The Coronavirus Threat: A view from East Asia.

Regular readers of Nones Notes Blog know that my brother, Nelson Nones, has lived and worked outside the United States for nearly 25 years – much of that time in East Asia. So naturally I was curious about his perspectives on the spread of the Coronavirus from its epicenter in Wuhan, China, what precautions he is taking in the face of the threat, and his perspectives on how the actions of Asian countries affected by the outbreak may be mitigating the potential effects of the virus.

Here is what Nelson wrote to me in response to my query:

The Coronavirus has not affected my business here in Bangkok to date. I did make a trip to Singapore during the last week of January and to Taiwan during the first week of February, after arriving back in Thailand from the U.S. on January 12th.  I haven’t been sick at all – before or since.

However, in an abundance of caution I am keeping myself at home as much as possible, and I have decided not to travel anywhere until the current hullabaloo dies down.

As for the situation here in Thailand, this country is actually the location of the first COVID-19 (Coronavirus) case ever recorded outside Mainland China. This was back on January 13th, just two weeks after China first notified the World Health Organization (WHO) of the new disease, and only two days after China recorded its first COVID-19 death.  

The patient here in Thailand was a Chinese woman who had traveled from Wuhan, the epicenter of the pandemic.

Since then, Thailand has recorded 42 additional cases for a total of 43 patients, of whom only one died (on Sunday March 1st), and 31 have recovered.  This leaves 11 active cases – all considered mild.

The first case of human-to-human virus transmission within Thailand was recorded on January 16th, affecting a taxi driver. Of the 43 cases confirmed so far, 25 affected Chinese citizens; seven affected Thai citizens with travel histories to China, Japan or South Korea; seven affected Thai citizens who work in the tourism or healthcare industries; and the remaining four were other domestic cases (of which only two potentially represent “community spread”).  Thailand’s infection growth factor peaked on January 26th.

Being one of the world’s most popular tourist destinations (especially from China), Thailand has never imposed any travel restrictions, even from China (nor has the U.S. ever imposed any COVID-19 travel restrictions on Thailand), but all arriving international passengers are screened by an initial body temperature check. Those who fail the initial screening are required to disclose their travel histories within the past 14 days, in detail.  If they have travelled to or from any affected areas, and exhibit any COVID-19 symptoms, they are immediately quarantined at a specially-designated hospital for isolation and treatment.

Under the circumstances, and considering its geographic proximity to China as well as the normal volume of Chinese tourist travel, I think Thailand’s containment efforts so far have been successful and offer some lessons for the United States. Containment in India, Indonesia and Bangladesh so far is even more impressive (Indonesia reported its first two cases only on March 2nd).

Displayed below is a listing of South, Southeast and East Asian countries, ranked by population (together with the U.S. for comparison purposes), showing the number of cases and deaths reported so far:

* Excludes Diamond Princess cruise liner cases.

Sources:

Case data are from https://www.worldometers.info/coronavirus/#countries

Populations are from https://en.wikipedia.org/wiki/List_of_countries_by_population_(United_Nations)

The countries shaded in green, above, are those which did not require advance visas for Chinese citizens holding ordinary passports, prior to the imposition of temporary COVID-19 travel restrictions. These countries were either visa-free or allowed “visa on arrival.”

The countries in red typeface, above, are those which had imposed temporary COVID-19 travel restrictions as of early February 2020. These include “entry bans on Chinese citizens or recent visitors to China, ceased issuing of visas to Chinese citizens and re-imposed visa requirements on Chinese citizens or countries that have responded with border closures with China.” (See https://en.wikipedia.org/wiki/Visa_requirements_for_Chinese_citizens for source data.)

It’s quite clear from the data above that, excluding Mainland China itself, there is little or no correlation between the incidence of COVID-19 cases or deaths and the leniency of a country’s previous or current travel restrictions in so far as Mainland Chinese are concerned.

Indeed, all of the four countries having a higher number of cases than Thailand (Japan, South Korea, Hong Kong and Singapore) required advance visas before the COVID-19 outbreak, and all but one (Hong Kong) had imposed COVID-19 entry bans as of February 2nd

Conversely, apart from Thailand, the countries which did not require advance visas before the COVID-19 outbreak have averaged fewer than one case per country (although all of them except Cambodia and East Timor had imposed temporary COVID-19 travel bans by February 2nd).

