Regulating Outsourcing Creates Surprising Vendor Opportunities!


trade-zone

(Published in Outsourcing Magazine, 12/14/2016)

During the election, Trump said that he would stop work from leaving America, and would tax offshored products at 35%. Weeks before Donald Trump is sworn in as President of the United States, he is hard at work wheeling and dealing with American corporations. Will these deals tell us about the “Trump Plan” for outsourcing? Let’s dive right in and see!

The Carrier deal has certainly received a lot of press, yet this deal has nothing to do with the official powers of the President. Carrier was offered $7 million in tax incentives in exchange for two things. First, Carrier will scale back outsourcing to Mexico, retaining 700 to 1,000 (reports vary) of the 2,000 workers scheduled for termination. Second, Carrier will invest $16 million over 2 years to upgrade their factory. Government funding money is from the state of Indiana, rather than the Federal government. VP to be Mike Pense, governor of Indiana sealed the deal.

In the past, this type of co-investment deal would yield more jobs over time. The Trump deal is different. CEO of United Technologies (Carrier’s parent firm), stated that their investment will allow them to automate the facility. Automation? The State of Indiana is subsidizing Carrier’s elimination of Indiana jobs through automation? If Carrier does not invest in automation, Trump will tax offshoring of these jobs.

I suspect this is NOT exactly what Trump had in mind. Likewise, these details have not yet been absorbed by the Washington Bureaucracy. This model has been followed or requested in the past, but usually only by the most liberal of Democrats. Usually, this will get you labeled “socialist” by conservatives. Trump may be able to convince fellow conservatives to accept this new paradigm. Still, much like the UK Brexit, as the financial consequences become understood, Republicans may agree with the goal but resist the mechanism.

To understand those consequences, we need to look at the following five elements that the Trump plan must address. Let’s start with…

Outsourcing: “Outsourcing” is the process of a firm moving its work to another firm. This definition, however, is too broad to translate into a government policy. If a firm outsources its accounting department, to a US accounting firm, is that outsourcing? Or must jobs be moved out of the US? This, however, is called offshoring. Offshoring moves work to another country, but the offshore firm could be your firm’s foreign office, a completely different firm or a co-owned venture. Will they all be taxed?

The last 20 years of offshoring involves every conceivable business arrangement. Look at LG computers. They started off as IBM’s offshore factories for laptops. IBM sold off the factories and the IBM laptop brand name to the Korean firm that would later be called LG. Is LG still an outsourcer today, or is it a foreign company? Do you avoid outsourcing penalties if you sell your offshore facility to a foreign company?

How will corporate America negotiate the new complexities of outsourcing? Who will produce reports and negotiate penalties? Probably HR, but HR has had its resources slashed in the past decade. The outsourcing of outsourcing management and reporting may seem… ironic?… but it may also be a huge and lucrative opportunity.

Incentives: Few jobs are created equal, and each job kept onshore could yield a different government payout. Indiana will pay $7 million, or $700 per worker, per year, for 10 years. Last year, Alcoa Aluminum in New York, cut a deal to save 487 jobs. The deal is for just 3.5 years, but it pays $21 million per year for a total of $73.6 million. That’s over $43,000 annually compared to less than $1,000 for Carrier. Corporations, or a service they hire, needs to ensure that clients receive the highest benefits and the lowest penalties possible from whatever program is put in place.

How big could this program be? The Federal government’s largest job incentive program is probably the US Postal Service. With 500,000 permanent employees, they run a total deficit of $47,000,000,000 over the last 10 years. That’s $95,000 per employee. The USPS continues to lose ground against private delivery services, email and (soon) drones. While the USPS is not about to be offshored, they need to be transformed. And soon. But this does indicate the size of the incentives that may be needed for Trump’s program.

To ensure that clients can fully participate in these programs, outsourcers must “unpack” the free analytics and management that is currently bundled into their offshore pricing. Providing a sophisticated new consulting service that can bridge the knowledge gaps that will come with new outsourcing regulations, will provide outsourcers with a huge revenue opportunity. 

