This Week in Tech 634 Transcript

Leo LaPorte: It's time for TWiT, This Week in Tech. I know you're looking at the play-bar on your podcast client and you're saying two and a half hours! But let me tell you, it's going to be the best two and a half hours you ever spent. Greg Ferro is here for the Packet Pushers Network. Ian Thompson from theregister.co.uk. The reason we went so long is we had so many great discussions about Apple and its iPhone, about the new Amazon Echos. What are they up to? About the new Blade Runner movie and ultimately we talked about the fundamental problem Silicon Valley is having as people start to turn their back on tech. It's all coming up next on TWiT.

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Leo: This is TWiT, This Week in Tech, episode 634 recorded Sunday, October 1^st, 2017.

An Apple Watch Walks into a Bar

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It's time for TWiT, This Week in Tech, the show where we cover the week's tech news and really this show is going to be a remedial show for me because I've been gone for the last two weeks. I have no idea what happened. Thank God we have two of the best in studio with us. They just happen to both be from the Colonies. No, we're the Colonies. You're the Empire. Ian Thompson from the UK.

Ian Thompson: Such as is at the moment. Sort of a small post box in Gibraltar, and the Falkland Islands. And that's pretty much it.

Leo: Not a huge empire. Former Colonies but now a nation-state on their own, but he does live in the UK: Greg Ferro from the Packet Pushers Network.

Greg Ferro: Hello everybody!

Leo: We're sorry you're out of studio. You were supposed to be here but you broke your ankle or something.

Iain: Yea, so I've been getting healthy and I decided I would walk more.

Leo: Big mistake. And then in the process of walking I fractured my ankle and ended up in the hospital with a plastic cast and blah, blah, blah.

Greg: It just goes to show that exercise is unhealthy.

Iain: Yes, I believe that the evidence might point to this.

Greg: Look at S. Adams; if he never would have went into that gym then we might have yet another hit show.

Leo: That's depressing.

Iain: The world needs more of those, that's for sure.

Leo: Hey, did you steal my iPhone 8? I put it right here. I was going to show that I have the latest and greatest thing! I don't anymore. I had a Note 8 and an iPhone 8. Oh wait, I'm sitting on them. Not recommended.

Greg: From what I've heard you're lucky you haven't cracked it.

Leo: So while I was gone, Apple shipped iPhone 8's to some lucky members of the press as well as some actual users. This I've been playing with for a couple of days. I had the Note 8 right before I left. But none of this matters one wit because Google's going to announce new Pixel's. And some day this year-maybe next year-Apple's going to start shipping the iPhone 10. Which the world resolutely calls the iPhone X.

Iain: Yes.

Leo: Is there a consensus yet on whether Apple's selling any of these iPhone 8's? It feels to me, it was so easy to waltz into the online store at 12:01 Pacific time and buy this. It feels like it's not selling like hot cakes.

Iain: I don't think it's flying off the shelf by any manner of means. There's nothing in there that is a must-have.

Leo: It's not a huge difference.

Iain: You got ticks and tocks and evolution. And this is just a light tick. And it keeps a lot of the things that people didn't like about the last iPhone. And it doesn't really add an awful lot more. So I'm going to be at the Pixel event on Wednesday and I'm curious to see what they've done. Although it does look as though they too are banning the 3.5-mil jack. Unless they can give me a damn-good reason for that, I'm doing to hammer them on it.

Leo: Drives me nuts. That's why I think the Note 8 might be the phone of choice despite the bizarrely-positioned fingerprint reader.

Iain: You've got an Essential.

Leo: I have an Essential in the other room. It cracked the first day. That was one problem. It's an amazing ceramic and titanium impervious design cracked without any impact. It just cracked!

Iain: That's not good.

Leo: 5,000 phones they've sold through Sprint. Now that's not the only source but I think this is a phone without a market.

Iain: Well now 5,000 phones is a rounding error compared to an Android.

Leo: Here from Slice Intelligence, so Slice as you know is that app-I use it-that tells you when you're getting stuff on its way. Slice has 5 million users. And the iPhone 8 sales: not good. These bar graphs here shows sales in the first five days following launch; I told you, I'm a little punch. iPhone 6, wow, big. There's no scale on this so I don't know how big big is. N equals 146,556 shoppers. I don't know what any of this means; I can't read it. iPhone 7 Plus, the next biggest seller, then the 7, then the 6 Plus, the 6S. Way down on the bottom: the iPhone 8 Plus and an even smaller wedge, the iPhone 8. Now that's not Apple's stat. Apple won't tell. But that is Slice's stat. Ming Chi Kuo, the analyst also said sales have been sluggish with the iPhone 8. And the stock market seems to think so; Apple's stock has been going down. The question really for us is: is that because people are waiting for the iPhone 10?

Greg: I really think so. I think that there's a bunch of early adopters where money's not a problem. It's all about having the latest and greatest phones. And there's people in the Android space for this as well. And back in the days of Microsoft Windows phones, etcetera, they wanted the latest and greatest and so I think Apple's made a fundamental flaw here. Introducing the iPhone 8 and the iPhone X or 10 at the same time. Right?

Leo: They Osborned it almost, right?

Greg: Yea, they should have released the iPhone 8 and said this is the best phone we've ever made. And then come around for another announcement in three, four, five, six months' time, and said here's the iPhone 10: this is our step-change.

Leo: How annoying would that be for people who bought the iPhone 8 to find out six months later that it's already obsolete? It's a challenge but, why do they even bother doing an iPhone 8? Because they couldn't make enough X's.

Iain: Well also because there's a very limited market for people who are going to spend $12,000 for a phone.

Leo: $1,200.

Iain: Sorry, $1,200 on a phone.

Leo: I'm not sure about that. I think that… it would be my guess that the iPhone 10 is going to end up-if they can make it, and that's…

Iain: And make it work.

Leo: Not an insignificant if… if they can make it-it's going to sell as well as any other iPhone. That's the one people want and are waiting for. And what it really points out to me is that the iPhone is not about technology. This is marginally… the 8 is marginally better than the 7. Not anything to write home about. If you have a 7, unless you absolutely have to have wireless charging or that goofy portrait stuff that they're doing, there's no reason to upgrade. Yes, it's an incredible… O'Mallick wrote this, to the A11 bionic processor and Apple's amazing ability to do its own fabs and do its own GPU now for the first time. And do its own amazing chip, and this chip is so fast it's comparable to a MacBook Pro. But you don't need it! It's like driving a Ferrari on a local city street.

Iain: Three things people use these for: browsing the internet, navigation, and making calls. And there is no significant improvement with the iPhone 8's in that. I'm not in sales, with the iPhone 10, they got rid of the home button. Well that's going to be more irritating than not.

Leo: It's a negative!

Iain: A definite negative. Facial recognition thing, unless that works flawlessly out the box, they're going to lose a lot of goodwill on that. And by all accounts, it's a fairly fragile piece of kit as well. So reparability is not good with Apple products to put it mildly. So I don't know, I think they could actually be heading for fall on this one.

Leo: They may have knee-capped themselves by doing these three phones in this sort of odd strategy. By the way, they offer still an iPhone SE at $350, an iPhone 6S at $450, an iPhone 7 at $550, an iPhone 8 at $700, an iPhone 10 at $1,000. This is exactly what Steve Jobs, when he came back after leaving Apple, said was wrong with Apple. They had too many SKUs.

Greg: I think there's a few things going on here. And some of them are economic and some of them are market-driven. So the idea is that the iPhone 10, the price for the premium phone, up from $700 to over $1,000. And that's key to getting the upper average revenue per user up for Apple. And they haven't been able to shift above because they've always had just one phone. And when you have just one phone, it has to be a price that appeals to the widest possible audience. So by running multiple product lines, you're now able to ship more products to more price brackets. And in theory, you should be selling more. And you also should be selling more at higher values. Now keep in mind also that the iPhone 6S and the previous generations: the production processes have been maximized, they're efficient. They've been working… they know how to make those phones at high profit margins now and produce them in volume. So the average profit margin on those older units is rumored to be very high. Much higher than it was say three or four years ago. And they can produce them on mass. So they're increasing the average sales price per unit by jumping in the iPhone X without disrupting all the stacks underneath. And I think the trick is, I think Apple was trying to be greedy here by introducing the iPhone X in time for the holiday season; they Christmas period where everybody says ‘I can buy myself a new iPhone because I can buy myself a Christmas present, or I can buy one for somebody else' and so forth. They really should have taken a step back and said ‘well we'll ship the iPhone 8 and then we'll come back for the iPhone 10 in March next year' or something like that.

Leo: I would skip the 8 and just go straight to the 10.

Greg: I don't think it makes sense to do that. Too many people are used to the yearly cadence. And they're expecting to see an upgrade. The iPhone 8 is a perfectly acceptable upgrade.

Leo: If you're coming from a 6 or earlier, yes.

Greg: Or a 7, yes.

Leo: Not a 7. I don't think it's a suitable upgrade from a 7. It's too close to a 7.

Greg: But nobody… well, and let me restate that. There are people who are early adopters who will buy whatever Apple ships to have the latest phone for this year. And those people are not going to rush out and buy the 8. They're going for the iPhone 10. And then price for them is not an object.

Leo: My real question is: isn't that what's really going on? Is that, Ben Thompson breaks it down. There's two people who buy iPhones. He actually has an excellent article on Stratechery talking about the strategy.

Greg: He does.

Leo: One of the keys, he says that two of the markets identified are customers who want the best possible phone. And customers who want the prestige of owning the highest status phone on the market. For those customers, the iPhone 10 is really the only option, right?

Iain: Yea.

Leo: And I even think that Apple's really well-aware of this. That one of the controversial features of this iPhone 10 is this bizarre notch at the top. Samsung managed to make a screen as big, in fact a little bit bigger with better resolution, with no notch at all. They just made it start a little bit lower on the screen.

Iain: It seems to be the normal way.

Leo: But I think there's a reason why Apple wanted the notch. It's not for technical reasons; it's not because it needed to be there. It's because it makes it so that you can have one and immediately it's apparent you have the newest, latest, hard-to-get phone.

Iain: Yea, we call this the Cupertino idiot tax. It's basically there are a bunch of people who no matter what it costs will buy the latest and greatest Apple kit. It's not just Apple; it goes across some other phones. But Apple users are fanatical about this. And they're not going to buy the 8; they're going to wait until the 10. People who have just bought a 7 a year ago probably aren't going to buy the 8 for another six months. And what is worrying is that Apple now has this long line of products and as we saw with Apple before Jobs actually came back, that was what was killing the company. You had a plethora of different computers; all of them not particularly good. I do think this exposes a real problem with Apple.

Leo: That's my question. Isn't this confusing for consumers?

Greg: I think you're assuming that the cost of the old phones is actually holding old inventory or producing old inventory. Having too many SKUs is hard and yet Apple's still producing the same 6S that it's already shipped 150 million units of. So the robots that make it, the production lines that produce the screen. The chips that are inside it don't cost them a lot of money to get a handle on. So it's not like keeping those lines running kills them.

Leo: No, that's true. It's not that Apple can't do it. Clearly Apple has logistics down. It's a question of whether it confuses the market. Now Ben does point out there's a third Apple phone buyer. Customers who want to own a top-of-the-line iPhone but can't afford one. And it's his position that that's what these other ones are for. Particularly the 6S and the SE.

Iain: Well yea if you've got a MacBook and you bought into the idea that…

Leo: You want to be Apple. You want to be part of the group buy you can't quite afford the 10 or even an 8. So that makes sense. He says that Apple's taking a pretty significant risk, in particular with the iPhone 8. He says ‘we know the company can succeed selling the best phone.' But he points to the 5C, the one with the plastic-color back. The example of building a less-than-best phone was underwhelming. It hardly sold. So he asks, ‘how many iPhone buyers will forego the 8 to buy the 10?' It's my suspicion that that's what's happening. Is that a great many people either are that third category and they're going to buy or most of them will stick with their iPhone. If they're buying an iPhone, they're going to get a lower-end, less-expensive iPhone. And the rest are status-conscious people or people who want the best phone. Really it's the best iPhone. Because I would argue that the 10 isn't particular spectacularly technologically advanced.

Iain: You see this is what kind of is worrying me about Apple's strategy at the moment. And since Jobs died, they haven't come up with a ground-breaking product. It's just been iterations of what came before.

Leo: Well look what's happening with the Watch now. They released a Watch that has massive technical issues with connectivity.

Iain: And also is a really bad deal for consumers in terms of data costs. You're not actually adding that much to your data costs but having to pay an extra $10 a month. Just like, there's only so long you can squeeze sheep before things start going out of hand.

Leo: Here's the interesting thing: I don't think it's going to hurt Apple. It would hurt any other company. I don't think it's going to hurt Apple.

Iain: It would be difficult to hurt Apple. But you know, Apple used to be the same God-mode technology company and they lost it in the mid-90's.

Leo: They've pivoted. They used to be a God-mode technology, now they're a fashion company. They're a status company. And I tell you what, I see among affluent people who can afford them, iPhones completely dominate. If you can afford an iPhone, you buy an iPhone for the most part. Only a few geeks like us prefer Android phones. And I think they continue to own that. And they don't own it for technical reasons. The whole noise about AR, like these phones were going to be the next breakthrough in AR. I downloaded all the AR apps; there's nothing! This is not a breakthrough in AR.

Iain: Their VR headset, I tried it. I got a unit of that, tried it out, actually the amount of good VR stuff out there which you can realistically download, put onto a phone and run, is minimal. We're still in the hype cycle upswing on this one.

Leo: The funny thing is, the hardware you need to do really good AR is actually on the iPhone 10. It's just facing you. It's facing the wrong way and it's used for two and only two things. This is very typical of Apple: they put NFC in but they didn't allow anybody to use it. They put all this super-duper connect technology with a dot-painting projection lights and the infrared sensors. And point it at you so you can do Face ID because they decided unaccountable to remove a perfectly good biometric authentication that everybody liked and gotten used to. It was very effective.

Iain: And it was easy to use.

Leo: They removed it so they had to put this face recognition in so that's one reason you get this. And the other reason you get this is so you can do animated emojis and you're not getting any of the AR benefit. If they put that on the other side, that would be a tango-like high-quality AR engine. But they didn't.

Greg: Then again, they're putting it on the iPhone 10 and they're not putting it on the iPhone 8. They could have put it in the iPhone 8 and sold it to the mass market. The iPhone 10 is intended to be a test. There's a vision of the iPhone 10 as a trial. Can we produce enough OLED screens? Can we produce units with the Face ID capability?

Leo: They're not even producing the OLED screens. They're not producing any of these components. They're buying them from Samsung.

Greg: Sure, they are but can Samsung produce them at Apple iPhone numbers? Can Samsung produce a million units a month and scale up to 10 million units? And Apple didn't think that Samsung could do them. And I think the challenge is that if they're trying to put an OLED screen into the iPhone 8, that the fear is that Samsung wouldn't have been able to produce enough screens to meet demand anytime in the next year. No matter how many robots… I mean you see Apple spend like $4 billion pre-ordering components which is giving those companies enough money to go and buy the robots. Some of those robots are like $250 million each, to make some of these parts inside of here.

Leo: Right. We should thank Apple because this is this kind of thing since 2007 that's propelled so many other markets. Because Apple has made it easier and cheaper to make all sorts of these components. That's why we have drones, we have so many amazing technologies. Frankly it's why we have all these other good smart phones. It's because Apple put all the money up front to make the pipeline…

Iain: If you look at how they've dealt with some of their supplies, it's been slightly less than ethical. But at the same time, you're right. Apple didn't invent the smart phone. It just made it sexy. It made it something that people actually wanted.

