Apple’s $257 billion cash hoard and parasitic accumulation

By Nick Beams
5 May 2017

The most striking feature of Apple’s financial results for the first quarter, released earlier this week, was the growth of its enormous cash holdings.

The US tech giant now holds more than $257 billion in cash reserves, a figure which has doubled in the past four and a half years. Some 93 percent of this more than a quarter of a trillion dollar cash pile is held outside the country in the form of short- and long-term securities in order to escape paying US corporate taxes.

In the last quarter of 2016, it is estimated that Apple was accumulating cash at the rate of $3.6 million per hour.

The cash reserve means that Apple now has on hand more money than the market value of both American retail giants Wal-Mart and Procter & Gamble and holds more than the combined foreign currency reserves of the UK and Canada.

The company increased its returns to shareholders by $50 billion and reported earnings per share grew by 10 percent in the three months of the year.

There is considerable conjecture about what the company intends to do with its vast holdings. But one thing can be definitely said at the outset: they will not be devoted to productive activities but rather to financial operations aimed at increasing profits still further.

Apple has indicated that if the Trump administration introduces legislation either waiving or at least significantly reducing tax payments on any money returned to the US then it could repatriate some of its money.

Trump has raised the possibility of tax breaks on overseas cashing holdings with the claim that this will bring jobs back to America.

But if Apple does bring back its cash it will not be used for increased investment, leading to the creating of more jobs, but will be deployed on essentially parasitic activities.

This could include the purchase of other companies, including content providers—the live streaming channel Netflix has been mentioned as a possible target—or to finance further share buybacks in order to boost the value of the company’s stock.

Some of the money could also be used in increased dividends, with one of the world’s richest individuals, Warren Buffett a major beneficiary following the decision by his company, Berkshire Hathaway, to double its holding in Apple last January.

Buffett’s move could well have been made in anticipation of a decision by the Trump administration to change the tax regime to encourage Apple and others to return cash to the US.

Whatever Apple decides to do it will be of an essentially parasitic character.

These operations are not an aberration but express the essential characteristics of the profit accumulation process of Apple and other high-tech corporations, which have more in common with financial firms than the industrial corporations of the past.

Unlike those corporations, which once dominated the American economic landscape, Apple does not essentially accumulate profit through the extraction of surplus value from the employment of a large industrial workforce but through the appropriation of surplus value extracted elsewhere. That is, its massive profits are essentially a form of rent.

The economic category, rent, first emerged in relation to land ownership.

Under the capitalist mode of production, competition between different sections of capital effects the formation of a general or average rate of profit. The overall mass of surplus value extracted from the working class as a whole is distributed among the different sections of capital, Marx explained, according to the proportion of the total capital of society they contribute.

They function as shareholders in the common plunder. But, like everything else in the profit system, this distribution does not take place through a conscious plan but through competition in the market which drives the movement of capital.

If profit in one sector of the economy is higher than the average, the capital investment flows into that sector, increasing the supply of commodities it produces, thereby lowering their price and reducing the profit level until it reaches the average. It is this divergence, above and below the average, which drives the continuous movement of capital.

However, in the case of agriculture there is a barrier to the movement of capital in the form of land ownership.

This enables the formation of higher prices than would otherwise apply had capital been able to freely move into that sector. The price divergence results in higher profits than would otherwise apply, a portion of which is appropriated by the landowner in the form of rent.

This rent is not the result of the extraction of additional surplus value but rather the appropriation of surplus value produced elsewhere by the monopoly ownership of an economic resource, in this case land.

While it takes a very different form, the profit accumulation of Apple and other such firms is essentially the same. In this case the monopoly is not of land but of knowledge protected, as is the land, by a series of laws, in this case intellectual property rights. These rights are jealously protected, to which a series of hard-fought court cases attests, because they are key to profit accumulation.

Apple does not manufacture the iPhones and other products it sells. They are put together in giant industrial concerns employing hundreds of thousands of workers, such as Foxconn in China, under conditions of intense exploitation, from components made elsewhere.

It has been estimated that the cost of an iPhone, retailing for around $650 to $700, is made up of $220 for the components and $5 for the labour of assembly.

The selling price of nearly three times the production cost means that Apple is able to secure a far higher rate of return on its capital outlay than is obtainable elsewhere—the average or general rate of profit.

What prevents the movement of capital to push down the price is the monopoly, enshrined in the intellectual property rights which Apple has over the software. Of course, other firms compete and put out rival operating systems. But their mode of accumulation is the same—it is based on a monopoly of knowledge, which, if it were freely available, would result in a massive fall in prices across the board.

Of course, like the landowners of the past, Apple and the other high-tech giants claim entitlement to this higher rate of return of return because of the outlay on hiring those who develop the new software programs and operating systems.

But these claims are no more justified than the claims of the landlords who, by means of their ownership of a natural resource, claimed a portion of wealth.

In the case of Apple and the other high-tech giants, money power is used to exploit a social resource, in the form of knowledge and science, in order to appropriate private profit.

Apple spends millions of dollars each year buying up the best brains from around the world to develop their new programs and devices. It is a cutthroat struggle in which failure to remain one step ahead runs the risk of becoming the next Nokia or Blackberry, bypassed in the sweep of technological change. This is one of the reasons why the high-tech firms have voiced opposition to Trump’s immigration restrictions, fearing that if barriers are set in place talent will go elsewhere.

But for all the money Apple and others lay out, they essentially obtain these services for next to nothing. This is because the capacities of the mathematics, engineering and computer programming graduates they hire are a pittance compared to the outlays by society as a whole, on schools, universities and other educational facilities, without which these undoubtedly talented and gifted individuals could not have developed their expertise.

In short, Apple’s mode of profit accumulation, expressed most graphically in its vast cash pile, is based on pressing science, which develops socially, into the service of capital for private profit, leading to the further accumulation of wealth on the heights of society, flowing into the coffers of figures such as Warren Buffett, at the expense of the population as a whole.

http://www.wsws.org/en/articles/2017/05/05/appl-m05.html

The ‘Trump Slump’ in Travel Is Costing America Billions

People Don’t Want to Come to Trump’s America:

This is where all that nationalist nuttery gets you.