The countries shown in bold typeface above are those which are geographically closest to the COVID-19 epicenter. An average of 570 COVID-19 cases have been reported within each of these 10 countries; only Laos has been immune so far. Conversely, an average of 6 COVID-19 cases have been reported within each of the remaining 26 countries (excluding China itself).

From these data, I’ve drawn the following four generalizations:

  • Outside of Mainland China, international travel bans and visa restrictions are not effective tools for controlling the spread of COVID-19 disease within a country.
  • Geographic proximity to Mainland China is well-correlated to the historical spread of COVID-19 disease in South, Southeast and East Asia.
  • Vigilant screening and disposition of suspected cases is vital to containing the spread of COVID-19 disease, as Thailand’s experience demonstrates.
  • Allowing high concentrations of suspected cases to form without treatment, such as Wuhan (China), the Diamond Princess docked at Yokohama (Japan) and Shincheonji church at Daegu (South Korea), is a recipe for disaster.  

Of course, the virus and its spread is an evolving narrative, and Nelson’s observations may soon be overwhelmed by new developments. Still, I was somewhat surprised to read that the situation is not quite as dire as the news reporting here in the U.S. would seem to indicate.

Have you heard from overseas friends or colleagues about how they are responding to the Coronavirus outbreak? Please share their perspectives with other readers here.

Facial Recognition Faceoff

Facebook has been resisting outside efforts to rein in its “faceprints” facial recognition initiative – and mostly losing.

I’ve blogged before about the concerns many people have about facial recognition technology, and the troubling implications of the technology being misused in the wrong hands.

Facebook would claim to be the “right hands” rather than wrong ones when it comes to the database of “faceprints” it’s been compiling over the past decade or so. But its initiative has run afoul of an Illinois biometric privacy law passed in 2008.

The Illinois measure, which prohibits companies from collecting or storing people’s biometric data without their consent, is one of the strongest pieces of legislation of its kind in that it also allows individual consumers to sue for damages – to the tune of up to $5,000 per violation.

And that’s precisely what’s happened.  A class-action suite was filed in 2015 by a group of Illinois residents, alleging that Facebook has violated the Illinois privacy law through its photo-tagging function which draws on a trove of “faceprint” photos to recognize faces and suggest their names when they appear in photos uploaded by friends on Facebook.

Facebook has vigorously resisted efforts to rein in its faceprint initiative, arguing that any such lawsuits should be dismissed because users haven’t actually been injured by any alleged violations of the state law.

That stance has been rejected – first in U.S. district court and then in the court of appeals. Undaunted, Facebook appealed to the U.S. Supreme Court which turned down the appeal in late January.

Rebuffed at all legal levels, Facebook has now decided to settle the suit for a reported $550 million, including payments of ~$200 each to claimants in the Illinois class-action suit.

Facebook has lost, but the whole notion of facial recognition technology could well be like playing a game of whack-a-mole. As it turns out, another firm has developed similar functionality and is busily selling facial recognition data to police departments across North America.  According to a recent investigative article publishing in The New York Times, a company called Clearview AI has mined billions of photos from Twitter, Facebook and other social platforms.  (Clearview is now being sued in Illinois for allegedly violating the same biometric privacy law that was at the center of the Facebook suit.)

And indeed, the efforts to rein in facial recognition activities may be a little too little, a little too late: According to a recent report from Business Insider, the faces of more than half of all adults in America have already been logged into police or government databases.

… Which brings us to a parallel response that appears to be gaining traction: figuring out ways to fool facial recognition software.  A number of entrepreneurs are developing intriguing methods to beat facial recognition software.  Among them are:

  • Clothing designers have begun to target weaknesses in the ability of facial recognition software to process overlapping or unusual shapes, as well as deciphering multiple similar images appearing in close proximity. One such example is a pair of goggles fitted with near-infrared LEDs that interfere with the ability to scan facial features.
  • Headscarves decorated with different faces “confuse” the software by overloading it with excessive amounts of data in the form of numerous facial features.
  • So-called “adversarial patches” – a graphic print that can be added to clothing – exploit the vulnerabilities in facial recognition scanning by making a person “virtually invisible for automatic surveillance cameras,” according to creators Simen Thys, Wiebe Van Ranst and Toon Goedemé.

