Is Facebook Simply Replicating Kenya’s Successful M-Pesa Mobile Payment System?

Facebook’s Libra and Safaricom’s M-Pesa

Are the similarities mere coincidence and competition, or is a global mega-corporation exploiting a successful Kenyan enterprise without collaboration or compensation?

Since Facebook announced its new Libra currency and mobile payments scheme, the global reaction has been very mixed. Libra is not truly a cryptocurrency though it will use blockchain. It will be pegged to a reserve currency, which cryptocurrencies are not.  Libra will “potentially” be governed by an association independent of Facebook, though that association remains non-binding and sketchy at this point. Potential regulatory issues abound around the World, and Facebook is currently not viewed very favorably by many governments.  But most interesting to me, Libra appears to be modeled after Kenya’s M-Pesa mobile payments system, the world’s leading mobile payments system, invented by mobile carrier Safaricom. Then I asked myself if Facebook, knowing that it needs to move away from selling personal data, has seized on Safaricom’s M-Pesa as its new revenue model. 

More disturbing to me, I asked myself if this might possibly be an example of Western mega-corporate exploitation of a smaller enterprise in the developing world. I have heard no reference whatsoever to M-Pesa from Facebook. In similar situations in high tech, the mega-enterprise would typically acquire the intellectual property of the smaller company, hire its founders and employees to gain market advantage. This is often called an “acqui-hire.” Even without IP, it can be done to simply ensure a positive brand image transaction.

Four years ago, in 2015, Facebook With apparent good intentions, and also a good dose of Facebook business strategy, struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. India was a prime market focus. While on the face of it Free Basics seemed to have merit, Zuckerberg ran into a wall of opposition. On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appeared to have been naïveté about the foreign markets it was trying to enter. International business is strewn with case studies of corporate arrogance and ignorance that led to failure. Zuckerberg could have looked no further back than 2013 for clues from Google and Eric Schmidt, who also failed in India, as to why Facebook failed. The Indian government viewed both Facebook and Google with the same suspicion that they had for the Raj in 1947.

I do not have all the answers yet about Libra and M-PESA, and other mobile carriers have also entered the mobile payment market, but at this point, I have deep reservations about Facebook’s failure to acknowledge its role and its responsibility to Safaricom and M-PESA. IMHO, questions need to be raised directly to Facebook.

Read more: Facebook’s International Business Blunder: following in the footsteps of Google

A bit of history from The Economist:

Why Does Kenya Lead The World In Mobile Money?

A convergence of factors, some of them accidental, explain Kenya’s lead

Source: Why does Kenya lead the world in mobile money? – The Economist explains

The Economist explains

From March 2nd, 2015:

PAYING for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s world-leading mobile-money system, M-PESA. Launched in 2007 by Safaricom, the country’s largest mobile network operator, it is now used by over 17m Kenyans, equivalent to more than two-thirds of the adult population; around 25% of the country’s gross national product flows through it. M-PESA lets people transfer cash using their phones, and is by far the most successful scheme of its type on earth. Why does Kenya lead the world in mobile money?

M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash and thus making possible lower interest rates. But after pilot testing, it was broadened to become a general money-transfer scheme. Once you have signed up, you pay money into the system by handing cash to one of Safaricom’s 40,000 agents (typically in a corner shop selling airtime), who credits the money to your M-PESA account. You withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also transfer money to others using a menu on your phone. Cash can thus be sent one place to another more quickly, safely and easily than taking bundles of money in person or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. Electronic transfers save people time, freeing them to do other, more productive things instead.

Dozens of mobile-money systems have been launched, so why has Kenya’s been the most successful? It had several factors in its favour, including the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator’s initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, most intriguingly, the post-election violence in the country in early 2008. M-PESA was used to transfer money to people trapped in Nairobi’s slums at the time, and some Kenyans regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-PESA then benefitted from network effects: the more people who used it, the more it made sense for others to sign up for it.

M-PESA has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money (because they do not need to waste hours queuing up at the bank). One study found that in rural Kenyan households that adopted M-PESA, incomes increased by 5-30%. In addition, the availability of a reliable mobile-payments platform has spawned a host of start-ups in Nairobi, whose business models build on M-PESA’s foundations. Mobile-money schemes in other countries, meanwhile, have been held up by opposition from banks and regulators and concerns over money-laundering. But M-PESA is starting to do well in other countries, including Tanzania and Afghanistan, and last month it was launched in India. At the same time, operators in some other countries are doing an increasingly good job of imitating it. Some of the factors behind Kenya’s lead cannot be copied; but many of them can, which means it should eventually be possible for other countries to follow Kenya’s pioneering example.