Leo: And they sold them in massive quantities.

Iain: Absolutely. They deserve credit for that.

Leo: Ben has an interesting theory about the iPhone 10. That it's really intended for China where the number one… first of all, Apple's been suffering in China. They've been beaten by the Chinese by WowWee, by ZTE, by Xiaomi. They're doing very well in China and iPhone sales have plummeted. But it's apparently a very status-conscious market. And Ben's in Taiwan so I think he has some insight into this. And he says the iPhone 10 will be a massive hit in China. And I wouldn't be surprised if most of the early iPhone 10 supply were ear-marked for China.

Iain: Makes sense. A lot of money slushing around there.

Leo: And Apple would love to come back and love to get that market back. Wall Street Journal had a story that two of the components in the iPhone 10: Romeo and Juliet. As one might expect are a pair…

Iain: That kill each other?

Leo: They both die at the end. No, they're a pair of components that are needed. And one of them is behind-I can't remember if it's Romeo or Juliet-and that's what's going to hold up… this was a story earlier this week… imbalance with modules fuels concerns about widespread sales shortages.

Iain: They're not going to sell… if they want to keep this as a premium product, make it fairly difficult to buy. Have a long waiting list. If you want to flood it into China and put a bunch of stuff there, that's fine. We could end up with a situation where we actually get people queuing up in China to buy iPhone 10's and send them back to the US rather than the other way around. The way it was five years ago. I don't know. It could work in China. But it's just a lot of money to spend on a phone and yea $1,000 for the base spec model. That's pushing it.

Greg: But at the same time Apple's not abandoning those other users. It's keeping the 7, the 6, and the 5 for those customers who want it. And it's not producing a cut-down version of it. It's still producing the same premium phone that it was producing just two or three years ago. You know what, for a lot of people it's actually perfectly functional. I want to come back to the China thing. I think there's one thing you need to realize about China too: most of the American tech companies have actually been booted out of China. No Google, no Facebook, no Netflix, no Amazon, right? All of those have been chased out of China because they weren't conformed to what the Chinese government wants. And Apple is almost the last of the American tech companies that are still there. We'll talk later on about Scott Galloway who's talking about how the US tech giants are starting to face a lash back. I hope we talk about it because it's one of my favorites.

Iain: Yes.

Leo: Yes, I really want to talk about that.

Greg: Yea. And you know so Apple is one of the last US tech companies that's doing business in China. So if it does something specific for the Chinese market that makes absolute perfect sense.

Leo: They already did. They yanked the VPN apps from the App Store.

Iain: They've shown themselves quite willing to play ball when it comes to dealing with Chinese authorities.

Greg: Don't go all pro-Chinese here, right? Because that's what you're effectively doing. Remember that Apple has been curtailing to any legally legitimate challenge from any government from anywhere in the world. Be it Australia, the UK, the US, as long as the challenge requests are legitimate and formed by the duly-elected government in charge, Apple will always do that. And it always has done.

Leo: I don't even think it's a bad strategy. You might have political qualms about it. Humanitarian qualms about it. I'm glad Google for instance decides not to play that game. But if you're from a purely capitalist business point of view, I understand why Apple is doing exactly what it's doing. I think the thing that's hard for me, I think the thing that we have to recognize is that Apple really isn't a tech company exactly anymore. It's a jewelry company.

Iain: Fashion.

Leo: It's a lifestyle company. It's a marketing company. And that's a perfectly fine thing for it to be. It's a good business.

Greg: It's a very popular business model.

Leo: Nothing wrong with it.

Greg: Google runs the same business model.

Leo: I know but it's sad to me because I'm a geek and I want it to be a tech company. I don't want it to be a fashion company, a lifestyle company.

Greg: No, the last 10 years most tech companies have been fashion companies or image-conscious. Or about selling, how about monetizing...

Leo: Well that explains why the Google Pixel is so damn ugly. If this is Google's fashionable statement, they've got a problem. They've got to hire Angela Ahrendts or somebody.

Iain: Well it's really weird what they've done with the Pixel line. Because when they started out with the Nexus line, they were cheap, barebones…

Leo: They were developer platforms.

Iain: They were developer units. Then they brought out the Pixel last year, jacked the price up nearly 40%. You didn't get a lot of extra for it. You got a re-skinned version of Android. You know, and they're like we want to compete with the iPhone. We want to be a fashionable phone. And you're right, it's butt-ugly. Compared to…

Leo: We'll see Wednesday what they can do. The early-leaked designs look a little bit better. They're full-bezel. I agree with you. I'm really disheartened if they take the headphone jack out.

Iain: Yea, unfortunately that seems to be the way of things at the moment. Headphone jacks are becoming rapidly extinct.

Leo: What is Google doing? They spent a billion dollars to buy some of HTC's assets. Remember that they bought Motorola. It didn't go well. They sold it at a loss. They tried to be in the phone business.

Iain: But they kept access to the patents.

Leo: Really what they wanted was the patents. So they got the patents but they weren't trying to be in the phone business. But apparently they're really now trying to be. HTC says, ‘oh no, we're going to still make phones.' That I find hard to believe.

Greg: We've seen a rash of articles this week about people talking about how Apple's integrated supply line. Because it owns its chips and designs its own CPUs and gets them manufactured. And because it has complete control of the iPhone assembly-even though they outsource assemble to Fox Kernel-in China they're still very heavily involved. And people are staying this vertically integrated supply chain…

Leo: It's brilliant!

Greg: Last week we saw them get into the Toshiba deal.

Leo: It's Tim Cook's greatest creation.

Greg: Yes. And now we're seeing them get into, partnering with, or rumored to be partnering with Bank Capital to drop a few billion dollars into buying Toshiba so they can get control of the DRAM supply. And I wonder if Google's saying, ‘you know what, Apple's doing this. We have to start thinking about doing the same thing before they get too far away from us.' If Apple gets too far away, gets this integrated supply and they leave something… Apple's already three, four years ahead of Samsung. If they continue to be able to do this, then where does that leave Android?

Iain: And operations are traditionally Tim Cook's strong point.

Leo: This is where he comes from.

Iain: Yea, this is his background. This is what he does very well. He's very good at taking over the whole supply chain, squeezing supplies to make a high profit.

Leo: And this is Steve Jobs' vision. He always said if you want to succeed you have to own the whole stack: hardware and software. And taking it one step farther, you have to make the chips. You have to make all the parts. And they have shown that they can make the benchmarks. As I've said for the A11 bionic, astounding! They run rings around the Samsung Note 8 for instance.

Iain: This is why I don't understand why Apple isn't playing to its strengths. I mean if you look at the security aspects of it, owning your own hardware and software stack, proper code-checking before it goes into the store, there's a great selling point for Apple phones on security because Android in the Play Store we've had let's see, malware outbreaks in January, March, April, July, two in September. It's getting silly at the moment. And Android users are disproportionately getting hit by viruses. So they should use this as a selling point.

Leo: It's a huge opportunity. Ironically they're not selling to the technically literate. They're selling to… it's a lifestyle. It really is a lifestyle which is nothing that works.

Greg: So the transition here is that the integrated supply chain fires in the face of everything that we've done for the last 20 years in tech. If you go back to when Microsoft started, their value was that they disaggregated the operating system away from the computer. And the PC disaggregated the supply chain of the hardware because it used the Intel CPU and somebody else's chip and BUS. The power supply was all stock off the shelf. The idea was that we should be disaggregated into pieces and we should have each company bid to make the piece. And now all of a sudden, Apple is integrating it back together. So if you continue to follow Ben he talks a lot about his theory of aggregation. What he's saying now is that you disaggregate and what you do is you bring it back together in a different way. You aggregate or you bond it back together in a different way, making sure you now control some element of that, that new aggregation now that you own it. And if that theory of aggregation holds true then what you're seeing is now Apple is stabilizing or morphing into a solid lock on the thing that it's got. But somebody's going to come along and disaggregate it in the future. And this is what's happening in China. Again Ben Thompson from Stratechery says in China the point is that the aggregation happens in weeks above it. Like every Chinese citizen uses a software. So the phone underneath whether it's iOS or Android or Windows or whoever's operating system, actually matters less to a large enough audience as it does say in western markets. So there's actually a different transition in the way the Chinese market to the western markets.

Leo: It's a complicated world we live in. I don't pretend to understand what these companies are doing.

Iain: I think a lot of it now is coming down, as you say, the hardware is less and less important. It's coming down to which ecosystem you buy into.

Leo: And Android is not really an ecosystem. It's too fragmented. It's now a Samsung or a Google ecosystem.

Iain: But if you use say, like many companies do, use Google Apps in the office, you're a Gmail user…

Leo: It's kind of a loose…

Iain: Yea, there's an incentive to stay with Android and that thing. If you're using MacBook Pro and Mac OS all the way along the line, there's a massive incentive to go with an iPhone. I mean my wife has just upgraded her phone. And I tried her out a couple of Androids and she's just like yea but when I tried linking in and syncing my iTunes and getting everything else done, there's going to be an enormous amount of work changing ecosystems. So you know, it's increasingly getting locked into these things.

Greg: I think it's certainly possible. Asking people to change is actually incredibly hard. Humans are not very good at change as we well know. And once they've walked down a certain path it's very difficult. Recently I bought my wife's parents some iPhones. But the reasons I bought them iPhones instead of low-cost… they can barely use it to send an SMS message much less surf the internet on it. Much less take photos or listen to music. But the reason I bought them iPhones is because I have to support the blasted things and I just can't be bothered working out with Android. It was just too hard. All the Android phones I wanted to buy for $300 were all running Android 4, which is just so basically insecure. I was just not willing to give it to them.

Leo: It's fascinating to watch. I think that I once read a tweet-I think it was this morning-where the guy was talking about all the pundits who think they understand why a company does what it does. And when pundits who are not running the company say things like, ‘well I don't understand why Apple is doing this,' it's very likely they don't really understand what Apple's up to at all. And I would say that Tim Cook probably knows a lot better what he's up to. But it's fun to try to penetrate the kremlin wall and understand a little bit better what their long-term strategy is. It's not that it's becoming less and less a tech story though.

Iain: Oh yes.

Leo: But ironically it's funny because in the process of controlling all the components in an iPhone, they've actually put a processor that's well ahead of anybody else's processor in here. And I would submit unnecessarily. It provides power to well beyond anything that you need. And yes they make it themselves so maybe that's the benefit and not the power. But maybe there's some goal down the road. Maybe this phone… that's what we thought at first, well it's all going to be for the AR. But there is no AR.

Greg: I think they're seeing in the market. The point is, for example I have an Apple Watch 3. It arrived earlier in the week. I'm not a huge Apple Watch fan. I'm a modest user of one. I had an Apple Watch 0 and it was fine. It wasn't bad but I wanted something that just ran a little bit faster. But particularly I wanted something a little bit lighter. So the new Apple Watch 3 is quite nice. And what I've discovered is I now get two days charge out of it.

Leo: How does he do that? That's impressive. Given the day of all these new radios and so forth. Mine comes tomorrow and by the way to support my thesis that it's all about fashion-it's indistinguishable from the other Apple Watches instead for a very visible red dot on the stem. And that's not there by accident. That's to say I have the latest Apple Watch. Right? That's the part you point at people.

Greg: So I have the LTE version but I don't it connected to the LTE network. And probably never will. I just wanted the other stuff that was in there. So just because there's technology in something doesn't mean that it gets used. It's a bit like the FM radios in the iPhone, which was an issue.

Leo: Let's talk about that. I would like to know what you all think about this.

Iain: American Pie shooting his mouth off again.

Leo: But maybe not! Maybe not, I don't know. Apple says well there's no radio in there. Except that there is, sort of.

Iain: Kind of.

Leo: But I'm not convinced that Apple's right on this one. I'm not sure. That's why I want the smarter minds who are here to explain it to me: Ian Thompson from theregister.co.uk. Greg Ferro from the Packet Pushers Network, an excellent technical podcast network. And of course an ethereal mind on the Twitter. Our show today brought to you today by my host. Actually the company that hosts 28% of all website in the world: wordpress.com. Well, that's not strictly fair. 28% of all the internet sites in the world run on WordPress. Some of them host it themselves, some of them use WordPress hosting. Actually some of the biggest companies in the world run on worldpress.com using their VIP plan. Including Quartz. Quartz when it came out, everybody said this is the most amazing website-look at the technology they're using. It was WordPress! My blog, not anywhere close to Quartz is using WordPress. And your business should be using WordPress. Everyday millions of people go online doing one thing: trying to find out about local businesses. Trying to find out about your business. If you're a plumber, if you're selling dishes, whatever your business is it doesn't exist without a website. And it's not enough to say oh we got a Facebook page or a Twitter account. That's not your page. You need to have your own website and when you don't, if you don't, it's because it's too much trouble. It's I don't want to become a web guru. You can do it on WordPress. It's easy! It will make it easy for your customers to find you, to connect with you, to hear how you can help them. Your business must have an online home. And you don't have to be a web expert to do it. You just need a wordpress.com website. Choose from hundreds of beautiful designs. It has built-in search engine optimization. It'll boost your visibility. Social sharing is automatic so your visitors can help promote your business on their Twitter and Facebook. You can activate other WordPress plugins functionality your business needs. It's all the goodness of WordPress but you don't have to worry about keeping it up to date, you don't have to worry about keeping it secure. They do that for you. And with a wordpress.com plan you can get expert support. You focus on your business, they'll make your website the best. That's what you want. Wordpress.com is also a community. A community of people who can help build your traffic because they've got a follow button on there. I'm a huge fan. It couldn't be easier. It's a great way to start. And because it's such a dominate platform, if you do decide, I want to hire somebody to help me with my site, there are plenty of experts out there. All the software out there supports the WordPress API. It's just the king of the hill. Wordpress.com/twit if you go there right now you can get 15% off any new plan purchase. That's wordpress.com/twit, 15% off. And we thank WordPress so much. Not only for supporting TWiT but for helping me keep my website going. So, Ajit Pai, Chairman of the FCC joined on something that actually I agree with. Many phones have FM radios. And in other parts of the world there's FM radios on the phones. The carriers in the United States make these companies disable their radios if they're in the phones, disable the radios, because they don't want people listening to free broadcast music. They want them to use expensive streaming services. That's a business model for them. And so the United States, most phones, even if they have the hardware don't turn on the radio. I agree with Ajit Pai. In fact it's not just Ajit Pai, the National Association of Broadcast and others have said there's been a whole movement to turn these radios on. They're useful particularly in cases of emergency. Forget what the carriers want. Forget their business model. The hardware's there, turn them on. Now Ajit Pai said Apple should do this. Put the safety of the American people first, step up to the plate. Apple is the one major phone manufacturer that's resisted doing this. I hope the company will reconsider its position, activate those FM chips. To which Apple responded, Apple cares a lot about our users. Especially in crises that we've got. Emergency services, the medical ID stuff on the screen, we enabled government emergency notifications. But iPhone 7 and 8 models do not have FM radio chips in them. Nor do they have antennas to support FM signals.

Iain: That's the key. It's the antenna I think. You might be able to job an FM radio. They've built them out of the design spec fairly early. But you've got to have the antenna to make it work.

Leo: I think there's an FM radio in there. I'm not convinced that there isn't the hardware to do it. I understand the antenna because on all these other phones the antenna is the headphones. And Apple of course has no headphone jack. That's why notable they mentioned the iPhone 7 and 8 models. So you tell me, you're in Britain, don't all your phones have FM radios?

