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Tuesday, July 7, 2020
FEW AMERICAN companies have done as well during the covid-19 crisis as Zoom. The lifesaver of lockdown joins a small coterie of tech firms whose product, like Google’s, you no longer need to explain to grandmas. Zoom’s staggering success was made clear this month when it reported a 169% surge in year-on-year sales during the three months to April 30th. Daily users ballooned from 10m in December to 300m in April; profits soared alongside. Even analysts, rarely the most expressive of writers, let rip. One report started with “Wow”. Another, with “Holy Cow”. Zoom’s achievements go beyond mere lucre. Its videoconferencing tools have the intuitive simplicity of an Apple product. It has made working from home feel not clunky, but chic. Moreover, its 50-year-old founder, Eric Yuan, cuts an intriguing figure. He has ridden an emotional roller-coaster this year as his company faced not just adulation, but scathing criticism for privacy lapses, data breaches and Zoom-bombings. Yet the speed with which he acknowledged the setbacks, and rolled out a 90-day plan to fix them, offers a case study of a leader who tries to learn from his mistakes. On June 17th, for instance, Zoom said it was introducing end-to-end encryption for all users. But Mr Yuan, an American citizen, has a more intractable problem. It concerns his country of birth, China. On June 11th it became clear how vulnerable Zoom was to the long arm of the Communist state when the firm, which prides itself on “the open exchange of ideas”, admitted it had temporarily shut down the accounts of three critics of the regime outside China. Investors barely noticed. Four days later Zoom’s market capitalisation reached a record high of $67bn. But it showed with devastating clarity how tech firms struggle to bridge the digital chasm between China and America. This poses an acute business risk for Zoom. Zoom’s relationship with China is complex. The American company has meagre sales on the mainland. But 700 of its staff are based there, developing global products. It also has servers in China that it says are geo-fenced to store Chinese data only (though in April it admitted the rule may have been breached by mistake). It says having its engineers in China helps reduce costs. It also hopes to increase sales to China. But its operations there force it to abide by Chinese law. Hence it suspended Zoom meetings with users in China and beyond commemorating the 21st anniversary of the massacre around Tiananmen Square on June 4th, which the Chinese government, hearing about them on social media, considered illegal. It also temporarily blocked an activist’s account in Hong Kong. Zoom admits it went too far, says it is developing tools to tackle the problem and pledges that requests from the Chinese government will no longer affect anyone outside mainland China. That is a hard promise to keep for any company with operations in China. American values of free speech are at odds with those of a surveillance state. American firms that do business in China are used to treading a fine line. Those with a lot of Chinese customers and operations, such as Apple, seek to obey Chinese rules, but only in China. They argue that their Chinese businesses are ring-fenced from the rest of the world. Free speech and data security elsewhere are not compromised. Firms which, like Facebook, are barred from penetrating the Great Firewall can ignore China’s rules completely. Zoom is different. It cannot easily fence off its Chinese operations from the rest of the world because its Chinese product developers are integral to its global business. Yet its activities in China mean it falls under laws that require companies to co-operate with the state and its intelligence services. That raises security and free-speech concerns not just within China but beyond it, too. The repercussions have started. Some governments, such as Britain’s, have reportedly been warned by spy agencies to avoid secret discussions about China on Zoom. China hawks in America’s Congress are demanding that the company answer questions about its relationship with the Chinese government. Academics note that Chinese students at American universities may be particularly at risk if their inability to travel to America for covid-related reasons means they have to attend lectures in China via Zoom. James Millward of Georgetown University says it could chill academic freedom. He called on universities to develop an urgent “Plan B” to Zoom. End-to-end encryption to protect privacy may provide some reassurance. Chinese law, however, makes it hard to guarantee that the state will not seek to intrude. That leaves Zoom with two unpalatable options. The first is the route that ByteDance, a privately held Chinese tech giant, is taking to ensure its short-video app, TikTok, is trusted in America. This means replacing some engineers in China