Automation: As stated earlier, Carrier’s $16 million investment will be used to automate. This is not some “Trojan Horse” by Carrier’s management. If you have an old factory that is no longer competitive, what can you do with a $16 investment to change that? Fix the roof?  Build a new cafeteria? No, you will invest in automation or equipment upgrades that increase productivity and reduce the need for workers.

Will US corporations be taxed if they eliminate jobs through offshoring, but given incentives if they automated away the same jobs? Because firms are constantly doing both, who will provide Washington with the documentation that proves that jobs were eliminated by automation (or other approved forms of job reduction) and therefore the firm is exempted from the 35% tax? Once again, more paperwork. A lot of paperwork!

Penalties: Will all US offshored products be taxed at 35% based on their suggested retail price. If parts made in the US but assembled offshore, do we just tax the “additional value” created offshore?  Are we just taxing goods outsourced after 2016, or from the beginning of time? How we define and monitor this could make or break Trump’s program.

Consider products that are no longer made in the US, such as men’s clothing? The vast majority of American men’s clothing … includes Donald Trump’s clothing line… moved offshore in the 1980’s. Are we trying to restart men’s clothing in the US? Or does Washington just exempt these goods from tax penalties? What about other products that the US doesn’t manufacture anymore: smartphones, computers, athletic shoes, solar power cells, light bulbs and (yes) air conditioners?  

Competition: Top of the line mobile phones cost $700. The Apple iPhone is 100% assembled offshore. Offshore assembly costs about $140, but onshore assembly would cost $780. Do we apply the 35% tax to the $700 phone, the $138 of added offshore value for assembly, or do we tax the $780 of work the US lost? If we keep it simple and tax the $700 retail price of the phone, the new cost is $925.

That will certainly send a message to Apple. But not the one you think. The higher cost of onshore assembly would drive the cost to over $1,400. That would lose most of Apple’s US market (and jobs). Or the factory could be automated, which would eliminate most of the reshored jobs. Neither option creates many new jobs.  

There is one other problem. Of the top 10 mobile phone manufacturers, only Apple is American. The rest are all Asian. If the offshore tax makes Apple’s phone go from $700 to $925, won’t it become uncompetitive against foreign phones? If Samsung and LG phones continue to cost $700, won’t that drive Apple out of the market? Taxing outsourced US products will benefit foreign competition. Does that inevitably lead to an across the board 35% tariff on all foreign imports and outright trade war? 

Conclusion: A 35% tax on offshored work and a few incentives to keep jobs in the USA seems like a simple plan, but in the real world it is far harder to implement than it appears. Defining what is and isn’t outsourcing, separating offshore American products from offshore products, and managing what could be a tidal wave of new paperwork will create a significant Federal bureaucracy, which will consume resources that few corporations have. That’s a big opportunity for outsourcers that are willing to create a new billable service.

Outsourcers who look at penalties on outsourcing and see the end of their industry aren’t looking hard enough. Automation, not regulation, is the greatest threat to the current outsourcing model.  Regulation offers a new opportunity to use and expand Intellectual Property that outsourcers already possess.  Remember, not every firm may wish to participate in a government incentive program, but if all outsourcing is penalized, every firm you work with (and more) will at a minimum need to report on their outsourcing activity. Will you be the first vendor to ask your client to manage this opportunity?

 

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It’s a Circus Out There, But Not For Long


rhino-elephant

(Previously published in “AndSociety”, January 22, 2017.)

GEEZE… what happened! On Friday I hear that Ringling Brothers Circus has its first female ringmaster in its 146-year history. I’m thinking, “Well, isn’t that interesting? The news has been completely dominated by the changes that come with the Trump election, but there are a lot of other changes happening out there!” And then on Saturday, I see that the Circus will close in May.

At first, I thought that it must have been some other Circus. Sure enough, the Big Apple Circus, a 40-year-old Circus, had declared bankruptcy and was auctioning off its assets in February. The Big Apple Circus is a very big deal. Ringling is the biggest Circus in the world, but Big Apple is very important and well known. OK. Mystery solved! But then I hear it again, “Ringling Brothers to Close!”     