Greg: No.

Leo: No?

Greg: No. So the way I think it works is every FM radio is fundamentally a think called a DSP or a digital signal processor.

Leo: Yea, software radio.

Greg: Yea, so what it is, is in every iPhone there is a chip. We usually call it the baseband modem. But a baseband modem is usually a gaggle of DSPs that receive the signal. So that signal is normally 2G, 3G, 4G, LTE, LT plus, blah blah blah. And every iteration of the iPhone includes a new version of the baseband modem chip. And one of the things that I believe-now I'm not an expert here-but I believe you can often program the baseband to be an FM radio because there's no difference between an FM radio signal encoded onto that chip. You can use basically a piece of software to decode it and then you can then use the DSP functionality. So it's possible that the baseband chips that are in the iPhones have DSPs that are capable of being used for FM radios. It does not mean that they are necessarily enabled in the chips that Apple has purchased. So that is they might be crippled at factory. If indeed, I suspect that the volume that Apple's making those chips, they've been designed out. In a custom design. In the same way that the A11 bionic chip, A8 and all that sort of stuff, is really really customized. You don't want a DSP in your baseband modem burning electricity. What you probably want to do is just shut it off. So usually the way you do it is when you design the chip you burn the links in there so that that part of the chip just gets isolated and it doesn't draw current. And so it's not creating heat that you have to get rid of and it's not drawing current so that your battery runs down. So that's part one. For a lot of phones it is true that there are DSPs that can be repurposed. There is no guarantee that those DSPs are actually enabled or even in the silicon that Apple buys. Point one. Point two: you must have an antenna to feed the signal into the DSP. Every antenna must be custom-designed to receive the frequencies on which you are receiving. So that is why in your iPhone around the top here is your 2.4 GHz. The side down here is your 5 GHz. And over here is your 2G, 3G, LTE, right? Every Apple iPhone for the last five years has the steel band around the outside as the antennas. And you see these little divots around the side, the plastic bit which actually separates the antennas. There is no antenna in here that would receive an FM signal. It has to be a very precise, like somebody did antenna design at university, the physics that goes into this is just mind-bogglingly archaing.

Leo: Isn't it the case though, Greg that many phones use their headphones. The wires in the headphones as antennas. Those are not specially designed.

Greg: Well your iPhone jack has to take that signal out. Apple uses the TRS or the four-way jack to be the headphone controller. So you can't use it for… you need to have something that's going to pull the FM signal out of that and then decode it. And that means again there must be chips inside the phone decoding that off the headphone jack.

Leo: Apple says 7 and 8. It doesn't mention other iPhones that it sells. I don't know, I'm not convinced that Apple's… I think Apple might be a little disingenuous.

Iain: Oh really?

Greg: If you're using an FM radio inside the BMC, you'll probably have to pay a license fee for it. And because the company whose intellectual property produces those chips. And then the fourth and final thing is that there must be software in the operating software to drive the FM radios. And if it's not in the operating system, you can't just suddenly turn it on. Because you would have to write that software and then deliver it on an over-the-air update. So there are four very sound reasons as to why there would be no FM radio in any iPhone for the last five to ten years, if ever, I don't think.

Iain: I think also Pai is kind of being slightly disingenuous about this because this whole argument is in the event of an emergency, an FM radio is a really useful thing. Well, yes, if you've got a dedicated amount… a hand-crank radio. But if you're relying on your phone whose battery life is probably not going to last more than about a day or so. And you've got no power to recharge it with, at the end of the day it's just a very expensive dual-stop after a day also. And it doesn't help save people's lives. So rather than try to mandate the handset manufacturers have to include this functionality, give people a tax credit for buying emergency radios. Easiest way to solve this.

Leo: I think ultimately it's a little bit of a tempest in a teapot.

Iain: Well it just happens to be also coming out the very time…

Leo: You should probably have an AM and an FM radio. And you should probably have a standalone dedicated radio.

Iain: But he's also bringing this up at just the time when he's trying to ram through the killing of net neutrality. And this is a really good way of distracting from talking about those issues.

Leo: I remember being at the NAB show last year and broadcasters were asking Apple and other phone companies to turn on those FM radios. There's been a move to do this even prior to Ajit Pai, under the previous FCC Commissioner.

Iain: Under Wheeler, huh?

Leo: However, if you can't do it you can't do it.

Greg: If you're a government and you've got a citizen who doesn't like to pay taxes and you've got an existing system that's built around FM radios that's used to deliver emergency information, what are you going to do? Are you going to go out and start building a new emergency system to notify people that something's gone wrong? And then you become dependent on your carriers. Like the government gets screwed over by Verizon and AT&T even more than it currently is. So what you want to do is start saying I need to use the existing stuff that's already bought and paid for. FM radio ultimately actually requires-it's very good for emergency. AM radio is actually much better. They'd be much better off saying let's put AM radios in because those transmitters go for hundreds and hundreds of miles.

Iain: It's relatively low-power as well. Your phone will last an awful lot longer.

Leo: The good news is as Apple quite rightly points out there are now emergency notification systems built into phones.

Iain: Oh yea. On Tuesday morning, everyone in our office's phones just went crazy.

Leo: It was very annoying.

Iain: Yea, they were warning us that it was going to be 85 degree temperatures. I have to say people in Arizona are just like, what it's nighttime.

Leo: It's hot!

Greg: I mean the thing about FM/AM is all so mute because the government has recovered most of those frequencies and then resold them off to the carriers to use for LTE. So the 700 MHz range that AM uses around television and stuff has already been recovered. And now they're flogging it off for billions to the telephone companies. So it's a bit disingenuous, quite two-faced really. There's a few things here. First of all, Ajit Pai is obviously an ignorant nut job because this is underdeveloped technology. Did you see that? I was really polite! And it's obviously kicking Apple here in particular or any of the phone companies, handset makers, it's an instant win. Because anything he says they can't exactly get on his case and make his life miserable. So he's really taking a shot at somebody who can't shoot back. And the fact that Apple's responded is actually quite interesting and normally they would have just ignored him and went, ‘you're an ass. Why am I even listening to what you're saying?' But what they've actually done is responded and pointed out… and like I said, four technical reasons that I believe, any one of those four is a killer. But there's four quite reasons why there will be no FM radio in any phone unless the government sits down and mandates it and makes it a condition. And that's not going to happen in the US with the current political climate.

Leo: Alright, everybody should go out and buy an AM radio you can crank.

Greg: Exactly!

Leo: The phone is not a good place for that.

Greg: You don't have a crystal radio that you've made yourself?

Leo: Everybody has one of those. I actually have an AM transmitter in the studio. I don't know what for. I'm ready.

Iain: So in other words when civilization breaks down with the next big earthquake, we're all coming up here and starting up the new United States.

Leo: Broadcasting from Petaluma! Let's see, thoughts on this Bluetooth/WIFI issue on iOS 11? There is a button in iOS 11 in the control center where you would quite logically look for it where you would turn off the Bluetooth and WIFI radio. Except it doesn't. And even if it did, it only turns it off until the next morning.

Iain: Apple knows best, Leo. Come on. Shame on you for thinking just because you bought a product you should actually have any rights to saying how it works.

Leo: It's not a mistake. You can by the way go into settings and really turn it off.

Iain: You can put it in Airplane Mode. That's the easiest way to get around that.

Leo: The really big issue is that there are good security reasons why you might wish to turn off WIFI or Bluetooth. And if a company puts a button on their phone that says ‘Turn off Bluetooth' or ‘Turn off WIFI' then it should do that.

Greg: So if you force-press the WIFI button…?

Leo: It will open up the WIFI settings. And then you can turn it off.

Greg: Yes, and now it actually shows you a much more detailed breakdown. The reason that the WIFI and the Bluetooth stays active is because you might be using the Bluetooth as a hotspot. Or you might be using it for an Apple Watch.

Leo: But why have that button?

Greg: So if you turn off Bluetooth, you're turning it off for connectivity or maybe for your… but you might want to keep it running so if you're using Bluetooth to run your Hues for example, your home automation system, you might want to keep that local network connectivity running.

Leo: So really they're saying you're just too stupid to know why…

Iain: That seems to be…

Leo: You might want to leave this on. So we're just going to give you a dummy button that makes you feel…

Iain: In more ways than one.

Greg: So when you turn off Bluetooth you probably didn't make… I actually don't want to airdrop photos or I don't want my Watch to talk to my iPhone.

Leo: But maybe I did want that.

Iain: I almost never have Bluetooth on on my phone. And I only have WI-FI on when in a trusted network situation.

Leo: Because you know about bad guys. You go to DEF CON.

Iain: I was at DerbyCon last week in Kentucky. And some of the things these guys can do with Bluetooth. You should have that stuff off and locked down as a matter of cause and only turn it on when you need it. Because yea, any kind of… same with WIFI to a point, but Bluetooth because of the complex nature of the Bluetooth stack and the amount of code that different manufacturers and different people manage to cram in there, it's an incredibly unwieldy standard. Riddled with security holes. So unless you absolutely have to have it on, shut it down! And also save on battery life. Wow, that did not sound good.

Leo: I take it you're an iPhone user, Greg Ferro?

Greg: Well I have the whole suite. The panoply of Apple stuff. Just literally because the idea of futzing with the technology drives me insane.

Leo: I love to futz! I'm a futzer.

Greg: I don't mind futzing but when I got stuff to do let's just say that the idea of trying to make my Android talk to my Windows machine, a life-shortening experience I just don't want to go through. So the idea here is that the fine is going to do what most people would think it would do. I'm disconnecting from my WIFI but I might actually still want to talk to my Watch. I'm not expecting my Watch to suddenly stop working. So that's what they're trying to emulate. Unfortunately they didn't communicate it very well. They should have done better icon design and visibility to get that transitioned from the old to the new. But then again what do you expect from Apple? Over the years Apple's done all those things, consistently made decisions and you just had to suck it up. So why whine about something Apple has done consistently for 10 years?

Leo: Yea, Apple knows best. What's the story with the Watch now? The connectivity issue's kind of interesting on this new series three Watch with LTE. It turns out that… I understand why this happened. I understand how this bug crept in. What I don't understand is why no one noticed it until they actually sold the product! But the problem is if you have a WIFI access point that uses a captive portal and you've already logged into it on your phone and then you re-enter that place-let's say a Starbucks-minus your phone, the phone has the password. Your Watch says, ‘oh I know this one, I can join it.' And it immediately loses all connectivity including LTE because it turns off the LTE radio to save battery. The WIFI's not actually connected to anything. So you walk into a Starbucks… it sounds like a joke. An Apple Watch walked into a Starbucks and lost all connectivity. This is an easy thing to fix obviously.

Iain: I'm amazed they didn't pick it up in testing.

Leo: That's what I don't understand. Why did they not know that about this? Why?

Greg: Have you guys ever built a WIFI network with a portal in it?

Leo: No. Those captive portal's a broken system anyway. It's a terrible idea.

Greg: Yea, so there's massive transitions going on in WIFI. Up until now we've always used HTTP portals. That is if you go to a webpage it's usually been HTTP which is clear text, which has been very easy to intercept. You just capture it, you divert it off to somewhere else. And you type in your username and password or hit the okay button and away you go. And that means that if you're in the Apple Watch and you want to test, what you used to do is send out a web request. And if the connectivity didn't work after that, you knew there was a portal there. What we're seeing is a transition to TLS 1.3, the new HTTPS. The security standard is no longer HTTPS, it's directly called TLS 1.3. And if the portals are shifting… if you're trying to attach to an encrypted website or connectivity, then there's no way for the portals to appear. There's actually no way for a portal to be captured. There is a bunch of work going on in the ITF to try and get captive portals coming up. But it's not reliable to predict whether there's a captive portal in the WIFI you've just connected to. So you can't actually know easily or reliably whether you're… all you can do is connect to the WIFI. But are you connected to the internet? How do you test that? And in the moment there's not a reliable test for that.

Leo: That's interesting. So my description of the bug is accurate. That's what's going on-your phone knew about this access and had the connectivity associated with it. But the Watch minus the phone couldn't do anything with it?

Greg: Yea, so if you go down to your favorite fast food junk store and you log in with your appropriate details and so forth, then your phone has a cookie in here that's cached to say you've signed up to fast-food portal. And the next time you turn up there, your WIFI connects and away you go. But your Apple Watch doesn't have the cookie.

Leo: Right.

Greg: The details for the wireless for the Watch come from the phone.

Leo: So the Watch knows if there's a phone present or not. So a Watch walks into a bar, sees WIFI, tries to connect, knows though that at this point it doesn't have a phone next to it. So it's a potential problem; it can't test whether there's internet access or not. Should it just not join that WIFI?

Iain: Pretty much.

Greg: Well it's a legitimate WIFI that your phone knows. It got a list of WIFI that you have connected to.

Leo: Does the phone know though it was a captive portal as opposed to a standard WPA or password?

Iain: You should be able to sync that data across so the phone knows what's a reliable network.

Leo: By the way folks, if you're puzzled like I am, what we're trying to do is figure out how hard it would be to fix this problem. We know the problem exists. Apple says it's working on a fix. It sounds like Greg, you're saying this is actually pretty hard to fix.

Greg: So there are different ways for portals to work. If you signed onto the portal then it may have stored the MAC address of your phone. And said this MAC address is allowed to go through. It might have stored a cookie in your web browser. It may have cached-this is quite complex so I'm trying to keep it fairly simple-there are many different ways of storing some sort of credentials to say, ‘yes, you've been to the junk food restaurant.' And you've signed up for the WIFI and passed it all. And they're going to cache that for a month or so before they force you to re-login. Well your iWatch, your Apple Watch connects to the WIFI, WIFI-preferred because it doesn't want to use bandwidth over the LTE. And it connects to the portal quite blindly thinking this is a perfectly legitimate WIFI network. But it doesn't have any of the validation that you would see that the phone would have.

Leo: So it's unusable. And in the process it's turned off LTE and now it has no connectivity at all. Does that mean your series three Watch, every time you walk into somewhere with a captive portal WIFI setup is going to fail? And there's nothing we can do about it?

Greg: I imagine that Apple's going to put a post-connect validation. They'll probably set up an apple.com web server.

Leo: Well they do now. When you get a captive portal, you go to captive.apple.com. Apple actually…

Greg: That actually just resolves…

Leo: Actually does that work for you? It's such a broken… the captive portal system is such a broken system. But it's what we live with and it's everywhere. That's why it's a matter of concern. Because you leave your phone behind, which is the promise of the series three LTE Watch, you should be able to do stuff with it. All of a sudden you walk somewhere and it's not working anymore.

Greg: So there is a working group in the ITF, working on captive portals. I did a podcast with them, it's published somewhere in the Packet Pushers. We publish four shows a week so there's an awful lot of them. It's still the very early days, they're working on it. There are some answers but they're very arcane. And because of the way TLS 1.3 is built so that nobody can man-in-the-middle it, it's very difficult to suddenly do a captive portal.

Leo: I understand that, yea.

Greg: Yea, so you would understand that the theory behind TLS 1.3, all of a sudden to say I've got to capture that and divert it to a captive portal requires some really deep cryptographic changes. And that's going to take several months, maybe years of work to get it to there.

Leo: On our vacation we were using the WIFI on this riverboat. And in order to use it-it was some kind of captive portal system-in order to use it you would attach to the WIFI and then a page would come up with a QR code. And then you had to go to the front desk and they would scan the QR code. And it was per-device by the way.

