This Week in Tech 493 (Transcript)

Leo Laporte:  It's time for TWIT:  This Week in Tech.  A great panel for you!  Ben Thompson joins us from Taiwan, Serenity Caldwell from Boston, and from the UK, via San Francisco, Iain Thomson at the register.  We're going to talk about CES aftermath, the Oculus Rift, Xiaomi the Chinese phone company that's coming on strong, and a whole lot more.  This Week in Tech is next. 

NETCASTS YOU LOVE, FROM PEOPLE YOU TRUST.  THIS IS TWIT! Bandwidth for This Week in Tech is provided by CacheFly, at cachefly.com.

This is TWiT,  This Week in Tech, episode 493 recorded Sunday, January 18, 2015.

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Serenity Caldwell:  Hello!

Leo:  You were part of that big mobile nation that took over the old booth we used to use. 

Serenity:  Yes!  CES live.  We did it with EP and Thomas Hardware.

Leo:  It was great.

Serenity:  It was really fun.

Leo:  And you were the star of the show, I might add.

Serenity:  No. 

Leo:  You had a good bunch of supporting cast.

Serenity:  I feel like Georgia Dow and Anthony Caselli get all the props.  Georgia is basically the queen of making crazy videos and shows, and I was stealing all of her stuff.  Anthony, her husband, was the one filming all of it all the time.  It was a blast.  A really good time. 

Leo:  It's great to have you back.  We'll ask you what you saw and liked, and we'll ask you what was of interest.  Also with us, a first-timer, from The Register, which is the greatest place to go to get Tech smart.  I've been reading it from a long time.  Iain Thomson is here.  Hi Ian.

Iain Thomson:  Hi there. 

Leo:  When did The Register start?

Iain:  1994. 

Leo:  20 years!

Iain:  We are an old man.  It started out as an e-mail list, and then went web.  Sometimes, I was talking to the publisher last week, and he was like, "yeah, it's 20 years.  We should do something, but we're kind of busy."  Let's carry on.

Leo:  And of course the great vulture, that icon. 

Iain:  Biting the hand that feeds IT. 

Leo:  Was it more IT focused in the early days?

Iain:  It was totally IT focused.  The whole thing was a reaction against all the computing magazines, which were terrible.  This computer does this and it has this and this.  Oh let's have some fun!  So we took the tabloid style red top tabloids from the UK style, and applied that to the headlines, and yeah.  People seem to like it.  We've been hanging around for a while.

Leo:  And great writing, in the tradition of the spectator and Punch.

Iain:  So much in Silicon Valley is just aching to have—there is an awful lot of people with massive sticks up their backs who really should just chill out and take themselves a lot less seriously. 

Leo:  And you've been how long in the states?  Were you assigned here?

Iain:  I came over here in 2008. I've got to say, it's a lovely place to live, and I kept on extending.  So now I've got a local girl and settled down, so I think I'll be here for the duration.  Also, British winters are terrible this time of year.

Leo:  Much better here.

Lain:  Yes.  Just in lack of snow, but you can't have everything.

Leo:  I've been stalling.  Oh my gosh, till the game finishes.  I think it just finished.  So, it's my guess it just finished, so we can welcome— are you a Sea Hawks fan or a Packers fan, Ben Thompson?

Ben Thompson:  I'm a Packers fan, and it's not over, but Seattle just took the lead, so yeah. 

Leo:  It's not over.  In fact, you probably won't be with us for another couple of minutes.

Ben:  Well, actually, it's not on TV here.  It's more muddling along with—

Leo:  Can we point a camera?  We've got to do this without violating NFL rules, but I think we could feed you our video, and then you'd really be distracted.

Ben:  No, I could stream—I could find ways to stream it. 

Leo:  We should mention that Ben Thompson, of course, at stratechery, which is the most insightful independent tech blog I know of.  He's in Taiwan, and it's early in the morning.

Ben:  Agonizing through the end of this game here.  It's looking a little grim right now.

Leo:  I didn't know you were a Packers fan.  I wouldn't have booked you.  You know what?  You've got Aaron Rogers, he's got a great two-minute drill.  I think it's not over until the linebacker sings.

Ben:  I looked at the times, actually.  I must have miscalculated the time zone, because I was sure it would be well over by now, but that's fine. 

Leo:  You're not watching.  What are you watching?  Is somebody texting you the score?

Ben:  No.  You can follow the game counts.

Leo:  Oh yeah.  At NFL.com they have a thing.  I'll give you a play by play.  Now a big guy in a black outfit—he looks like he's wearing tights.  He's running and he's kicking the ball, it looks like he kicked it all the way down to the other end, so that's good.  And then the guy is running with it—Oh my god!  They're hurting him!  And then, the people are running.

Ben:  That's fine. 