Look, in a hundred years when they look back on the 21st century I doubt that anyone is going to say, “Ah, that was the golden age of the Circus”,  but still. The circus is gone? Last year Ringling gave up its elephants. That was the last straw (do they still use straw?). We still have Cirque Du Soleil, from Canada. And the Blue Man Group. Both of these got started in the last couple of decades of the 20th Century, as “modern” alternatives to the traditional circus. So they still have a few productive years left.

Without the circus, where do parents bring their kids for that once in a lifetime experience with a big animal? Sea world? Not so much. Orcas or dolphins are being phased out in SeaWorld and similar entertainment parks. That just leaves Zoos and aquariums. Without a direct profit motive, and with sponsorship from conservation groups, these are generally the best-managed places to see big animals. Yet, even these organizations are under increasing pressure from animal rights groups to return big animals (and fish) to the wild.

Ringling Brothers has a pretty straightforward view about animal protection groups. Ringling says that once they announced that they were retiring their Elephants, ticket sales went through the floor and was the primary reason for the closure. At Seaworld, it’s harder to say if they will survive without Orcas and Dolphins. Zoos? They are terrified of the next time that they need to put down an animal because a guest wandered into a Gorilla enclosure or precipitated a lion attack.

Some of the world’s biggest animals are in danger of extinction. I knew that. So did you. But did either of us know that when big animals faded away that the circuses and marine parks that displayed them we go first? Sure, we still have the Discovery Channel and National Geographic, endless documentaries, Indie films and YouTube mini-films. But without the ability to see, maybe touch, definitely smell (whoa-yep, definitely smell) these wonders of the wild, do we still care if they are are still alive anywhere at all?

I could also do without creepy clowns, but what happens to the art of clowning? Trapeze, and jugglers and a multitude of other skills, some of which go back thousands of years, may fade away… when the last circus closes. It is the 21st Century, and the Circus in America is mostly a 19th Century art form that managed… just barely… to survive the 20th Century.   

It’s ironic that at the end of this week we will have the inauguration of Donald Trump as the President of the United States. Will it be the start of a new age or the end of an old one? Circuses, Elephants, and Lions may not be part of this new American age, but maybe… just maybe… the animal rights people are right and this is the best way to have the animals is to get rid of these institutions. In any case, we’re about to find out!

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Yahoo Users Hacked


hack

Photo: All Rights – Javad Rajabzade

(Previously published in AndMagazine, January 14th, 2017)

Yahoo keeps hitting the jackpot, in a bad way. Earlier in December, Yahoo had a BILLION ACCOUNTS hacked. That’s the largest number of reported accounts hacked, EVER! To make it even worse, the second largest hack in history happened in September. Who is the poor fool that holds the #2 position? You guessed it, Yahoo! Now, that just can’t be good for business!

And as it turns out, it’s not. Yahoo! is in the middle of being sold to Verizon, with the price set at $5 billion. That’s an insultingly low figure for an Internet firm. Then again, it’s been a long time since Yahoo! was a technology leader. Verizon thought that for $5 billion, it was buying customers and getting a little technology. Now those customers are changing their passwords, or just changing to other providers.

Repeated breaches have undermined confidence in Yahoo!, and the Verizon deal. Verizon is making sounds that the price tag may need to be… discounted. When one corporation buys another, there is a veil of secrecy that makes any operational details fuzzy. Such as, who knew what about the hack, and when. It doesn’t appear that Verizon knew about the September hack until well after it happened, and the deal to sell was already in play.

Sadly, only part of the problem is Yahoo! If your firm has a well-known name and you are in any way connected to the Internet… you’ve been hacked! Oracle and Steam have been hacked. Citi has been hacked. There are many other firms that may have been hacked, but if it was a smaller attack or if the corporation believes that it was not an effective break in, it may never be publically reported. Of course, if the hacker is more skilled than corporate security, does the corporation they really know what happened?

When a story begins with international hacking, we expect it to end with China. China has been identified as the source of the hacking at the New York Times, the FDIC, and the US Office of Personnel Management. Now, after the 2016 elections, we hear that Russia is also hacking in the US. Is there anyone left who isn’t trying to pry into our passwords?