Immigrants Will Think Twice About Coming to Silicon Valley

Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive.  In my own group at Intel years ago, one of my closest colleagues was a Canadian math graduate from McGill and a Harvard MBA with an H1-B visa. Today, Silicon Valley is now notable for its multicultural diversity.  The election of Donald Trump has raised very real fears in Silicon Valley. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education. But then Trump is on record calling computers “a mixed bag” and thinks people should wean themselves off the internet. Trump is also said not to have basic computer skills, beyond the use of his Twitter account. 

Supporters of Trump prior to the election were few and far between. Peter Thiel, a venture capitalist, former founder of PayPal, and a gay man, is perhaps the single most visible Trump supporter in the Valley. Tim Cook, CEO of Apple, did hold a private Silicon Valley fundraiser for Paul Ryan during the election, but otherwise, his support has been publicly tepid at best, as Trump has lashed out vigorously at Apple’s overseas manufacturing. Meg Whitman, CEO of Hewlett-Packard and a host of other Silicon Valley luminaries were outspoken supporters of Hilary Clinton. There are indications of a tenuous thaw from some in Silicon Valley but where will it lead?

What Will Happen to the H1-B Visa and Investment In STEM?

Source: Silicon Valley Reels After Trump’s Election – The New York Times

 STATE OF THE ART THE NEW YORK TIMES, NOV. 9, 2016

Farhad Manjoo

Silicon Valley Reels After Trump’s Election

Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.

Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products and that the miscalculation would cost the industry, and the world, greatly.

“The horror, the horror,” said Shervin Pishevar, a venture capitalist at the firm Sherpa Capital who, like just about every leading light in tech, had strongly supported Hillary Clinton’s candidacy. “We didn’t do enough,” he added. “There were too many people in the tech industry who were complacent. They waited and waited and waited to get engaged in this election. And now we have this nightmare.”

Others were more succinct in their devastation. “I’m heartbroken,” said Stewart Butterfield, co-founder of the corporate messaging service Slack.

 For some, buried in the visceral reaction was also a realization that the tech industry’s relationship with government — not to mention the public — looks bound to shift in a fundamental way.

During the Obama years, Silicon Valley came to see itself as the economic and social engine of a new digital century. Smartphones and social networks became as important to world business as oil and the automobile, and Amazon, Apple, Facebook, Google and Microsoft rose to become some of the most prosperous and valuable companies on the planet.

Mr. Obama, who rode many of these digital tools to the presidency, was accommodative of their rise; his administration broadly deferred to the tech industry in a way that bordered on coziness, and many of his former lieutenants have decamped to positions in tech.

Mr. Trump’s win promises to rip apart that relationship. The incoming president had few kind words for tech giants during the interminable campaign that led to his victory. Mr. Trump promised to initiate antitrust actions against Amazon, repeatedly vowed to force Apple to make its products in the United States, and then called for a boycott of the company when it challenged the government’s order to unlock a terrorist’s iPhone. Mr. Trump’s immigration plans are anathema to just about every company in tech.

Amazon, Apple, Facebook, Google and Microsoft offered no immediate comment about Mr. Trump’s win, or how the new administration’s stated policy goals would affect their businesses.

But it seems clear that a shift is in the offing. Leaders of these behemoths have long spoken in ambitious, gauzy sentimentalities about a broadly progressive future. Their goals weren’t simply financial but, they said, philosophical and democratic — they wanted to make money, sure, but they also wanted to make the world a better place, to offer a kind of social justice through code. Theirs was a tomorrow powered by software instead of factories, and offering a kind of radical connectivity that they promised would lead to widespread peace and prosperity.

Last year, Sundar Pichai, Google’s chief executive, published a broad rebuke of Mr. Trump’s plan to ban Muslims from immigrating to the United States. Mark Zuckerberg, Facebook’s co-founder and chief executive, told an audience of developers in April that “instead of building walls, we can help people build bridges.”

