Andy Wang, an IT engineer at a Shanghai-based gaming company, occasionally felt a pang of guilt about his job.
Most of his hours were spent on a piece of surveillance software called DiSanZhiYan, or “Third Eye”. The system was installed on the laptop of every colleague at his company to track their screens in real time, recording their chats, their browsing activity and every document edit they made.
Working from their floor in a downtown high-rise, the start-up’s hundreds of employees were constantly, uncomfortably aware of being under Third Eye’s intent gaze.
The software would also automatically flag “suspicious behaviour” such as visiting job-search sites or video streaming platforms. “Efficiency” reports would be generated weekly, summarising employees’ time spent by website and application.
“Bosses would check the reports regularly,” Wang said. Farther down the line, that data could skew workers’ prospects for promotions and pay rises. It could also be used as evidence when the company looked to fire certain people, he added.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
Even Wang himself was not exempt. High-definition surveillance cameras were installed around the floor, including in his office, and a receptionist would check the footage every day to monitor how long each employee spent on their lunch break, he said.
After two years, an overwhelmed Wang eventually quit.
“It does not make sense,” he told Nikkei Asia. “We can’t work nonstop in the office. We need to take some breaks.”
In China, technology adoption promises its swelling middle classes an easier, more productive life. But as companies bring productivity-enhancing tools into everyday office life, their efficiency is being channelled, not into leisure time, but into squeezing ever more value from employees.
Just as algorithms have come to govern the workdays of blue-collar warehouse workers at Alibaba Group and food delivery riders for Meituan, elsewhere, white-collar workers are becoming affected by the creep of software-driven management and monitoring into their professional lives.
This is particularly the case in China’s tech industry where rapid technological development, paired with poor labour regulations, has created the potential for labour abuse. The big tech companies themselves, locked in cut-throat competition for new business opportunities, are pioneering these technologies and tools in their own operations. From hiring and goal-setting to appraisal and lay-off, productivity-enhancing technologies look to quantify workers’ behaviour by collecting and analysing extensive amounts of personal data.
Some scholars warn that some practices can be unethical, invading employees’ privacy and burdening them with greater workload and mental stress. Others draw parallels to the fatigue faced by factory labourers during industrial revolutions, where workers chased the pace of machines.
“I felt that I was getting busier and having less time for myself,” said the engineer Wang, looking back on his five years at Chinese internet companies.
The harsh conditions synonymous with China’s sweatshop factory culture have come to be identified with the country’s technology companies, where workers often endure slavishly long hours to hit objectives set by big data analytics. The environment of intense pressure has, in some cases, created a lethal environment for office workers.
Pinduoduo is one of the crown jewels of Chinese tech. In just five years, the Shanghai-based ecommerce company grew from zero to 788m annual active users, surpassing JD.com to become the country’s second-largest ecommerce company with a market valuation of $175bn, second only to Alibaba.
But it is clear that stunning growth is coming at a cost. A 22-year-old female employee died in December last year after collapsing on her way home from work at about 1.30am. She worked for the company’s grocery shopping unit, Duoduo Grocery, whose services had rapidly grown to encompass 300 Chinese cities as orders leapt during coronavirus-related lockdowns.
Two weeks later, Pinduoduo confirmed one of its engineers jumped to his death. The young worker, a fresh university graduate, checked the company’s messaging app one last time before he took the final leap, according to a former Pinduoduo employee.
The same month, another employee who had posted a photo of a colleague being carried out of the office on a stretcher was identified and fired by the company. In a video posted on Weibo, the Chinese social media site, the fired employee said: “I don’t know if the company identified me through computer monitoring or through information provided by Maimai.” Maimai, the Chinese equivalent of LinkedIn, denied it had provided any user information to a third-party organisation.
Pinduoduo has been circumspect about publicly commenting on the deaths or its work culture. It released a statement in January saying it was “profoundly saddened” by the 22-year old employee’s death. Pinduoduo declined to comment further on the death and other labour-related questions posted by Nikkei.
The series of incidents sparked a round of online debate on the infamous “996” culture, where employees toil from 9am to 9pm, six days a week. But, as in the past, discussion quickly died away.
“Workers are not being replaced by algorithms and artificial intelligence. Instead, the management is being sort of augmented by these technologies,” said Nick Srnicek, a lecturer in the digital economy at King’s College London. For example, with the development of digital technologies, management could monitor workers who were not in a centralised space, he said.
“Technologies are increasing the pace for people who work with machines instead of the other way around, just like what happened during the industrial revolution in the 18th century,” he said. “The same thing is happening today. Humans just have little autonomy over that.”
While China has moved to draft laws to prevent tech companies’ extensive personal data collection from their users, there is little legal protection for the privacy of their workers, according to Samuel Yang, a lawyer specialising in personal privacy protection and cyber security at AnJie, a Beijing law firm.
“The challenge in legislation is to determine what kind of work monitoring should be considered reasonable and necessary,” he said.
In the west, employee monitoring has picked up in popularity as companies grow anxious about remote working productivity. In China, it is driven by competition: as tech giants compete in more areas from ecommerce and short videos to online finance and community group-buying, employees can come under greater pressure — from both the companies and their peers — to put in extra hours.
While there is a long history of using technologies to manage workers, developments such as machine learning have strengthened their capability. As urban workers shift to online platforms, work surveillance has increasingly become the norm.
“The pace of legislation can hardly match the development of technologies,” Yang said.
Outside China, monitoring employees, including their work devices, is allowed in most countries to protect company assets and sensitive business information. There were few laws and regulations that specifically protected workers’ privacy and autonomy, said Srnicek.
While US federal laws prohibit an employer from intentionally intercepting employees’ oral, wire and electronic communications, exemptions can be made if the employer can show there is legitimate business purpose for doing so. In the EU, employees enjoy better protection: collection of their personal information requires their consent.