Photo Credit: Gage Skidmore / Wikimedia Commons

Well, that didn’t take long. People around the world have taken a look at Donald Trump and decided his America is not a place they want to visit. The result has been labeled the “Trump Slump,” a drop in international tourism that’s predicted to cost the United States more than $7 billion. Experts across the travel industry have sounded the alarm that the Trump presidency, already destructive on so many fronts, may also do serious financial damage to the country’s $250 billion tourism sector.

Frommer’s, a prominent travel guide, notes that “the prestigious Travel Weekly magazine (as close to an ‘official’ travel publication as they come) has set the decline in foreign tourism at 6.8 percent” for this year. ForwardKeys, which crunches travel numbers, points to a 6.5 percent downturn in international travel to the U.S. in the week after Trump attempted to issue the Muslim travel ban in January. During the same period, the company found reservations for U.S.-bound flights from Western Europe fell 14 percent and plunged 38 percent from across the Middle East. And a survey released this month by the Global Business Travel Association concluded “45 percent of European business travel professionals say they are less likely to schedule meetings or events in the U.S.,” according to the Los Angeles Times.

The numbers offer evidence that Trump has turned off potential visitors from around the world. The resounding message of Trump’s “America First” stance, his obsession with the Mexico border wall, his anti-immigrant and anti-refugee policies, his Muslim ban, and his rudeness to longstanding allies is that America is inhospitable to foreigners. Predictably, international travelers are opting to stay away—and that includes the European ones that Trump and his supporters are totally cool with.

“Even white, Anglo-Saxon people, who are most of our customers, they are afraid of crossing the border,” Al Qanun, who runs a Toronto travel agency, told the Times. “They don’t want to end up in some prison.”

Among the innumerable costs of Trump’s and his follower’s nationalism are a few you can actually put a price tag on. Tourism Economics, which uses data to forecast travel trends, expects the international tourism drop-off to result in a revenue loss of $7.4 billion, according to Bloomberg News. That figure doesn’t include contributions from those who come to the U.S. for medical treatments or educational reasons, and who tend to spend even more money, enriching American coffers, while they’re here. The loss of all those visitors could mean future problems for a sector on which more than 15 million people rely for employment. Oxford Economics suggests the toll may ultimately ripple beyond the travel industry, even reducing the U.S. gross domestic product by a few percentage points, per Market Watch.

“I’ll tell you quite honestly, when I saw these reports my reaction was, Oh, my god,” Douglas Quinby, of travel-market firm PhocusWright, told the Boston Globe. “To see a decline in search and booking volume in the 6- to 8-percent range is a profound shift.”

Travel industry insiders aren’t just freaking out, they’re trying to stop the trend in its tracks. Roger Dow, CEO of the U.S. Travel Association, penned an open letter to Trump, as if he could be reasoned with.

“Mr. President, please tell the world that while we’re closed to terror, we’re open for business,” the brief letter nearly pleads. “Imbalanced communication is especially susceptible to being ‘lost in translation’—so let’s work together to inform our friends and neighbors, who could benefit from reassurance, not just who is no longer welcome here, but who remains invited.”

The coastal cities where Trump fared the worst in the election are likely to be hardest hit by travel downswings triggered by his administration. Bloomberg cites New York, Los Angeles and Miami as cities that could suffer heavy economic losses. One estimate suggests Miami could lose as much as $736 million over the next three years. Thirty percent of all foreign tourists arriving in the U.S. have New York City as their destination, and if just 300,00 fewer of them visited the city in a year, its economy would be shorted roughly $900 million. To stave off those kinds of losses, NYC & Co., the city’s official tourism agency, has adopted “All Are Welcome” as its new slogan and made it clear it opposes the Trump travel ban.

The rise of Trump and his xenophobic messaging has motivated a number of countries to warn their citizens against non-essential trips to the U.S. The Nigerian government, citing “a few cases of Nigerians with valid multiple-entry U.S. visas being denied entry and sent back,” suggested its residents skip the jaunt to America if they have a choice. In January, the Toronto Star published an editorial suggesting Canadian citizens boycott the U.S. in response to the Trump Muslim ban.

Other negative reactions to America’s longstanding social issues and rising right-wing policies began to take hold even before Trump office. Turkey, the United Arab Emirates, Bahrain, Bahamas, the U.K., Germany and New Zealand all issued 2016 U.S. travel warnings to citizens due to the U.S.’ issues with mass shootings, general gun violence, police murders of black citizens, anti-LGBT bathroom laws, and ongoing social upheaval.

With Trump and his white nationalist brigade in charge, the tourism lag could dip to levels not seen since after the World Trade Center attacks.

“The U.S. is in danger of taking the same path it took after September 11, which led to a decade of economic stagnation in the travel and tourism sector,” David Scowsill, CEO of the World Travel & Tourism Council, told the Globe. “Strict visa policies and inward-looking sentiment led to a $600 billion loss in tourism revenues in the decade post-9/11.”

Trump and his followers will definitely find a way to blame President Obama if the tourism decline persists, but in reality, under the previous administration foreign visits went way up. Bloomberg cites data from U.S. Travel indicating that from 2006 to 2015, “America saw international visitors rise, with arrivals increasing from 51 million in 2006 to nearly 78 million in 2015.”

Perhaps under Trump, Russia can fill the growing gap and make up the difference. Flight app Hopper found Russia is an exception to the rule, with U.S. flight search queries recently increasing 88 percent, per the Guardian.

Why does Donald Trump demonize cities?

Because they show that the liberal experiment works

March 17

Will Wilkinson is the vice president for policy at the Niskanen Center and a former U.S. politics correspondent for the Economist.

President Trump is a big-city guy. He made his fortune in cities and keeps his family in a Manhattan tower. But when Trump talks about cities, he presents a fearsome caricature that bears little resemblance to the real urban landscape.

“Our inner cities are a disaster,” he declared in a campaign debate. “You get shot walking to the store. They have no education. They have no jobs.” Before his inauguration, in a spat with Atlanta’s representative in Congress, he tweeted: “Congressman John Lewis should spend more time on fixing and helping his district, which is in horrible shape and falling apart (not to mention crime infested).” He makes Chicago sound like an anarchic failed state. “If Chicago doesn’t fix the horrible ‘carnage’ going on, 228 shootings in 2017 with 42 killings (up 24% from 2016), I will send in the Feds!” he warned. His executive order on public safetyclaimed that sanctuary cities, which harbor undocumented immigrants, “have caused immeasurable harm to the American people and to the very fabric of our Republic.”

