors had an established hyperlocal network effect, it became even more expensive for Uber to enter and operate in these markets. As a result, Uber was forced to eventually sell many of its regional units to local competitors and acquire others…

…Airbnb’s model, on the other hand, is built on cross-border network effects, i.e. the addition of a unit of supply (a host) makes the product more valuable for the demand side (guests) across geographic boundaries.

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Singh, you’ll recall, has joined 6CVentures, a VC firm built by founders. This is a great analysis. Although of course AirBnB – and Uber – have other wrinkles, as seen above.
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Motorola Razr review: a tragedy unfolds • Input Magazine

Joshua Topolsky:

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Let me put this very bluntly. The screen on the Razr is gross. It ripples, it creaks, it moves when you touch it, it very visibly shows creases and bumps when the display is off. Its physicality is pronounced in a way that is simply very different than any other smartphone display on the market. It doesn’t feel nice, it feels worrying. But to be clear, it’s also fine. It works exactly as any other phone does. It’s responsive to touch. Images and videos look crisp and clear, text is easy to read. It is a phone screen. But you’re going to be surprised about the way it feels and scared about its longevity. Because of the nature of the folding display and the lack of maturity these kinds of devices naturally exhibit, this kind of wonkiness is probably going to be with us for quite some time. But I want to be clear: it’s fine. It’s fine!

One thing that did bug me endlessly, however: the display never unfolds to completely flat (or straight). The upper part of the phone always sits at a very slight angle, so that if it’s on a flat surface you can wobble it a bit. I desperately wanted the screen to go flat, but unless you bend the phone backwards in a worrying way, it can’t be done. Why? We may never know.

Otherwise, I actually found the display to be somewhat too small and too skinny. The keyboard feels microscopic on the screen, even when adjusting screen resolution and keyboard height (of course, maybe my monstrously large hands are the problem). Websites feel claustrophobic in the browser. Apps seem like their sides have squeezed into submission. When you add in that giant chin, the whole configuration sort of forces your hands to hover over and down into the screen, like someone slid a wrist rest under your hands while using it. You get used to it, but it’s weird and uncomfortable at first.

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Anyway, yours for $1,500. (Side note: it seems The Outline is still going. So is Input a spinoff? Has Topolsky moved on? I feel that I missed a memo somewhere.)
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Errata, corrigenda and ai no corrida: none notified

3 thoughts on “Start Up No.1242: how the CIA spied on everyone, FTC to query past tech buyups, now wash your hands!, Razr reviewed, and more

  1. Thank you for the Vulture link. Procrastination gold. I had forgotten the best Vaulter headline – ““This Tinder for Pedophiles App Sounds Like a Really Bad Idea”

    • I pointed out via email that it’s rude to come into someone’s house and insult them repeatedly; that there are ways to disagree without being pointedly obnoxious. The message wasn’t heard – which perhaps isn’t a huge surprise. So that’s sayonara.

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