Meanwhile, in China, the use of such technologies for constant, low-level monitoring is becoming more commonplace.
Sangfor Technologies, China’s largest provider of online monitoring platforms, counts ecommerce giant Alibaba, TikTok’s owner ByteDance, Weibo’s parent Sina Corp, smartphone maker Xiaomi and telecommunication equipment maker ZTE among its more than 50,000 corporate clients, according to the company’s website.
The Shenzhen-based company sells services that can access employees’ mobile browsing history and application usage records once their phones are connected to company WiFi, according to sales materials seen by Nikkei. The service requires no prior approval from users, and can block selected mobile apps that are considered counterproductive to work, such as short video platform Douyin and Twitter-like social network Weibo.
Besides that, the system ranks “inefficient workers” based on the time they spend on applications and websites considered unrelated to work. It also identifies employees who have a high probability of resigning by analysing their browsing activity on job search sites and transfer of CV-like documents.
In China and elsewhere, algorithms are starting to make decisions on behalf of humans — who gets hired, who gets fired and who gets promoted. In 2019, US ecommerce giant Amazon was criticised for using a computer system to automatically fire hundreds of warehouse workers considered by the system to have low productivity, The Verge reported that year.
A Chinese subsidiary of Japanese camera maker Canon, Canon Information Technology, last year unveiled a new workspace management system that only allows smiling employees to enter the office and book conference rooms. Using so-called “smile recognition” technology, Canon said the system was intended to bring more cheerfulness to the office in the post-pandemic era.
The software is in use in its Beijing office and is also being marketed at companies in Singapore. However, many workers found the use of such technology intrusive. “So now the companies are not only manipulating our time, but also our emotions,” one user said on Weibo. The company did not respond to a request for comment.
Zhongduantong, a Beijing-based software company, developed a work-reporting mobile application that requires workers to check in at designated locations within a certain timeframe and upload a picture of the surrounding environment as proof through the app.
The use of such real-time tracking apps led to the Rmb200 ($31) fine of a sales manager in the northern city of Shenyang, who was found to be visiting a housing fund centre for personal reasons during their lunch break, Xinhua News Agency reported in 2018.
In another case, the positioning was so accurate that an employee in Shanxi Province was punished for browsing Weibo for 10 minutes in a company toilet, according to the same Xinhua report.
“Many of these apps track if an employee stays in a certain area, such as the toilet, for too long,” said Alan Li, a blogger writing about labour rights for tech workers. While most tech companies did not have a rigid attendance time, he said, some used office cameras to calculate an employee’s approximate work time.
Li, who is also a product manager at one of China’s top internet companies, said that this kind of information gave the companies great bargaining power over workers when they dealt with labour disputes.
“For internet industry workers, their relationship with the companies is not too different from that between riders and food-delivery platforms,” he said. Labour rights protections for full-time tech workers, that is to say, are barely better than for contractors, as they also lack the resources and power to protect their rights during labour disputes.
Employees of top internet companies are aware of the irony. They often teasingly refer to themselves as “workers of big factories”.
In some more controversial cases, technology, including remote sensors, was used to monitor the time workers spent in toilets. Short video platform operator Kuaishou Technology sparked an online backlash last year after the company was found to have installed a countdown timer above each of its office’s toilet cubicles. Amid an online backlash, the company said the timers were installed for testing purposes and had been removed.
Alibaba has also developed an internet-connected smart toilet system where an infrared detector is installed to monitor the occupancy and odour of each toilet cell. Developers said the system would increase the space use efficiency, as it would automatically trigger exhaust fans and send cleaning requests to cleaners.
While such aggressive practices triggered fierce criticism from the public and complaints from employees, they have had little impact on investor sentiment. Pinduoduo’s share price recovered quickly from the news of the 22-year-old employee’s death, surging 12 per cent the next day following an initial drop of 6 per cent the day the news was released.
Investors were encouraged by the company’s improving results and efficiency. Pinduoduo achieved its first quarterly profit in the third quarter of last year, and held the leading share in China’s brutally competitive online grocery market.
Eye of the beholder
The artificial intelligence-driven decision-making process, however, can reinforce bias and discrimination, as machine learning is designed to learn from existing examples.
To Jia Kai, associate professor at the University of Electronic Science and Technology of China, the crucial question is: to what extent can a human society be managed by programs?
“For example, if a worker has a cold today, will the programs be able to detect that and allow more time for the person to finish his job?” Jia asks.
The answer is no, he said, at least for now. “What a computer system can capture is only a simplified version of human behaviours.”
Nevertheless, the financial rewards for enduring the punishing rules of the tech world continue to lure talented young graduates to the industry.
According to the latest income report of China’s National Bureau of Statistics, internet industry workers topped the chart with an average annual income of Rmb177,544 ($27,700) in 2020, up 10 per cent from the previous year. It surpassed the income of the average finance industry worker, and was twice as much as that earned by a property sector worker.
“When companies squander so much money on employees, they feel entitled to increase the workload as they like,” said Li, the blogger.
With the Chinese tech industry growing faster than it can bring in workers, high salaries are combined with intense productivity to act as both carrot and stick. Since work at internet companies is knowledge-intensive, productivity cannot be boosted by increasing workers as in a standard manufacturing model. Having each person work longer hours is still a more efficient way to get the job done.
To speed up the launch of products and services, companies often assigned a limited number of people to one project to reduce time spent communicating among team members, Li said. “The more each of them works, the lower their costs would be.”
The supply of talent was far from enough, said Xiao Miao, a longtime headhunter for internet companies. These companies, especially newcomers, must aggressively poach talent with proven track records from each other.
