The Unraveling of 'We Do not Trust Chinese' Business Model

The Unraveling of 'We Do not Trust Chinese' Business Model

A few months back, we were chatting with the head of an American genomics cloud company and casually asked how they expected to compete with BGI, given the differential in cost structures. We thought he would mention superior technology and we could go into a discussion on algorithms, hardware, etc. To our surprise, he cited the lack of trust in Chinese government as his biggest asset. Apparently, many US and Europe-based customers were afraid of sending their data inside China, and his company could allay their fears by providing a US-based data infrastructure.

Snowden Disclosures

That conversation took place before the Snowden disclosures, which seemed to have changed quite a few equations around the world. The disclosures are still continuing in drip-drip-drip fashion and every time US mainstream media/publicists/government appeared to discredit a claim, a new disclosure showed that things were even more severe. Several things have become clear by now.

(i) The spying has very little to do with terrorism or NSA would not go and tap the phones of Angela Markel and alike. Flying planes into US buildings is the last thing one expected from the heads of states of France, Germany and Spain, although we would not be surprised if they changed mind after this disclosures :)

(ii) The primary purpose of spying is likely to be economic espionage, or stealing business-related information from foreign companies. In one of the internal training documents, NSA gave a demo to young employees on how to go into private network of Petrobas (Brazilian oil company) and steal information.

(iii) The spooks cared very little about legality. Even though they had nearly unlimited access from their fraudulent secret court, they turned that into unlimited access by breaking into public clouds of Google and Yahoo.

(iv) Your personal medical data is not likely to be safe anywhere in the USA and UK. That creates legal headaches for second-level companies, who are possibly using the cloud services from Google, Microsoft or other big companies to host data.

DNAnexus Raises $15 Million, Teams With Google To Host Massive DNA Database

If Google-executives are taking part in what appears to be illegal behavior and if government takes part in same activities, how can a smaller company sign a privacy and data protection contract with a customer in good conscience, while storing data at Google?

A few detailed examples of what came out of NSA-related disclosures -

How The NSA Spies On Your Google And Yahoo Accounts

It’s quite simple really, and as the WaPo explains, the NSA “has secretly broken into the main communications links that connect Yahoo and Google data centers around the world, according to documents obtained from former NSA contractor Edward Snowden and interviews with knowledgeable officials. By tapping those links, the agency has positioned itself to collect at will from among hundreds of millions of user accounts, many of them belonging to Americans. The NSA does not keep everything it collects, but it keeps a lot.”

“NSA Tapped The Pope”, Spied On Vatican To Prevent “Threats To Financial System”

NSA hacked Mexican president’s email, according to latest leaks

Merkel: US spying has shattered allies’ trust

Why not? Those are three most likely places to look for Osama and his fellow travelers.

NSA, Five Eyes use Australian embassies to gather intel on Asia

US intelligence agencies are using Australian embassies throughout Asia to intercept data and gather information across the continent, according to the latest report based on documents leaked by NSA whistleblower Edward Snowden.

Data collection facilities operate out of the embassies in Jakarta, Bangkok, Hanoi, Bejing, and Dili, according to Fairfax media. There are also units in the Australian High Commission in Kuala Lumpur, the most populated city in Malaysia, and Port Moresby, the capital of Papua New Guinea.

More intelligence collection occurs at US embassies and consulates, as well as at the diplomatic outposts of other Five Eye nations, particularly Britain and Canada. The Defence Signals Directorate, which falls under the Australian Defence Agency, conducts the surveillance missions, and most Australian diplomatic officers are completely unaware of such activity, according to the Sydney Morning Herald.

The Five Eyes is an alliance for intelligence cooperation that includes the United States, Britain, Canada, Australia and New Zealand.

Last Year’s Stories about Chinese Hacking Were Likely Fake

Two years back, Google raised a huge hue and cry about not being able to protect privacy of its customers in China due to pressures from Chinese government. Given how little the company cared about privacy based on Snowden’s disclosures, we may have to revisit many of the news stories on Chinese hacking passed in mainstream media last year. You can sense that change in tone in many of the recent comments at ycombinator, where the hackers now realize that China was used as boogeyman to protect NSA and its main backers.

Gmail hack: phishing finger pointed at China’s Lanxiang vocational school

Depending on your perspective, Lanxiang vocational school is either the heart of a secretive global hacking conspiracy or a second-rate educational factory that is best known for churning out hairdressers and cooks.

Founded in 1984, the school takes in 20,000 students a year and has a domestic reputation for its kitchen and boutique training.

But it also has a large computer studies class. The school’s catalogue boasts 10 huge, high-standard laboratories equipped with 2,000 Founder brand PCs. At one point Lanxiang said it held a Guinness world record for the room with the most computers.

The school gained notoriety in 2010 when the New York Times named it as one of two schools suspected of involvement in hacking attacks on American companies and human rights activists.

The report, which cited anonymous sources close to the investigation, suggested the strikes were linked to a specific class taught at Lanxiang by a Ukrainian professor. It traced the attacks to the IP address of one of the school’s computers.

NSA Disclosures are Cutting into Bottom-line of US Companies

Instead of making huge financial gains from the above economic espionage, US companies seem to have shot themselves on the foot. Germany and Brazil are talking about establishing private internet or US-free internet, but the larger impact took place in Asia.