With this talk, Trump is playing to his base, which overwhelmingly is not in cities. Party affiliation increasingly reflects the gulf between big, diverse metros and whiter, less densely populated locales. For decades, like-minded people have been clustering geographically — a phenomenon author Bill Bishop dubbed “the Big Sort ” — pushing cities to the left and the rest of the country to the right. Indeed, the bigger, denser and more diverse the city, the better Hillary Clinton did in November. But Trump prevailed everywhere else — in small cities, suburbs, exurbs and beyond. The whiter and more spread out the population, the better he did.

 

He connected with these voters by tracing their economic decline and their fading cultural cachet to the same cause: traitorous “coastal elites” who sold their jobs to the Chinese while allowing America’s cities to become dystopian Babels, rife with dark-skinned danger — Mexican rapists, Muslim terrorists, “inner cities” plagued by black violence. He intimated that the chaos would spread to their exurbs and hamlets if he wasn’t elected to stop it.

Trump’s fearmongering turned out to be savvy electoral college politics (even if it left him down nearly 3 million in the popular vote). But it wasn’t just a sinister trick to get him over 270. He persists in his efforts to slur cities as radioactive war zones because the fact that America’s diverse big cities are thriving relative to the whiter, less populous parts of the country suggests that the liberal experiment works — that people of diverse origins and faiths prosper together in free and open societies. To advance his administration’s agenda, with its protectionism and cultural nationalism, Trump needs to spread the notion that the polyglot metropolis is a dangerous failure.

The president has filled his administration with advisers who oppose the liberal pluralism practiced profitably each day in America’s cities. “The center core of what we believe,” Steve Bannon, the president’s trusted chief strategist, has said, is “that we’re a nation with an economy, not an economy just in some global marketplace with open borders, but we are a nation with a culture and a reason for being.” This is not just an argument for nationalism over globalism. Bannon has staked out a position in a more fundamental debate over the merits of multicultural identity. Whose interests are included when we put “America first”?

When Trump connects immigration to Mexican cartel crime, he’s putting a menacing foreign face on white anxiety about the country’s shifting demographic profile, which is pushing traditional white, Judeo-Christian culture out of the center of American national identity. “The ceaseless importation of Third World foreigners with no tradition of, taste for, or experience in liberty,” wrote Michael Anton , now a White House national security adviser, is “the mark of a party, a society, a country, a people, a civilization that wants to die.” Bannon has complained that too many U.S. tech company chief executives are from Asia.

The Census Bureau projects that whites will cease to be a majority in 30 years. Suppose you think the United States — maybe even all Western civilization — will fall if the U.S. population ever becomes as diverse as Denver’s. You are going to want to reduce the foreign-born population as quickly as possible, and by any means necessary. You’ll deport the deportable with brutal alacrity, squeeze legal immigration to a trickle, bar those with “incompatible” religions.

But to prop up political demand for this sort of ethnic-cleansing program — what else can you call it? — it’s crucial to get enough of the public to believe that America’s diversity is a dangerous mistake. If most white people come to think that America’s massive, multicultural cities are decent places to live, what hope is there for the republic? For Christendom?

The big cities of the United States are, in fact, very decent places to live. To be sure, many metros have serious problems. Housing is increasingly unaffordable, and the gap between the rich and poor is on the rise. Nevertheless, the American metropolis is more peaceful and prosperous than it’s been in decades.

Contrary to the narrative that Trump and his advisers promote, our cities show that diversity can improve public safety. A new study of urban crime rates by a team of criminologists found that “immigration is consistently linked to decreases in violent (e.g., murder) and property (e.g., burglary) crime” in the period from 1970 to 2010. What’s more, according to an analysis of FBI crime data, counties labeled as “sanctuary” jurisdictions by federal immigration authorities have lower crime rates than comparable non-sanctuary counties. The Trump administration’s claim that sanctuary cities “have caused immeasurable harm” is simply baseless. Even cities that have seen a recent rise in violent crime are much safer today than they were in the early 1990s, when the foreign-born population was much smaller.

Yes, cities have their share of failing schools. But they also have some of the best schools in the country and are hotbeds of reform and innovation. According to recent rankings by SchoolGrades.org , the top 28 elementary and middle schools in New York state are in New York City; Ohio’s top four schools are in Cincinnati, Cleveland, Youngstown and Columbus; and the best school in Pennsylvania is in Philadelphia. “The culture of competition and innovation, long in short supply in public education, is taking root most firmly in the cities,” according to the Manhattan Institute researchers who run the site.

And it gets things exactly backward to think of unemployment as a problem centered in cities.

Packing people close together creates efficiencies of proximity and clusters of expertise that spur the innovation that drives growth. Automation has killed off many low- and medium-skill manufacturing jobs, but technology has increased the productivity, and thus the pay, of highly educated workers, and the education premium is highest in dense, populous cities. The best-educated Americans, therefore, gravitate toward the most productive big cities — which then become even bigger, better educated and richer.

Meanwhile, smaller cities and outlying regions with an outdated mix of industry and a less-educated populace fall further behind, displaced rather than boosted by technology, stuck with fewer good jobs and lower average wages. The economist Enrico Moretti calls this regional separation in education and productivity “the Great Divergence.”

Thanks to the Great Divergence, America’s most diverse, densely populated and well-educated cities are generating an increasing share of the country’s economic output. In 2001, the 50 wealthiest U.S. metro regions produced about 27 percent more per person than the country as a whole. Today, they produce 34 percent more, and there’s no end to the divergence in sight.

Taken together, the Great Divergence and the Big Sort imply that Republican regions are producing less and less of our nation’s wealth. According to Mark Muro and Sifan Liu of the Brookings Institution, Clinton beat Trump in almost every county responsible for more than a paper-thin slice of America’s economic pie. Trump took 2,584 counties that together account for 36 percent of the nation’s gross domestic product. Clinton won just 472 counties — less than 20 percent of Trump’s take — but those counties account for 64 percent of GDP.

The relative economic decline of Republican territory was crucial to Trump’s populist appeal. Trump gained most on Romney’s 2012 vote share in places where fewer whites had college degrees, where more people were underwater on their mortgages , where the population was in poorer physical health, and where mortality rates from alcohol, drugs and suicide were higher.