Will the two-front attack on facial recognition technology from the legal as well as technology standpoint succeed in putting the facial recognition genie back in the bottle? It’s debatable.  But it’s certainly making things more of a challenge for the Facebooks and Clearviews of the world.

Cookie-blocking is having a big impact on ad revenues … now what?

When Google feels the need to go public about the state of the current ad revenue ecosystem, you know something’s up.

And “what’s up” is actually “what’s down.” According to a new study by Google, digital publishers are losing more than half of their potential ad revenue, on average, when readers set their web browser preferences to block cookies – those data files used to track the online activity of Internet users.

The impact of cookie-blocking is even bigger on news publishers, which are foregoing ad revenues of around 62%, according to the Google study.

The way Google conducted its investigation was to run a 4-month test among ~500 global publishers (May to August 2019). Google disabled cookies on a randomly selected part of each publisher’s traffic, which enabled it to compare results with and without the cookie-blocking functionality employed.

It’s only natural that Google would be keen to understand the revenue impact of cookie-blocking. Despite its best efforts to diversify its business, Alphabet, Google’s parent company, continues to rely heavily on ad revenues – to the tune of more than 85% of its entire business volume.

While that percent is down a little from the 90%+ figures of 5 or 10 years ago, in spite of diversifying into cloud computing and hardware such as mobile phones, the dizzyingly high percentage of Google revenues coming from ad sales hasn’t budged at all in more recent times.

And yet … even with all the cookie-blocking activity that’s now going on, it’s likely that this isn’t the biggest threat to Google’s business model. That distinction would go to governmental regulatory agencies and lawmakers – the people who are cracking down on the sharing of consumer data that underpins the rationale of media sales.

The regulatory pressures are biggest in Europe, but consumer privacy concerns are driving similar efforts in North America as well.

Figuring that a multipronged effort makes sense in order to counteract these trends, this week Google aired a proposal to give online users more control over how their data is being used in digital advertising, and seeking comments and feedback from interest parties.

On a parallel track, it has also initiated a project dubbed “Privacy Sandbox” to give publishers, advertisers, technology firms and web developers a vehicle to share proposals that will, in the words of Google, “protect consumer privacy while supporting the digital ad marketplace.”

Well, readers – what do you think? Do these initiatives have the potential to change the ecosystem to something more positive and actually achieve their objectives?  Or is this just another “fool’s errand” where attractive-sounding platitudes sufficiently (or insufficiently) mask a dimmer reality?

What’s the “long-game” in the U.S.-China trade conflict?

The efforts to craft a new trade agreement with the People’s Republic of China have run into some pretty major roadblocks in recent weeks and months.

Things came to another inflection point this week when President Trump announced that new tariffs would be imposed on more Chinese goods imported into the United States. As of September 1, pretty much all categories of Chinese imports will now be subject to tariffs.

If we look at the impact the protracted impasse has had on markets, the repercussions are plain to see. One result we’ve seen is that China has dipped from making up the largest portion of trade with the United States to being in third place now, behind Mexico and Canada:

But what’s the long-term prognosis for a trade deal with China? Recent world (and USA) statistics point to softening of the economy, which could have negative consequences across the board.

When it comes to perspectives on economic and business matters involving China and the Pacific Rim, I like to check in with my brother, Nelson Nones, who has lived and worked in the Far East for more than 20 years.  He has first-hand experience working in the Chinese market and is keenly aware of the issues of intellectual property protection, which is a major bone of contention between the United States and China and is one of the factors in the trade negotiations.  (Nelson runs a software company which has chosen to forego the Chinese market because of regulations requiring software firms that set up a joint ventures with Chinese companies to disclose their source code — something his firm will never do.)

I asked Nelson to share his thoughts about what he sees happening in the coming months.  Here are his observations:

Chinese President Xi has a lot on his plate right now. It isn’t just the U.S. trade war but also the Hong Kong disturbances, U.S. arms sales to Taiwan, the U.S. sending warships through the Taiwan Strait and the South China Sea, and China’s domestic banking sector weakness, to name just some. Trump has also put President Xi in a tight spot by demanding (or getting) Xi’s assurances that China will buy more U.S. agricultural products and will enact legislation protecting foreign intellectual property.  