Wolf Richter: NSA Revelations Kill IBM Hardware Sales In China

The first shot was fired on Monday. Teradata, which sells analytics tools for Big Data, warned that quarterly revenues plunged 21% in Asia and 19% in the Middle East and Africa. Wednesday evening, it was IBMs turn to confess that its hardware sales in China had simply collapsed. Every word was colored by Edward Snowdens revelations about the NSAs hand-in-glove collaboration with American tech companies, from startups to mastodons like IBM.

But the fiasco was tucked away under the lesser debacle of IBMs overall revenues, which fell 4.1% from prior year, the sixth straight quarter of declines in a row. Software revenue inched up 1%, service revenue skidded 3%. At the hardware unit, Systems and Technology, revenue plunged 17%. Within that, sales of UNIX and Linux Power System servers plummeted a dizzying 38%. Governmental and corporate IT departments had just about stopped buying these machines.


All regions were crummy. Revenues in Europe/Middle East/Africa ticked up 1%. In the Americas, they ticked down 1% The improvement came equally from the US and Canada and once again, we had strong performance in Latin America, is how CFO Mark Loughridge spun the situation during the earnings call because it was less bad than last quarter.

But there was nothing to spin in Asia-Pacific, where revenues plunged 15%. Revenues in IBMs growth markets dropped 9%. They include the BRIC countries Brazil, Russia, India, and China where revenues sagged 15%. In China, which accounts for 5% of IBMs total revenues, sales dropped 22%, with hardware sales, nearly half of IBMs business there, falling off a cliff: down 40%.

Germany Advises Journalists To Stop Using Google Over US Spying Concerns, May Ask Snowden To Tesity Against NSA

“The German Federation of Journalists recommends journalists to avoid until further notice the use of search engines and e-mail services from Google and Yahoo for their research and digital communication,” the union said in a statement.

It cited “scandalous” reports of interception of both companies’ web traffic by the U.S. National Security Agency (NSA) and Britain’s GCHQ.

“The searches made by journalists are just as confidential as the contact details of their sources and the contents of their communication with them,” said Michael Konken, head of the union which represents about 38,000 journalists. He said there were safe alternatives for both searches and email.

Reaction among scientists and others

In twitter, we follow two different communities - scientists PIs (for definition, check here) and independent software developers. There is no overlap between the communities, and the difference in reaction among those two regarding Snowden-disclosures is quite eye-opening.

The reaction of the PI community is - “nothing to look here, move along”. Titus Brown’s earlier snub toward our suggestion of not using Google analytics captures that viewpoint well.

Metagenome Biologist Titus Brown Offers New Course on Internet Realities

Such reaction is understandable, because the government is the indirect employer of all government-backed scientists.

Independent software programmers, on the other hand, are quite critical of NSA spying. Not only they do not gain anything from economic espionage of other companies’ secrets, they stand to lose a lot, if international customers start to shun US-based programmers. Many of those programmers work remotely on projects from all around the world, and fragmented internet is the last thing they like to see.

The Good Guys

Lavabit And Silent Circle Join Forces To Make All Email Surveillance- Proof

In recent months, Lavabit, based in Texas, and Silent Circle, based in Washington, D.C., both shuttered their encrypted email services. The companies said they couldnt keep them running knowing they were vulnerable to surveillance if faced with a dedicated enough attacker which for Lavabit came in the form of the federal government when it wanted access to NSA whistleblower Edward Snowdens Lavabit account. Now the companies are teaming up with plans to offer an open-source tool that could make peer-to-peer, end- to-end encryption an easy add-on for any email service. The challenging part: they need to get other email providers especially the heavyweights, Google, Yahoo, and Microsoft to join them in offering the tool.

The easy part: the name, which sounds like a group of superheroes or supervillains depending on your perspective on monitoring and data-mining email. Lavabit and Silent Circle are the first two members of the Dark Mail Alliance, a group of email providers who will give users control over the privacy of their email so that it cant be handed over to third parties, scanned for ads, or easily hijacked by an interceptor. Were taking our inspiration from the Rebel Alliance, says Levison. Were the rebels who have decided privacy is too important to compromise on. Were fighting to bring privacy back to the Internet.

The Bad Guys

The thugs at Google are using this opportunity to block sending all search- engine keywords to downstream websites. For example, earlier our website used to get information on how a viewer came to a particular blog post (google search on ‘de Bruijn graph’ or ‘transcriptome’), but Google stopped providing that information two weeks back in the name of others’ ‘privacy’. However, if you pay Google through one of its programs, you will be allowed to see those keywords and privacy would not be a concern.

Google to Encrypt ALL Keyword Searches: Say Goodbye to Keyword Data

Warning: This isn’t one of those happy news updates that opens up new doors for your marketing – like Facebook announcing embedded posts. Nope – this is one that’s going to actually close some doors for you. And like Peter Griffin says, it’s really going to grind your gears. Yesterday, Search Engine Land reported that Google has made a change aimed at encrypting all search activity – except for clicks on ads.

Google veteran brought in as part of health website fix

WASHINGTON An engineer from technology giant Google has been recruited to help fix, the new federal insurance exchange website.

Software companies Red Hat and Oracle will also assist, according to Julie Bataille, spokeswoman for the Centers for Medicare and Medicaid Services, which has coordinated the development of the site that has experienced numerous problems in its first month of operations.

Why not make the whole website open-source so that we can see what Google is putting there. We can bet ‘open-source advocates’ like Titus Brown will never make such suggestions.

Things are changing at quite fast pace, and it will not be clear, until the passage of a few years, whether US businesses come out stronger than ever through the above changes or whether they lose global dominance by trying to take government-provided shortcut to success. Our vote is for the later.

Written by M. //