But Trump’s narrative about the causes of this distress are false, and his “economic nationalist” agenda is a classic populist bait-and-switch. Trump won a bigger vote share in places with smaller foreign-born populations. The residents of those places are, therefore, least likely to encounter a Muslim refugee, experience immigrant crime or compete with foreign-born workers. Similarly, as UCLA political scientist Raul Hinojosa Ojeda has shown, places where Trump was especially popular in the primaries are places that face little import competition from China or Mexico. Trump’s protectionist trade and immigration policies will do the least in the places that like them the most.

Yet the Great Divergence suggests a different sense in which the multicultural city did bring about the malaise of the countryside. The loss of manufacturing jobs, and the increasing concentration of the best-paying jobs in big cities, has been largely due to the innovation big cities disproportionately produce. Immigrants are a central part of that story.

But this is just to repeat that more and more of America’s dynamism and growth flow from the open city. It’s difficult to predict who will bear the downside burden of disruptive innovation — it could be Rust Belt autoworkers one day and educated, urban members of the elite mainstream media the next — which is why dynamic economies need robust safety nets to protect citizens from the risks of economic dislocation. The denizens of Trump country have borne too much of the disruption and too little of the benefit from innovation. But the redistribution-loving multicultural urban majority can’t be blamed for the inadequacy of the safety net when the party of rural whites has fought for decades to roll it back. Low-density America didn’t vote to be knocked on its heels by capitalist creative destruction, but it has voted time and again against softening the blow.

Political scientists say that countries where the middle class does not culturally identify with the working and lower classes tend to spend less on redistributive social programs. We’re more generous, as a rule, when we recognize ourselves in those who need help. You might argue that this just goes to show that diversity strains solidarity. Or you might argue that, because we need solidarity, we must learn to recognize America in other accents, other complexions, other kitchen aromas.

Honduran cooks in Chicago, Iranian engineers in Seattle, Chinese cardiologists in Atlanta, their children and grandchildren, all of them, are bedrock members of the American community. There is no “us” that excludes them. There is no American national identity apart from the dynamic hybrid culture we have always been creating together. America’s big cities accept this and grow healthier and more productive by the day, while the rest of the country does not accept this, and struggles.

In a multicultural country like ours, an inclusive national identity makes solidarity possible. An exclusive, nostalgic national identity acts like a cancer in the body politic, eating away at the bonds of affinity and cooperation that hold our interests together.

Bannon is right. A country is more than an economy. The United States is a nation with a culture and a purpose. That’s why Americans of every heritage and hue will fight to keep our cities sanctuaries of the American idea — of openness, tolerance and trade — until our country has been made safe for freedom again.

An increasingly connected world needs hackers more than ever before

Internet security expert Justin Calmus explains why bug bounty programs are so important

An increasingly connected world needs hackers more than ever before
(Credit: Getty/welcomia)

As the world around us becomes more connected to the internet, the number of ways that hackers can infiltrate our lives becomes increasingly multifarious. Today data breaches are taking place in ways that were unheard of just a decade ago — from remotely hacking cars to infiltrating “smart” teddy bears.

The threats have grown so quickly that companies are overwhelmed by the increasing number of attacks, security experts say. This is not just because of the growing number of opportunities to infiltrate a network or device, but also because these attacks are increasingly automated and launched from low-priced computer hardware using open-source tools that require relatively low coding skills to deploy. Defending against such attacks can require well-paid and highly trained experts.

“We believe that cybersecurity is a correctable math problem that, at present, overwhelmingly favors the attackers,” Ryan M Gillis, vice president of cybersecurity strategy for enterprise security company Palo Alto Networks, said at a House Homeland Security Committee meeting last week about protecting the private sector from hacking. “Network defenders are simply losing the economics of the cybersecurity challenge.”

One increasingly popular way for a company or government agency to root out vulnerabilities is through a big bounty program, a policy that invites hackers to try to infiltrate its connected networks. Hackers receive financial compensation for identifying entry points that could be exploited for malicious purposes. The idea has been around since at least 1995, when internet browser pioneer Netscape initiated its “bugs bounty” program with a $50,000 budget. Today such programs are common among major companies, including United Airlines and Tesla Motors, and can be lucrative projects for the most talented hackers who can earn from $10 to tens of thousands of dollars depending on the severity of the vulnerability identified.

Last week Google and Microsoft increased their top rewards for people who can expose the most serious threats, like when code can be remotely injected and executed through network defenses. This underscores the growing popularity of bounty programs as companies compete for the attention of the most talented ethical hackers. Apple, which has resisted compensating people for identifying flaws, last year succumbed to the trend and now offers bounties of as much as $200,000.

Justin Calmus, vice president of hacker success for San Francisco-based HackerOne, which has a bug-bounty platform whose clients include the U.S. State Department, Uber Technologies and General Motors, spoke with Salon about the role bug bounties play in boosting network security.

Bug bounties have been around for about 20 years. Talk about the most recent innovations in the practice and where it might be headed.

I’ll start with the problem first. If we go back 15 years, companies would be able to recruit engineers because they were focused on specific technologies. You would have a few issues from most likely Python, [a high-level general-purpose programming language,] and you would have a website and some people who knew HTML, [the standard language for building websites]. Today we have so many different programming languages and we have different infrastructure components, like running in the cloud versus on premise, we have [Amazon Web Services, a widely used cloud-computing platform] and we have all these different operations.

The problem of security is getting bigger and bigger. How do you control your security? If you run a startup, how do you control your security as you build your business? That’s an even harder problem to solve because you don’t necessarily have the funding to hire tons of security resources. You have to figure out “How do I continue to stay secure while I scale?” That’s one of the problems bug bounties solve for.

For the most part, if you have a company, and it could be any company, you tell hackers, “Hey, I want you to do anything it takes to get access to our data and report it to us.” If you do that, you then have thousands of eyes looking into your specific programs to help you scale and help you secure your business.

Are there hackers that just do this as full-time jobs?

Yeah, we have a gentleman in Vegas that does this full-time, making a half a million dollars a year doing this. You can make a significant income from bug bounties. It’s a fantastic way to make extra income and to potentially go full-time.

Google and Microsoft recently announced big increases in their bug bounty rewards. Why do you think bug bounties are becoming more lucrative?