Iain: This sounds like something the French would do.

Leo: And at that point they send a cookie or they do a MAC address or something. And well I think it was a Swiss company. Even better.

Iain: Okay.

Leo: And then you would be okay. And you'd be using that WIFI. That seemed like a good system.

Greg: To guess what they're doing there, the QR codes are picking up the MAC address of your WIFI. And by scanning…

Leo: And they're registering the MAC address. That makes sense.

Greg: See you know how there's like eight hexadecimal characters, 16 hexadecimal characters…

Leo: That's perfect for a QR code, yea.

Greg: Yea, and the front desk can just scan that and then the MAC address goes into a database and says this MAC address is permitted for 24 hours.

Leo: That's easy to fix though because you can spoof MAC addresses like nobody's business. That's a simple thing to handle.

Greg: Yea but the risk profile is very light. You're only holding it for a day. You're on a boat. You're in the middle of a river.

Leo: You're busy drinking wine, eating sausage, you know… you have no time for that!

Greg: You just want to send some Instagram's, you know!

Iain: For all the dissing on this, the new version of the Watch has something which is really quite interesting. At last, Apple has embraced the Qi wireless charging standard. Because in the past it's always used while it's charging.

Leo: It was inductive charging.

Iain: Yea but it was the Qi standard but they were bugging around with the firmware and so it would only work with Apple products.

Leo: I could use a Qi device. I couldn't remember; it went one way but not the other.

Iain: Yea, you couldn't charge an Apple wireless charging device on the Qi standard charger. And now you can. They finally embraced this…

Leo: Hallelujah because now there is a standard. And there were competing standards: there's Powermat and other stuff. So, just by virtue of the new iPhones and the new watches supporting Qi, makes Qi it. That's good news.

Iain: Yea, I mean it's already in 90% of the wireless charging mats.

Leo: That's funny because Apple doesn't even make a Qi charger yet.

Iain: No.

Leo: (Laughing). You'll have to go buy a Belkin. But this works with everything. It works with all my Qi chargers.

Greg: Yea, yea, yea, but somebody was on Twitter this week saying that every time the phone vibrates, it actually rotates off the Qi charger.

Leo: (Laughing).

Greg: Because the Qi charger's actually, you've got to be just so.

Leo: You have to be just so. I use a charger from Tilt that is an easel. Very nice and it works perfectly and doesn't fall off, doesn't vibrate off.

Iain: No, I've got one of those for my Nexus. And then Google stripped wireless charging out of the Pixel.

Leo: I know. That drives me crazy. Well, let's take a break and talk about what we expect Google will announce on Wednesday. I'm excited and then sadly, October 4^th was also the say Sonos said, "We're going to make some announcements." But I don't think anyone—they're not going to pay attention. It's not quite as bad as doing your announcements on Apple day, but it's almost.

Iain: Although a couple of companies did use Apple day to bury some bad news.

Leo: That's actually—very bad.

Iain: Yea.

Leo: Yea, that's right. Apple day. Did you go to the spaceship thing?

Iain: Oh, are you kidding? I've been banned by Apple for the last decade.

Leo: Oh, me too.

Iain: We had one of our journalists, actually did a piece a couple of months ago, where he applied to go to an Apple event seven months in advance and then we just printed out all the emails and the responses that we'd get from Apple, just trying to get them to admit that a blacklist exists and they're never going to do it, but I highly recommend you read that. It's one of the few articles that will literally have people crying with laughter, as long as you know Apple's PR that is.

Leo: (Laughing) We'll take a break. Greg Ferro from PacketPushers.net. That's the right address, right? Yea. I see it right behind you. PacketPushers.net. You've got one of those little signs churches have. You need a little—you've got a little statements there, little bomos, epigrams. Trust me, you can dance says beer.

Greg: Yea (laughing).

Leo: (Laughing). I think you should—every time we come back from a commercial, have something different on that little sign behind you, you know?

Greg: I've got—I had this massive passion that I would actually have lots and lots of different things to hang up there and then I got all those hung up and guess what?

Leo: No room. What?

Greg: I just stopped.

Leo: You stopped.

Greg: So, one day I'm going to get—I designed all these myself and got them all printed.

Leo: Oh, neat.

Greg: So.

Leo: So, do more of I can't tell because you're head's in front of it. Do more of what makes you happy. I like that one. Yes. Oh, these are affirmative, positive messages.

Greg: Well, a little bit.

Leo: If winning makes losers, why play? Wow, I'll have to think on that one. Think about that.

Greg: Yea, that's my anti-corporate rant. One of the things about—

Leo: You don't like the NFL either, do you?

Greg: I'm not a fan of large corporations and one of the things is they always talk and say like executive order, crush the opposition.

Leo: Crush the opposition.

Greg: Kill the opposition. But I'm going like they do realize that every time you win, someone loses. And so, every time you lose a deal, the losers know that you're not a winner.

Leo: No, capitalism is not a zero sum game.

Greg: I love upsetting them.

Iain: My favorite game is from a Microsoft engineer who just had eagles may soar but weasels seldom get sucked into jet engines.

Leo: (Laughing). Or my favorite, three turkeys doesn't make an eagle. Is that?

Iain: Ok, I haven't heard that one.

Leo: Actually, I don't think I have either (laughing). That just came to me. Again, I haven't had a lot of sleep.

Leo: Our show today brought to you by my mattress. Man, oh man. You know what? I have to say, travelling's nice. One of the things that I like about traveling is that it's great to get home, isn't it? With your bed. Yea. And oh, man, that was the best feeling. We got home on Friday evening and I'm just thinking, "I can't wait to lie down on my Casper." Yes. And it was a great feeling until about 2:00 in the morning when my eyes are like boom because it's daytime in France. Boom.

Greg: You're missing the wine?

Leo: I was missing the wine. I need another bottle. Casper makes these great mattresses. Designed and made in the United States by a team of 20 engineers and perfected by a community, well, now it's half a million, nearly half a million sleepers. I love this. I'm one of them. Obsessive engineering makes a great mattress, not just the Casper but the new Casper Wave, which features a natural geometry support system and a new top layer. I've got the Casper Wave in my house, the box. I was so tired, I just went to bed.

Iain: You slept on the box.

Leo: I slept on the box. But I will open it this, I will probably open it tonight and let you know how it is. Casper Mattresses delivered to your door. It's a surprisingly compact box. We got, we have a king mattress in a box—well, actually we have that video. You've seen it, where we open up the box. It just opens up. It smells great. There's no—you don't have to air it out. And by the way, I've had mattresses where you couldn't really sleep on them for a couple of weeks. You had to let them breathe. Not the Casper. I don't know what they do. They just do something magical but that's the Casper team. They're a bunch of engineering nerds. Digging into the science of sleep and technology to give you an amazing mattress that delivers pressure relieving supportive memory foam with a breathable open-cell layer for all-night comfort. That's one of the things I missed. I just love how cool sleeping the Casper is. Casper was named Fast Company's Most Innovative Brand of 2017. Free shipping to the U.S., Canada and now the U.K. I also should point out that there's free returns, too. And this is really important. I know a lot of people are reluctant to buy a mattress without lying on it first. But Casper gets its prices so low because it doesn't have that network of middle people who double, triple, quadruple the cost of the mattress. That's how they keep the cost low. So, they don't have those showrooms. Actually, I think they have one in New York, a couple of them. But, most people don't get to lie on it. But don't worry. You've got 100-day trial period. That means you can sleep on that mattress for more than three months and even then you can say, "Yea, maybe not." And they'll come, they'll get it. They will pay you back every penny. You will have absolutely no cost to you. Free shipping, free returns so there is no risk here. I guarantee you though, you're going to love this mattress. Considering you spend a third of your life lying on it, it's important that you have one you love. That's why Casper gives you 100-night to try their mattress out. And look at the reviews. And I mean, seriously, I get email all the time from people saying thank you. I love this mattress. And man, is it affordable. Want to know more? Dive deeper into the science behind the perfect mattress and get $50-dollars towards any mattress purchase at Casper.com/TWiT. Enter the promo code TWiT. That's Casper.com/TWiT. Promo code TWiT. Terms and conditions apply. I have Casper pillows, Casper dog—they make dog beds. They're really nice.

Iain: I thought you said you had a Casper dog there for a second. I was like they're really branching out.

Leo: I need a Casper dog. Actually, our dog passed away so I don't have a Casper.

Iain: Oh, I'm so sorry.

Leo: Yea, I know. I don't have the Casper bed anymore but yea. It was nice for Ozzie. Casper.com. C-A-S-P-E-R.com/TWiT.

Leo: Ok. What are we going to get here with this new Pixel? I am actually excited. There are a number of phones I'm very interested in. Of course, the iPhone 8. The Essential Phone was really exciting until I got it. Well, it's not bad except the camera is just broken. I literally, I launch the camera app and I thought, "Oh, they must have fixed it by now. They took long enough to get it out to me." They shipped it. And it immediately rebooted the phone. The next time it just froze it, so, they're getting better.

Iain: Yea, although—

Leo: It's on my desk, John. The Essential. It's not in this box. You brought me the box and I opened it up and it's gone. I think it's on my desk. It's very pretty.

Iain: But are you running Oreo on any of your phones at the moment?

Leo: Yea, I'm running Oreo on my Pixel.

Iain: I'm running it on my Pixel. I'm getting a reboot about once every two days, spontaneous reboot. And it's kind of like, I can't work out if it's a 3^rd party app or if its—

Leo: Actually, that's a feature on Samsung phones. There's a setting, I kid you not, to reboot every night. Because (laughing). You know why, right? Because it will crash if you don't. So, and I turn that on. Reboot every night.

Greg: And how much did you pay for that experience?

Leo: $830 bucks. Why? It does it when I'm asleep.

Greg: How the hell can you pay $830 bucks for a faulty product and then smile and tell me it's actually good?

Leo: Hey, Windows 95 you had to reboot every day. What's the big deal?

Iain: Yea, there's a reason why we remember Windows 95. It was a really lousy operating system.

Leo: Do you think that's an Android flaw or a Samsung flaw?

Greg: Windows 95 was still a hell of a lot better than LINUX or a whole bunch.

Iain:  You're slicing words, Greg, and I'm not going to take it.

Greg: The operating systems of the day, they were a hell of a lot worse.

Leo: The Essential Phone has the notch too, and I have to say, even though it's a teeny-weeny notch, I don't like it. And I'm really worried about this notch in the iPhone 10 which is bigger. Why put a notch in? Why? And then you can see—

Greg: Why not?

Leo: Why not, I know. I don't believe it was dropped. There is a crack right there in the glass. This is supposed to be titanium. Anyway, not selling that well. That's the Essential Phone. So, then the Note 8 comes along. I'm excited. It's got a stylus. It reboots every night just like it's supposed to (laughing).

Iain: Must control fist of death.

Leo: You know, it's got a beautiful screen.

Iain: But how often do you actually use the stylus?

Leo: Absolutely never. But if I ever were to go to a bar and want to get a young lady's phone number, I can just—instead of putting it on a soggy napkin, I can just whip out my Note 8 and—

Iain: Depends on what bars you're going to.

Leo: And say, "Would you mind giving me your phone number?" No. That never happens.

Greg: Your teenage children mustn't have taught you exactly how to do it these days. It's called AirDrop or texting.

Leo: Or Tinder.

Greg: Why would you—yea. If you're going to swap phone numbers, it's not going to be using it.

Leo: It's a fantasy.

Greg: In fair, back when I was growing up, it was lipstick on the chest, you know, the number.

Leo: Oh, love that. Very romantic.

Iain: There was a really unfortunate trend in London for a while of people using the receipt slips from their ATM. And what they would do is chuck a load of money into their account, and then get the receipt.

Leo: Oh, smart. I've got a thousand dollars in my account.

Iain: Yea, here's my number. And the minute they turn it over, oh, these guys have got a lot of money in his account.

Leo: He's a rich bloke. Then we've got the iPhone 8 Plus. I like it. I got the white or silver I guess it is.

Iain: It's ok, but it's a bit blah.

Leo: It's just like the—I like it. It's a good camera. It's very much like the 7 Plus, like the wireless charging. Glass back, that's going to break right away. Going to break right away. But I'm still waiting, I'm interested in the LG V30. Good reports of that. They put the—they have a fingerprint sensor and they put it in a sensible spot, right in the back in the middle like Samsung. It has a headphone jack I believe. I am going to be very mad if the Pixel 2 does not have a headphone jack.

Iain: I am going to be furious, particularly if they can't justify it because one of the reasons I want to go to this is to get—

Leo: Courage. It's courage.

Iain: I have not yet had a reliable answer as to why the jack has to go.

Leo: Well, that's my point. If you can put a jack in a Note 8 which is jammed with technology, and there's enough real estate to put a jack in there. Why can't Apple?

Iain: I know. I know.

Greg: Two reasons. Waterproof. You can't—

Leo: This is IP68. This is IP68.

Greg: Yea, sure.

Leo: Well.

Greg: Drop it in a bucket of water, let's see how it's going to go. I mean it already doesn't work. You might as well drop it in a bucket of water.

Leo: It works. It reboots every night on purpose.

Greg: That sounds faulty as far as I'm concerned, right? And the second thing is actually that the structural integrity, because of the way these things work, have you ever looked at the inside of the structural integrity, the steel band that goes around the outside is actually the load bearer. There's a bunch of other load bearing things inside it here. But the actual jack where it goes through the thing actually becomes a weak point and phones often fracture around that. And getting rid of it actually simplifies the construction of the phone. And it reduces cost.

Leo: I like headphones. I'm sorry.

Iain: Yea, you've got an enormous user base of headphones out there that use this.

Greg: Sorry, there's some whining noise. I've got this whining noise in my ears.

Leo: So, you're of the opinion, you think all connectors—I mean, that's got to be the same problem for a Type-C charger, a lightning charger. You think all connectors are going to be gone, is that the--?

Greg: That's why the lightning charger is thin, so that your structural integrity can be maintained. So, there's enough material around the outside of it so that it's strength can be maintained and the lightning connector which is designed in such a way that you can actually waterproof what goes inside. Now, that's not to say you can't do it at some level, but the physical depth, like you're asking for a 3.5- millimeter jack with a TRSS. You're actually asking for this much space inside the phone, right? And it just—and when you break the outside of this thing, like just getting the speakers in is ok because all you're doing is emptying out the, you know, drilling small holes in the stainless steel outer rim, but it does make a big difference to the structure and the manufacturing and the structural integrity of the device.

Leo: Wow. That's the first compelling argument. I don't know why Apple has not said that because that's the first compelling argument I've heard. They said, "We need the space."

Greg: Yea, that's the problem with having people with liberal arts degrees writing about technology.

Iain: But also, coming back to your point, it's not a really big selling point for most Apple buyers. Also, I'm going to play devil's advocate here. If you drop your phone into a bucket of water, you deserve to lose the bloody thing. You know, it's just like—

Greg: So, you've never walked you know, like gotten rained on and had your phone ruined because it got wet in your pocket, like you had to walk through the rain?

Iain: Never.

Greg: So, you've never lived in a tropical country like let's say, Australia or the Philippines or—

Iain: I'm from Britain, ok. Then I moved to California which has pretty much the same weather in the Bay Area. So, I'm afraid not.

Greg: So, apparently, your personal experience is representative of the entire global population.

Iain: No, we've got about 5-6-milllion readers a year.

Greg: You just told me that you've never had this problem. And then you inferred that from your experience, that nobody else ever has.