 Peter Thiel, former founder of PayPal, and perhaps the most visible and lonely Trump supporter in Silicon Valley

In private, during the campaign, many tech leaders were positive that their vision would prevail over Mr. Trump’s. When asked about whether they were preparing in any way for a Trump victory, bigwigs at many of the industry’s leading tech and financial firms were bemused by the notion. They thought it would never happen.

The deeper worry is that tech is out of step with the national and global mood, and failed to recognize the social and economic anxieties roiling the nation — many of them hastened by the products the industry devises.

Among techies, there is now widespread concern that Facebook and Twitter have hastened the decline of journalism and the irrelevance of facts. Social networks seem also to have contributed to a rise in the kind of trolling, racism and misogyny that characterized so much of Mr. Trump’s campaign.

And then you get to the economic problems. Unlike previous economic miracles, the tech boom has not led to widespread employment. Much of the wealth generated by the five biggest American tech companies flows to young liberals in California and the Pacific Northwest, exactly the sort of “global elites” Mr. Trump railed against in his campaign.

It’s not clear that most Americans see technological progress as the unalloyed good that it is considered in Silicon Valley. Technology has pushed so deeply into people’s lives, changing how they work and go to school and raise their children, that it could well raise more fears than hopes. A new smartphone is nice, but perhaps not if it means that your trucking job will be replaced by a big rig that drives itself.

“We need to figure out how to connect more Americans to the economic engine of technology,” said John Lilly, a partner at the venture capital firm Greylock Partners.

On Wednesday, some in Silicon Valley worried about their disconnection from the mass of voters who chose Mr. Trump.

“In tech, we need scale, so we look at the world through the lens of aggregate metrics like page views, active users and even revenue,” Danielle Morrill, the chief executive of a start-up called Mattermark, wrote in an email. “But that doesn’t mean we understand the people on the other side of the screen as individuals. That’s the danger and the opportunity.”

Still, some people in tech said that despite their heartache over the outcome, they felt renewed inspiration to take bolder action to realize their progressive visions. Some made very big, idealistic proposals — this being, after all, the land of disruption. On Twitter, for instance, Mr. Pishevar said he would fund a campaign to get California to secede from the nation.

Others weren’t as high-flying but were nevertheless resolute.

Aaron Levie, the chief executive of Box, an online document storage company, suggested that the tech industry promote specific policy issues.

“To shift to an economy driven by innovation from tech-enabled businesses, we need to get ahead on the issues we’ve been talking about in Silicon Valley for years, like education, patent reform and immigration reform,” he said. “By and large, minus taxes and some tax repatriation issues, much about Trump’s rhetoric has been antithetical to most of the big businesses that are driving the economy.”

Mark Suster, a venture capitalist at Upfront Ventures, echoed the idea.

“Tech needs to take a deep breath, and then reflect on how this happened,” he said. “And have policy proposals that can realistically address the inequality in our country.”

Facebook’s International Business Blunder: Following In The Footsteps of Google

With good intentions, and also a good dose of Facebook business strategy to expand its base of users, Mark Zuckerberg has struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. While on the face of it Free Basics would seem to have merit, Zuckerberg has run into a wall of opposition.  On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appears to be naïveté about the foreign markets it is trying to enter. It is possible to argue that Zuckerberg and Facebook have the best of intentions and sound arguments.  But the best of intentions and sound arguments mean nothing if the key element lacking is a clear understanding of the targeted foreign market, and the crucial need to adapt to it or fail.  Zuckerberg could have looked no further back than 2013 for clues to why he has failed.

In 2012 and 2013, I was involved in an effort to deploy wide area wireless Internet capability to broad swaths of India. This involved working with large Indian corporate partners. We were also working at a time when Google, Microsoft, and others were also busily competing to deploy so-called “white space Metro WiFi” to rural areas in lesser developed countries. Google was also experimenting with its “loon balloon” project to use high altitude balloons to deploy Internet access points in remote areas.  It quickly became clear to us that the Indian government and corporate officials wanted only an indigenous Indian Internet solution, which fit our strategy of working with Indian partners.  Google and the other big U.S. based companies were viewed as neo-colonialists. Ironically, on March 19, 2013, Google Chairman Eric Schmidt wrote an editorial in The Times of India, “Which Internet Will India Choose,” in a well-intentioned effort to convince Indian leaders of the Google vision for the Internet in India.  For all intents and purposes, Schmidt’s editorial landed on deaf ears in India.  Also, regrettably, Indian corporate culture being what it is, not much happened on the Indian side to develop their own Internet deployment solution. All of this is not unusual in foreign markets.

