The 5 Business Stories You Need to Know - Week of Dec. 9

Good morning, friends. Here is this week's roundup of stories from Morning Brew. As always, we appreciate your thoughts, opinions, and feedback!

Can Facebook and Apple Keep a Secret?

Like The Crown periodically reminds us of the oddities of the British monarchy, government officials periodically remind us of the ethical dilemma of encryption when they drag tech leaders into their mahogany halls. 

Cut to yesterday

First, Facebook denied Attorney General Bill Barr’s proposal to add “back doors” for law enforcement to access encrypted messages. 

• FB is planning to add end-to-end encryption to services like Messenger (WhatsApp is already encrypted). 
• In October, Barr sent a letter asking the company to delay those plans. It was cosigned by the U.K.’s and Australia’s top law enforcement officials. 

Also yesterday, Facebook and Apple privacy execs defended their encryption practices before the Senate Judiciary Committee.

Big picture: Encryption makes communications more private and secure...but that presents major hurdles for law enforcement looking for evidence. Both Democratic and Republican senators threatened to pass legislation mandating back doors if the tech giants don't develop them on their own. 

• Some U.S. senators and Barr argued that Facebook and Apple are aiding criminals by allowing private communications that can’t be accessed with a warrant. 
• With 1.5 billion users, WhatsApp may be the world’s most widely used encrypted messenger.

Even Manhattan District Attorney Cy Vance Jr. took the Northeast Regional down to D.C. to join the pile-on. He said encryption “effectively upended centuries of American jurisprudence.” 

Tech’s side of the story 

Facebook responded to Barr by claiming his proposal would be a “gift to criminals, hackers, and repressive regimes.” Apple’s manager for user privacy said there’s no way to create back doors that “only work for the good guys,” adding, “They will be exploited by nefarious entities as well.” 

Zoom out: Both companies have clashed with lawmakers over privacy before, but for different reasons. Apple encountered a similar encryption dilemma when it tried to deny the FBI access to the San Bernardino shooter’s iPhone in 2016. Facebook has been criticized for its slip-ups in keeping private user info private.

The U.K. Fancies a Change

Brits will head to the polls today to determine whether they’d prefer Conservative tossers or Labour wankers running the country.

• The general election features races for all 650 districts that represent seats in the House of Commons. 

The lucky number: 320. That’s how many seats each party needs to claim a majority in the Commons and deliver Churchill’s fountain pen to the party’s leader.

• To gain a majority, current Prime Minister Boris Johnson’s Conservative party needs to steal nine spots from Jeremy Corbyn’s Labour. 
• If neither party wins a majority, you’ve got a “hung Parliament.” 

How we got here: Parliament can vote to hold a new election whenever it wants, and this is the third time it's done so since 2015. This election, the government’s trying to resolve Brexit once and for all—Johnson’s rallying cry is “Get Brexit Done,” while Corbyn would hold another referendum if he wins a majority (but that isn’t looking likely). 

Looking ahead...polls close at 10pm GMT, or 5pm ET. No matter who wins, the WSJ notes, expect loads of government spending. 

+ Did you know: In the U.K., trucks are lorries, elevators are lifts, and swing districts are marginal seats.

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Bezos: Big Tech Should Play Defense

Jeff Bezos thinks the U.S. military should work more closely with the largest American tech firms because “We are the good guys, I really do believe that.”

Speaking at the Reagan National Defense Forum this weekend, the Amazon CEO warned that China was a growing threat to U.S. tech supremacy. “If big tech is going to turn their backs on the Department of Defense, this country is in trouble, that just can’t happen,” he said. 

Who’s turning their backs

Bezos didn’t name names, but it’s pretty clear he was subtweeting Google. Last year, the company said it wouldn’t renew a contract with the Department of Defense for Project Maven, a program that used Google’s artificial intelligence to analyze drone footage.

• While Google was still actively working on Project Maven, more than 3,100 employees signed a petition requesting that CEO Sundar Pichai cancel the contract. 
• “We believe that Google should not be in the business of war,” it read. “We cannot outsource the moral responsibility of our technologies to third parties.” 

Bezos disagrees 

“I know it’s complicated but you know, do you want a strong national defense or don’t you? I think you do. So we have to support that,” he said.

Amazon is supporting that, actively pushing its tech to law enforcement and national security agencies. Its controversial facial recognition software, Rekognition, has been used by police departments around the country. In the summer of 2018, it pitched Immigration and Customs Enforcement (ICE) officials on using Rekognition. 

• Most recently, Amazon lost out to Microsoft on a $10 billion cloud computing contract with the Pentagon. Amazon filed a lawsuit earlier this month alleging President Trump’s apparent bias against Bezos and Amazon hurt its chances. 

Bottom line: To Bezos, companies providing the U.S. military with the best technology available is not a decision to be made but a patriotic duty. “This is not a sporting competition. You don’t want to fight fair,” he said.

Former Fed Chair Paul Volcker Dies at 92

The 6’7” former Fed chair and Wall St. honcho leaves behind a legacy of political independence, inspiring us all to live boldly enough to have a landmark banking regulation named after us.

Volcker played many important roles in U.S. monetary policy for more than six decades, but his two greatest hits were...

Fed chair: In the late 1970s and ’80s, Volcker led a full-court press to cut down rampant inflation. When Volcker took over the Fed, annualized inflation hit 14.7%. The Fed’s goal these days is 2%.

• Volcker’s strategy involved raising interest rates as high as 20%, sending the U.S. into a recession during which unemployment peaked at 10.8%. 
• While that earned Volcker few lunch buddies in the Carter White House, he received admiration after the fact.

WH advisor: Volcker’s late-career as an Obama advisor was punctuated by the “Volcker Rule,” instituted by the administration to prevent big financial institutions from making certain speculative investments. 

Deal or No Deal?

Today, T-Mobile and Sprint will defend their planned $26.5 billion merger in a Manhattan court. What’s at stake: Both the future of the U.S. wireless industry and Dick Wolf’s reputation for owning NYC courtroom scenes.

The case for: T-Mobile and Sprint, the respective No. 3 and No. 4 U.S. carriers, say the only way to keep up with top dogs Verizon and AT&T in terms of pricing and innovation like 5G is to join forces. Also precedent—the Justice Department and the Federal Communications Commission already greenlit the deal.

• Those signoffs followed T-Mobile’s promise to support Dish's quest to become a new mobile carrier. How a satellite TV company you haven’t thought about since 2010 can compete in the wireless industry is a big question mark, but it was enough to satiate some antitrust busters.

The case against: 14 state attorneys general from NY, California, and more will argue the merger cauterizes competition and could cost consumers billions. Also precedent—the DOJ blocked AT&T’s attempt to buy T-Mobile in 2011.

Looking ahead...the trial’s expected to last several weeks. See you around Valentine’s Day for the decision.

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