with ones in America, and perhaps cutting off the Chinese business from the rest of the world. Such a rearrangement is hard to swallow for a firm like Zoom, whose mission is to foster global communication. It would cost time and money. The alternative is to continue to bestride both systems and accept the consequence that trust—arguably the most important attribute of a communication tool like Zoom—is at the mercy of the Chinese Communist Party. Many users will have no problem with that; Zoom book clubs may be happy to bore Chinese eavesdroppers to death. But on sensitive topics in business and politics, wariness should prevail. Even though Zoom says there is no “back door” enabling snooping on its users, in the back of some minds is the thought of using a Soviet telephone during the cold war. The rebirth of distance Zoom’s business may suffer as a result. Cisco’s Webex, Microsoft’s Teams and Google’s Meet can easily compete for its most sensitive clients. More significant, the kerfuffle reinforces how geopolitics is splitting the global internet into rival camps. Tech companies are increasingly facing the invidious choice of which side of the divide to be on. The word for that is not “wow”. It is “ugh”. ■ This article appeared in the Business section of the print edition under the headline "Zoom and gloom" Reuse this contentThe Trust Project
Twenty Saudi nationals went on trial in Turkey for the murder of journalist Jamal Khashoggi on Friday even though they weren’t in court to face the charges. The “in absentia” trial involves two former aides to Saudi Crown Prince Mohammed bin Salman and 18 other Saudis allegedly flown to Istanbul to commit Khashoggi’s gruesome killing in October 2018. Turkish prosecutors want to put the defendants behind bars for the rest of their lives. But all 20 suspects have left Turkey and Saudi Arabia has refused to extradite them while slamming Turkey for not cooperating with its own trial last year. The crown prince’s ex-advisers, Saud al-Qahtani and Ahmed al-Asiri, have been charged with “instigating a premeditated murder with the intent of (causing) torment through fiendish instinct,” while the other 18 defendants were charged with carrying out the killing. Khashoggi, a Saudi dissident and Washington Post columnist, went into the Saudi consulate in Istanbul nearly two years ago to get documents for his marriage. While inside, his alleged killers suffocated him and then dismembered his body with a bone saw, according to Turkish officials. The CIA and other Western governments believe bin Salman ordered Khashoggi’s killing, which Saudi officials have denied. A Saudi court sentenced five people to death for Khashoggi’s killing in December, but they got a reprieve after Khashoggi’s family said they forgave the killers. With Post wires
Movie-theater chain AMC backtracked on Friday after initially saying it won’t require patrons to wear face masks in order to avoid “political controversy” when it reopens next month. The nation’s biggest theater chain — whose more than 600 locations nationwide were shuttered by coronavirus lockdowns in March — is slated to reopen 450 theaters on July 15, and expects to be almost fully reopened by the end of July in time for Disney’s “Mulan” to make its debut, according to a report by Variety. On Thursday, Chief Executive Adam Aron had told the trade publication that AMC had no plans to require moviegoers to wear face masks, nor would they be screened for fevers. “We did not want to be drawn into a political controversy,” Aron said. “We thought it might be counterproductive if we forced mask wearing on those people who believe strongly that it is not necessary.” A day later, however, Aron reversed course and said AMC will require masks at all screenings nationwide. “This announcement prompted an intense and immediate outcry from our customers, and it is clear from this response that we did not go far enough on the usage of masks,” Aron said in a Friday statement. “Accordingly, and with the full support of our scientific advisors, we are reversing course.” Aside from masks, AMC said it plans to minimize the risk of spreading the coronavirus by reducing theater capacity, cleaning theaters more rigorously, providing hand sanitizer, and pushing online ticket purchases rather than in-person sales. Separately Friday, No. 2 cinema chain Regal said it also will require moviegoers to wear masks when its theaters reopen next month, after Regal and Cinemark previously said they would “encourage” customers to wear a mask. Alamo Drafthouse, an independent movie theater chain based in Austin, Texas, also jumped into the fray, issuing a Friday statement outlining its own pro-mask reopening plan. “When we open, the safety of our teammates and guests cannot be compromised,” Alamo said. “This is not political. We will require that guests wear masks at the theater (except when eating and drinking). Those without masks will be given one.”