Read more: Eric Schmidt: Which Internet Will India Choose?

As a veteran of high technology international business, I am intrigued by these international business blunders by otherwise very sophisticated business leaders and corporations.  They seem to repeat themselves over the years, sometimes in different ways and in different markets. Years ago I stumbled on David A. Ricks book, Blunders in International Business, now in its fourth edition, with new and updated case studies.  It is enlightening and also quite funny.  I recommend the book to Mark Zuckerberg.

Mark Zuckerberg can’t believe Egypt  & India  aren’t grateful for Facebook’s free internet

The nerve. (AP Photo/Rajesh Kumar Singh)

December 28, 2015Quartz India

All Facebook CEO Mark Zuckerberg wants to do is make the world a better place for his new daughter. While he’s technically on paternity leave, he couldn’t sit idly by as India attempts to halt Internet.org, Facebook’s initiative to provide free but limited internet to the developing world.E

Last week, the Times of India reported that the country’s telecom regulatory body had asked Facebook’s partner, wireless carrier Reliance, to cease the Internet.org service as it determines whether operators should be able to price their services based on content. Responding to criticisms of the program, Zuckerberg penned an op-ed published Dec. 28 in the English-language daily. In it, he expressed annoyance that India is debating net neutrality—a principle dictating that telecom operators provide people with equal access to the internet—as the country struggles to connect its citizens to the internet.

In the process of defending Internet.org, Zuckerberg paints India—where about a billion people are not connected to the internet—as backwards for even daring to question the benefits of Facebook’s charity-like endeavor.

“Who could possibly be against this?” he asks passive-aggressively. “Surprisingly, over the last year there’s been a big debate about this in India.”

Yes, net neutrality is a big deal—and not just in India. In the US, for example, an appeals court is currently examining the legality of a new set of net-neutrality rules enacted by the Federal Communications Commission this year. But Zuckerberg almost portrays net neutrality as a first-world problem that doesn’t apply to India because having some service is better than no service.

Net neutrality activists have long argued that Internet.org provides a “walled garden” experience because the sites that users can access for free are determined by Facebook and its telecom partners, essentially making them gatekeepers to the internet for poor people.

While Zuckerberg acknowledges that Internet.org, which is currently active in more than 30 countries, does not provide people with access to the full web, he argues that it’s a step in the right direction. According to the Facebook CEO, half of the people who come online for the first time using Internet.org decide to pay for full internet access within 30 days.

Instead of wanting to give people access to some basic internet services for free, critics of the program continue to spread false claims–even if that means leaving behind a billion people.

Instead of recognizing the fact that Free Basics is opening up the whole internet, they continue to claim–falsely–that this will make the internet more like a walled garden.

Instead of welcoming Free Basics as an open platform that will partner with any telco, and allows any developer to offer services to people for free, they claim–falsely–that this will give people less choice.

Instead of recognizing that Free Basics fully respects net neutrality, they claim–falsely–the exact opposite.

Zuckerberg continues by offering an anecdote of a farmer named Ganesh, who uses the free internet service to check weather updates and commodity prices. “How does Ganesh being able to better tend his crops hurt the internet?” he asks rhetorically.

But examined more closely, his arguments don’t directly address the concerns of net neutrality activists. For the people who choose not to upgrade or can’t afford to pay for full internet access, Internet.org does indeed provide a walled garden of online content. Millions of people already have a skewed perception of the web, believing Facebook to be the internet, a Quartz analysis has shown.

Furthermore, while Facebook can add more telecom partners, which would theoretically open up the number of sites and services Internet.org users could access for free, it currently has only one partner in India, Reliance.

Zuckerberg also fails to address the claims that zero-rated services such as Internet.org amount to economic discrimination—that this is essentially poor internet for poor people. Furthermore, in an op-ed published in the Times of India in October, net-neutrality advocacy group Savetheinternet.in quoted Tim Berners-Lee, father of the internet, as saying: “Economic discrimination is just as harmful as technical discrimination, so [internet service providers] will still be able to pick winners and losers online.” Facebook’s walled garden could very well determine the sites and services that will succeed in India.