The worst of it, for many average users, is that even if you don’t use Yahoo!, you should still change your passwords, which you probably keep on the back of an envelope somewhere. How many of you have multiple accounts because you’ve lost your id or password, or maybe you never wrote down the answers to those annoying security questions. It’s not a coincidence that there are now so many tools to store your login info. Half of which just might be fake services trying to steal your passwords!

One thing that we can say is that, at least for now, hacking is evolving faster than security. We can all expect to see more stories on hacking, from Yahoo! and from every other big corporation. Banks and financial firms will have new rules in 2017 and will be required to report more small security hacks than in the past. They will need to issue reports to regulators faster. We will learn about hacks that failed or that perhaps weren’t even true hacks, but were instead just glitch. The more that corporate America reports hacking, the more that regulators will create even more new reporting rules. Expect to hear so many stories about security breaches that we start to go a bit numb!

So, remember to change your passwords, and change them often. In fact, I just got an offer in email for a new tool to manage my passwords. Hey, it will also manage my credit card information! For Free! Gee, I wonder how they can make any money? 

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Death By Sushi: The Eel, Nearly Extinct, And TOTALLY Delicious


unagi

(Previously published in AndSociety, January 14th, 2017)

In America, we rarely think about food deprivation. Yet we are constantly learning about foods that have become scarce or on their way to extinction. Basics like bananas and oranges are under attack by viruses that may wipe both out as commercial crops in as little as 5 years. Strawberries are having a hard time dealing with rising temperatures and are not producing as much fruit as in past years. Now we can add eels to the list of disappearing foods!

Eels? Who eats eels? Well, just about everyone when you love sushi! Have you ever ordered Unagi at a sushi bar? It’s almost always barbecued in a sweet sauce, and delicious in sushi or in a rice bowl. In Japan, eel is so popular that they have dedicated eel restaurants. While American’s are just getting to the taste (and idea) of eels, they have been a favorite food in Japan for centuries. But if you want to try eel, you’d better hurry up! It looks like the world is running out of eels!

Eels are long, thin, and fin-less, but they are fish and not some species of snake, as some first-time eel eaters assume. And there isn’t just one kind of eel. There are over 800 species of eels that live in the sea or in freshwater. Without a doubt, Japan is the #1 market for eels, consuming over 70% of the eels harvested worldwide. For decades Japan has been supplementing declining local eel populations with eels from Europe, but now that strategy no longer works.

Wild eels have a complex lifecycle, spending a good deal of their juvenile lives in the ocean, and just like salmon, returning home as adults. In nature, eel eggs mature and the tiny baby eels start moving towards the east coast of the US. They then metamorphose into glass eels. A bucket of squirming glass eels looks a lot like a bucket of earthworms, except that they are transparent (that’s the “glass” in the eels). Then they keep growing, entering a stage where it is called an “elver”, where it loses its transparency. Then the eel moves inland, in lakes and rivers across America. Finally, it returns to the ocean as an adult.     

But in the 1980’s something mysterious happened. The eel population across Europe dropped dramatically, by as much as 95%. Was it over-fishing, changes in weather or sea currents or something else? Experts are still debating the cause, but years have gone by and there hasn’t been any recovery in the eel population.

With wild eels in decline around the world, by the 1990’s eels for Japan had to come from a new source… America! As I said earlier, wild eels have a complex lifecycle. Well, it looks like the lifecycle of farmed eel is nearly as complex.  

Their artificial life cycle begins in New England. In the past, glass eels were used as bait. Not anymore. This year the cost of glass eels hit a new high, $2,500 per lb. And next year might be even higher. That’s definitely not fish bait prices! An experienced eel fisher can make $100,000 or more per night during the short glass eel season. Of course, at these prices, more and more fishermen are showing up every year to dig in the mud for aquaculture gold. It doesn’t take a lot to connect the dots between this new fishing industry and an extinction event for the American Eel.