An ex-Green Beret and his son were arrested by authorities in the US Wednesday for allegedly helping Carlos Ghosn escape Japan in a concert equipment box. Former US special forces soldier Michael Taylor and his son Peter Taylor are charged in the bizarre plot to smuggle the ousted Nissan CEO out of Japan in December. Federal prosecutors want the pair jailed while they face extradition to Japan, saying they have an “aptitude for hatching escape plans on a grand scale.” Japanese authorities issued warrants for their arrest in January. “The plot to spirit Ghosn out of Japan was one of the most brazen and well-orchestrated escape acts in recent history, involving a dizzying array of hotel meetups, bullet train travel, fake personas, and the chartering of a private jet,” prosecutors wrote in court filings seeking the Taylors’ detention. Authorities nabbed Peter Taylor in Boston the same day that he planned to fly to Beirut, where Ghosn has been hiding out for nearly five months, according to prosecutors. It’s unclear where his father was arrested. The pair, who live in Harvard, Mass., will appear via video for a court hearing Wednesday afternoon. Their lawyer, Paul Kelly, did not immediately return a phone call seeking comment. Court papers unsealed in Massachusetts federal court outline how the Taylors helped smuggle Ghosn, 66, from Japan to Lebanon. They allegedly had help from a third man, George Antoine Zayek, whom Japanese prosecutors also want arrested. Ghosn was out on bail in Tokyo while awaiting trial for allegedly under-reporting $80 million in compensation earnings and siphoning off company cash for his own use. He has denied the allegations and said he fled “persecution.” Peter Taylor met with Ghosn at least seven times last year leading up to the late December escape, prosecutors said. On Dec. 28, he checked into a Tokyo hotel and then met with Ghosn again for about an hour, court papers say. The following day, Michael Taylor and Zayek took a private jet from Dubai to Osaka, where they would board a plane with Ghosn late that night, prosecutors alleged. Telling airport workers they were musicians, they entered Japan with two audio equipment boxes — one of which would later carry Ghosn, according to court filings. The pair later met Peter Taylor and Ghosn at the Tokyo hotel, where Ghosn changed his clothes in Peter’s room apparently using a key he was given the previous day, prosecutors say. Peter then headed to Tokyo’s Narita Airport and boarded a flight to China, authorities said. Michael Taylor, Zayek and Ghosn continued by train to Osaka and went into a hotel around 8:15 p.m., prosecutors said. Taylor and Zayek left the hotel room with the two black boxes — one of which contained Ghosn — that were not checked when they got to the airport, according to court filings. They then boarded a private jet to Turkey at about 11:10 p.m. and Ghosn announced two days later that he had made it to Lebanon, prosecutors said. The Ghosn caper isn’t the only escape allegedly orchestrated by Michael Taylor, the founder of American International Security Corp. He has “facilitated the extractions of other individuals,” prosecutors said, such as journalist David Rohde, whom he helped free from Taliban captivity in 2009. But Taylor also spent time behind bars after pleading guilty to wire fraud for allegedly paying kickbacks for $54 million in Defense Department contracts. Japanese prosecutors have had a harder time getting their hands on Ghosn because Tokyo does not have an extradition treaty with Lebanon. Authorities also issued an arrest warrant in January for his fashionista wife, Carol Ghosn, saying she perjured herself when she was interviewed about her husband’s alleged crimes. She later called the accusations “a bit of a joke.” Share this:
Microsoft on Thursday said it would await federal regulation before selling facial recognition to police departments, making it the latest big firm to back away from the surveillance business following protests against police brutality. The announcement came a day after rival Amazon declared it was pausing police use of its “Rekognition” service for a year, while IBM also said this week it no longer is generally offering the software and that technology should not promote racial injustice. In a statement, Redmond, Wash.-based Microsoft said it has long worked on enacting principles and legislation for the software’s use. “We do not sell our facial recognition technology to US police departments today, and until there is a strong national law grounded in human rights, we will not sell this technology to police,” the company said in a statement. The Washington Post first reported the news. Microsoft is updating its review procedures for all customers looking to widely roll out the technology as well, it said, without specifying how. The death last month of George Floyd, a black man pinned down by a white officer who kneeled on his neck for nearly nine minutes, has prompted worldwide protests against racial injustice. Concerns have also risen over whether facial recognition could be used against protesters unfairly. Research found that face analysis and identification often were less accurate for people with darker skin tones, adding to activists’ concerns that false matches could lead to unjust arrests. Matt Cagle, an attorney with the American Civil Liberties Union of Northern California, said in a statement, “When even the makers of face recognition refuse to sell this surveillance technology because it is so dangerous, lawmakers can no longer deny the threats to our rights and liberties.” Congress has weighed possible regulation for months. Police departments still work with other vendors such as Idemia. Microsoft and Amazon did not immediately answer a request for comment on whether their bans included other forms of law enforcement, such as an unnamed prison, to which Microsoft had said it agreed to provide the software. Share this:
Is there a better way of dividing the corporate spoils?