Despite the large number of job applications, Xiao said, it took huge effort to find an eligible candidate. “From the companies’ perspective, it’s a shame if they cannot have those people work more,” Xiao said.
These candidates are considered the educational elite, graduates from the top universities who have had to pass rigid screening to get the job.
Cindy Yang, who recently joined Chinese tech giant Tencent Holdings from a start-up, endured six rounds of tests and interviews before she was offered the job. The competition is so fierce that the masters degree holder spent Rmb8,000 on a private tutoring class designed to teach candidates how to pass job interviews at the internet companies.
“Most tech companies would ask if you mind working overtime during the interviews. If you show a little hesitation, you’d lose the opportunity,” Yang said.
The 28-year-old now works from 10am to 10pm, together with her team members, fuelled by free lunches and dinners from the company canteen.
“All of us are having a strong sense of crisis,” she said, “We can’t write codes like this forever. There will be younger people who can learn the new technologies quicker and are more willing to work overtime.”
According to a 2020 report conducted by Maimai, the average age of employees at China’s top 20 internet companies is not even 30 years old.
“Only our team leader was born before 1990. Where are the older people?” Yang asked.
Tencent applies a scoring mechanism — like many of its rivals, in a precedent set by western companies — in which workers are assessed every half year. Those with the lowest scores will be dismissed.
Upstart companies run even more brutal working hours. ByteDance allows its employees a full weekend only every other week — called the “odd-even” weekend shift system, which compensates with double-time pay — as does video platform Kuaishou.
At Pinduoduo, employees at some of its newer units are required to work at least 300 hours a month, according to several users on Maimai. Pinduoduo earlier denied the existence of such a requirement.
But the intense work schedule affects turnover. According to a LinkedIn report in 2018, Chinese internet industry workers spent an average of 1.47 years at one company before moving on.
Tony Yang, a former engineer at ByteDance, quit after spending two years under the “odd-even” schedule. He worked from 11am to midnight every day, and was on call 24/7 for system problems.
“I felt unwell toward the end of the job. I was overweight, and had mental meltdowns from time to time. Sometimes, I cried out all of a sudden and had the urge to smash things,” the 31-year-old said.
In addition to the growing workload from ByteDance’s fast expansion, Yang’s stress also came from his high expectations.
“There are too many rags-to-riches stories in this industry. The atmosphere makes you want to climb up. When you find people of your age standing so high, and you are not yet there, the stress is huge.”
While ByteDance provides psychological consulting services to employees, Yang said he simply did not have time to go. “Only time is a scarce resource,” he said.
After a brief break, he joined another internet company. He was still very busy, but the work schedule was less intense compared with ByteDance, he said.
“Everybody tells us the internet industry is very problematic. But what are the other options for us? I can’t find any industry that can offer the kind of rewards for people my age,” he said.
When an industry with great growth potential emerged, companies tended to invest all their available resources — both human and technological — to grow new businesses, said Jack Qiu, professor at the National University of Singapore. The internet industry is the latest example.
“Companies look to increase the marginal revenue, or so-called surplus value, through increasing the work hours and intensity of labour,” he said. The greater technological capability in production did not equate to workers having a more relaxing life, he added.
As in the previous development of new industries, a large number of young people would be drawn because of their physical resilience, ability to work long hours and lack of family responsibilities, Qiu said.
“The new economy is not so much different from the old economy in terms of the accumulation of wealth,” he said, as substantial amounts of human work was involved to support the operations of algorithms and machines.
The irony: the reason why many engineers are working overtime is to create more powerful tools that, in turn, squeeze labour from wage earners. The ever-growing workload is beginning to scare off talent, too.
David Yu received an engineer job offer from Pinduoduo two years ago which more than doubled the pay he was getting. The growing ecommerce company also offered him stock options.
However, the 27-year-old decided to decline after he found out he would have to take an overnight shift several times a month to monitor system errors, on top of the 13-hour day work schedule and “odd-even” weekend shift.
He also does not agree with the way technologies are being applied to pursue efficiency and profits over the wellbeing of employees.
“When an ultra-high efficiency was achieved by the algorithms, we know there will be extra costs. And the costs have to be borne by someone,” the engineer said. While extensive capital could help improve efficiency, such improvement had limits too, he said.
In reality, few companies would actively incorporate humane concerns into the algorithms of their products, because such designs tended to lower the efficiency of the systems and hurt competitiveness, Yu said.
Programmers such as him are only given instructions to keep iterating the system, so customers’ demand can be located more accurately and filled in a shorter time. “We are the tools,” he said.
After spending five years at three internet companies, Danny Sun drew a conclusion: it’s just not worth it.
He decided to stay away from internet companies, instead becoming a full-time blogger at video-sharing platform Bilibili.
“It’s getting harder and harder to get promoted these days, with so many people flooding into the industry,” Sun said. He said the best time to work for tech companies had passed, because most companies already had their initial public offerings — meaning the financial returns for employees are not as lucrative as they used to be.
“Unless you have reached a really high position, we are all just small screws of a big machine,” he said.
A version of this article was first published by Nikkei Asia on June 9, 2021. ©2021 Nikkei Inc. All rights reserved
India’s Zomato soars on market debut in strong sign for tech listings
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Shares in Zomato, a food-delivery company and the first of India’s tech groups to go public, rose as much as 80 per cent on debut in a vital test of investor appetite for the country’s cash-burning start-up scene.
Zomato’s shares surged to a high of Rs138.90 ($1.87) from their issue price of Rs76 in early trading on Friday. The initial public offering, which was about 40 times subscribed, had been closely watched by a number of other richly valued companies that are expected to go public in the coming months.
India’s fast-growing tech groups had previously relied on foreign venture capitalists to fund their often lossmaking businesses. But regulatory changes enabling unprofitable companies to list have encouraged several start-ups, led by Zomato, to look to public markets instead.