After glass eels are caught, they are packaged and sent around the world for a year or so of feeding. Taiwan used to the top spot for eel farming, but it has been overtaken by mainland China. For the final growth period, eels are often “finished” in Japan. Until very recently, American eels were considered to be less tasty and therefore less valuable than the local varieties. Eel fisheries claim that they have figured out how to adjust eel feeding and growing conditions to match the natural environment of their wild cousins and deliver richer and more nuanced flavors.  

With European eels in sharp decline and Japanese eels being eyed very suspiciously since the rise in ocean radiation since the 2011 Fukushima Daiichi nuclear power station disaster, America may be the last great source of eels for Japan. There are other species of eel in Africa, and Australia, but the American eel has become the eel of choice, explaining the growing demand for American glass eels and the high prices.

While $2,500 per lb. may seem like an insanely high price, it’s really just a pittance in the overall market. For every dollar worth of glass eels that are shipped from the US to China for farming, produces $8-$12 of eel. The cost in the restaurant is several times the farm price. It is estimated that the glass eel market in the US is just $40 million, but it is turned into a $1 billion aquaculture market.  

Eel fishing in New England is regulated, but the sky-high prices for baby eels have started a rising tide of poaching that is only going to get worse over time. Japan will continue to demand the majority of the year’s catch. However, China is becoming a growing customer for eels and a competitor to Japan. The price will continue to rise and the availability of eels will fall.

Eels are far from the top of America’s environmental list, but if we don’t set up more controls over the domestic eel market, the glass eel may not have much time left. Tasty as they are, Japan and the world will need to control their appetite for eels!

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Robot Saves Lives!


car-crash-2

(Previously published in AndMagazine, January 21, 2017)

Everyday robots are getting smarter. Soon, robots will soon become so smart that they will steal your job. And do it better than you ever could! But long before robots steal your job, they will probably save your life!

Some writers have talked about robots helping in hazardous work. Putting out forest fires, working with toxic or radioactive materials and even supporting the police in a hostage or terrorist situation. However, far more lives are at risk from “normal” events. Over 35,000 Americans are killed every year in car accidents. Around a million Americans are in traffic accidents and receive lesser injuries. That’s a staggering amount of injuries. Yet, if we had the same rate of injuries today as in the 1970’s, there would have been 85,000 deaths.

Why is it that driving is so much safer today? Technology. Miniature computers and sensors made airbags possible. Anti-lock brakes, collision detection software, and other technology enhancements have made driving safer than ever before. Now that cars have begun to drive themselves, we can expect even more improvements. Over time as more robots and fewer people drive cars, we can expect traffic related deaths to continue to drop. If only robots drive vehicles, the number may drop to virtually zero.

It’s not just a matter of robots being better drivers, although that is a larger part of it. Already, robots drive better than humans, with fewer accidents. Aside from just driving skill, robots have several advantages over humans. Humans choose to drive even when they are tired, and their reflexes are impaired, or even when they are falling asleep at the wheel. Humans drive when they drink and they drive when they are drug impaired. Human drivers get into accidents when they are distracted by an argument with passengers, or even when they get a call on their cell phones. Drivers take selfies of accidents, only to get into an accident themselves. As more and more applications arrive on phones, there will be more and more distractions… and accidents.

On the other hand, robots will get better all the time. Every minute that a car is on the road, contributes to databases that help robots become better drivers. New standards are being created so that all robot drivers can communicate with each other, sharing information on road conditions in real time. Oil spills, debris on the road, and accidents that are just around a corner or over the next hill are transmitted to other robots drivers, providing more time to change lanes, slow down and compensate. And robots not only see with visible light, some of the newest self-driving cars supplement this with infra-red, ultraviolet and radar sensors that can cut through fog, rain, smoke and other visibility hazards.

But are we ready for robot cars? Are they really that good? Take a look at this YouTube video. You see once car spin out of control and another car hit the first car. We see the video from the point of view of the third car, a Tesla with self-driving features. You hear a “beep” as the Tesla’s computer signals that it detects and accident and it is taking over control of the car, which is then brought to a smooth stop well short of the first two cars. Did you hear the beep? Did you notice that the beep starts about 2 seconds BEFORE the accident? It predicted the accident. And prevented a new accident.

https://www.youtube.com/watch?v=4IgJWHfLEN4

Technology is already saving the lives of tens of thousands of Americans every year. Will 2017 be the year when we turn over control of our cars to the robots? The sooner we do, the more lives we will save.