Imagine if Salon.com is trying to recruit the best reporter in the world, but that reporter must have specific knowledge about security — and it also wants a little bit of software engineering background because the reporter needs to talk technical, and it wants the reporter to be located in this area, and the reporter must be willing to travel. Suddenly you’re moving your needle so small that there might be three people in the world who fit the criteria.

Google is starting to have this problem. They’ve developed a lot of their own tools and they’ve developed their own [programming] language. It’s not easy to find a Google bug because there isn’t external training on what Google does, how they do it, all the different types of infrastructure. There are pretty good resources to figure this out, but to go deep on such a massive problem you need to spend hours and days and months getting to know the infrastructure to find a bug. So to dedicate all of your time and resources into Google you need to be very incentivized to look because at the end of the day you might not find anything.

We’re entering an era of the internet of things [that] connects cars, smart cities, toys with Wi-Fi connections. Are bug bounties being implemented for things like this?

We’re getting to the point to where the [makers of] hardware and the internet of things components are starting to be asked those very questions. As a hacker myself, I want to see them participate in bug bounty programs because I use Alexa, I use some of the apps connected to [the internet of things] and it’s my job to understand how the software and hardware that I buy works. Doing due diligence and being able to reverse engineer to take a look deep into a product, you may find issues and vulnerabilities; some of them may even give you access to other customers’ data. Companies need to be able to responsibly disclose all of that. For hackers to put in the time and effort to find some of these vulnerabilities — it would be fantastic if companies would reward the hackers so that they continue looking into their programs.

We’ve read a lot about how automakers are encouraging white hat hackers to root out these vulnerabilities. But is this happening with other makers of internet-connected products, like internet-connected home appliances or “smart” teddy bears?

It’s absolutely a slow roll. The tech companies get it. They have to deal with security issues day in and day out. The hardware companies don’t necessarily understand it as much as they need to. It’s a problem we’re solving for. We do have some hardware companies on board. We do have internet of things [companies] on board. But we do need to get the word out that security is a fundamental piece of everybody’s life. You need to be able to understand the security outcomes of making life more efficient or easier or whatever it may be. So do I think that we need to spread the word? Absolutely. Do I think they get it yet? Not 100 percent.

The Information Technology and Innovation Foundationrecently said that a significant number of federal government websites failed basic security benchmarks. Is the federal government falling behind in this effort to entice ethical hackers?

The Department of Defense has a bug bounty program and we’re starting to see efforts to secure all of our government services. Just speaking to higher-ups on the government side I hear them talking about “Hey, we need to find these hackers and reward them and incentivize them, see what we can do to continue to have them continue to look at our programs and even eventually hire them.” The U.S. has its own hiring criteria, but the [Defense Department] is open to anybody today, not just U.S. citizens looking to work for them.

HackerOne recently announced a platform for the open-source coding community, which is free. What inspired you to go in that direction?

We’re absolutely huge open-source fans. Open source powers our platform. It powers many platforms. We see the mission as making the entire internet safer and make sure that everyone is taken care of. We’re better off doing that for all of the open-source projects out there. We want to make sure we’re on top of that. This also helps us branch out to the best hackers out there. We’re able to leverage our ability find vulnerabilities [in open-source software] while we’re getting more connected to the hacker community.

How Uber Could End Up As Silicon Valley’s Most Spectacular Crash

ECONOMY

Lately, the curtain is being pulled back to reveal a rotten culture and troubled CEO.

Photo Credit: Prathan Chorruangsak / Shutterstock.com

Just a year ago, Uber reigned as the tech industry’s awe-inspiring, all-powerful Wizard of Oz. But lately, the curtain is being pulled back to reveal a guy who’s more like an angry drunk frantically yanking levers while taking roundhouse swings at the Tin Man and propositioning Dorothy.

Uber is in a whole lot of bad right now, and there’s growing concern that it’s about to melt down like a haywire nuclear reactor, which would leave a crater in the heart of Silicon Valley. Uber gave us on-demand transportation. Countless people all over the world love this new kind of service. The category is only going to get bigger. But it’s possible it will do that without Uber.

Rotten Culture, Bad PressAt the heart of Uber’s trouble is its culture, which seems to have been born from a one-night stand between John Belushi’s crude Bluto in Animal House and Ayn Rand’s hypercompetitive Hank Rearden. That culture got put on public display in February, when former engineering employee Susan Fowler published a blog calling out Uber’s rotten treatment of women and its general dysfunction. The place is so cutthroat, she wrote, “it seemed like every manager was fighting their peers or attempting to undermine their direct supervisor so that they could have their direct supervisor’s job.”

If anyone thought Fowler was a lone whiner, a few days later tech industry legend Mitch Kapor and his wife, Freada Kapor, who is an expert in workplace mores, published an open letter to Uber’s board. The Kapors were early investors in the company, and they were unhappy about Uber’s tepid response to Fowler’s post and fed up with Uber’s “destructive culture,” to use their term. “We are speaking up now because we are disappointed and frustrated; we feel we have hit a dead end in trying to influence the company quietly from the inside,” they wrote.

A week later, while riding in an Uber, CEO Travis Kalanick was captured on video berating the driver, who dared to complain about cuts to his income because Uber keeps reducing fares. “I’m bankrupt because of you,” the driver told Kalanick, who then erupted. After Bloomberg obtained and published the video, Kalanick found himself in the all-too-familiar position of publicly apologizing. He posted on Uber’s site, “I must fundamentally change as a leader and grow up.” Duh.

Negative publicity keeps battering Uber. The company ran afoul of the protesters who flocked to airports after Donald Trump’s travel ban, then had to fend off a #DeleteUber movement. (Some estimates say 200,000 people deleted the app in the days after the hashtag went viral.) About six months earlier, Uber took a $3.5 billion investment from Saudi Arabia’s Public Investment Fund, a move that made Uber look as if it was buddies with a government that won’t let women drive and puts gay men in jail.

One Uber investor said to Fortune about the deal, “It goes to the heart of who Travis is. He just doesn’t give a shit about optics. Ever.”

Now Uber is being painted as a technology thief by Google’s parent, Alphabet. Last year, Uber bought a company called Otto for a reported $680 million. Otto develops autonomous driving technology. A bunch of people who work there came from Alphabet’s autonomous car subsidiary, now called Waymo. Alphabet alleges that some of those people stole technical data from Waymo, and Alphabet is suing to stop Uber from using it. Uber has often stated that its future rests on having a fleet of self-driving cars—so, of course, it won’t have to share revenue with those pesky human drivers. If Alphabet wins its case, Uber would pretty much have to start building the technology all over again or pay a ton of money to buy someone else’s.