“This is the first company in India, in my memory, that has gone for an IPO in India without turning a rupee of profit,” said SR Srinivasan, an independent investment adviser. “It shows the level of maturity in the market. Hopefully, it’ll be positive, but I’m guarded.”
It has been a rollicking year for Indian stocks, which have followed global equity markets to records this year. The Bombay Stock Exchange’s Sensex index has climbed more than 10 per cent, hitting an all-time high last week.
The bullish mood has encouraged a stream of listings, with companies raising $3.9bn in the first half of 2021, according to Refinitiv, the most since the global financial crisis.
Zomato’s IPO, the largest in more than a year, is set to be followed by that of Paytm, a New Delhi-based payments group that filed a draft prospectus last week. As with Zomato, Paytm is backed by Chinese billionaire Jack Ma’s Ant Group. It is also lossmaking.
Several other Indian tech groups are believed to be waiting in the wings, including Walmart-owned ecommerce group Flipkart.
Proponents hope the string of listings will give equity investors an opportunity to participate in the growth of India’s tech sector, as US shareholders enjoyed through companies such as Amazon or Facebook.
They are also betting that Indian companies will benefit indirectly from a regulatory crackdown on Chinese tech groups that could prompt global investors to search for opportunities elsewhere.
Chinese authorities hit ride-hailing business Didi with a data security probe days after it raised $4.4bn in a New York IPO last month, sending Chinese tech stocks tumbling and threatening what had been a lucrative market for Wall Street banks.
But Zomato and its peers face challenges of their own. For one, analysts are sceptical that Zomato, which reported a net loss of $110m in the year to March, has a plausible path to profitability.
Its economics have improved thanks to the boost to food delivery groups during the coronavirus pandemic, but order values remain low by global standards. Some analysts believe that mark could fall further as Covid outbreaks wane and people return to eating out.
Indian tech companies must contend with regulatory challenges of their own as the government looks to exert more control over user data and foreign investment.
The government last year introduced curbs requiring investors from China to seek official approval, which prevented Zomato from receiving new financing from Ant.
“There’s a lot of money going in. But we have to look at the fundamentals: is there profitability, is the company good?” said Roopa Venkatakrishnan, a director with Sapient Wealth Advisors and Brokers in Mumbai.
“Profitability, because of the way the business is, may be two, three, four years down the line. But it’s something where people will have to invest for the long-term,” she said. “Today, with the euphoria, people invest with a very short-term view.”
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Poco launches OnePlus Nord 2 5G rival Poco F3 GT. Price, other details
Poco India has launched the new Poco F3 GT which comes with various gaming features. The phone comes with dedicated shoulder triggers, high touch sampling rate, a high refresh rate and an AMOLED display. This will be the fourth Poco device to be sold in India. The device is a re-branded Redmi K40 Gaming Edition device that was launched in China in April this year.
Price and Availability
The Poco F3 GT has been priced at ₹26,999 for the variant with 6 GB RAM and 128 GB of internal storage. The variant with 8GB RAM and 128GB internal storage will be sold at ₹28,999. The top variant will come with 8GB RAM and 256GB of internal storage and is priced at ₹30,999.
Interestingly, Poco has introduced a new pricing method under which interested buyers can purchase the device at a lower price initially. In the first week of sale from 26 July – 2 August 11:59 AM, all three variants will be available with a discount of ₹1,000. In the second week starting from 2 August 12 PM to 9 August 11:59 AM, the three variants of the device will be available with a discount of ₹500. From 9 August 12 PM onward, the device will be sold at the original prices, mentioned above.
Pre-orders will start on 24 July at 12 PM and sales will begin from 26 July at 12 PM. The device will be available from Flipkart. The device will be available in two colours Predator Black, Gunmetal Silver.
The phone comes with numerous features that focus on the gaming audience. The phone gets Maglev Triggers and GT Switches. Maglev Triggers use magnetism to pop up the buttons above the body of the device to give better tactical feedback. The phone is built with aircraft-grade aluminium for the chassis.
The display on the Poco F3 GT is a 6.67-inch Tubro AMOLED panel with a 120Hz refresh rate. The display gets a touch sampling rate of 480Hz. The new Poco F3 GT comes with dual speakers that provide Dolby Atmos sound. The phone has a total of three mics for gamers to have a better experience while holding the device in landscape mode.
The Poco F3 GT is powered by MediaTek’s Dimensity 1200 chipset which is also featured in the OnePlus Nord 2 5G. The processor is built on 6nm architecture. The phone gets a vapour chamber with White Graphene heat sync to dissipate heat while gaming sessions.
In terms of optics, the new Poco F3 GT comes with a triple-lens camera. The primary lens of the phone is a 64MP unit.
In terms of battery, the device comes with a 5065mAh battery. The charging brick and cable in the box provide 67W charging. The cable is L-shaped to help hold the device while it is being charged. The company claims that the charger can provide a 1-day in 15 minutes of charge.
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Money’s quantum time bomb | Financial Times
There’s a paradox at the heart of cyber security. It relates to the trade-off between keeping our secrets safe and protecting the communications of bad actors.
Most people are blissfully unaware of it, but an uneasy balance was struck in the early 2000s following the conclusion of the Crypto Wars. After many years of fighting the ability to export secure encryption, US officials finally capitulated on restrictions in 2000, opening the door to a much larger share of the world being able to benefit from secure encryption protocols. While many saw this as too much of a concession to terrorists and criminal organisations, privacy advocates argued the benefits of secure communications for all outweighed the risks.
With quantum computing around the corner, however, some believe the power balance struck in the 2000s could be on the verge of breakdown due to the technology’s potential to break current encryption standards. This time, they say, the consequences could be far graver than anything in the past because of the scale of economic value and infrastructure that has been linked in the interim to secure encryption.