In spite of his very substantial power, I predict that Xi will have a very tough time ramming Trump’s conditions down the throats of his countrymen. 

I should mention that the biggest issue here is intellectual property protection. The draft agreement that China “almost” signed had assurances that IP protection laws will be enacted, but Xi apparently nixed that draft whereupon the Chinese government stated that no government can promise, when negotiating a treaty with a foreign country, to change its domestic laws.

Technically, they’re right. For example, President Trump can’t commit to changing U.S. laws because only the Congress can do that under the constitutional separation of powers. Similarly, on paper, only China’s National People’s Congress (the national legislature) can change Chinese laws, and President Xi is not a member of the National People’s Congress. (Of course, this explanation conveniently overlooks the fact that both the Presidency and the National People’s Congress are subservient to the Communist Party of China, and that Xi is the General Secretary of the Communist Party, but still it’s technically correct.)

In view of all this, the natural Chinese instinct is to wait … and in this case, wait until the 2020 U.S. election and see what happens. If Trump is defeated for re-election, then perhaps many of Xi’s problems will disappear magically. On the other hand, if Trump stays in office maybe the pain that Trump’s China trade policy is inflicting on U.S. businesses and consumers will force Trump to lighten up a bit.  

In other words, President Xi has much to gain and relatively little to lose by playing the waiting game for a while. 

As for U.S. tariffs, those are causing Chinese businesses to adapt their supply chains by routing them through other East and Southeast Asian countries which are not subject to the tariffs. For instance, instead of sending products straight to the U.S., Chinese manufacturers are sending products to Vietnam or Thailand where a tiny bit of additional work is done – just enough to qualify for a “Made in Vietnam” or “Made in Thailand” label. (This adaptation partially explains Thailand’s large trade surplus which has made the Thai Baht one of the world’s best-performing currencies this year.)  

These maneuvers actually provide a safety valve for both Xi and Trump. For Xi, it cushions the reduction in demand for Chinese exports. At the same time it puts some additional pressure on Trump because this type of safety valve does not really exist for U.S. exporters trying to evade reciprocal Chinese tariffs.  But on the plus side for Trump, it tends to dampen the impact of higher tariffs pushing up U.S. producer and consumer prices.

If you ask me to bottom-line this, the trade problems look more like a protracted siege than an episode of brinksmanship.

How the siege is resolved depends on how strong Trump’s position will be after the 2020 election. If the Democrats continue with their leftward lurch, then Xi will eventually have to cave because Trump’s position will be strong (I’d say a 65% probability of re-election). But if the Democrats come to their senses and Trump continues shooting himself in the foot, then he’s in real danger of losing the election and Xi will come up the big winner (I’d give this a 35% probability as of today). 

So there you have it: the prognosis from someone who is “on the ground” in East Asia.  What are your thoughts?  Are you in broad agreement or do you see things differently?  Please share your observations with other readers here.

DMARC’s job of demarcating: How well is it doing?

In the drive to keep the onslaught of fake e-mail communications under control, DMARC’s checks on incoming e-mail is an important weapon in the Internet police’s bag of tricks.  A core weapon of cyber felons is impersonation, which is what catches most unwitting recipients unawares.

So … how is DMARC doing?

Let’s give it a solid C or C+.

DMARC, which stands for Domain-based Message Authentication, Reporting and Conformance, is a procedure that checks on the veracity of the senders of e-mail. Nearly 80% of all inboxes – that’s almost 5.5 billion – conduct DMARC checks, and nearly 750,000 domains apply DMARC as well.

Ideally, DMARC is designed to satisfy the following requirements to ensure as few suspicious e-mails as possible make it to the inbox:

  • Minimize false positives
  • Provide robust authentication reporting
  • Assert sender policy at receivers
  • Reduce successful phishing delivery
  • Work at Internet scale
  • Minimize complexity

But the performance picture is actually rather muddy.

According to a new study by cyber-security firm Valimail, people are being served nearly 3.5 billion suspicious e-mails each day. That’s because DMARC’s success rate of ferreting out and quarantining the faux stuff runs only around 20%.  And while America has much better DMARC performance than other countries, the Unites States still accounts for nearly 40% of all suspicious e-mail that makes it through to inboxes due to the shear volume of e-mails involved.

In developing its findings, Valimail analyzed data from billions of authentication requests and nearly 20 million publicly accessible DMARC and SPF (Sender Policy Framework) records.  The Valimail findings also reveal that there’s a pretty big divergence in DMARC usage based on the type of entity. DMARC usage is highest within the U.S. federal government and large technology companies, where it exceeds 20% of penetration.  By contrast, it’s much lower in other commercial segments.

The commercial sector’s situation is mirrored in a survey of ~1,000 e-mail security and white-collar professionals conducted by GreatHorn, a cloud-native communication security platform, which found that nearly one in four respondents receive phishing or other malicious e-mails daily, and an additional ~25% receive them weekly.  These include impersonations, payload attacks, business services spoofing, wire transfer requests, W2 requests and attempts at credential theft.

The GreatHorn study contains this eyebrow-raising finding as well:  ~22% of the businesses surveyed have suffered a breach caused by malicious e-mail in the last quarter alone.  The report concludes:

“There is an alarming sense of complacency at enterprises at the same time that cybercriminals have increased the volume and sophistication of their e-mail attacks.”

Interestingly, in its study Valimail finds that the government has the highest DMARC enforcement success rate, followed by U.S. technology and healthcare firms (but those two sectors lag significantly behind). It may be one of the few examples we have of government performance outstripping private practitioners.

Either way, much work remains to be done in order to reduce faux e-mail significantly more.  We’ll have to see how things improve in the coming months and years.

“By any means necessary”: China’s Huawei Technologies flies close to the sun in its quest commandeer proprietary technology.

Not all-smiles at the moment … Chinese leader Xi Jinping.

In China, it’s difficult to discern where private industry ends and the government begins. At some level, we’ve been aware of that conundrum for decades.

Still … opportunities for doing business in the world’s largest country have been a tempting siren call for American companies. And over the past 15+ years, conducting that business has seemed like the “right and proper” thing to do — what with China joining the G-8+5 economic powers along with incessant cheerleading by the U.S. Department of Commerce, abetted by proactive endeavors of other quasi-governmental groups promoting the interests of American commerce across the globe.

But it’s 2019 and circumstances have changed. It began with a change in political administrations in the United States several years ago, following which a great deal more credence has been given to the undercurrent of unease businesspeople have felt about the manner in which supposedly proprietary engineering and manufacturing technologies have suddenly popped up in China as if by magic, pulling the rug out from under American producers.

Nearly three years into the new presidential administration, we’re seeing evidence of this “new skepticism” begin to play out in concrete ways. One of the most eye-catching developments – and a stunning fall from grace – is Huawei Technologies Co., Ltd. (world headquarters: Shenzhen, China), one of the world’s largest makers of cellphones and high-end telecom equipment.

As recounted by NPR’s Weekend Edition reporter Emily Feng a few days ago, Huawei stands accused of some of the most blatant forms of technology-stealing.  Recently, the Trump administration banned all American companies from using Huawei equipment in its 5G infrastructure and is planning to implement even more punitive measures that will effectively prevent U.S. companies from doing any business at all with Huawei.

Banning of Huawei equipment in U.S. 5G infrastructure isn’t directly related to the theft of intellectual property belonging to Huawei’s prospective U.S. suppliers.  Rather, it’s a response to the perceived threat that the Chinese government will use Huawei equipment installed in U.S. 5G mobile networks to surreptitiously conduct espionage for military, political or economic purposes far into the future.

In other words, as one of the world’s largest telecom players, Huawei is perceived as a direct threat to non-Chinese interests not just on one front, but two: the demand side and the supply side.  The demand-side threat is why the Trump administration has banned Huawei equipment in U.S. 5G infrastructure, and it has also publicly warned the U.K. government to implement a similar ban.

As for the supply side, the Weekend Edition report recounts the intellectual property theft experience of U.S.-based AKHAN Semiconductor when it started working with Huawei. AKHAN has developed and perfected an ingenious form of diamond-coated glass – a rugged engineered surface perfectly suited for smartphone screens.

Huawei expressed interest in purchasing the engineered glass for use in its own products. Nothing wrong with that … but Huawei used product samples provided by AKHAN under strict usage-and-return guidelines to reverse-engineer the technology, in direct contravention of those explicit conditions – and in violation of U.S. export control laws as well.