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Everyone is Hacked!


 

putin

Photo Courtesy of the Kremlin

 

Every UD intelligence agency has told us that the Russians hacked the 2016 Elections. They also say that the Russians DID NOT (successfully?) attack voting machines or the vote itself. Nor has there (yet?) been proof that the hacking was successful, and handed the election to the Trump camp. Although a Trump victory was the stated goal of hacking the election.

Any President of the United States needs to look at any such acquisition objectively, perhaps appointing an independent body to follow up on something so personal that objectivity may be impossible. To dismiss the threat from Russia, without any information to support the “non-hacking” position, sends a very bad message about how the Whitehouse will deal with bad news. As President, Trump will need to hear a lot of bad news, assuming that he attends his Presidential briefings. If he gets frustrated by issues he does not want to hear and adopts a “kill the messenger” approach, his briefing will eventually omit information that is ignored.    

Trump could be justified in believing that Russia did not hack the Election IF he has another source of credible data (which he has not revealed), or if he was personally an expert in spycraft or cyber warfare. Trump, by his own admission, is not… although back in September when he was told that the Russians were testing the Internet and would possibly hack the election, Trump said that his 10-year-old son Baron might possess the skills to understand the issue.

More importantly, Trump said, “… we have to get very, very tough on cyber and cyber warfare. It is—it is a huge problem… The security aspect of cyber is very, very tough. And maybe it’s hardly doable.” When the issue of Russian hacking was previously brought up, Trump said it could have been China. As far back as 2012, Trump said that that the White House was being hacked by the Chinese. Why does Trump see Chinese political hacking as credible,  yet find it “ridiculous” that Russians might do the same thing?

https://twitter.com/realdonaldtrump/status/253206663664922624

Let’s sort out a few terms. In the past, spycraft was all about spies. Before World War II, stealing state secrets meant human beings stealing documents and maps, verbally communicating secrets, buying a secret (for money, aid, or perhaps in exchange for other secrets) or compromising someone (sexually, criminally, financially, etc.) to obtain current or future information. This all happened in the “real world”, spies had to go behind enemy lines, physically entering other countries, usually with false names and counterfeit passports.  

After WW II, human spies were supplemented by technology. This expanded the sources of intelligence and began a process where spies didn’t alway need to set foot on foreign soil. Photographs could be taken from high flying planes or offshore ships, telephones could be bugged, radios transmissions intercepted, and computers began to break codes and coordinate random information to indirectly determine when and where troop moved and if new weapons were used.      

Today, most of our communications are electronic, so spying had to become electronic… entering the cyber sphere. But now that so much of our data and our economy was in cyber space, cyber spies were becoming more valuable than James Bond-type spies. James Bond would go beyond stealing the occasional Top Secret document, dabbling in assassinations, blowing up weapons factories and getting the girl before the closing credits.

Cyber spies rarely get the girl, but they do get a target rich environment. They can steal emails, plant false data, take down servers and knock down the Internet, turn off ATM’s, blow out every traffic light across a state, crash life support systems in a hospital, down air control systems and crash commercial planes, overload turbines at power plants and dams, killing thousands of people. All without ever setting foot in America, or leaving much evidence as to who did it. Without the need to move warships or troops, cyberspying can evolve into Cyberwar in just days, perhaps just hours. 

In the 2016 Election, the key issues are less dramatic. The main issue was “manipulation of the media”. This breaks down into two actions by Russia. The first is breaking into servers to steal email (from Hillary Clinton, the Democratic National Convention, etc.). These emails were then handed over to Wikileaks and other social media sites, which spread these documents around the world. The second accusation is that the Russia added false information, making minor issues look more important. 

We haven’t yet seen evidence that the Russians took on this project to elect Trump, but it seems likely. If Russia can hack Clinton and the DNC, why couldn’t they hack  Trump and his supporters? We have to assume that the Russians did hack Donald Trump’s email but then chose not to release any of the information they found. Think about it. What are the chances that Donald Trump wrote an offensive email or two? If anything, Russia may have spent time keeping other hackers out of Trump’s email!   

Spies would have been happy to find the launch our nuclear weapons in Clinton’s email, but they weren’t looking for Top Secret data. They want personally embarrassing emails. Nasty comments about important political figures, talking behind a celebrity’s back, personal pettiness, racism, sexism, any ‘ism that make a big voting bloc defect from the Clinton camp. In terms of spycraft, this kind of information is what you would call “pee-wee league.”

For perspective, let us turn to Henry Kissinger, a politician who rose up during the cold war between the US and Russia. In a recent interview on CBS This Morning, Kissinger stated, “Everybody has a hacking capability. And probably every intelligence service is hacking in the territory of other countries”. Even Trump agrees that the US has been repeatedly hacked by North Korea and China. Trump even acknowledges that individuals do hacking; Trump said the DNC hacking, “could be somebody sitting on their bed that weighs 400 pounds. Why not Russia?

What if this isn’t about the 2016 Election? What if this is just an old habit? Russia and America have been spying on each other since the cold war. When the Soviet Union fell and the Russian Federation rose in 1991, what happened to all the communist spies?

One of those spies became the leader of Russia. Vladimir Putin started his career in the KGB as a counterintelligence agent (i.e. spy). If a political leader was raised as a spy, promoted as a spy, and was able to grab the big seat in Russia because of his connections to the intelligence community, wouldn’t he depend on this community to manage Russia’s interests? The SVR (the agency that replaced the KGB) has a comprehensive mandate under the “Law on Foreign Intelligence Organs”, which was approved by then President Boris Yeltsin in 1996. That mandate includes:   

  • Conduct electronic surveillance in foreign countries – One of the accusations against Russia is that they hacked data from Hillary Clinton and from the DNC, handing over those files to Wikileaks and similar sites. Looks like a bullseye.   
  • Conduct military, strategic, economic, scientific and technological espionage – It doesn’t specifically say, “interfere with the US election”, but if you put “military” together with “economic” and add a touch of “strategic”, and you can see where it falls under the SVR’s mandate to sway elections (and the electorate) to minimize risks to Russia.    
  • Implement active measures to ensure Russia’s security – AH! This takes us from just reading someone’s email to manipulating politics. Such as creating fake emails and including them in the release to  Wikileaks. If this did happen, these “truth” sites may have been completely unaware of the original source of the data or that emails were manipulated before they were passed on.   

 

If Putin has spies with a mandate to do exactly what they are accused of and if the US Intelligence community has extremely credible evidence that America was hacked by Russia, wouldn’t you think that the President-Elect would be… interested? When a President, or President to be, is told by all of his spymasters that another country is interfering in their Electoral process it requires their full attention and swift reaction.

Whatever the extent of the tampering, action needs to be taken now, or we can expect even greater interference in 2020. Even if Russia can be dissuaded from future interference, China, and North Korea have plans of their own. As do private hackers, “hacktivists” who believe that disruption can lead to social good. The number of cyber threats is rising. President Elect-Trump must give this issue more attention or we will find out just how hacked our elections can get!

 

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Mr. Trump, Can We Examine Your Email Server?


trump-security

(Previously posted on AndMagazine, 12/10/2016)

Whether you love or hate his policies, you have to admit that Trump IS a definitely, “high energy”! It’s still weeks before he is sworn in as President, and he has already closed deals with Ford Motor Co. and Carrier Air Conditioning to stop the outsourcing of US jobs. The details are a little thin, but it looks like both deals will stick! WOW, just the emails on the Carrier deal could be a whole chapter when they write books about the Trump Presidency. Uhhh… did I say email? DEAR GOD Mr. Trump, please tell us you spent Thanksgiving building a secure email server!

Wait! We don’t need to panic. Just yet. After all, he hasn’t yet been sworn in as President, so he doesn’t need to preserve his emails. Or does he? We just spend years on Hillary Clinton’s here again / gone again email. Surely someone knows the rules?