But others think the threat may be being overhyped by those who wish to profit from selling quantum security or by those who have an interest in getting institutions to migrate to platforms they control and can exploit.
In the latest issue of the European Cybersecurity Journal, Jaya Baloo, the vice chair of the Quantum Flagship initiative, an EU-funded research initiative, argued that the impact of quantum computing has the potential to be bigger than the computing revolution. This is why, she says, quantum secure encryption must be rolled out well in advance to fend off any adverse effects.
But rather than focus on building more secure systems, Baloo also noted there are still many officials lobbying to weaken existing encryption regimes via backdoors and system overrides in the name of national security and fighting crime.
Baloo compared this to the arguments made during the Vietnam war that the best way to save a village was to burn it down:
We’re looking at the same absurd situation when it comes to encryption. People with noble ends — stopping crime, terrorism, child pornography, and human trafficking — are proposing means to those ends — weakening encryption with backdoors — that would in fact destroy the very end goal of security and privacy for everyone.
As it stands, banks are probably the most ahead when it comes to fending off quantum decryption risk. Many have discreetly begun assembling teams to think hard about moving — if not already moving — their systems to quantum secure levels. Much of this activity is being done in the shadows because of the downside of accidentally signalling to would-be attackers (especially state-level ones) how insecure one’s system currently is. Nobody wants to let the proverbial quantum security cat out of the bag since doing so would invite a perpetual arms-race between attackers and defenders, with encryption having to be continuously adapted to new threats.
Even so, this scenario may eventually become unavoidable. Amit Katwala, the author of Quantum Computing, how it works and why it could change the world, told FT Alphaville that while quantum is likely to break certain types of encryption eventually, there’s a good chance it will be contained in counter-encryption upgrades. “By the time these devices are ready to break those types of encryption, there will be new types of encryption in place that will be harder for them to break.”
A digital asset nightmare?
Not all in the crypto security world are convinced by the urgency of the matter. In some quarters, an active debate is being had about whether quantum computing will ever be strong enough to break standard encryption protocols. The question is of particularly relevance to those active in the cryptocurrency sphere, since so much of the sector depends on secure cryptography to retain its value. Opinions, however, remain hugely divided.
Among those who see it as a big problem are the founders of Arqit, a British network security company that claims to have solved some key problems in the quantum security field.
Stephen Homes, Arqit’s chief product officer, argues in a new paper co-authored with Liqun Chen from the University of Surrey that quantum computers could in theory use Shor’s algorithm, a number crunching technique, to break Elliptic Curve Digital Signature Algorithm (ECDSA) signatures, which many cryptocurrencies depend on.
To fend off quantum attacks, the paper outlines, cryptocurrencies like bitcoin will have to adapt in ways that would make usability increasingly cumbersome for users. Keeping on top of the threat, they say, “requires a significant change in user behaviour and a cryptocurrency becomes increasingly less usable as each additional protection is added.”
To achieve user-friendly security, the authors add, cryptocurrencies would have to migrate to quantum safe digital signature schemes. But doing so would require a hard fork, which is a notoriously complex process that involves high levels of community consensus to ensure successful implementation.
One other option, Holmes and Chen note, is migrating one cryptocurrency to a new cryptocurrency platform designed specifically to be quantum resistant. “This could be achieved relatively easily through an exchange process as a cryptocurrency is becoming more at risk to the ever increasing performance of quantum computers,” they say.
But many top-level bitcoin developers and experts remain sceptical. Some argue there’s no clear indication that quantum computing will ever be strong enough to break either ECDSA or the Sha-256 secure hashing algorithm that underpins bitcoin.
Stepan Snigirev, a former quantum physicist now involved in the crypto space, told FT Alphaville that it is unlikely that quantum computers will become a threat to bitcoin in the next 20 years. As he noted:
In order to break elliptic curve cryptography, one needs ~10 thousand physical qubits and their quantum state should survive several million operations.
The current state of the art Quantum Computers are tiny and very noisy – 20 qubits with ~100 operations is what you can expect today.
Optimistically one can expect ~10x improvement in both parameters every 5 years. Or maybe in 3 years if you have unlimited funding.
So these simple estimates give us about 15-20 years to develop and deploy quantum-safe cryptography.
Others in the community go further than that. They claim the true agenda of those circulating fear, uncertainty and doubt (FUD) about bitcoin’s resilience to quantum is to sabotage trust in the novel financial system, since it poses such a threat to incumbent powers. A counter-narrative that might best be described as “quantum denial” has thus appeared in some quarters too.
The views of those developing quantum computers sit somewhere in the middle.
“Certainly quantum computing is not a hoax,” Dr Kuan Yen Tan, chief technology officer of IQM Quantum Computers, told FT Alphaville. “There is of course lots of hype around, but some of that is very good because quantum has great potential. We think it is going to eventually change everything because it is like a new force of nature that we are taking into use.”
His colleague Prof. Mikko Möttönen of Aalto University and chief scientist at IQM however caveated that “for quantum computers to become a security threat, in the sense that you define, you would need something called quantum error correction. So you would need a machine that makes almost no errors at all . . . and that kind of machine is beyond 10 years from now.”
A quantum security solution for the quantum threat?
Irrespective of how great the quantum threat really is, efforts to provide the market with pre-emptive solutions are coming.
Holmes’ company, Arqit, is among those looking to cash in. In recent months Arqit has come to market claiming it has figured out how to commercialise symmetric key encryption, a much stronger method of encryption that has until now been viewed as impossible to scale.
It works on the basis that if two counterparts can access the same genuinely random number that only they share, they can encrypt their communications in a way that is most likely to be quantum secure. The method is most famous for protecting high security assets like the US nuclear codes, using the nuclear football. But it also comes with a big disadvantage: in most circumstances it calls for the physical exchange of passwords between two parties, meaning it is no good for encryption between distant parties that never have the chance to meet in person.