Over and over again, Zuckerberg has pointed to research showing that internet access can help lift people out of poverty. The fact remains that Internet.org provides limited, slow, and subpar access, and these limitations make it all the more difficult for people to climb the economic ladder. As Naveen Patnaik, chief minister of the Indian state Odisha, has said: “If you dictate what the poor should get, you take away their rights to choose what they think is best for them.”

Google’s Schmidt blasts NSA over fiber-optic snooping: Damage Could Be Massive for U.S. Companies

U.S. National Security Agency global surveillance of virtually all Internet traffic has been devastating for Google’s international business. At the exact time when Google has launched a strategic initiative to expand as an Internet Service Provider (ISP) in foreign countries, the NSA revelations have torpedoed its efforts.

Google sees its future growth being dependent on emerging new markets that either do not have Internet connectivity or it is very limited.  Google has been experimenting with low orbiting satellites and stratospheric balloons as a means to expand Internet coverage to the most remote corners of the globe.  Last March, Schmidt visited India to meet with government officials and to discuss his vision for the Internet. At the same time, Schmidt also wrote an editorial in The Times of India arguing for a Google future in India. The response of the Indian government was to ban Gmail use in all government agencies. ICANN, the organization that manages the Internet globally, is based in the United States. ICANN has also realized the huge damage to its credibility, and is scrambling to distance itself from any relationship with the U.S. government.  I would expect that as the International Telecommunication Union, a sister global organization, is based in Geneva, Switzerland, ICANN may be expected to relocate to Switzerland.

The potential damage of the NSA revelations of snooping on foreign leaders, breaking encryption and pinpointing cellular users locations, is incalculable.  It’s implications extend far beyond Google, to Yahoo, Facebook, LinkedIn and virtually any other big social media site you can name. The cost to the U.S. economy, it’s reputation, and to the standing

Devastating Damage To U.S. Global Internet Leadership

by Barb Darrow

SUMMARY:Google’s chairman says the NSA’s tapping of its and Yahoo’s fiber-optic cable data traffic probably violates the law.

Google, a company that’s taken some lumps itself for treading heavily on users’ privacy, is not at all amused by reports that the National Security Agency  tapped fiber-optic cables running between its data centers. Google Chairman Eric Schmidt registered that disapproval to CNN and other news outlets early Monday.

“I was shocked that the NSA would do this — perhaps a violation of law but certainly a violation of mission … This is clearly an overstep,” Schmidt told CNN.

Schmidt was responding to recent revelations from former NSA contractor Edward Snowden that the NSA was not only harvesting some customer data from big U.S. internet companies with their knowledge but also collecting data flowing in the fiber optic cables between them unbeknownst to them. Those allegations that the NSA tapped both Google and Yahoo cable links were first reported in the Washington Post, which cited Snowden-supplied documents. The documents said the NSA collected hundreds of millions of records over a month and held it for 3 to 5 days while deciding what to keep.

The NSA told the Post in a statement that it focuses on “discovering developing intelligence about valid foreign intelligence targets only.”

Whatever, Schmidt is not happy.  He told CNN: ”From a Google perspective, any internal use of Google services is unauthorized and almost certainly illegal.”

Gigaom

Google, a company that’s taken some lumps itself for treading heavily on users’ privacy, is not at all amused by reports that the National Security Agency  tapped fiber-optic cables running between its data centers. Google(s goog) Chairman Eric Schmidt registered that disapproval to CNN and other news outlets early Monday.

“I was shocked that the NSA would do this — perhaps a violation of law but certainly a violation of mission … This is clearly an overstep,” Schmidt told CNN.

Schmidt was responding to recent revelations from former NSA contractor Edward Snowden that the NSA was not only harvesting some customer data from big U.S. internet companies with their knowledge but also collecting data flowing in the fiber optic cables between them unbeknownst to them. Those allegations that the NSA tapped both Google and Yahoo cable links were first reported in the Washington Post, which cited Snowden-supplied documents…

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Eric Schmidt Nailed It: China’s Military Is Hacking Us Silly

On the evening of February 6th, I delivered a guest lecture to the local chapter of the Institute of Electrical and Electronic Engineers (IEEE). During the course of my lecture I referenced a very recent quote from Eric Schmidt on cyber security concerns about China.  I have great respect for Schmidt, as I worked with him when he was Sun Microsystem‘s Chief Technology Officer, and I was with SunSoft, the division responsible for Sun’s version of the UNIX operating system.  The cyber security issue  is an area that has concerned me since I first began working in China, representing P-Cube (acquired by Cisco Systems), and its advanced Internet traffic policy engine.