Macy’s said it will axe 3,900 corporate employees on Thursday as it struggles to recover from coronavirus lockdowns nationwide. The department-store giant said it has also eliminated an undisclosed number of store employees, who may be rehired as the company’s sales recover. Many furloughed workers will be asked to return to their jobs starting in July, according to a statement. “COVID-19 has significantly impacted our business. While the re-opening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,” Macy’s Chairman and Chief Executive Jeff Gennette said. “These were hard decisions as they impact many of our colleagues.” The layoffs will save the company approximately $365 million in fiscal 2020 and $630 million on an annualized basis. Earlier this year, the largest department store received $4.5 billion in new financing to cover the impact of the pandemic on its bottom line. “We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward,” Gennette said. Macy’s shares were recently off 3.7 percent at $6.53 in Thursday morning trading.
MGM Resorts played games with high rollers like Stephen Paddock — and his anger at the casino giant may have driven him to commit modern America’s deadliest mass shooting, a new documentary suggests. The film, “Money Machine,” aims to offer new clues about why Paddock fired indiscriminately into a crowd of thousands in October 2017, killing 58 and injuring hundreds — a question local and federal investigators struggled to answer. Drawing on interviews with people who knew the gunman, filmmaker Ramsey Denison posits that Paddock was angry at MGM for promising perks it didn’t deliver — so he wanted to leave the company a bloody mess to clean up. “They had to make it look like this was just some random act by a guy and that it had nothing to do with the casinos, and that’s just simply not true,” Denison told The Post. “He did it the way he did it to leave MGM liable,” he added. The movie, which opens online Friday, is Denison’s follow-up to “What Happened in Vegas,” his 2017 directorial debut focusing on police brutality and corruption in Vegas. “Money Machine” paints Sin City’s powers that be as quick to sweep the shooting under the rug through interviews with survivors and investigators, while MGM and public officials are heard from through their past statements and appearances. It contradicts the findings of the FBI, whose probe of the attack unearthed “no single or clear motivating factor” behind it. Investigators also found nothing to indicate Paddock was driven by a “grievance” against MGM’s Mandalay Bay Resort and Casino — where he committed the massacre — or any other Vegas institution. But Paddock’s brother, Eric Paddock, recalled him growing irate at Mandalay Bay for reneging on perks. For instance, he says, the casino would triple the “points” given to other gamblers during certain hours but tell Paddock he couldn’t take advantage of the promotion. “When they broke the deal, he was pissed,” Eric Paddock says in the film. “The deal’s a deal.” This sort of tactic was common at Mandalay Bay and MGM, according to former bellhop Andy Martinez, who remembers Paddock as a sometimes moody “man of very few words.” When high rollers suffered a big loss, Martinez alleges, Mandalay Bay would lure them back with complimentary perks like a weekend hotel stay — only to tell them the room was unavailable and charge $500 for an upgrade. “I saw it continuously — thinking everything’s gonna be comped and when they get there, nothing is comped,” Martinez says in the film. “This deceptive practice comes from the very top.” In a statement, MGM Resorts General Counsel John McManus rejected the idea that Paddock targeted the company, noting that he scouted other locations for the massacre and was a “lifetime winner” at Mandalay Bay. “We also hoped law enforcement could have found evidence to determine a motive as it is almost too painful to believe that one man caused this carnage just because he could,” McManus told The Post. “We regret that the efforts of these individuals to have their 15 minutes of fame may cause the survivors and families of those lost additional pain.” McManus also denied Martinez’s accusation that it asked customers to pay for things it had promised for free. The company has asked the Nevada Gaming Control Board to investigate the alleged practice, he said. “Money Machine” is available to stream starting Friday from Theatrical-At-Home, a streaming platform launched by production company Joma Films.