But Arqit’s CEO David Williams says the company — which consists of a plethora of former GCHQ code crackers and former British and US military types — has solved the trickiest part of the problem by using another quantum process known as quantum key distribution (QKD).
At the heart of the solution is a mechanism that draws on the spooky properties of quantum states to help distribute the keys securely over distance. The quantum properties ensure that if a message is intercepted it disappears before it can be read.
“If you try and read quantum information, you break it, and it doesn’t get used,” says Williams, while pointing out that the downside of quantum key distribution is that its resistance to hacking is also what makes it highly sensitive to more benign forms of interference it the real world. “It unfortunately only lasts a few dozens of kilometres because the quantum information bumps into glass molecules and dies,” says Williams.
Arqit solves this problem by using satellites to distribute the keys to terrestrial receivers, a process which extends the transmissibility of the codes by many hundreds of kilometres. It also claims to have found a way to branch off that security and offer it as a service to mass-market telecoms providers, ensuring everyone’s personal computers and mobiles can benefit from QKD.
Arqit, however, is not the only venture to claim to have solved QKD using satellites. In 2016, China launched a quantum communications satellite known as Micius, that was also set to transmit encrypted keys from space.
Xinhua reported at the time that the satellite was “designed to distribute keys between relay stations on two different continents using high-speed coherent lasers” and that “as a quantum photon cannot be separated or duplicated, it becomes ‘impossible to wiretap, intercept or crack the information transmitted through it.””
But Williams claims Arqit, which fetched a $1.4bn valuation on Nasdaq in early May via a merger with Spac, is far ahead of the Chinese effort. He says Micius unlike Arqit has not yet solved the “global versus trustless” conundrum, which allows for the quantum encryption to be distributed beyond its end point on the ground.
Solving this means the technology can be applied not just to direct communications but much more broadly, including to protect new blockchain-based financial systems from quantum attack.
“Our customer announcement will be about a central bank digital currency, which we think is the best legitimate regulated use of blockchain technology, but only works if it is quantum safe,” he told FT Alphaville.
The idea central banks may be inclined to draw on quantum properties to secure their currencies is certainly intriguing. One of the big challenges facing CBDC issuance, after all, is how they will be able to maintain users’ privacy while simultaneously complying with their own Know-Your-Customer and Anti-Money-Laundering rules, which require active supervision and monitoring of all transactions.
As it stands the two requirements are paradoxical. From a users’ perspective, siding more firmly with one or the other requirement also risks alienating users either way, whether that’s on privacy grounds or on stability and risk grounds. In that context, being able to say “we’ve solved this impossible problem with quantum” seems an awfully convenient thing to be able to promote.
Such assurances, however, are unlikely to satisfy the eternally distrustful crypto community. One high-level cryptographer source told FT Alphaville that even if QKD has been achieved at scale, it doesn’t mean the wider system is necessarily unhackable. If the attacker controls the endpoint in a QKD pair, they said, it is possible they could see the key being generated and that would then give them access.
“That’s how governments will backdoor it,” they noted. “They will be using a keyed random number generator, so the question is: how do you audit the independence of the random number generator? And the answer is you can’t.”
For now at least we guess that means the paranoia in the sector is unlikely to be abated.
How trolltrace became a real thing – FT Alphaville
Why CBDCs will probably be ID-based – FT Alphaville
BIS hones in on the paradox at the heart of central bank cryptocurrencies – FT Alphaville
How traders might exploit quantum computing – FT
NHS shares English hospital data with dozens of companies
More than 40 companies, ranging from the world’s largest management consultancies and pharmaceutical groups to a data company co-founded by a member of the Sackler family, have received years of detailed medical records from English hospitals, a Financial Times analysis has found.
There are at least 100 different NHS data sets that have been shared with companies, ranging from the broad Hospital Episode Statistics (HES) database that lists every single patient who was admitted, their diagnosis, treatment and any outpatient appointments, to narrower sets of data on emergency care, mental health, mortality, cancer waiting times, sexual health and maternity services.
How the NHS uses and shares data has become a priority for the government, especially since the start of the coronavirus pandemic, with officials repeating the mantra that “data saves lives”.
Last month, the health department released a draft strategy promising to improve access to NHS patient data for researchers, so they can “provide innovative solutions” on everything from drug discovery to shielding programmes.
The NHS is also considering how to pool the medical records of 55m patients registered at local GP clinics into a single database that will also be shared with third parties.
But the FT’s analysis of the NHS Digital Data Release Register over the past five years, since it started publishing complete records, raises concerns over potential conflicts of interests and a lack of transparency about what happens to the data after it is shared.
Most of the third-party recipients of the data are public bodies, such as Transport for London, local councils and universities, which use it for planning and research purposes.
But sensitive patient data was also shared with 43 different commercial organisations including McKinsey & Company, KPMG, Novavax, AstraZeneca and marketing firm Experian. These accounted for 13 per cent of the total recipients of data.
Any organisation can apply for access to NHS patient data by following a stringent procedure to prove that it can keep it secure, and will use it solely for improving the health of English patients. The data is also pseudonymised, meaning that identifying information such as names and NHS numbers are removed.
Rory Collins, chief executive of UK Biobank, a genetic database of half a million UK patients and a professor of medicine and epidemiology at Oxford university, said that while records only stretch back five years, hospitalisation data had been available to third parties “for decades” and that “it is incredibly valuable for managing the health service and also for doing research”.
But the FT found that insights from the data were often shared or sold on to other commercial entities and providers that use it to price products being sold back to the NHS, or conversely restrict the NHS’s access to analysis of its own data, creating conflicts of interest. Among the biggest criticisms focused on the opacity around the data’s fate after it leaves the NHS’s servers, and the lack of an auditing trail beyond the companies on the register.