Dissatisfied Drivers, Bleak Financials. While Uber is counting on a hazy future of self-driving cars, in the meantime it has to keep its 160,000 drivers happy, and they are not, as Kalanick’s video encountered showed. Drivers want the Uber app to allow tips; Uber won’t do it. Uber has fought court cases brought by U.S. drivers asking for employee benefits. It settled a suit for $20 million for posting ads that were misleading about how much its drivers can earn. Rival Lyft has been running ads lampooning Uber’s treatment of drivers, hoping to lure away Uber drivers—and convince conscientious riders they should prefer a company that treats its drivers better.  Strategically, Kalanick and his team seem guilty of constant overreach. Does anybody ever order a falafel from UberEats? Who at Uber thought it was a good idea to take on Seamless? Not only did Kalanick buy Otto to get into self-driving cars, but in February he hired a former NASA scientist to develop flying cars. Trump likes to say we always lose to China—well, Uber proved him right by going into China ill-prepared. Last summer, Uber cut a deal with China’s Uber clone, Didi Chuxing, to leave China in exchange for 17.5 percent of the Chinese company and a $1 billion investment by Didi. Is that setting up Didi to eventually beat Uber worldwide? Trump will have a seizure if the day ever comes when U.S. riders no longer say they’re going to “Uber” somewhere and instead say they’re going to “Didi.”And then there is Uber’s financial picture. The company is private, but some of its numbers have been leaked. Bloomberg reported that Uber lost $800 million in the third quarter of 2016. Some speculate Uber may have lost $3 billion last year. Uber is a costly business to run. To serve more customers, it needs to bring in and pay more drivers, so the company can’t take advantage of economies of scale. It has little pricing power because it still faces competition from Lyft and taxis and other newcomers including Maven, which is a unit of General Motors. In order to have the cash to fund operations and expansion, Uber has brought in round after round of private investment, pumping up the valuation of the company to nearly $70 billion. That would make Uber worth more than GM. Raise your hand if you think that makes sense.

The sky-high valuation may be haunting Uber. Kalanick has famously refused to take Uber public, even though the company, at eight years old, is in the sweet spot of when many tech companies do an initial public offering. He makes his stance sound like a maverick’s declaration of independence from public markets, but whispers now are that Uber’s finances might not justify an IPO at a valuation high enough to make current investors happy. If that’s true, Uber is in a hole. It won’t be able to raise money from anyone who has passed sixth-grade math.

If Uber stalls, it isn’t going to be saved by a loyal consumer fan base. There is no stickiness to Uber. It has no frequent-rider program. It has no social component. It prevents users from forming bonds with drivers. No one gets a heightened sense of self by identifying as an Uber rider versus some competitor. We’ll stick with Uber as long as it continues to get us where we want to go at a price we like. Someone else comes along with a better service or lower price, we’ll use it.

Drexel of the 2010s?It’s hard to imagine the devastation that would come with an Uber collapse. Its dozens of investors range from venture capital companies to individuals like Kapor and companies such as Microsoft and Citigroup. The company employs 11,000 people (excluding drivers), mostly around Silicon Valley, and is in the process of spending $250 million on new offices. The blow to Silicon Valley’s ego might be up there with the pain the Democratic Party has been feeling lately.

Uber has done amazing work in its short life. It created, defined and has so far dominated a new market of on-demand transportation, changing the way we do things today and profoundly changing the way we think about the future of urban transportation. It is a historically important company. No one will ever take that away from Kalanick and his crew. But Uber has proved to be a flawed company. To find a business tragedy that’s an appropriate warning for Uber, go back to Drexel Burnham Lambert in the 1980s, when Kalanick was in grade school. (He is, believe it or not, 40 years old.) Drexel, led by investing legend Mike Milken, defined and dominated junk bonds as a category of finance. This changed Wall Street and business forever. Drexel was a superstar. But the company had a flawed culture of insane pressure to perform, so employees took sketchy risks that ultimately led to criminal charges. Within a couple of years, the company fell from the pinnacle of Wall Street power to filing for bankruptcy. Milken went to prison for securities fraud.

The category Drexel created lives on. Today, junk bonds are a $1 trillion market, without Drexel.

The Kapors are pushing Kalanick to reinvent Uber’s culture so it can become an enduring company. It would be awesome if Uber can fulfill its promise and stand next to companies like Apple and Amazon. But as Uber’s bad days pile up, it often looks as if Kalanick has built the Drexel of the 2010s.

Kevin Maney is a best-selling author and award-winning columnist.

 

The Snap IPO: Trump agenda fuels an orgy of speculation

snap-surges-44-in-its-stock-market-debut-after-an-ipo-that-made-its-20-something-founders-multibillionaires

3 March 2017

Shares of Snap Inc., the maker of the Snapchat messaging app, surged 44 percent Thursday after its initial public offering (IPO). The firm, which has a miniscule number of employees, has never turned a profit and lost $514.6 million last year, is now valued higher than the retailing giant Target, which employs over 300,000 people.

Within seconds of trading in the stock getting underway, an hour and a half or so after they had rung the opening bell, the wealth of each of the company’s two co-founders, Evan Spiegel and Bobby Murphy, was boosted to $5.3 billion as the shares jumped from an initial price of $17 to more than $24—a leap of 44 percent. They rose even further during the course of the day before falling back slightly at close of trading. Others also benefited, including the venture capital firms Benchmark Capital and Lightspeed Venture Partners which made $903 million and $613 million respectively.

The explosion in the value of Snap shares is illustrative of two interconnected processes. It is a further demonstration of the rise of parasitism at the heart of the US economy and financial system. At the same time, it is another graphic endorsement by Wall Street and US financial elites of the policies of the Trump administration aimed at setting loose the “animal spirits” of capitalist money-making, free from any government control or regulations.

The fact that Snap Inc. has warned that it may never turn a profit did not prevent a rush for the stock. Speculators salivated not so much on the prospect that Snapchat’s 158 million users, sending more than 2.5 billion images and messages every day and concentrated in the 18- to 34-year-old demographic, could be a lucrative source of revenue. Rather, the stampede was motivated by the very short-term prospect, measured in minutes or even seconds, that there were huge immediate gains to be made on a rise in its share value.