A GLOBAL PANDEMIC would not seem like the best time to bring a business to the stockmarket. But several initial public offerings (IPOs) are afoot. On June 3rd Warner Music started trading in New York having raised $1.9bn—a healthy wodge even in good times. IPOs have had a slow but hardly catastrophic start to the year, according to data from Dealogic. The $51bn raised by the end of May is about a quarter lower than the average over the past decade and nothing like the cratering of 2009. Some are predicting a bumper year as firms pile in after holding off as markets convulsed. Soon to join stock exchanges are an Italian mask-maker and a Korean K-pop impresario. This article appeared in the Business section of the print edition under the headline "IPOs stay afloat"
Elon Musk is officially in the money. The Tesla CEO on Thursday became eligible to cash in on a controversial payday which could see him pocket more than $700 million. The electric automaker said in a filing that its board had certified the operational milestone needed to unlock the first award in Musk’s eye-popping $50 billion pay package, which required him to steer Tesla’s stock market value to an average of more than $100 billion over the past six months. Musk now has the option to buy 1.69 million Tesla shares at $350 a pop. At Tesla’s Thursday closing price of $805.81, the billionaire could flip his new shares for a profit of about $775 million. Musk’s award comes just weeks after he listed two Bel Air mansions on real estate site Zillow, following a series of tweets in which he said Tesla’s stock price was “too high” and that he would “own no house” and get rid of most of his possessions. To earn his full, $50 billion award, Musk would have to lead Tesla to a market cap of $650 billion by 2028. Tesla’s board signed off on the compensation package in March 2018, when Tesla’s market cap was $52.46 billion. Musk still has eight years left to clear 11 more valuation hurdles, mostly in $50 billion increments, which would fetch him roughly $5 billion each. If Tesla doesn’t reach any other milestones, Musk will not receive any more money from Tesla. The South Africa-born billionaire does not take a salary from Tesla, and only earns money through performance-based rewards. A full payoff for Musk, who is also the majority owner and CEO of the SpaceX rocket maker, would surpass anything previously granted to US executives. Share this:
Vice Media said Friday it is slashing more jobs as the coronavirus continues to slam ad revenue at its web operations. The gonzo news gatherer is facing “business challenges,” Chief Executive Nancy Dubuc said in a Friday memo, confirming that the Brooklyn-based company is eliminating 55 positions in the US and 100 jobs internationally, primarily in the struggling digital division. “Currently, our digital organization accounts for around 50 percent of our headcount costs, but only brings in about 21 percent of our revenue,” the memo said. “Looking at our business holistically, this imbalance needed to be addressed for the long-term health of our company.” Dubuc said the US-based cuts will take place Friday and the international layoffs will hit in the coming weeks. Aside from the digital division not pulling its weight, Dubuc cited broader challenges that the publishing industry is facing amid the coronavirus crisis. “Publishing right now is difficult across the whole industry — plain and simple  —  and the pandemic has intensified the tensions we all know exist between publishing and advertising,” she wrote. While Vice has built its digital business quickly, it isn’t seeing a strong return on investment, as platforms like Facebook and Google are taking the lion’s share of advertising revenue and have formed a monopoly of sorts in digital media, according to Dubuc. “I worry about the day that I fear is fast approaching, when I wake up and everything I see, touch and know is because a few machines filtered my view by ‘optimizing’ the world around me for the sake of more growth and more revenue,” Dubuc said. She called for the media industry to “stand together” in the face of “monopolies,” while offering her own newly laid off employees severance pay, their work-issued laptops and job search guidance. Such cuts have been part of a larger reorganization under Dubuc, who joined the firm in March 2018. In February 2019, the company cut 10 percent of its staff, or about 250 people. Share this:
Billionaire Tesla boss Elon Musk lashed out Wednesday at lockdowns meant to contain the coronavirus in a series of early-morning Twitter posts echoing calls from protesters around the US. “FREE AMERICA NOW,” Musk  tweeted at 2:15 a.m. The 48-year-old tech tycoon crowed “Bravo Texas!” in an earlier post hailing the Lone Star State for moving to reopen restaurants and retail stores this week. His praise came a week after Texas Lt. Gov. Dan Patrick said the state should lift restrictions because “there are more important things than living.” Musk also shared a Sunday op-ed in The Wall Street Journal arguing that severe shutdowns have not helped save many lives. “Give people their freedom back!” Musk wrote. Musk’s missives followed protests in several states urging officials to lift lockdown measures that have forced business to close and put millions of workers on the unemployment rolls. President Trump recently voiced support for the largely conservative protesters by calling on officials to “liberate” Minnesota, Michigan and Virginia. Musk has expressed skepticism about the coronavirus for weeks even though it has sickened more than 3.1 million people and killed more than 217,000 people worldwide, according to a Johns Hopkins University tally. Musk called panic about the virus “dumb” in early March and later falsely claimed that children are “essentially immune” to the disease. He also wrongly predicted last month that the US would probably see “close to zero new cases” by the end of April; more than 24,000 US cases were reported on Tuesday alone, Johns Hopkins says. Tesla, Musk’s $141 billion electric-car company, has reportedly asked some workers to return to its California factory this week even though the Bay Area has yet to lift a lockdown that forced it to halt production. Musk is also closing in on a $750 million payday while Tesla’s hourly workers faced furloughs. Share this: