Tim Cook’s Unfair and Unrealistic Privacy Speech, Strategy Credits, The Privacy Priority Problem

Good morning,

Today’s update is, in large part, covered by this week’s episode of Exponent, which will be out in a few hours. Generally I don’t like doing this — I want Daily Update content to be exclusive — but I thought it was important enough that it was worth getting down in writing.

On to the update:

Tim Cook’s Unfair and Unrealistic Privacy Speech

Great work by Matthew Panzarino, who seems to have been the only person reporting from EPIC’s Champions of Freedom event Wednesday evening in Washington D.C, where Apple CEO Tim Cook was honored for his commitment to privacy. From Techcrunch:

“Like many of you, we at Apple reject the idea that our customers should have to make tradeoffs between privacy and security,” Cook opened. “We can, and we must provide both in equal measure. We believe that people have a fundamental right to privacy. The American people demand it, the constitution demands it, morality demands it”…

Cook lost no time in directing comments at companies (obviously, though not explicitly) like Facebook and Google, which rely on advertising to users based on the data they collect from them for a portion, if not a majority, of their income.

“I’m speaking to you from Silicon Valley, where some of the most prominent and successful companies have built their businesses by lulling their customers into complacency about their personal information,” said Cook. “They’re gobbling up everything they can learn about you and trying to monetize it. We think that’s wrong. And it’s not the kind of company that Apple wants to be”…

“We believe the customer should be in control of their own information. You might like these so-called free services, but we don’t think they’re worth having your email, your search history and now even your family photos data mined and sold off for god knows what advertising purpose. And we think some day, customers will see this for what it is.”

Cook’s speech is getting a lot of praise around the web, particularly in Apple circles, and I get the allure: who would want “your email, your search history and now even your family photos data mined and sold off for god knows what advertising purpose”? It’s also a criticism — and round of approval — that is distressingly close to duplicitousness:

  • First, it’s simply not true to say that Google or Facebook are selling off your data: what they are doing is promising advertisers they will display their ads to a particular type of customer as defined by the advertiser using Google or Facebook’s provided parameters. This may sound like semantics but the difference is significant: Google and Facebook do know a lot about individuals, but advertisers don’t know anything — that’s why Google and Facebook can charge a premium!

  • Second, Google and Facebook are highly motivated to protect user information. In fact, should Google or Facebook decide to sell your data, the value of each company would fall through the floor! Their competitive advantage in advertising is that they have data on customers that no one else has. In other words, if you consider incentives, Google and Facebook have more motivation to protect their users’ data from 3rd-parties than Apple does: money has a funny way of trumping morals (not that I question Apple’s! Rather, I’m just pointing out how wrong Cook’s implication is).

  • Third, Cook saying that “some of the most prominent and successful companies have built their businesses by lulling their customers into complacency” is an awful lot like Apple haters saying the Cupertino company has “built its business by convincing gullible customers to buy overpriced shiny baubles.” The reality (according to Cook) is that “Apple’s mission is to make the greatest products on earth”; as I noted in Bad Assumptions what makes Apple such a financial juggernaut is that their mission happens to be aligned with their business model: selling ever more personal computers at a significant mark-up to customers who value the difference.

    Google (“Organize the World’s Information”) and Facebook (“Make the World More Open and Connected”) have different mission statements, and that’s great; those mission statements drive both companies to create really awesome stuff that enhances lives. Note, though, that while Apple’s mission is deep — make the best products (but not all of the products), both Google’s and Facebook’s are broad: all the world’s information, and all the world’s people, respectively. And, as I explained in Ello and Consumer Friendly Business Models, these missions dictate that Google and Facebook both be free: that’s the only way to gain the critical mass of people necessary to allow both company to accomplish their missions. And, if your service must be free, your business model must be advertising.

    In other words, just as Apple’s business model of “overpriced shiny baubles” is actually more fairly described as “making great products and selling them for what they’re worth”, Facebook and Google’s business model of “gobbling up everything they can learn about you and trying to monetize it” is actually more fairly described as “providing unprecedented services that people willingly use and sharing that attention with advertisers.”

To be fair, I suspect most of you reading still prefer Apple’s model; so do I! But we also have the luxury of that preference: we can all afford iPhones. It certainly is interesting the degree to which we all value our own personal privacy more than we wish the poor could have a superior user experience with their personal computers, because that’s the exact implication of preferring Apple’s model. Google and Facebook, on the other hand, serve everyone as well as they possibly can, no matter how rich or how poor they may be.

Now here is the important point: Facebook and Google don’t treat everyone equally out of altruism; rather, their business model demands it. And that’s a good thing! Both companies are extraordinarily successful because, like Apple, their mission, product, and business model are perfectly aligned. On the flip side, though, neither company is evil because they gather personal data and allow advertisers to serve ads against it. Cook’s reduction of their business model to a matter of wrongness was unfair and unrealistic.