AKHAN discovered the deception because its product samples had been broken into pieces via laser cutting, and only a portion of them were returned to AKHAN upon demand.

When confronted about the matter, Huawei’s company officials in America admitted flat-out that the missing pieces had been sent to China.  AKHAN enlisted the help of the FBI, and in the ensuing months was able to build a sufficient case that resulted in a raid on Huawei’s U.S. offices in San Diego.

The supply side and demand side threats are two fronts — but are related.  One of the biggest reasons why Huawei kit has been selected, or is being considered, for deployment on 5G mobile networks worldwide is due to its low cost. The Chinese government, so the thinking goes, “seduces” telecom operators into buying the Huawei kit by undercutting all competitors, thereby gaining access to countless espionage opportunities. To maintain its financial footing Huawei must keep its costs as low as it can, and one way is to avoid R&D expenses by stealing intellectual property from would-be suppliers.

AKHAN is just the latest – if arguably the most dramatic – example of Huawei’s pattern of technology “dirty tricks” — others being a suit brought by Motorola against Huawei for stealing trade secrets (settled out of court), and T-Mobile’s suit for copying a phone-testing robot which resulted in Huawei paying millions of dollars in damages.

The particularly alarming – and noxious – part of the Huawei saga is that many of its employees in the United States (nearly all of them Chinese) weren’t so keen on participating in the capers, but found that their concerns and warnings went unheeded back home.

In other words – the directive was to get the technology and the trade secrets, come what may.

This kind of behavior is one borne from something that’s far bigger than a single company … it’s a directive that’s coming from “China, Inc.”  Translation: The Chinese government.

The actions of the Trump administration regarding trade policy and protecting intellectual property can seem boorish, awkward and even clumsy at times. But in another sense, it’s a breath of fresh air after decades of the well-groomed, oh-so-proper “experts” who thought they were the smartest people in the room — but were being taken to the cleaners again and again.

What are your thoughts about “yesterday, today and the future” of trade, industrial espionage and technology transfer vis a vis China? Are we in a new era of tougher controls and tougher standards, or is this going to be only a momentary setback in China’s insatiable desire to become the world’s most important economy?  Please share your thoughts and perspectives with other readers here.

Boeing: Late to the reputation recovery party? Or not showing up at all?

Debris field from the Ethiopian Airlines plane crash (March 10, 2019).

It’s been exactly two months since the crash of the Ethiopian Airlines 737 Max 8 Boeing plane that killed all 157 passengers and crew on board. But as far as Boeing’s PR response is concerned, it might as well never ever happened.

Of course, sticking one’s corporate head in the sand doesn’t make problems go away — and in the case of Boeing, clearly the markets have been listening.

Since the crash, Boeing stock has lost more than $27 billion in market value — or nearly 15% — from its top value of $446 per share.

The problem is, the Ethiopian incident has laid bare stories of whistle blowers and ongoing maintenance issues regarding Boeing planes. But the company seems content to let these stories just hang out there, suspended in the air.

With no focused corporate response of any real coherence, it’s casting even greater doubt in the minds of the air traveling public about the quality and viability of the 737 planes — and Boeing aircraft in general.

Even if just 20% or 25% of the air traveling public ends up having bigger doubts, that would have (and is having) a big impact on the share price of Boeing stock.

And so the cycle of mistrust and reputational damage continues.  What has Boeing actually done in the past few months to reverse the significant market value decline of the company? Whatever the company may or may not be undertaking isn’t having much of an impact on the “narrative” that’s taken shape about Boeing being a company that doesn’t “sweat the small stuff” with proper focus.

For an enterprise of the size and visibility of Boeing, being reactive isn’t a winning PR strategy. Waiting for the next shoe to drop before you develop and launch your response narrative doesn’t cut it, either.

Far from flying below radar, Boeing’s “non-response response” is actually saying something loud and clear. But in its case, “loud and clear” doesn’t seem to be ending up anyplace particularly good for the Boeing brand and the company’s

What are your thoughts about the way Boeing has handled the recent news about its mode 737 aircraft? What do you think could have done better?  Please share your thoughts with other readers here.