Or is that the point? Every new four-year term as the president is like the tick of the technology clock. A term as President is a whole generation of technology! With every new Presidency must face a new technology challenge.  And a challenge for the agencies that carry out those regulations.

When it comes to records, there are two justifications for tracking the President. The first is the archive process, managed by the National Archives and Records Administration (NARA). Their job is to preserve “historically important” documents from the President, Congress, and other branches of government.

After each Presidency, NARA ensures that relevant Presidential documents are available to the American public. Traditionally, only 1-2% of government documents are archived, so determining what to archive can be controversial. President Nixon believed in the power of the “Presidential Agreement”. This was usually verbal (no documentation), usually NOT for public discussion, not discussed with or approved by Congress, expired with the end of the President’s term, and open to reinterpretation (since the wording was not documented). Nixon’s agreements involved matters of war, so archivists naturally wanted documentation. But without documentation, can there be archiving?

If this seems like a gap in regulations, it is not. It is a battle over Presidential power. Agreements without documentation might not need to be reported to Congress. The power of the President comes from negotiations, often secret negotiations! Congress repeatedly pointed out that Nixon’s “Presidential Agreements” looked suspiciously like international treaties, which can be negotiated by the President but MUST be ratified by the Senate, leaving little room for secret negotiations.

While the Carrier deal was largely a domestic matter, not a treaty since it did not involve a foreign government, and Trump isn’t yet a member of the government, he probably hasn’t broken any laws. But at the end of his Presidency, will he volunteer copies of these and other historic emails? And will Archives need to archive his Tweets and YouTube uploads?

Trump is not the first President to deal with technology. Long ago, discussions and agreements were either verbal or written (on paper). As long as you didn’t get the two confused, life was good. Yet the media would get “leaked” confidential documents or a verbal agreement (or even comment) would be overheard and become news.  

President George Bush Senior (President #43, 1989-1993) had some very concerned archivists. He had dramatically fewer paper documents than his predecessors. Voice mail and email were replacing paper correspondence. Voice mail was stored on cassette tape, and overwritten when the tape was full. Besides, the archives did not include telephone calls, so why archive v-mail? It was argued that email was used more to tell you that you had a call or a visitor, just like the little slips of paper that said “You have a call”, and these were never archived. So the arguments went, for a while.

By Bill Clinton’s Presidency (1993-2001), email and messaging took off. The Palm Pilot in 1992 was the first successful “computer in your pocket”. It was years before MS Outlook took off (1997), Corporate America fell in love with the Blackberry (1999), or Google created Gmail (2004).

When George W. Bush (President #45, 2001-2009) appointed Colin Powell as Secretary of State, he got a modem to go with the job. Modem? Think of it as a sad little box that squeaked, and slowly… ever so slowly… talked sent data around at 0.0056 MB. That’s right! Your tragically slow phone plan probably has more bandwidth than the entire White House had in 2001.

A lot changed by the time Hillary Clinton was Secretary of State. Besides, her issue wasn’t with her server or home computer. She just wanted a wy to keep her Blackberry and separate work from personal emails. Her logic, and that of many others was, this is a phone, right? But the reality was that her Blackberry was a more powerful computer than Colin Powell’s desktop. The least used feature on today’s smartphone is the… the phone!

Hillary’s downfall was her desire to continue to work the way she was used, without carrying around two phones.  Will President Trump be able to give up his Twitter account? Donald Trump has been a media phenomena. But has he decided where Trump Inc. ends and President Trump begins?

During Bill Clinton’s Administration Hillary Clinton may have been the most powerful First Lady ever, working on meaningful healthcare reform legislation. Ivanka Trump may be the most powerful First Daughter ever. Trump has already asked for top secret clearance for his kids, and Ivanka has attended government meetings. There are hints that Ivanka will run the Trump empire while her father is President, but there are also hints that Trump wants to continue to have Ivanka as an advisor.

Which will it be, or will it be both? Will the entire First Family need to work on government-issued phones and computers? One way or another Donald Trump is going to rewrite the rules on how the government listens to how the President communicates!

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