Iain: Not so, because I teach sailing in the Bay and a lot of people take their phones out there and even those people would say, "I'm not trusting a manufacturer's waterproof rating. I'm getting a waterproof case."

Leo: Well actually, that's the truth. Just as you were saying, Greg, about the so-called IP68 rating which I have no reason not to believe in the Note 8, you're still not going to take a chance, are you? You get a waterproof case.

Greg: They're not waterproof down to 30 meters. They never have been.

Iain: If your phone is going down to 30 meters, it's buggered anyway.

Leo: How are you going to get it back? You're going to put a Bell diving helmet on. I'm going down to get my phone.

Greg: It should be able to sit in your pocket and get wet in the rain for an hour and it will survive. That's the point of the IP68 rating. So.

Leo: I know it's down here somewhere.

Greg: You know what? That's what happens to real people sitting at bus stops waiting for busses to come by and pick them up and take them to work. Which brings me on to my point, have you seen Google's new connected jacket?

Leo: That you can only wash 10 times.

Iain: Oh, it's the most pathetic useless waste of technology I've seen in years.

Leo: $350-dollars. Well, it's a proof of concept.

Iain: No, I think honestly, if I saw somebody wearing one of those jackets, it would be immensely useful because you know they've got more money than sense, no fashion style.

Leo: Nobody's going to buy this. Zero. Fewer people are going to buy this than the Essential Phone.

Greg: I don't actually think this is actually meant to sell.

Leo: No, it's not.

Greg: I think it's one of those, you know, it's meant to suck in all the idiots with their liberal arts degree people who write at various media sites around the world as if—because they can understand it, right? It's a jacket. It's got leather.

Leo: So, this is Google's—is this their Thread Technology? Or no, it's Jacquard. Connected Apparel Platform.

Iain: For goodness sake.

Leo: And it's, I guess—what do you do? Why is it connected? There's buttons on the jacket that you can fast forward your iPod?

Greg: What they've done is they've put some threads in the cuff and if you swipe down across the threads, they electrostatically pick up your fingers. And certain of these actions can be translated via an app on your phone to do things like play music, fast forward, rewind, answer a call.

Leo: And this is better why?

Greg: It's not. It's stupid.

Leo: This is clearly a technology in search of a problem.

Greg: Yea, and I didn't mention it because it's so stupid that we should just say it's stupid and move right along.

Leo: It's $350-dollars and you can only wash it ten times. And at time 11 it stops working.

Iain: I mean we've had so much. At CES they had an internet connected hairbrush which would monitor the number of strokes and let you know whether or not your hair was wet or dry as if you didn't have a mirror in front of you when you were doing this.

Leo: But isn't this the way it is? You've got to try all these things and see what—well, here, look for example at Amazon which announced a variety of Echo devices this week, which it really looks like they're just throwing crap at the wall and see what sticks. It doesn't quite—

Iain: Literally in this case.

Leo: Yea, there's a—

Greg: Have you seen Amazon's website? It looks exactly like somebody threw stuff at the wall. It's so ugly.

Leo: So, we've got the Echo Spot which on the surface looks like a good idea. It's kind of round and adorable. It's an alarm clock. It's a screen. You put it by your bed. You'll know what time to get up, what the weather's going to be like. You can listen to music. And, how handy, it has a camera in it.

Iain: Yea, because that's what I really want over-looking my bed. Particularly with the kind of lousy technology that these, lousy security technology these things have. It just—you know.

Leo: Why is the camera in there? Did they say? I was away when this announcement came out.

Iain: It's a feature. You know, we can't question them.

Leo: Do you think they're really kind of nefarious and they just really want to put cameras everywhere so they can just—they're not going to spy on you. I think they're trying to understand what you wear, what you—

Iain: No, it's an add-on that you can put in there and make people think that you're getting more for your money.

Leo: I ordered one. Immediately.

Iain: And you know, nine times out of ten, the security on these things is disastrously bad. It just—

Leo: We don't know what we should say, if any issues with people. You don't know that turning on the camera—

Iain: With this particular camera, no. But last weekend I was in a presentation being given at the DerbyCon Hacking Conference and there's like a million, just one manufacturer had a million IP connected cameras which would be extremely easy to hack. You know, it just takes a couple of packets and that's it. You're in.

Leo: Ironically, this was the best product that Amazon announced. They also announced a product I don't understand at all, a $35-dollar box called the Echo Connect that turns your Echo into a landline phone but it requires, guess what? A landline jack. So, as far as I can tell, it's a speaker phone.

Iain: I should imagine the planning of these things went very well. It was held in a pub or something because that's the only way you can get that.

Leo: It's got a jack on the back. It's a RJ45 or is it RJ11? It's RJ11, right? It plugs into the phone line.

Greg: So, I think what's happening here is that Amazon's A, throwing spaghetti at the wall and seeing what sticks. What you also need to know is that Amazon has a service called Chime which is a Slack type functionality and they also have another one which is a unified communication which is an IP telephony service. So, first of all you get these boxes into people's homes. You give them cameras and speakers. Then you play music on them. Then you get them used to having video cameras wherever they are. You get them to start using these telephone calls to communicate over Echo and then Amazon can come back to a smartphone and maybe round that out. So, there's a few different agendas going on here. One, if you can get them connected to the landline, you can get them to start using an Amazon service, IP telephony service instead of using a landline.

Leo: They did turn that feature on as well. You can call a phone directly from your Amazon Echo, giving it parity sort of with the Google Home.

Greg: But I mean in the US, where the tele-co rules are setup. Because in the US the way that it works is the caller and the receiver both pays for the call. So, that means that in the US, it's possible for Amazon to make money by calling people.

Leo: What?

Greg: Yea. So, they actually can get a—

Leo: Wow. So, it's a profit deal.

Iain: Yep.

Greg: Yea. If they make a call, then they get money out of that.

Leo: Wow.

Greg: So, that's how all of the free conferencing services in the US work because everybody calls in to the conferencing service and they make money out of, by charging you to call into their service, just from the telephone calls.

Leo: They also announced the Echo Button. They're hockey puck shaped devices that cost $20-dollars and they have colors and they light up. It kind of looks like the Staples Easy button. But it does something. What does it do?

Greg: The big weakness with these devices is they have to be slaved off a full Echo. So, you can't just have them alone.

Leo: But what am I going to—so, all Amazon says is well, you can play trivia games with it.

Iain: Great.

Greg: Yea.

Iain: We have a toddler next door who can do that as well and it doesn't cost twenty quid.

Leo: It doesn't feel like there's a unified strategy here. Maybe you've come up with one, Greg. They just want to have sensors everywhere in your environment.

Greg: I think what they're doing is trying to immunize the customer base to get used to the fact that there's an Echo everywhere, that you can talk to your Alexa thing. Yea, ok.

Leo: Look. You've played with these. Both of you have. This is the button we use for the trivia game.

Iain: Oh, yes. Of course.

Greg: Yea, yea.

Leo: Game of Geeks. It looks exactly—in fact, it's indistinguishable from an Echo Spot.

Greg: They used the same company.

Iain: Yea, probably the same white list manufacturer.

Leo: It's the Me First Game Show buzzer.

Greg: Yes. So, I think they are immunizing the customer base about having these in the house, that you talk to an Echo wherever it might be.

Leo: I love it. I don't want to live without it. I missed Echo.

Iain: See, I refuse to have them in the house.

Leo: Oh, I have them everywhere.

Iain: Where do you stand on this, Greg, because we've got full-time user, complete boycott. Where are you on this?

Greg: If I could get Siri to actually answer a query and intelligently I might actually use it more. But for now—

Leo: Why would you prefer Siri if it doesn't work?

Greg: I don't prefer Siri. I just don't like them. I'm not a big fan of the speaking things.

Leo: So, you'd rather have an Apple? You trust Apple but you don't trust Amazon?

Greg: I do like Apple's privacy policy, so, they're very up front about the fact that we don't keep your data infinitely whereas Amazon absolutely is mining everything that I ask them or send to them, to haul products at me and make me spend more money with them and line up.

Leo: I'm curious. Do you really think that Apple's not data mining you?

Greg: I believe that at a fundamental level they're not. That doesn't mean that they're not extracting data about you at various levels, but they're not doing it to the extreme that Google and Amazon and Facebook are.

Leo: Boy, I mean I have no evidence for one or the other, but I find that hard to believe.

Iain: I think that that does make a level of sense because like they wouldn't get as much value out of it as Amazon or Google would.

Leo: Right. That's true.

Iain: But I am finding, particularly with Google and the later builds with Android, they're getting really, really pushy about the amount of data that not only are they taking, but that they're pushing out to you.

Leo: But that's one of the reasons. There's many but that's one of the reasons Siri is less functional. Because they don't know anything.

Greg: They have less context and they have to train. So, they're not keeping the training data.

Leo: They also have less training, right. They have less information yea.

Greg: But Apple's been so—for example, with Facetime in the iPhone 10 that's shipping, the face data never leaves the phone. So, they're not shipping that up to the cloud and storing it and analyzing it to improve Facetime. The Facetime data never leaves the phone.

Leo: They said that and I'm glad because that's kind of a requirement. We just learned that Russia's decided to use face recognition on all of its many of thousands of cameras all over Moscow.

Iain:  Yea, the UK government's been trying it as well with very poor results.

Leo: But face recognition is a solvable problem, isn't it? I mean—no?

Iain: No, no. We've got a-ways to go.

Leo: Oh, I thought they were pretty good.

Greg: It's about 90% accurate today getting up—

Iain: When the false positive leads to you getting cuffed and thrown in the back of a van, then it's kind of—

Leo: That's a good point. You kind of want to be 100% accurate there.

Greg: But the way they see it is it's starting at 90% accuracy and iterating over the next 5-10 years.

Leo: And it's better than a human. I mean what they've been doing now is they have humans looking at these screens going, "I think I recognize him. I don't know. Maybe. It looks like him. Oh, I don't know."

Greg: Is that you, Sergey? I think it's you.

Iain: One of the best airport security systems in the world is in Israel because they've had that much practice and they don't go on facial recognition, they don't go on biometrics. But by the time you get from the airport door to the plane, you'll have met two or three people who are trained to look at body language signals that you are in distress or that there is something going on there. And it works. There's a reason why Israeli flights don't get hijacked because they take it seriously. And they don't look for attack face.

Leo: We've got the dreaded SSS on our tickets as we were leaving Heathrow for the United States. And that means you've been selected for a secondary security search which means—

Greg: Oh, so that process really works, then? Does it? That's great. I'm just joking (laughing).

Leo: Well, the eight of us who were selected were sitting here going huh. But it's funny because the Brits who were doing it said, "Yea, the Yanks are making us do this." They didn't care. Yea, yea. We've got to do this for America.

Iain: For freedom.

Leo: For freedom. Freedom. And I was very proud because one of the other passengers said, "Yea, it's security theatre." I thought, well, the message is getting through.

Iain: It is. It is.

Leo: The message is getting through. Amazon has a new Echo Plus. They just were busy. Busy, busy, busy, that looks a lot like the Home Pod, Apple's competing device. What a surprise. It's lower cost of course, $100-dollars.

Iain: Amazon's done a lot to drive this market. It's a logical step for them. But it just, you know, how many of these things do you have in your house?

Leo: How about this? You want Alexa in our BMW? You will starting next year.

Iain: Yea, there are many, many more reasons to buy a BMW than Alexa.

Leo: (Laughing) If you get Android Auto or Apple's CarPlay in your car and many cars are now supporting this, don't you get the voice assistant that goes with the respective platforms or no? You can't use Siri on CarPlay?

Greg: If I'm spending $70,000-bucks on a car, it had better have more than Alexa in it.

Leo: (Laughing).

Greg: There better be a car in there.

Leo: That's an expensive—

Iain: You buy a BMW for the engineering. I test drove the latest Ford Mustang recently. And it had build quality that would make these engineers furious. I mean the door panels weren't aligned properly. Acceleration was ludicrous but it couldn't corner for anything. There are reasons you buy a BMW. I'm not sold that Alexa is going to be a major—

Leo: Are you a BMW fan? I think you are.

Iain: I grew up with them, yes. And if I could afford one now, I would but I went instead for the economy version and bought a Prius which is—yea.

Leo: So, we were excited about—actually, I'm not that excited about it, but now that I'm seeing the reviews, I'm getting excited about Blade Runner 2049.

Iain: The reviews are great.

Leo: The reviews are really good. I thought, Ryan Gosling? This is a bad idea.

Greg: Oh. It's so exciting. So exciting. I've seen all the shorts and then they released a bunch of the directors talking about. There's a pretty short with Jared Leto lining up the transition from the previous movie to the new one and then there was a 15-minute anime release this week, padding out more of the story line about what happened in the gap between the two movies. So, if you're a real Blade Runner fan, get out there into the YouTube Warner Brothers and watch them all.

Leo: I am. I am.

Greg: You'll be just like so excited.

Leo: I'm very excited.

Iain: Watch it on the biggest screen possible apparently. All reviews are saying basically it's such a visually stunning film that you want to get really, really big screen.

Leo: But Ryan Gosling.

Iain: He's not that bad.

Leo: Yes, he is. Look at him. It's as bad as Keanu Reeves. It's—ok.

Iain: I know Kung-Fu.

Greg: But the shorts that we've seen, just look at the coloring.

Leo: Oh, dude. Is that Jared Leto?

Greg: Yea.

Leo: It's creepy.

Iain: For once they're going to do a reboot which doesn't take a massive dump on my childhood. I'm ecstatic about this. If it's good, then fine because after what they've been doing with the Alien franchise and let's not mention Star Wars. There were only the original three films, nothing else matters.

Leo: You guys Star Trek Discovery fans?

Iain: I haven't seen it yet.

Leo: I don't want to get hooked because I don't want to pay CBS, whatever it costs to get CBS All-Access.

Iain: Yea, I think it was—

Leo: You have to buy it.

Iain: To boldly stream where no one—

Leo: Except for you, Greg. You can boldly stream it on Netflix in the UK.

Greg: Really?

Leo: Yea.

Greg: Huh. That sounds like a thing.

Leo: To boldly stream where no man has streamed before. It sounds like a—something that happens behind a bar.

Greg: So exciting. Star Trek.

Leo: All right. This is the one that excites me. Amazon, back to Amazon.

Iain: Good thing we're not here in the same studio, mate.

Leo: They're going to make a TV show based on one of my favorite Sci-Fi novels, Neil Stephenson's Snow Crash. How about that?

Iain: It's either going to go reasonably well or catastrophically badly. And I love that book. Now, don't get me wrong. It's good for civilization as well because Neil Stephenson can't do endings for toffee.

Leo: I know. It's such a funny thing. I agree with you. This has the best first chapter of any book I've ever read since The Tale of Two Cities. But it has the worst ending. It just tapers off.

Iain: It's just dire.

Leo: But everybody should read it because the metaverse described in Snow Crash is really, I think, powering all of this AR / VR nonsense is people are trying to recreate—and I wish they would. I'm ready to plug it in to the back of my brain and go into space.

Iain: Hey, I'd get wetware as long as it's proved right, but I mean the Snow Crash was a very pivotal book particularly in terms of how Silicon Valley saw these things. You know, there were reports of somebody coming into a VC's office, throwing down a copy of Snow Crash, and saying, "That's our business plan," which is probably a good idea not to fund them, but still. But it's a really great book. It starts off strong. It's got lots of plots.

Leo: The first chapter. Read the first chapter. Pizza delivery girl on a skateboard. Great chapter. Moves.

Iain: Unfortunately, Hollywood has a way of screwing up science fiction.