“The idea of data going beyond the control of the NHS and not knowing where it ends up, concerns people,” said Natalie Banner, lead of Understanding Patient Data, a health data initiative by the Wellcome Trust. “Health data is particularly sensitive because it is a really precious relationship, collected in the context of your doctor; it makes it feel particularly distressing.”
To examine which groups have benefited from the NHS’s vast patient data trove, the FT compared the recipients in the 14 months before the onset of the pandemic with the same period since.
IQVIA, a little-known US data company formerly known as IMS Health and co-founded by drug mogul Arthur Sackler, received the most data in the post-pandemic period.
IMS Health was well known for tracking the detailed prescribing habits of doctors in the US on behalf of drug companies, including Purdue Pharma, which was founded by the Sackler family and was responsible for the widespread distribution of OxyContin.
The specifics of what IQVIA provides its commercial clients are not clear from its NHS disclosures, but it says it has used this data for at least 28 projects in 2020 alone, to provide analysis to pharmaceutical and medical companies and to the NHS’s various bodies.
IQVIA also purchases medicines supply data from NHS hospital pharmacy systems, then sells an aggregated data set on to drug companies.
But in an example of the power asymmetry between private sector companies and the NHS, the health service’s own access to IQVIA’s data set is restricted according to research in the British Medical Journal by the doctor and academic Ben Goldacre. In certain cases, the NHS cannot even release data to UK regulatory bodies without prior permission from IQVIA.
“This hospital medicines supply data already exists. It is provided by NHS hospitals to the drug industry for marketing purposes,” Goldacre wrote. “But the restrictive terms of the [agreement] mean that we are unable to use it for open audit to improve quality, reduce avoidable expense, and make prescribing safer in hospitals.”
Since the pandemic began, the NHS has accelerated its data sharing, with the number of corporate recipients rising to 29 between April 2020 and May 2021, from 21 in the same number of months before the pandemic.
These numbers do not include companies, such as the data analytics group Palantir, that were given access to health data under emergency measures last year for pandemic-related work.
Health data has provided the NHS with critical insights under extreme pressure, for instance identifying dexamethasone as an emergency treatment for Covid-19, a breakthrough that has to date saved 22,000 lives in the UK and another 1m worldwide.
“The [coronavirus] vaccine rollout could not have been delivered without effective use of data,” said Simon Bolton, chief executive of NHS Digital. He added that the data could only be accessed by organisations using it for healthcare planning and research purposes, and that this would be overseen by the NHS.
Critics argue that patients are often unaware of the NHS’s data-sharing practices, and even if they withhold consent it can be difficult to prevent their data from being disseminated externally.
While the NHS provides a “national data opt-out” option for patients, it still shared full, pseudonymised data sets with external organisations in 84 per cent of instances when opt-outs had been exercised.
“The fact it is being used at 10-20 per cent effectiveness is horrendous. Patients must have confidence that if they have expressed opt-out that will be respected,” said Phil Booth, head of the medical privacy campaign group MedConfidential.
The NHS said it had primarily ignored opt-outs in cases when patients are not identifiable because names and NHS numbers had been removed from individual records that were shared. Researchers have questioned how effective this type of “pseudonymisation” is in genuinely protecting privacy.
Campaigners also worry that while the NHS stipulates in its contracts with third parties that it will track where the data ends up, this is impossible in practice.
“There is no end-to-end audit or transparency on all of the users of the data. There are black holes here. We need to see comprehensively all the flows of data,” said Booth.
For instance, British medical data company Compufile Systems states that its data analytics services are offered to at least seven “medical device, medical supply and life science companies”. It is unclear if the NHS receives any proceeds from its valuable data sets being used to develop commercial products.
The company said there was “mutual benefit” to both parties because “the pharmaceutical company builds reputation and strengthens relationships with their customer [the NHS]”. It did not respond to request for comment.
In another case, a company called La-ser Europe, owned by US drug development firm Certara, used hospital data last year to study a specific subpopulation of haematological cancer patients. The study was funded by global biotech firm Amgen, which manufactures therapies for these cancers.
While the company claims that the data will not be used “primarily” for marketing purposes, it acknowledges that Amgen could use the NHS data to price its products, and to lobby for recommendations from NICE, the independent agency that approves NHS funding for new treatments.
“What are the financial relationships here? Some drugs are very expensive and a pharmaceutical company may be trying to get its drug approved by NICE,” said Booth. “The best way to do that is to prove there is demand for it. If this particular type of cancer is underserved, you can use that to lobby NICE to get your drug and then make some money. That is a possible interpretation.”
Wellcome Trust’s Banner suggested that NHS Digital could provide a health data “bill”, similar to a council tax bill that shows what your contribution has been spent on.
To this end, health economists have been trying to establish how to value health data, and therefore protect the NHS from being exploited by the private sector. Some have suggested that a fair return for the NHS would be if any financial proceeds from its health data are ringfenced for public health and social care.
Annemarie Naylor, who until recently was the director of policy and strategy at Future Care Capital, a health policy charity, said: “We all want innovation in treatments and more preventative health service that is cost effective, but we want to be assured no one is benefiting disproportionately and giving away our data, rather than [it] being deployed strategically by the government.”
The UK campaign group MedConfidential pointed us to the NHS Digital Data Release Registers, which were used to conduct this FT analysis
Sony boss shows passion for purpose
When the Covid pandemic forced many of his employees to work from home, Sony chief executive Kenichiro Yoshida took every opportunity to speak about the company’s stated “purpose”.
Created in early 2019, this 12-word statement — “fill the world with emotion, through the power of creativity and technology” — was repeated like a mantra via blog posts, Zoom calls and investor presentations.