I think it is fair to say that Eric Schmidt, Chairman of Google, has been one of the first to openly and vocally declare our national cyber security threat from Chinese hackers. Just two weeks ago, on February 1st,  Wall Street Journal blogger, Tom Gara, posted an exclusive article describing his review of early galley proofs of Schmidt’s new book, planned for release this coming April.   Apparently, Schmidt is quoted from the proofs, writing that:

“China is the world’s most active and enthusiastic filterer of information” as well as “the most sophisticated and prolific” hacker of foreign companies. In a world that is becoming increasingly digital, the willingness of China’s government and state companies to use cyber crime gives the country an economic and political edge.”

Read more: http://blogs.wsj.com/corporate-intelligence/2013/02/01/exclusive-eric-schmidt-unloads-on-china-in-new-book/

In late January, shortly before the WSJ blog post, we learned from a blog post by Eric Schmidt’s daughter Sophie, that Schmidt had also just returned from a surreptitious visit to North Korea with former New Mexico Governor, Bill Richardson.  Schmidt described the other worldly cyber world of North Korea. had access to North Korea’s mobile network, which allows international calls but has no data service. Schmidt got a look at North Korea’s national intranet, which Schmidt described as “a walled garden of scrubbed content taken from the real Internet.”

Clearly, China and North Korea have become major topics of interest for Schmidt and Google. Something is up.

All week this week, National Public Radio‘s Morning Edition, has featured a series of stories on our military’s growing concern and focus on cyber attacks, and the development of both defensive and offensive cyber strategies.

Sunday night on CBS 60 Minutes, Janet Napolitano, Obama’s Secretary of Homeland Security, revealed that China was at the top of of her cyber threat list, also listing Iran and Russia.

But the most important event occurred this evening, when the New York Times published a Breaking News Alert on a story written by three of the best NYT investigative journalists.  The four page detailed article, “Chinese Army Unit Is Seen as Tied to Hacking Against U.S.,” provides extraordinary detailed evidence.  The breadth and depth of the cyber attacks on the United States go back as far as 2006, and the article describes attacks on numerous industries and hundreds of U.S. companies.  Most concerning, there is now compelling evidence of near-miss attacks seeking means to disable our critical infrastructure.  There has been much talk about our vulnerability, but until this NYT article nothing has so explicitly exposed our risk to cyber attack from the Chinese military.  For me, one of the more interesting details was that the source of the attacks was a PLA building in Shanghai.

Read more: http://www.nytimes.com/2013/02/19/technology/chinas-army-is-seen-as-tied-to-hacking-against-us.html?pagewanted=4&emc=na

(Since I first posted this story on my blog, virtually all major national and international media outlets have exploded with their own stories: BBC, Canadian Broadcasting, PBS Newshour, NBC, MSNBC, CBS, ABC, CNN, and dozens of others.  Tuesday, February 19th is the day that President Obama’s Executive Order to strengthen U.S. government resources, strategy and tactics in the growing cyber war go into effect.)

So it would now appear that the proverbial cat is out of the bag, and we can expect considerably more discussion about this and policies to counter it.  Some may argue that Stuxnet worm attack on Iran’s nuclear centrifuges marks the opening of a covert new war. The consensus seems to be that we have no choice now but to respond.

As I spent more and more time in China, and spoke with my colleagues at TDF Ventures in Shanghai, and as we met with officials of IBM Global Services in Beijing, I developed this subjective impression that Shanghai was much more politically conservative, patriotic, and aggressive with foreign companies. Just something about Shanghai that I couldn’t put my finger on.  Shanghai has also historically had a kind of separate local culture with the Shanghainese dialect, which is unintelligible to Mandarin speakers. Shanghai locals seem to pride themselves on their differences with Beijing.  More recently, others I know who have familiarity with Shanghai have concurred with my sense that the place is the conservative center of China. I can distinctly remember meetings with computer and Internet experts in Shanghai that left me with a very uncomfortable sense of their motives. They also did not seem to be particularly shy about their motives.  During my first visit to Beijing in 1999, for the 50th anniversary of the People’s Republic of China, I was deeply impressed by the event, and the obvious patriotism.  But as I continued to visit China on business, I became increasingly uncomfortable with what I was seeing and hearing.

It now seems that my gut concerns were well placed.