The response to the Snap launch was hailed on Wall Street as a sign that the downturn in IPOs in the past two years was coming to an end and that further massive fortunes could be made if other firms such as ride-hailing service Uber and rental service Airbnb decide to list publicly.

The Snap IPO took place in the midst of a market surge that began with the election of Donald Trump four months ago. Since Election Day, the market has risen by 15 percent and on Wednesday the Dow Jones index hit a new record high of 21,000 after passing the 20,000 mark on January 25.

The IPO took place the same week as Trump announced plans to increase US military spending by a massive $53 billion, offset with cuts to social spending and foreign aid, and as his administration presided over a massive round-up of undocumented workers.

As Trump noted in his address to Congress this week, since his election victory, more than $3 trillion has been added to share values. The driving force of this process is not the prospect of a genuine revival of the US economy—growth continues to trend below 2 percent—but rests on the belief that the administration is going to scrap legal and administrative constraints on profit-making.

In short, the type of economic and financial arrangements that have characterised Trump’s business career, based on speculation, swindling, low wages, and business malfeasance, are now going to hold even greater sway in the American economy as a whole.

This perspective has been articulated by Trump’s chief strategist, the fascistic ideologue and economic nationalist Stephen Bannon, who has insisted on the scrapping of what he calls the “administrative state.”

The Snap IPO is an expression of this general process. This is a company which makes nothing, which has very few employees and whose valuation is based on the belief that it is a vehicle through which money will simply be able to beget more money via financial operations.

That such speculation now increasingly assumes the first place in wealth accumulation is expressive of the rot at the very heart of American capitalism. It results from the fact that trillions of dollars are unable to find a productive outlet in the real economy and investors increasingly seek returns through financial manipulations.

The same phenomenon is visible elsewhere. One of the chief drivers of the share market rise has been the escalation in the value of bank shares, particularly of Goldman Sachs, former executives and employees of which have assumed prominent positions in the Trump administration.

The rise in bank share values is not the result of expectations of a surge of lending for productive activities, but flows from the belief that the Trump Administration intends to dismantle financial regulations, including the extremely limited measures introduced under the Dodd-Frank Act in response to the financial crisis of 2008.

Likewise, the surge in the shares of companies, such as Caterpillar, involved in infrastructure projects is not based on any genuine public initiatives—notwithstanding Trump’s declaration in his address to Congress that crumbling infrastructure will be replaced by new roads, bridges, tunnels, airports and railways, “gleaming” across the land. Rather, it is grounded on the understanding that at the centre of the $1 trillion so-called infrastructure program will be tax concessions and write-offs for major firms.

Armaments firms and defence contractors are also enjoying a surge because of Trump’s commitment to increase military spending at the cost of vital social services. And adding fuel to the fire is the promise of major tax cuts, both at the personal and corporate level.

The prospect that the very heights of American society, already wallowing in obscene levels of wealth, are going to be further richly rewarded under the Trump administration is the essential content of the Snap IPO frenzy.

The election of Trump marks a new stage in the social counter-revolution initiated under Obama, the aim of which has been to massively enrich the financial oligarchy through the impoverishment of workers, the dismantling of social services, and the elimination or non-enforcement of financial, environmental, occupational health, and other business regulations.

This is the outcome of the capitalist system, which, beset by economic, geopolitical, and social crisis, sees no solution to its internal maladies outside of dragging society back over a hundred years to the age of the robber barons.

Trump’s reactionary social and economic agenda, which has already given rise to the largest mass protests in US history, will set the administration on a collision course with the working class. If workers are to fight back, they must understand that Trump does not act as an individual—a blot on the otherwise healthy capitalist system—but rather expresses its innermost essence: parasitism, dictatorship, and militarism.

The struggle against the Trump administration is the fight against the social class he represents—the American financial oligarchy—and the capitalist system. It requires the working class to adopt a socialist strategy, aiming to overturn capitalism and replace it with public ownership and control of the means of production.

Nick Beams

http://www.wsws.org/en/articles/2017/03/03/pers-m03.html

State of Resistance: California in the Age of Trump

ELECTION 2016

The battle begins now.

Photo Credit: ilozavr / Shutterstock

For the past two decades, California has been on the cutting edge of social and economic change in America. Now, with Donald Trump about to enter the Oval Office, the Golden State is poised to take on a new role: leader of the anti-Trump resistance.

California’s frontline position in opposing Trump is not merely a reflection of its deep-blue politics. On many of the flashpoint issues expected to define Trump’s presidency, California has a tremendous amount at stake. As the new administration tries to reverse the significant gains made on immigrant rights, climate change, criminal justice and workers’ rights, to name a few subjects, many of the fiercest battles in the country will be fought up and down the state.

Can California lead the resistance to Trump’s right-wing agenda and continue to be in the vanguard of advancing progressive change? Yes – and in fact, the two are inextricably linked, both tactically and symbolically. In the months and years to come, California must become like the best sports teams, capable of playing defense and offense at the highest level.

Why California Must Lead

No state rivals California either in the dimensions of its population or economy. At just under 40 million people, California has more residents than the nation’s 20 least densely populated states put together. Its economy is the sixth-largest in the world, trailing only the U.S., China, Japan, Germany and the United Kingdom.

California is also home to several of the nation’s most powerful and influential industries, including high tech and entertainment. Both Silicon Valley and Hollywood wield enormous economic clout, and are key shapers of consumer habits and cultural norms.

Why is this significant? Because California has the ability to exert enormous pressure on everything from markets and mores to politics and policy, a position it has ably demonstrated in its leadership role in addressing climate change, despite federal inaction.

Size and economic strength by themselves are not enough. But over the past 20 years, California has acquired another key comparative advantage: It has developed some of the most innovative social movements in the country – and exported them to cities across the U.S. These movements have secured rights for immigrants, boosted worker pay, protected LGBTQ Californians and pushed the state forward on addressing climate change. They will be called upon to use their organizing prowess to hold the line against Trump even as they continue to push the envelope of social and economic justice in California and beyond.