Leo: Well, it's always been my opinion, science fiction is always better when you're reading it because you have a much higher budget in your brain than any Hollywood spectacular, right?

Iain: Yea.

Leo: It's much harder to create this for real than what you see in your mind. Let's take a break. Come back. There's lots more to talk about including is it all over for Silicon Valley? Greg Ferro wants to talk about this. Is it the end of the line? It's the end of the line for Silicon Valley as some say.

Greg: They might have to pay tax.

Leo: (Laughing).

Iain: Yea, good luck on that.

Leo: Greg Ferro is here from PacketPushers.net. You've got to listen to the Packet Pushers Podcast. They're fabulous. @etherealmind on the Twitter, which is I guess a play on ethernet and the Ethereum or I don't know. What is it?

Greg: Well, back in the day, ethereal, the idea was there was a spiritual aspect to being ethereal and the mind. So, it was meant to be spiritual mind. And then it was a double play on the words because there used to be a thing called Ethereal which was a packet sniffer on a networking engineer.

Leo: Oh, I get it.

Greg: So, it was sort of meant to be a play between spiritual mind and packet brain and somewhere along the line I've since forgotten which one of those it is and now it's just become a handle.

Leo: That's the problem with us. Their genesis is so far in the past, that now it's just a random set of letters. What is your handle, Iain?

Iain: Oh.

Leo: Like if you were in IRC or what's your hacker name?

Iain: I'm not sure I should say that because it might appear in various things and I'm here as a guest of Homeland Security.

Leo: Oh. That's fine. Just stop right now.

Iain: I would say basically I change my handle about once every ten years.

Leo: So, this is actually germane because Marcus Hutchins and we talked about this. You were very upset when this happened and actually we haven't kind of circled around on it. He is the security researcher who stopped WannaCry in its tracks, somewhat suspiciously, he happened to know, "Well, I was reading the code. I figured it out," how to stop it. How to trigger the—

Iain: Well, no, what he found was that they were using a particular domain, a host to command a control service. But they hadn't registered it.

Leo: They hadn't registered it. Once it registered, its stopped working.

Iain: So, he spent 10 quid, turned that domain over and it stopped it dead in its tracks.

Leo: Yea, it was a kill switch built into WannaCry apparently which I think is a little suspicious that he said—I think it was suspicious that he knew it. In any event, he was arrested. He was out here for—was he out here for DEFCON?

Iain: He came out for DEFCON Black Hat, yea.

Leo: He was going to go back and as he's about to board the plane, which is where they always arrest people on the way home, because it's easy.

Iain: There are a lot of guards around. It's a lock down environment.

Leo: He's arrested. Thrown into jail. The Department of Justice accuses him of hacking crimes kind of—have we seen the indictment yet?

Iain: A lot of it is redacted.

Leo: We don't know the details.

Iain: Basically, they say they have evidence and that he was behind the manufacture and sale of the Kronos banking malware and then said—when they arrested him, he was held for 24-hours without access to any outside legal counsel and they've also said that during that time he admitted it to them.

Leo: Well, that would be illegal.

Iain: He of course is denying this completely and it's a really weird case because when he was put out on bail, usually with stuff like this, if you're out on bail for computer crimes, one of the key things they say is you cannot touch a computer. And the only restriction that—he can use a computer. He just can't access servers that he was using for malware research. He's got to wear a GPS cuff on his leg, but other than that, he's fine to get on computers. He's fine to—

Leo: Did you read Brian Krebs article in which he kind of implies that Marcus Hutchins had a change of heart. That he was in fact a teenage hacker, a malware creator. And then as he aged, as many of us do, he thought better of it. He had a change of heart. And it's these earlier crimes when he was 15-years-old.

Iain: Well, I read Krebs' article and he kind of puts two and two together and makes 222. You know, there's an awful lot of inference there but no direct proof. And let's face it, it wouldn't be the first time that that had happened. You know, Steve Jobs and Steve Wozniak—

Leo: Yea, they sold Blue Boxes.

Iain: They sold Blue Boxes, Gates dumpster dived. There's a whole bunch. And speaking from security researcher's perspective, a lot of research has got interested as teenagers by saying, "Oh, this malware's really interesting. I wonder how it works?" And then applying that to security research. I mean if you talk to any bunch of security researchers off the record and after a few drinks which always really helps, you know, they will say, "Look. Some of the coding I did just noodling around, didn't release it or anything," but that could be technically considered to be making malware. I think the only evidence I've seen is really of that level of involvement. And if he had been this sort of hardcore hacker, he wouldn't really—

Leo: 15-years-old.

Iain: Yea. But, you know, I think the government would have had a lot more evidence they could have thrown at him if it was that clear, that cut and dried.

Leo: Well, we'll follow it with interest. The only reason I brought it up is because you mentioned that sometimes handles can be the problem and part of the reason Brian Krebs was able to dig this stuff up was the relationship between Marcus Hutchins and the handle Flipertyjopkins.

Iain: Yes.

Leo: And I'll leave for that you to read the rest.

Iain: Handles should change. In the interest of your right to know, the last one I'm willing to tell you was GrandMasterFluffles.

Leo: (Laughing) It's not Flipertyjopkins, but it's good. GrandMasterFluffles.

Iain: You've got to have fun with these things after all.

Leo: That's no name for a hacker.

Greg: It's perfect.

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Leo: This is one for you, Greg Ferro. Microsoft and Facebook just laid 4,100 miles of cable across the Atlantic capable of 160-terabits-per-second.

Greg: Yea, now, this is really, really important. And I just want to highlight some of the secrets behind this that a lot of people haven't thought about. One of the reasons for net neutrality and the fact that the government wants to tear it down is because the carriers want to be able to not install bandwidth. What they say is, "We need to be able to shape the traffic on the internet to protect users. Because we can't create enough bandwidth and that's why." So, now what we have—

Leo: Lies. Lies.

Greg: Outright lie. Absolutely an outright lie. So, what we have now seen is that Facebook and Microsoft, AKA, not AT&T or Verizon or Tata or Level 3, any of the telecoms on the world, ran a submarine cable across the Atlantic. It is actually a leading example of high-speed. Just so much bandwidth across the ocean. And they did it in less than 2 years and it was financed just out of the costs. So, this is literally going to be a private network just between Facebook and Microsoft. Now, this is my argument, is this whole argument about removing net neutrality so that carriers can sustain the network for growth, literally just a way for them to avoid investing in their networks. And of course if they don't have to spend money upgrading their network backbones, if they don't have to spend money replacing routers or division multi-plexes and installing new fiber, overhauling the electronics gear at the end, then they make mega profits and stitch up their customers for nothing.

Leo: And it's why we have such crap internet in the United States compared with other countries.

Iain: You don't have a competitive market. You've got one where the companies browbeat regulators into doing exactly what they wanted and at the end of the day, we all end up paying through the nose.

Greg: Exactly right. And this isn't—and if you want to look at the source, the source is on Microsoft's blog. I'll post the link into the chatroom, but this one here talks about the fact that it uses an open design. It's not using closed technology. So, not only has Microsoft and Facebook power enough to build the cable, they've actually taken the technology, kicked out the normal bunch of losers that exist, that make this technology. Again, they're building open technology that can be and they're actually expecting to get this running literally within another year. So, two years to roll the cable across and then another year before it's lit up. But it's just a huge amount of bandwidth, just so much faster than we can possibly imagine. You don't need net neutrality. What we need is to kick the carriers into investing into their networks and rolling out upgraded backbones and new access technologies to give us the bandwidth that we want.

Iain: Which they were supposed to do when they got the tax break a decade ago which we all gave them for, oh this is going to be used to connect the US. And instead they took it and gave it back to shareholders or spent it on useless make-wood projects. I think this is a great thing, too. Although I was so interested that they're not actually connecting this to the UK. They're connecting it to Spain. And I wondered if the GCHQ's fondness for tapping overseas cables might have led them to think, "You know what? Maybe we'll just not put it into Cornwall like we usually do. We'll take it down to Spain and see if that's any better."

Leo: That's interesting.

Greg: No, a lot of cables actually land in Spain. So, it's a choice. You either want to run the cables up around to—what you actually want to do is get them onto mainland Europe because that's where the bandwidth can be sold off and is actually where you want it to be. Ending cables onto land's end in the UK just means you then have to trunk the bandwidth across the UK and then usually to Amsterdam, because Amsterdam's the main internet exchange or the main exchange point. So, bringing it down south into Bilbao is not a bad idea because it gets you onto the mainland and you can trunk it up. That's the way of a fiber network. If you go to a website called Telegeography, they have a graphic that will show you the fiber that runs under the ocean and you'll see quite clearly that a lot of cables either go north around the UK to Amsterdam to get it right into the backbone. And that's the super low latency ones that you want for PIN trading. And then you want the other ones, some of them come on to the UK but they're for the UK market. But the UK is not usually the place if you want to get up to Ireland to where Amazon and Apple and all those guys are, landing it on the UK soil is quite popular. And then the rest all land down in France or down in Spain because that's the fastest way to get into land. And don't forget that Spain then takes you on into the rest of the world. So, Saudi Arabia, Turkey, Egypt into the North African companies and then also to the rest of Southern Europe. Laying cables in the Mediterranean is a popular pastime.

Iain: Yea, and unfortunately, also catching them on ship's anchors is a reason to be a fairly popular pastime for some awkward buggers.

Greg: Yea.

Iain: We had a couple of big breaks about 18 months ago?

Greg: It happens all the time. It's fairly constant. The cables break fairly regularly. It's not just anchors. It's also animals under the ocean, ships sinking, currents, all sorts of things. They break fairly regularly. The one about the anchor was that it broke the only cable that was running into Egypt at the time and it was when the revolution was on and it was originally seen as a terrorist act. And that's why it made the press. Again, liberal arts people with no technical competence being asked to comment on the technology industry is a real disruption for us.

Iain: It's a real bug bite for you, this liberal arts thing, isn't it?

Leo: Is it easy—I have a liberal arts degree. Excuse me. Actually, I don't even have a degree. I just started. I started. I tried. Is it easy to repair these? Is that why it's not a big deal that they break?

Greg: It's probably—it does. It depends. It's mostly whether about how many vessels there are available to repair the cables. There's only about a half a dozen in the world and they're being used to repair cables. It takes like two or three months to repair a cable.

Leo: So, it's not something you want to have happen.

Greg: The boat has to steam to where the cable is. Then it has to send divers down. It's not complicated in the sense that we know how to do this and this is done every day.

Leo: Yea, I've watched them splice fiberoptic cables. It's kind of interesting. You can actually splice it.

Greg: Yea. Well, the undersea cables are quite radical because they're like this thick. They can be like half a meter across.

Leo: This Microsoft article says it's actually one and a half times the size of a garden hose. It's not that thick. It's kind of an amazing technology that they're doing.

Iain: Yea, there's some fascinating history as to how they've developed these initial cables. And first I thought, wait, if you're just putting cable down, there will be nothing but junk out of it.

Leo: Average depths of 11,000 feet. Active volcanoes. Earthquakes. Coral reefs. Eight pairs of fiber optic cables circled by copper, a hard-plastic protective layer and a waterproof coating. And boy, do they get bandwidth out of this thing. Highest-capacity subsea cable ever made. Incredible. Incredible.

Greg: So, because it's very small, think about this. Because it's so small, because it doesn't have a lot of weight, so there's lots of interesting things about small cables. So, as they go down, they don't have a lot of distance. And once they hit the bottom, they don't actually sink as hard into the ocean floor, which causes lots of problems because normally you actually want them to sink into the floor. Anyway, there's a really good article in Telegeography website. I posted the link into the chatroom of what happens when they break.

Leo: I love this map. It's fabulous. Thank you for that link. This is really cool. You can buy this map. It's expensive. It's $280-bucks. They have an interactive online version and it really is—you know what? I might get this map just because it would be so beautiful to have that on the wall.

Greg: Yea, the release it every year as a new version of it, which doesn't change a lot from year to year because it takes several tens of millions of dollars, hundreds of millions of dollars to run those cables. One of the interesting things that's happening here is of course that Microsoft and Facebook are now replacing carriers and building their own bandwidth which is also an interesting market transition. So, instead of—up until—

Leo: It's not Sprint anymore. It's not AT&T. Not Verizon.

Greg: Or Tata Communications or BT or any of those carriers. These companies now carry so much of the bandwidth. Now, Google for example says that its network carries 25% of the internet traffic today on its own internal network. So, they're actually building their own.

Leo: Wow. So much for them free riding on Verizon's back.

Greg: Well, this is the international stuff, not so much inside of the US. Keep in mind here, there's a whole world, Leo.

Leo: The backbone's in the US. The backbones in the US still are Tele-co mostly, right?

Greg: Increasingly they're owned by a bunch of investment banks who've been digging, trenching in dark fiber all around the United States.

Leo: Ah, interesting.

Greg: So, they are speculative investing and what we have now, there are various—this starts to get really arcane so I won't go on for very much longer. But, there was a real investment trend about five years ago, there was a bunch of tax breaks to be issued around ditching fiber into the ground and now there are companies going around buying up those fibers and conglomerating them together and sell them off into packages. So, in the same way that we've seen our F-bandwidth or spectrum created by the government and then sold off, we're now seeing dark fiber doing the same. So, there's plenty of cable in the ground for the back hole, it's just not being done by AT&T and Verizon. It's being done by other companies.

Iain: And this was the primary reason why Google tried to get into fiber and tried to get that to work, was it was sick of entire areas of the US having very, very poor internet access and figured we're going to see if we can do it. And they ran into so many problems, it now appears they were pretty much abandoned large-scale plans for that. But I think the technology companies are basically getting sick of being given the runaround by the Tele-cos.

Greg: Well, what's happening, again, is basically about technologies. So, the technologies that they are using to propagate the signals down these cables are not owned by specific vendors. So, these traditional companies that make these technologies. What Microsoft and Facebook are doing is they designed their own technology using off the shelf components to drive this viaduct. And that's what they mean by open. Somebody in the chatroom is asking that question. There are a few flipsides here. One is Google and Facebook and Amazon are substantially larger than most of the Tele-cos. The reason that Google's giving up on Google Fiber isn't because they found a technologically unfeasible or even legally unfeasible. The short answer is that 5G will probably replace the need for cable in the ground in the short-term. So, 5G is going to give us a gigabit to the house most likely and even at sub-rate, so if you're talking 50-100 MGs, it's going to be much easier to put up a tower than it is going to be to try to ditch, put cable in the ground.

Iain: See, I'm slightly skeptical about that because that was the story we were told with 4G originally. You know, and it was going to be super-fast and the rest of it. 5G, I mean 4G the bugger around with the standards so much that Wi-Max was 4G and LTE was 4G and it Hunt's 3G could be possibly be sold as 4G. 5G, we're seeing, you know, like I say, I'm skeptical but that's purely based on past experience. Maybe you're right.

Greg: So, the difference between 3G, 4G and 5G has substantially to do with the spectrum allocations. At 5G they're starting to talk about using 5 gigahertz and also there's a bunch of spectrum around 4 gigahertz to 50 gigahertz which are fundamentally junk spectrum.

Leo: Isn't spectrum, though, a limited resource? I mean, doesn't that get in the way? You can't—you don't have an infinite spectrum.