Strategy Credits

Over the last year or so Cook has become much more vocal about privacy, but even before then Apple hasn’t hesitated from getting its digs in. Two years ago when the Edward Snowden revelations came out, Apple released a statement entitled Apple’s Commitment to Customer Privacy:

Apple has always placed a priority on protecting our customers’ personal data, and we don’t collect or maintain a mountain of personal details about our customers in the first place. There are certain categories of information which we do not provide to law enforcement or any other group because we choose not to retain it.

At that time I christened this a Strategy Credit:

A Strategy Credit is an uncomplicated decision that makes a company look good relative to other companies who face much more significant trade-offs (For example, Android being open source).

User information of this type isn’t important to Apple’s business model, so they “choose not to retain it.” There’s nothing worth praising here — or denigrating — but it’s worth acknowledging.

The Android point is illuminating in this regard: in 2010 then VP of Engineering Vic Gundotra attacked Apple in the opening keynote of Google I/O. As Techcrunch recounted:

[Gundotra] extolled the virtues of an open platform and contrasted it with a “Draconian future, a future where one man, one company, one device, one carrier would be our only choice.” Then he showed a poster of 1984, with the title, “Not The Future We Want.” The reference is to Apple and the iPhone.

It was ugly, and the subsequent lock-down of Android would prove it was hypocritical. It was also a Strategy Credit: Android was open source because being open source (and thus reassuring OEMs) was the best way to accomplish Google’s original goal of blocking Windows and latter goal of slowing the iPhone. The fact they got to beat Apple over the head over it was a bonus.

Thus, even though I couldn’t stand what Gundotra and company were doing, I could understand it. Similarly, I understand what Apple is doing: being better on privacy than Google (or Facebook) is “free” by virtue of business model; if that can be transformed into a powerful selling point for Apple’s products, it’s a bonus!

Perhaps you think this take is a bit too cynical: maybe Cook and company really do care at a fundamental level about consumer privacy. But then why the specific focus on Google and Facebook (not just in this speech, but also over the last year)? After all, for many of the reasons I noted above, Facebook and Google may know a lot about you but are much more respectful of your personal data than a whole host of other companies. Shady ad tech firms and networks track you all across the web, and sell the information to the highest bidder; firms like Datalogix, Epsilon, Acxiom, and Bluekai harvest your data from purchase receipts and loyalty card programs, and sell it to the highest bidder; banks and credit card companies harvest your data, and sell it to the highest bidder. The list goes on and on, and all of the companies and industries on those lists, by virtue of their willingness to sell your actual data to the highest bidder (as opposed to selling advertising impressions against an anonymized data set) are far more of a threat to personal privacy than Facebook or Google.

And yet Cook says nothing about them! In fact, through the establishment of APIs like the IDFA (Identifier for Advertisers) Apple helps advertisers track you, and developers are grateful they do; after all the iPhone company certainly isn’t lifting a finger to help apps monetize Apple style — offering a product for a fair price. In other words, a look at the entirety of Apple’s business suggests that privacy isn’t quite the black-and-white matter that Cook paints it as.

The Privacy Priority Problem

The trouble, though, is that black-and-white pronouncements have a funny way of ossifying into unshakable beliefs. Over the last year, and particularly with this speech, Cook has drawn a very deep line in the sand. And, again, it might be to Apple’s benefit. Some number of customers will find that Apple’s message resonates.

The question, though, is how many people actually care (and how many of those who do care are already Apple customers)? There is precious little evidence that that number is large. The reason this matters, though, is that lots of people — including myself — care about how well our products work. And increasingly, an increasingly important facet of performance is a responsive and intelligent cloud.

John Gruber admitted that privacy alone isn’t a selling point:

Apple needs to provide best-of-breed services and privacy, not second-best-but-more-private services. Many people will and do choose convenience and reliability over privacy. Apple’s superior position on privacy needs to be the icing on the cake, not their primary selling point.

It’s a nice sentiment, but in truth the private handling of data is at odds with the level of machine-learning required to deliver superior services. It’s exceptionally difficult to see how Apple prioritizes both sides of an either-or choice.

If your response is that Apple will anonymize the data, well so do Google and Facebook (and, as I noted above, whatever is not anonymized is never exposed to 3rd-parties, and not for reasons of principle but for reasons of business model). Therefore to be different Apple needs to collect less data. But to collect less data is to, in the long run, deliver a worse product — and that would be antithetical to Apple’s mission.

Indeed, I’m reminded of the zealots who bought into Gundotra’s speech: many really did believe that Apple was closed, that it was a bad thing, and that in the long run the open web would win. And, at least for now, they were all wrong. More people than ever love iOS, the entire world loves apps, and the web doesn’t even exist on the Apple Watch. Apple pundits everywhere had the last laugh.

For now, anyways. As I observed when writing about the Apple Watch, the category is not just an opportunity but also a threat to Apple because the cloud is so integral to the device’s functionality. If Apple’s selectively narrow view of privacy in the long run makes the company increasingly less competitive in those cloud services, who will be laughing then?

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