California advocates have succeeded in large part by mobilizing an incredibly diverse set of stakeholders. This will pay big dividends now, as very disparate groups of people – immigrants, Muslims, African-Americans, the poor, women, communities already suffering the effects of climate change – see their interests threatened by the Trump administration. The experience of working together across racial, ethnic, geographic and class lines will lend itself to the creation of even broader alliances – so broad that California could be a key base for the biggest and most diverse progressive coalition the nation has ever seen.

Flashpoint Issues

While California’s anti-Trump coalition will need to develop the capacity to fight many battles at once, one initial front will surely be immigration. If Trump makes good on his campaign promises, hundreds of thousands of undocumented immigrants will be faced with deportation, many of them DREAMers protected by the Deferred Action for Childhood Arrivals (DACA).

The economic, social and human costs of disrupting the lives of so many Californian families are staggering. Recognizing this, state and local leaders have vowed to resist efforts targeting immigrants, setting the stage for high-stakes confrontations with the new administration.

No less dramatic will be the battles over climate change. Governor Jerry Brown has vowed to oppose any efforts to roll back the state’s pioneering environmental policies (including a promise to have California launch its own satellites to gather information on global warming!), and he will be joined by a broad-based group of business leaders and activists.

Another flashpoint will be workers’ rights. Fast-food CEO Andrew Puzder is likely to be the new labor secretary: He is on the record as opposing increases in the minimum wage and expansion of overtime pay and is clearly no ally of those who seek to rein in the abuse of independent contractors and gig-economy workers. In California, the nation’s strongest labor movement, together with community and business allies, has enacted some of the most far-reaching worker protections in the country; we will need to stand firm on what we’ve won and stand strong against an assault on labor rights.

More broadly, unions face an existential crisis under a President Trump. Just last year, the Supreme Court heard a key case initiated out of the Golden State, Friedrichs v. California Teachers Association, in which anti-labor advocates sued to eliminate the ability of unions to collect dues for collective bargaining. Down one justice, the Court deadlocked – but since a tie sets no national precedent, another version of the same sort of case is widely expected to come up once Trump fills the open seat. Californians will have to be among those opposing any Court nominee likely to ignore worker, minority or women’s rights.

Another bone of likely contention: Trump can also be expected to push hard on a law-and-order agenda that will fly in the face of efforts to reform the criminal justice system. After recognizing its own disastrous infatuation with over-incarceration, California has embraced recent initiatives to reduce the sentences of nonviolent offenders and to ban labor market discrimination against former felons. This will be another policy battleground and will provide the opportunity to showcase a national counter-example to Trump’s fear-driven attempt to strengthen law enforcement at the expense of civil rights.

The Challenges Ahead

While California is well positioned to lead the charge against Trump, the success of these efforts is not inevitable. The challenges ahead include the risks of factionalism, the rise of extremism and the need to craft a new relationship with business forces.

When Richard Nixon was elected president in 1968, left-of-center political forces fragmented badly, expediting the rise of conservatism, which in turn has dominated national politics ever since. California’s progressive movement does not appear to be headed in this direction, but Trump has proven himself a master at dividing and conquering, and he will no doubt pursue the same strategy as president. He will also attack on many fronts, creating a strain on resources and the possibility of destructive in-fighting.

And although California may currently vote progressive, it is also no stranger to extremism. The descendants of the John Birch Society are alive and well, the Tea Party has its Golden State adherents and it’s worth recalling that Rush Limbaugh got his talk-radio start in Sacramento. With Trump in the White House, the right in general and the politics of hate in particular may well get a boost. The inland and rural regions of California have been the traditional breeding grounds for white nationalism, but the alt right is also operating in the state’s urban population centers.

Finally, some business leaders, lured by tax cuts, deregulation and union-busting, will be supportive of the Trump agenda even if they are repulsed by the anti-immigrant and anti-trade rhetoric. Other business leaders have a more balanced perspective, recognizing that a strong and sustainable economy requires that wages rise, racial inclusion occurs and the planet is protected. Progressives will have to figure out where alliances are possible and effective. This is particularly important in California, where some “business Democrats” often side with corporate lobbies on critical environmental and labor legislation. While several such elected officials found themselves unelected in 2016, others may be emboldened by Trump and his brand of scorched-earth capitalism. This could pose a serious risk to progressive priorities, even with the Democratic super-majority in the state legislature.

Looking Forward

As Trump and his allies wage war on all fronts, a weariness may set in – and along with it a tendency to take refuge in California’s different political reality. That would be a very costly mistake. Not only must California help the country fight back, it must not take its own prolific advances for granted.

After all, it was only two decades ago that we were convulsed by our own anti-immigrant hysteria in the form of Proposition 187, a law that sought to strip all services, including education, from undocumented immigrants. It passed with an overwhelming majority, and the state soon followed with an electoral attack on affirmative action and aggressive efforts to criminalize black and Latino youth. And even as the nation voted for Obama in 2008, California voted for Proposition 8, stripping the rights of same-sex couples to marry.

We’ve come out of our political morass, not just because time has passed and demographics have shifted, but also because of a new hard-fought and hard-forged politics and social compact. With the nation now experiencing its own “Prop 187 moment,” we have a responsibility to help others avoid our own mistakes and accelerate the country’s path to a more inclusive future.

We will also need to lead by example. For all of California’s political progress, we still have one of the highest levels of inequality in the country, some of the most polluted communities, huge shortages of affordable housing, a massive homeless population, ongoing police brutality and one of the nation’s highest number of people caught up in the criminal justice system.

Even in the Trump era, California can tackle these problems – but it will require old relationships and new allies, solid institutions and innovative strategies, long-standing-values and a fresh and compelling vision of our future. All this will require a clarity of purpose, a level of passion and strength of resolve that few of us have been called on to summon.

So get ready. The battle begins now.

 

 

 

Dr. Manuel Pastor is Professor of Sociology and American Studies & Ethnicity at the University of Southern California where he also directs the Program for Environmental and Regional Equity and co-directs USC’s Center for the Study of Immigrant Integration. His most recent books include Just Growth: Inclusion and Prosperity in America’s Metropolitan Regions (Routledge 2012; co-authored with Chris Benner) Uncommon Common Ground: Race and America’s Future (W.W. Norton 2010; co-authored with Angela Glover Blackwell and Stewart Kwoh), and This Could Be the Start of Something Big: How Social Movements for Regional Equity are Transforming Metropolitan America (Cornell 2009; co-authored with Chris Benner and Martha Matsuoka).