Greg: You don't, but what we're seeing now is for example in Wi-Fi today, in the 802.11ac standard they're now talking about some of the numbers. It's getting a bit late over here. So, some of my numbers are getting mixed up. But we're talking now about companies going to be able to use 40 kilohertz channels. There are 60 channels of 40 kilohertz in the 5-gig standard and some companies can do 3 MIMO channels on those. So, you can actually start to do multiple streams over multiple radio frequencies simultaneously. Now, those standards that are emerging and devices that support those, and there are challenges around running three antennas to propagate signals at speed, blah, blah, blah. But we are seeing some iteration. Now, if you think about doing that in a broadband context from a bay station, so today 3G, 4G uses older encoding mechanisms and they are not often able to do what they call spatial, what they call multi-spatial streams, so you use multiple pieces of bandwidth in various directions for—this is so hard to explain. But anyway, the answer is that they're working forward with 5G is they're not building the standards to be fixed and locked. So, it's not meant to be 5G is this and that's it for time and memorial. There's a group of standards that formant and is meant to be an evolutionary thing. So, the same way that HTTP 2.0 has now just been called HTTP, it will continue to evolve in part for the rest of time. But there won't be a 2, 3, 4, 5, 6 because otherwise it forces this punctuated equilibrium sequence where things—we work with a particle until it doesn't do what we want, so then we leap forward to the next level. What we're looking at is 5G is meant to be a group of standards to do things like mesh back hole, mesh forward hole, use a range of different spectrums, range of different mediums, some of which were designed for handsets, some of them are designed for Wi-Fi, some of them are public spectrum, some of them are private spectrum. It's a far more—and this is why the 5G standards haven't crystalized in some ways is because there's so many wifty-wafty like because we're not locking in on a specific area, it's sort of very amorphous.

Leo: I wonder if—it sounds like you're going to have warring stakeholders here. I wonder if you're ever going to reach an agreement.

Greg: Have you ever seen that joke about the scientist with the blindfold and they're feeling the elephant? The person feeling the leg, yea. So, 5G is very much that. How do you decide which part of 5G do you go forward with and yes, there's a whole bunch of intellectual property and patents and stuff that is stopping it from moving forward, too, but that's the usual thing.

Leo: Well, it's just one of many choices. We shall see what happens. Real quickly, a couple of highlights. I want to take a break and then we will talk about Greg's favorite story. I can't remember what it is anymore. No, I do remember. Instagram has 800-million monthly users, 500-million daily active users. Well, it continues Facebook's dominance, right, because they own Instagram. If you don't want to use Facebook, use Instagram.

Greg: We've had so many lies come out of Facebook when they're reporting statistics and their numbers.

Leo: That's true. You can't always trust those numbers, can you?

Iain: Bear in mind Facebook counts a video view if you watch it for 3 seconds.

Leo: Right, 3 seconds, yea.

Greg: Yea, and then they announce—remember a few weeks back they announced that there were 35-million 18-35-year-olds in the UK? But there's only 60-million people in the country.

Leo: Numbers. They can be hard. Equifax's CEO says, "I give up." He quits (laughing). I'm sorry, retires. He retires.

Iain: They didn't even fire him.

Leo: He retired.

Iain: The CSO, the CIO and the CEO have all retired with nice golden parachutes and not been fired and have their asses kicked out the door as they should be. Sorry.

Greg: There's no part of the Equifax thing that just—as a security professional, I've been a security professional for financial institutions, there's nothing but incompetence coming. The stink of incompetence coming off of this is just unbelievable.

Leo: How about the Deloitte hack? Tell me about that. What do we know about? Deloitte and Touche are a very well-known consultant for—management consultant, right?

Iain: They were Gartner's Security Consultancy of the Year for the last five years.

Leo: They are also a security consultant.

Iain: Yes.

Leo: Well, that's not good.

Iain: Yea, well, particularly when you consider they've got twelve thousand—the day after this, people started looking into it. 12,000 open-facing systems around the world. They haven't instituted basic lock-down facilities. One of their guys was even posting admin logins and passwords on his public Google + page.

Leo: (Laughing) Which it's easier to find them that way.

Iain: Well, yes, it is, but you know, we were discussing this in the office and like is it incompetence or is it deliberately trying to run a honeypot? And we took Occam's razor and said, "He's an idiot."

Leo: Wow. So, when you see this kind of incompetence, especially from a firm that supposedly specializes in security, you really have to wonder, what's going on?

Iain: I think part of the problem is nobody know what's going on within the company. You've got the sales people promising the moon and the starts. You've got the IT department, it's probably under budget, underfunded and not taken too seriously by management and you've got the layer eight problem of a whole bunch of users that really don't know what they hell they're doing. So, I mean, this is typical with large companies in particular. You would have thought that a security consultancy selling these services at very high cost might have wanted to get their own system sorted out before trying to fix other people's.

Greg: Oh, no. Gosh, no. They don't want to do that. They send their best consultants out to their customers.

Iain: Well, this is it.

Greg: As somebody who's worked extensively for institutions, and I use the word institutions with the word mental in the back, these people really are that retarded that they would take their best security people and send them out to the customers for billable hours instead of actually securing their own systems. And internally, keep in mind, if you've got a bunch of really broad IT people inside your organization, guess how they treat their internal IT?

Iain: Yea.

Greg: They're not of value.

Leo: So, this makes Equifax look good (laughing).

Iain: No, nothing could make Equifax look good. I'm sorry.

Greg: I'm sorry, Equifax is bad.

Iain: This is what I don't understand. They've had 40-days before they went public to sort this out. They—the first website they stick up for people to check must have known it was going to get spammed heavily because everyone was panicking. Horrible website. The catalogue of failure after failure just got—I mean, they were linking out to a spoof site set up to show how easy it was to phish the site.

Leo: Then they started re-linking it. Tweeting it out.

Iain: Then they immediately started tweeting this thing out. I mean it was just a catalogue of absolute rubbish.

Greg: Their lack of competency at every level. Like there's fundamentally four things to a security policy. Don't get hit. So, don't be penetrated. If they get in, detect that they're in, right? And if they're in and moving around inside of your organization, don't let them extract the data, right? And then 4^th, have immediate strategy ready to go for when you get dug. Out of those four, Equifax failed at all four. Not just a little, comprehensively, they got owned to a basic vulnerability and announced by Apache in March. They failed to patch it for over 4-months, ought to mitigate it. They should have had a mitigation capability. When the data was being stolen from their site, they didn't detect it. And I mean you're talking about multiple gigabytes of data, probably hundreds of gigabytes of data being stolen over a period of time. They didn't detect when they were in. They didn't detect the exfiltration and they completely fumbled the media response afterwards. There is no reason for anybody to believe that Equifax can ever be an organization that's worthy of trust because nobody at any level of the organization clearly knew what they were doing.

Leo: What's the solution? Do you make a law? Do these people have to go to jail? Do you—I mean, how do you solve this? How do you enforce security in companies that hold very personal data about us?

Iain: Well, the problem with the credit checking companies is that we're not actually customers of theirs. You know, they just grab our data.

Leo: We're just victims, basically.

Iain: We're their bitches, basically. They grab our stuff. They sell it off to everyone else. And we don't really have a comeback on that. So, the only way I can see to sort this out is that if you're going to be a credit reference agency, you're going to be holding the keys to the kingdom when it comes to financial flaws, then you better have a mandate, audit it, check and constantly check security. Now, you're never going to stop an intrusion. Not even the NSA could stop their own system from being subverted. But, you've got to have a frame—you can't just say, "Well, it's laissez faire. These things will sort themselves out."

Leo: No, they won't.

Iain: No. Absolutely not.

Leo: So, what is the consequence? How do we make this happen?

Greg: We need to see credit reference agencies or any sort of—

Leo: Forget credit references. Our information is spread out over hundreds of companies.

Greg: So, any company that's a surveillance company, Facebook, Netflix, Google, Amazon, credit reference agencies, medical institutions, need to all be defined as critical infrastructure and the government needs to define a bunch of rules around critical infrastructure.

Leo: I agree. As important as the grid. I agree with you, yea.

Greg: That's exactly right. And they need to be treated as such. And then in the grid, if the CEO fails then he is criminal, right?

Leo: Right.

Greg: There's criminal negligence inside of those and that fundamentally I believe ultimately leads into our discussion around what's happening with Scott Galloway and what he's been talking about.

Leo: Why people have lost faith in Silicon Valley.

Greg: Exactly.

Leo: We're going to take a break and do it. Patience, young critic. Patience. He's literally—if he had a bit, he'd literally be champing at it. Fortunately, he has no bit (laughing). That's pretty obvious. Our show today—Greg Ferro, PacketPushers.net. Iain Thomson, TheRegister.co.uk. We intentionally booked no one else on this show. Now you know why. Normally we have a panel of four. We decided that with Greg and Iain, and me jet lagged, that's just exactly right. Perfect, perfect harmony.

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Leo: So, what is going on? I actually first become acquainted with this when our friend Mike Elgan wrote an article for Fast Company and I think this is what you're talking about, right, Greg? Why the public's love affair with Silicon Valley might be over. But you're referring to somebody else.

Greg: Yea, I think this article is loosely based off something that's been discussed by Professor Scott Galloway. He works for New York University. He's a tenured professor there. He has a company called L2, Inc. And he has a pretty amazing YouTube channel. And one of the messages—and he also has a history of being right about this sort of stuff also, by the way.  And his point is, is that the world has turned. So, for the past 10-20-years, we've all said that Amazon, Apple, Facebook, Google, they're all doing amazing things and bringing humanity forward.

Leo: The four horsemen of the technology apocalypse.

Greg: That's right. And but what's happening is, we're now suddenly falling out of love with Facebook. We've got the Russian hacking scandal. We've got Uber having its license pulled in London. We've got Google suddenly, the do no evil starts to look like a bro boys club where women aren't accepted. You know, James Damore and that sort of stuff. You know, this whole surveillance thing, look at the Equifax thing is a part of this, these so-called technology companies. We've seen the Juicero debacle. All these startups that are just pointless. Tech nerds who thought that, tech nerds that probably could have used someone with a liberal arts degree to tell them that they're pretty stupid actually for a while. So, what he's trying to say is that all of these companies are stupid. And what he's doing is backing this up with some interesting evidence. And the point is, these people are destroying billions of dollars of market value. So, companies like Kroger for example, has sunk from $28-billion to $20-billion dollars. These are the people who employee people. So, Walmart actually employees like 50,000 employees in the states. Amazon does it with 10,000. So, if you're a government, and you're looking at the $64-billion dollars in tax paid since 2008 from Walmart and the $1-billion paid in tax from Amazon, who do you start legislating for? Right? And if you're Apple in Europe and you're looking at the European Union coming after you for tax revenue and you're going, "Oh, but we—" and you've only paid a billion dollars instead of $20-billion dollars over the last ten years, and then all of a sudden you say to the government, "You should protect us. We need help." The governments are going, "You're not paying tax. You're not actually a citizen here. You're not paying enough money to participate in modern society." So, here in the UK, you now have the UK government starting to get after Facebook and Google and Netflix and saying, "If you don't start paying tax in this country, we are going to have to create tax laws specifically to get you."

Leo: How is this different from Luddite-ism? How is this different from the traditional fear of technology that government and other slow-moving incumbents have always had?

Iain: There is an element of this that the tech communities, as Greg has pointed out, we're building technologies like the self-driving cars, like smarter systems, which are going to put enormous numbers of people out of work in the next decade or so. And there is no plan to deal with this. And if you talk to the technology—

Leo: Well, I would blame politicians for that. They're the ones who were lying to people. Who was it, the Treasury Secretary who said, "Oh, no. Automation? It's not even—we're not worried about that." They're lying. They don't want people to know that this is coming. They don't want to have people retrain. They want to pretend that coal's coming back, that there's going to be jobs for you as a miner. That's a lie. And it's not fair to people, so, the government's more to blame than technology. Technology's going to solve these problems.

Iain: Well, no, technology is creating some of these problems. If you speak to any—

Leo: But humans are creating these. This is called progress.

Iain: I've spoken to numerous self-driving car people—

Leo: What would you have happen? Get rid of self-driving cars? What we need is more children in the factories making shoes?

Iain: None of them have even a clue as to how to deal with this. And they don't care because it's not their problem. And as Greg points out, particularly it's less so in this country, but certainly back in the UK, when it came out that Google had paid, what was it, Greg? It was something like—

Greg: $30-million.

Iain: Yea, $30-million on tax.

Greg: On $8-billion of revenue.

Iain: It just—you can't do that and expect to say, "Well, I'm a good citizen. You should protect me."

Leo: Well, I could match every point on this list of negatives and there are many, obviously, with positive points, things that technology has brought us and our life span is longer.

Greg: Amazon has paid, since 2008, Amazon has paid $1-billion dollars in tax to the US Government. And yet, Amazon is totally dependent on roads, bridges, electricity, workers, healthcare.

Leo: And we should all be upset about that. So, should is that just reform, tax reform we need?

Greg: So, what we've seen is technology companies—

Leo: They're taking advantage, by the way, of loopholes created by the incumbent companies who all along wanted to not pay taxes and take advantage of the infrastructure. These are tax laws that are on the books. Google comes along. It's not Google's fault. It's not Apple's fault. They're taking advantage of tax laws that were created not by them, but by their predecessors.

Greg: Yea, but they industrialized the abuse of those systems. So, way before the systems weren't being abused on a multi-billion dollars scale, they're being done at a minor scale.

Leo: Well, like everything in technology, they're just better at it.

Greg: But the big part of this is in the US, Amazon has actually got a competitive advantage over its—by just choosing not to make a profit. You only pay tax when you make a profit. So, if you build a business that doesn't make a profit, you don't pay tax. So, now, all of a sudden, Amazon can out compete Walmart because it never has, it doesn't have to carry that liability on its books.

Iain: Yea, Microsoft in its last quarter paid a minus 8% tax rate, because they managed to wipe out all the stuff from Nokia.

Greg: So, the governments have a problem. They need the revenue to sustain the internal systems. I mean in America particular, there's not enough money to fund the police force that's going to keep society secure. The reason that the police force has been militarizing is because they're frightened because there's not enough of them. How would you feel if you were like, what is the policing ratio in the UK? I think it's one to one hundred thousand? Something like that. And in the US, it's even much, much smaller. If there was any sort of significant societal upheaval in the US, this simply—

Leo: I'm sorry. This auto play gets me every time.

Greg: So, I think there's a whole bunch of things here. One is that they don't pay tax or they're pursuing strategies which deliberately avoid paying tax and maximize growth, and at some point, Amazon by never ever paying any tax is going to become so large and so dominant that the governments are just going to have to say, "It's a monopoly," and break it up. That's the logical extension of this. If Apple continues to get any larger as a nation state, like a corporate nation state, the only way governments are going to be able to tax it or to control it is if they force it to break up as a monopoly. And what Professor Galloway's making the point is that Amazon and Apple, all these companies can't continue as they are because they're just not paying enough, not contributing back to the societies that they take from.

Leo: He says, "We're barreling toward regulation." That's basically the message here is that governments are going to, their backbones are going to stiffen. You're going to get greater regulation. What does that mean? Does that mean break up Amazon or just tax Amazon appropriately?

Iain: No, what we're seeing in the European Union, where they're coming up with tax plans and saying, "Right. We're going to tax you on revenue that you make in our country, not on profit because that is a better way to do it because at the moment, you're licensing your technology off to people that aren't in Holland or in Ireland.

Leo: They can bury the revenue.

Iain: Yea, you can bury it that way. So, the European Union is saying, and they moved astonishingly quickly on this in the last month or so, saying, "We're going to go after revenue."