“Our purpose is the basis of how Sony engages with society,” he said during a government seminar in March. “It is also what drives each of our employees.”
For companies struggling with pandemic disruptions, talk of sustainability initiatives and purpose may feel like luxuries when the priority is to rebuild their business.
However, for some chief executives, last year’s events — the pandemic, the Black Lives Matter protests and a string of natural disasters — have prompted a rethink of employee wellbeing and their companies’ social role.
In April 2020, Sony announced the rollout of a $100m fund to support those affected by Covid-19. Two months later, Sony Music launched another fund of the same size to support social justice and anti-racist initiatives. While some executives questioned spending money at a time of crisis, rank-and-file employees welcomed the initiatives.
But when Yoshida took the helm of the Japanese entertainment group in April 2018, few associated the quiet but straight-talking former finance chief with a passion for climate change and sustainability. He won respect from shareholders by helping to end Sony’s long period of losses, selling off weaker businesses, and breaking down the silos that had divided its lucrative entertainment segments, ranging from games to music, films and animation.
As the company’s financial performance steadied and its shares hit a two-decade high, however, Yoshida turned his focus to the question of purpose.
In an early sign of his priorities, Yoshida wrote an internal blog post titled “Sony as part of the Earth” a day after he took over as CEO. “Companies such as Sony are able to carry out their economic activities because of a healthy global environment,” he wrote. “Let’s think together how Sony can make ESG [environmental, social and governance] contributions through our growth.” Within nine months, the company’s purpose statement and a set of corporate values had been created.
“There was a period when we struggled operationally but, after Yoshida became CEO, we entered a phase of thinking about how the company can achieve long-term, sustainable growth,” explains Shiro Kambe, Sony’s sustainability officer.
Takashi Nawa, visiting professor at Hitotsubashi University Business School, says Japanese companies’ sustainability efforts are often confined to simply improving their environmental performance. It is still unusual for them to identify areas of their business where they can both lead the market and promote sustainability.
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“Companies must obviously meet environmental standards but the ones like Sony are trying to set a sustainability agenda that will link to their true competitiveness,” Nawa says.
Sony’s green ambitions actually predate Yoshida’s tenure as CEO. In 2010, the group set out its ambition to achieve a “zero environmental footprint” by 2050 and has since announced five-year action plans to reduce carbon dioxide emissions and the use of plastic.
To strengthen accountability, executive pay is now linked with ESG metrics. Sony is also one of the eight founding members of the Responsible Business Alliance, an international consortium of businesses committed to corporate social responsibility in global supply chains.
But pressure to move faster on sustainability continues to grow. In July 2020, technology giant Apple, Sony’s biggest client in image sensors, called on its manufacturing partners to switch to 100 per cent renewable energy by 2030. While Sony’s sites in Europe and China already run entirely on renewables, its biggest challenge is in its home country, where most of its image sensor manufacturing is based and electricity generation is heavily dependent on fossil fuels.
The largest part of Sony’s carbon footprint, however, comes not from its factories but from its products and services when they are in use by customers. In its 2019-20 fiscal year, annual energy consumption per product was 52 per cent lower than in 2013-14, but executives say more technological innovation is needed to make further reductions.
While Sony’s engineers were urged to cut costs during the lossmaking era, Kimio Maki, head of the group’s electronics and medical businesses, says the mindset on spending has changed. Managers now recognise that the short-term costs incurred in creating environmentally friendly products can translate into longer-term value, as consumers worry more about sustainability.
To take one example, Sony last month began selling noise-cancelling earbuds that are packaged in a material made from bamboo and sugarcane fibre. “Creating products that are friendly to the environment is an added value and that requires a cost,” Maki says. “But products that do not take the environment into consideration will be ignored by the customers we are targeting.”
Twitter’s says Apple’s changes to ad-tracking had ‘lower than expected’ impact on revenues
Micro-blogging giant Twitter has said that iPhone maker Apple’s new App Tracking Transparency feature hasn’t impacted its advertising revenues as expected. In a letter to investors, reporting its second quarter earnings for 2021, the company said that the impact of the changes Apple made to how advertisers track users have had “lower than expected” impact on the company’s Q2 revenues.
“To support App Tracking Transparency (ATT), we issued prompts to 100% of iOS 14.5 or higher accounts that used the Twitter iOS application in Q2, and extended support for SKAdNetwork’s view-through attribution capabilities to our Mobile Measurement Partners (MMPs), allowing them to compare performance from opted-in versus opted-out audiences,” the company said in its letter.
Further, Twitter reported a 74% year-over-year increase in revenue, citing a “broad increase in advertiser demand”. The company beat Wall Street’s expectations, posting $1,190 million in revenues, up from $683 million in the second quarter of last year. Total advertising revenue amounted to $1.05 billion, an increase of 87% year-on-year.
Apple’s App Tracking Transparency update, which started rolling out to users in April, stops advertisers from tracking users via cookies. The feature, which has been vehemently opposed by social media giant Facebook, was expected to affect such businesses significantly. Facebook had said earlier that over 80% of its users will choose to stop Facebook and Instagram from tracking their activity across the internet. Tracking users’ activity across the internet allows platforms like Facebook, Google, Twitter and Instagram to deliver accurate targeted advertising to users.
Further, Twitter also said that the total number of users logging into the platform grew by 11% year-on-year in the second quarter. Average monetizable daily active users, that is users who can see Twitter’s ads, grew to 206 million in this quarter, as compared to 186 million in the same quarter last year.
“In Q2, with the onset of the second wave of COVID-19 in India, Twitter emerged as a real-time lifeline as people turned to the service seeking and offering help to secure life-saving facilities, medicines, food, and credible information,” the company said in the letter.
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