Leo: Isn't there a risk though? Do Amazon and Apple and Microsoft—

Iain: What, are they suddenly not going to sell in Europe? You know, it's never going to happen. They need customers. And they need the internet backbone and—

Leo: Would you submit that Europe needs them as much as they need Europe?

Iain: Europe's done ok for the last two thousand years before Amazon. I think they'll—

Leo: I think it's terrifying. I think they idea of governments deciding, "Oh, these technology companies suck. They're not paying enough taxes. Let's get rid of them. We don't need them." It's terrifying. Which would you prefer? Which would you rather have? The governments we've got out there or the companies we've got out there? I think the companies are doing a hell of a lot better job.

Iain: Really? You think Uber is—

Leo: Not Uber, but Amazon, Microsoft, maybe not Facebook. Google.

Greg: So, the point is I think the usefulness of these companies has reached the limits of what they can achieve. And we now need to reevaluate where we are. So, for example, there's a law that's now enacted across the whole of the European Union called the GPDR, The General Protection Data Act.

Leo: Nightmare. It's a nightmare.

Greg: It's a nightmare for Facebook because they have to delete user data after two years. Mandated. Absolutely.

Leo: Ridiculous.

Iain: Why? Why is it ridiculous?

Greg: It's not ridiculous.

Leo: It puts an excessive burden on the business. It's ridiculous. And it's a fundamental misunderstanding of how technology works.

Greg: It's actually quite a well written piece of legislation. It's very—it's not perfect and it won't be because what we do have is companies in Silicon Valley that go broke and pick up their data and sell it off to another company in the disposal.

Leo: You don't think there's a peril that they're doing this at their peril, that this will be so damaging to techo-companies that it will set us back? That it's—this is reminiscent of the dark age. The dark ages say, "Ah, you know, she's a witch. Burn her."

Iain: I'm sorry, no one is saying, no one is proposing putting Jeff Bezos on a spike and burning his corpse. Although I know some of his competitors would really quite like that. But I mean, at the same time, they've had a free rein for so long, and there is a certain arrogance creeping in which is—Tim Cook in Congress last year, for example. He was talking about—we had the Trump tax plan come out this week and Trump said they would be doing a once in a lifetime one off tax break to allow the $2.5-trillion dollars being stored outside the US be brought back in. And they'll probably do a special tax rate. The only problem is, we did this in 2004 with the Investment Act and all that money just went directly to shareholders, apart from Dell who built a very small factory in Texas.

Leo: Is your complaint that capitalism is failing? Isn't that your complaint?

Iain: No, I want politicians to grow a pair and start making sure that everyone plays by the rules. If I went to the IRS and said, "Well, my half-gains were pretty bad this year. Forget about the salary. I've made a bit of a loss, so can you give me some money?"

Leo: Do you feel that the Department of Justice prosecution of Microsoft in the late 90s helped our situation? Do you think it made things better?

Iain: I think it was a classic example of why the US situation was so bad, because at the end of the day, Microsoft got a slap on the wrist from the DOJ. The real impedance on Microsoft to move was the EU which didn't take such a laissez faire attitude. The DOJ settled with Microsoft, for really a slap on the wrist.

Greg: Yep. And I mean the answer is—

Leo: Well, look what we've got in the EU. We've got the Browser Ballot.

Iain: Well, what's wrong with getting people a choice of browser?

Leo: We get this insane cookie message which is completely meaningless.

Iain: I know you hate that one.

Leo: We get crap from governments that don't understand technology. Now, I'm not going to disagree with you that the technologists are arrogant and that these companies are running roughshod, but I'm not convinced that any government knows what to do with these guys in a way that's going to be responsible and work. I think that GDPR is going end up being a nightmare.

Iain: This is why you need that counter balance because if say for example the government says on the Internet Explorer case, "Well, it's your operating system. You do what you want with it." And that's what they did do initially and we ended up with Internet Explorer having 90% of the market and then Microsoft just—

Leo: The market took care of not the DOJ or the EU. Putting on the ballot for browsers did not fix that problem.

Iain: No, but at the same time—

Leo: It was completely reasonable for Microsoft to put a browser in its operating system.

Iain: Yea, but not when it got into a monopoly position in the browser market. Say, "Yea, we're not going to bother developing that for a few years." And before you know it, they've got a massive security problem which the end user was paying for. It took Mozilla to come along and actually force Microsoft to do some development work and later Chrome before that changed.

Leo: So, what is the endgame on this? Do we get a negotiation and a balance between these two mighty powers?

Greg: I think there's a couple of things. I think we're going to see a few things happening. One of them is, I was listening to a podcast this week with a group of economists arguing over what the future of capitalism looks like. And the point that one of them was trying to make is that companies like Apple and Amazon have actually found ways to hack capitalism in their favor.

Leo: I don't think it's a hack. I think it's the nature of late-stage capitalism. But, go ahead. This is what free market capitalism drives towards.

Greg: Yea, effectively, it drives late state capitalism and it's not unlike what happened in the 1700s in the Europe at the time. But, let's not try and pretend that everything repeats exactly the same because it doesn't. Everything is different.

Leo: Hey, here's a chance to do it better.

Greg: Yea, so what we're now seeing is that the tech giants are basically becoming the robber barons of the modern era. They have so much data, they have so much funding, so much capital, just so much ability to move in any direction they want, there's no regulations or restriction. There's no competitive situation for them to be normal. And so, now we have a situation where they're uncontrolled. And importantly, they're now in a position where they can move governments. But they're not paying any taxes to the governments. So, the governments now in a situation where they can go and squash these organizations because there's no tax money coming from them. There's no penalty. All there is, is what's happening in public and increasingly, the public section of companies like Uber and Apple and Facebook is switching against them. And once they lose public opinion, they lose everything. There's no support behind them because they don't pay taxes, they don't participate in society. They're not contributing to the ordinary people and they take everything and consume it and generate profits for themselves. They're not actually a valuable part of society more widely. And so—

Leo: Really? You don't think we have benefitted from the powers of these companies? I mean we talk a lot about Apple, Google, Facebook, Amazon and Microsoft, but really, there are a thousand tech companies doing incredible innovation, changing the world in dramatically good ways.

Iain: And there's no reason why that should stop. They just have to play by the same rules as the rest of us.

Leo: They're playing by the exact same rules as the rest of us.

Greg: No, they're not.

Leo: Are they breaking the law?

Greg: Pretty much.

Iain: In Uber, definitely.

Leo: Ok, Uber is a really bad example. I will grant you that Uber—there's Theranos. There are companies that are bad. I'm not saying there aren't. In fact, I'm kind of with Greg here. I'm not a big fan of giant corporations either. But, I'm afraid we're going to throw the baby out with the bathwater. I'm afraid that we are going to overregulate technology out of existence and we're going to create a new dark age. I don't want the EU to be running the world.

Greg: But the point is, we don't have a choice. We're now at the point in this cycle where we have to throw the baby out with the bathwater or these people are going to—

Leo: Oh, boy. You people are all going to be out of jobs.

Greg: That's the risk we have to take because these people are so out of control.

Iain: I mean, at the end of the day—

Leo: How are your physical labor skills? Are you good at making things with your hands?

Iain: I'm a reasonable jobbing carpenter. Look, it's not that—we have this argument every time the corporate tax rate comes up. It's like well, in Britain there was this big thing, Vodafone was due to pay like $6-billion in tax and they reached a deal with the UK tax authorities that they only paid $1-billion and a half. Now, a company like Vodaphone isn't going to say, "Well, we don't like your tax rules. We're going to stop doing business in the UK."

Leo: Well, they can't.

Iain: Because it hurts them more than it hurts the authorities. But governments are now just rolling over to these people. I mean, look at the number of tax breaks that are being offered to host Amazon's next headquarters.

Leo: I think they do that because they feel like there is a benefit in the long run to fostering technology. This is how we move. This is progress. This is how we move into the future.

Iain: Well, yea, but I mean, ok. The Foxconn factory which is supposedly being built.

Leo: Well, that's a joke. That's a joke. I agree.

Iain: That's costing a hundred thousand a job, maybe even a million.

Leo: Yea, yea. It's crazy. But I agree with you. That we should stop but that doesn't mean we need to regulate the hell out of these guys.

Iain: We don't need to regulate them out of existence, but something like the GDPR is a perfectly reasonable thing to do, to say to companies.

Leo: We should do a show on GDPR.

Iain: Yea. I'd be well up for that.

Leo: Because it's a complex law and there's a lot of consequences. The idea that I agree with is you own your data and then these companies should be compelled to delete your data periodically and to protect your data. I'm not against that. I'm really not against that. It does offer some technical challenges, though, because the internet is a fundamentally global system. It's not in Germany or France or the UK.

Iain: Well, no company invented the internet. No company invented the world wide web.

Leo: No. No. Well.

Greg: It's all government. The government invented the internet.

Leo: Yea, we need government investment. I'll grant you, a lot of science—

Greg: The only way you can do that is if you have taxes and the only way that those taxes get collected is by and large from corporate taxes. And I think there was an article in The Telegraph—

Leo: Wait until we get robots. They won't be paying any taxes.

Greg: They're talking about robot taxes. But anyway, there was an article in The Telegraph this week about Uber. And apparently the majority of Londoners are actually for Uber getting stripped of its license. So, Uber is losing the PR war.

Leo: Why did London boot Uber?

Iain: Because they failed to comply with—if you want to run a public taxi service in the UK, you've got to have your drivers checked to make sure they're not dodgy. If they assault a driver, a passenger, that's got to be reported. And you've got to play reasonably fair with the police, the actual authorities.

Greg: Medial checks, criminal checks.

Iain: Oh, yes, medical, yea.

Leo: Has Uber refused to do any of that?

Iain: Yea. Refused to do any of that and also deployed—what's the gray thing?

Leo: Oh, God, Greyball.

Iain: And introduce Greyball to try to dodge.

Greg: And then the piece de resistance was we don't trust them.

Leo: We don't trust them. Who said that?

Greg: The TFL, the licensing authority for taxis said, "We do not believe that Uber is a trustworthy organization."

Leo: By the way, TFL might have a dog in this hunt. They've got a lot of black cabs and cabbies that might be out of work.

Iain: No, the black cabs are a separate organization completely.

Greg: The TFL is a quango, a semi-government organization that just regulates public transport in London.

Leo: Yea, but don't you think they act in the interest of, well, I don't know what they call them in the UK, but the medallion holders?

Iain: No, honestly, they don't need TFL.

Greg: There are three other ride—

Leo: I just want to say that as a customer, if I'm going to go to London, I'm going to miss Uber.

Greg: You can use one of the other ones.

Iain: London's got the best—

Greg: There are three others. There are three other ride hailing companies in London that are just as good if not better than Uber. When I was in Prague—

Leo: I have a hard time. I want to delete Uber. I agree. It's pretty convenient.

Greg: When I flew into Prague in Czechoslovakia about six weeks ago for the ITF Conference, and they had a perfectly fine app from a company called Liftago and it worked exactly like Uber and it worked fine. And it was a person in a black car with a nice clean car and blah, blah, blah and they took my credit card.

Leo: Uber exists, and I'm not sure this is true in London, but in most places, certainly in the US, because cabs are such a God- awful experience, right?

Iain: Certainly, in San Francisco.

Leo: And New York. They're a God-awful experience.

Iain: Cabs in New York are grand.

Leo: I'll never forget going to Paris and it started snowing and all the cab drivers rolled up their windows, lit their Gauloises, opened their paper and said, "No." They would not give us a ride. There's a reason Uber exists. They're disintermediating a broken system.

Greg: I mean, only in certain locations does it actually work. So, in New York, Uber makes sense. But at the same time, Uber has deployed inexcusable practices to prevent competitors from emerging.

Leo: I agree but—

Greg: But literally TFL basically said, "We don't trust what Uber has submitted to us. They've consistently failed to comply. We've taken it as far as we can."

Leo: So, Dara, the CEO, went over there.

Iain: Yea, he actually admitted there was a problem with this.

Leo: Yea, we're going to see if we can fix this.

Iain: But then while he was away, Travis appointed two new board directors.

Leo: We could go on and on about Uber but we can't because we're done.

Greg: But what I'm saying here—

Leo: We've gone two-and-a-half hours, gentlemen.

Greg: Yes. But what I'm saying here is that is—they're losing the PR war. So, as we're seeing increasingly, people are turning against Facebook. They're turning—they distrust Google. Apple's starting to lose its privileged position. People aren't lining up for the iPhone 8, in part because why am I continuing—I think in a small fashion, there is a backlash.

Leo: I agree with you. There is a backlash.

Greg: And my point is, how do we solve it?

Leo: I'm well aware of it. In fact, in some cases been the purveyor of the backlash.

Iain: I mean, it's just when things get to this level, this stage, you've got to execute getting some triads in place otherwise it is going to be Luddites taking over things. So, if we're actually smart about this, and the tech companies think it through, they'll see it's in their long-term interests to actually play a level playing field. If they don't, well, then they're thinking short-term and they're stupid and we're all screwed.

Leo: And it is a clarion call to these companies that maybe it's time for them to think about what they're doing, sit down with government and come to a compromise that benefits everybody instead of being rapacious robber barons.

Iain: But what worries me is you've got Zuckerberg doing his not-presidential—

Leo: He's going to run for President. And that's one way to fight this is to take over the government.

Iain: Yea, no.

Leo: Don't have the science fiction stories talk about how it's a dark world that's run by corporations?

Iain: You could argue that we're getting into the Asimov merchant princess.

Leo: Exactly.

Iain: But I would much rather have a democratic government.

Leo: Oh, we lost that a long time ago (laughing). You're such a dreamer.

Iain: Oh, well. One day.

Leo: Iain Thomson, some day we will have a democracy. He is a reporter for The Register. If you don't go to TheRegister.co.uk every single day and read, you're missing out on some of the best writing, the best snark and Iain is a very important part of all that. It's a pleasure to have you here.

Iain: Oh, it was fun as well. Thank you.

Leo: And of course, Greg Ferro, what can I say? Just a fount of wisdom.

Greg: I just make stuff up.

Leo: He's at PacketPushers.net. He's—well, don't tell me that now. I believe everything you say. It's great to have you both. This was a very fun conversation and I hate to cut it off. But, I got to go. So, (laughing) to the bathroom. I just can't—

Iain: Ok, TMI. TMI.

Leo: Hey, it's been a lot of fun. We thank you for joining us. We do This Week in Tech every Sunday afternoon. It's so nice to be back. I have to say, I love doing this show so much and I really am grateful to our hosts that filled in. Fr. Robert Ballecer who ran the show. Becky Worley did a great job. But you don't have this seat yet. I love coming here every Sunday, 3:00 PM Pacific, 6:00 PM Eastern, 2200 UTC. We will do it for you live if you want to watch at TWiT.tv/live. If you do, please join the conversation behind the scenes in the chatroom at irc.TWiT.tv. You can even listen live on your Echo. I should have, I've got to mention this. YouTube turned off the video on the Echo Show. I'm pissed off about that, but you can always listen if you just day, "Echo, listen to TWiT Live on TuneIn." You can listen to what's going on right now. Or pick your favorite show. You can say, "Echo, listen to This Week in Tech on TuneIn," and it will play the most recent episode. So, another great way for you to listen. You can also subscribe using your favorite podcast app. I wish you would. I think you all for being here. And I will see you next time. Thanks to our studio audience who've got buns of steel. Anytime, we'll put a more comfortable seat out for you next time, but anytime. Just email tickets@TWiT.tv. We'd love to have you. Thanks for joining us. We'll see you next time! Another TWiT is in the can. Bye-bye.