Leo:  Aaron Rogers has 12 game winning drives and 37 opportunities.  He's 32% for this particular situation.  I'll tell you, there are not many quarterbacks you'd rather have in the NFL there.  I'll tell you what.  Ben, you keep watching the game.  There we go.  We have the footage now.  Direct from the game.  Number 1 is running around.  Number 2 is in a fistfight, it looks like.  He's fallen down now.  Now number 1 is running around in a circle.  He's going back the other way, and number 2 has again fallen down.  That's terrible.  Number 1 is just running back and forth.  It's terrible.  I think that's Russell Wilson, isn't it?  Just the humanity. 

Ben:  This is cruel, here.  It's the Techmobile.  You basically see if you can run the entire quarter. 

Leo:  That's interesting.  Is this Atari?  Sega?  What is that?

Ben:  This is Nintendo. 

Leo:  So the idea is you just keep running until they tackle you. 

Ben:  Bo Jackson was basically unstoppable in this game.  The goal was to do a running play on the first play and see if you could run out the entire quarter. 

Leo:  I guess this is a speed run, because Bo Jackson touchdown!  Bo knows football.  And baseball.  I figure out a way to distract.  Ben didn't watch the game.  I'm just going to ask Iain.  Hey, what about that David Cameron, uh?

Iain:  I'm so sorry.  I am so sorry.

Leo:  British Prime Minister David Cameron—we should actually get the video of this—he's speaking at—

Iain:  Have you no shame?

Leo:  The future.  He's—there's an election coming up.

Iain:  Yes.  There's an election coming up.  The government chooses when we have an election as a deadline, so he has to call it by May 7.  There's some heavy electioneering going on, which is why he's here with Obama to show that he can pal it up with World leaders just like everyone else, even though the two apparently don't get on that well, if gossip is to believed anyway. 

Leo:  Is he challenged by UK IP?

Iain:  Well, UKIP will only take supporters from Conservatives, because they're like the rabid wing of the conservative party, whose attitude towards foreigners standing at the English channel:  "Just leave the wine and cheese and bugger off." 

Leo:  I hypothesize that maybe he's feeling some heat from UKIP and has to be strong. 

Iain:  He's seen as a very limp character.  He needs to try and beef up the toughness of the conservative party, to try and hold off UKIP.  In this, he's barking up the wrong tree. 

Leo:  He said that he believed that it would be critical for law enforcement—this is in the wake of the terrorist attacks at Paris, that there be no communications that law enforcement can't read.  In other words, no crypto.  Or crypto must always have a back door for law enforcement, and he said there's nothing to fear here, because the home secretary would have to sign a warrant, so what's all the worry about this?

Iain:  That's the problem here.  Teresa May, who is, let's say she's technology challenged, would be a nice way to put it, and when it comes to human rights, she was famously criticized by her predecessor in the position as making remarks that were described as child-like and incompetent.  When she was forced to apologize to fellow conservatives, he said, "I regret the language that I used."  Does that mean he regrets the words?

Leo:  And yet he was careful not to call for a new law. 

Iain:  Well, I think to be honest, he must know deep down that this isn't going to work.  The Security services would love something like this.  He would introduce a new law in the next section of Parliament, is what he's saying to ban encrypted applications.  Whether or not he can get it through and whether or not he can see sense before then remains to be seen.  It's electioneering, so certain flexibility in what you say you will do and what you will actually do, because at this stage it's trying to garner as many votes as possible.

Leo:  It does seem to me—I got a lot of e-mails from our UK viewers showing concern; it does seem to me almost impossible to enforce a law that prevents encryption. 

Iain: Well, this is it.  Apple and Google and Microsoft are going up against their own government about this.  So if they honestly believe that their formal colonial masters are going to say well actually you're going to do what we want you to do, not going to happen.  It's one of those things that sounds like a great policy idea, but in terms of actually getting it into working practice—it's not going to work.

Leo:  We're going to have to keep talking about this, because they're know going into overtime.  I didn't even have to know the score to say that, because I see Ben go, aaah!

Ben:  The thing is with all the dead space, I fully admit it's a problem in most games, but you get into this where it's like, unbelievably tense.  The same way with baseball.  I'm not personally a huge baseball fan, but when you get to the post season, every pitch has so much weight on it. 

Leo:  We'll let you continue to watch. 

Ben:  It's fine.  I just think—I was going to make a smart comment.  I'm totally distracted.

Leo:  Go ahead.  Pay attention.  The game is more important.  What scares me a little bit—

Ben:  What is there to say?

Leo:  It's crazy.

Ben:  The only thing I would say, I've written about this previously, there's some aspect of We in Tech.  It's clearly, these people have no idea how this works.  It's so obvious to us that if you put in a back door for law enforcement you're by definition putting in a back door for everyone else in the world.  It seems to be clearly doesn't resonate or doesn't make sense to people.  At some point, part of it has to be beyond going nuts about the stuff.  I'm trying to help people understand how this stuff works. 

Leo:  According to what Cory Doctorow wrote on boing boing:  what David Cameron just proposed would endanger every Briton and destroy the IT industry.  He says if they understood the technology, they'd be shocked to their boots.  He gives a list of why this is a terrible idea.  He says, Cameron is proposing first all Britons' communications must be easy for criminals, voyeurs and foreign spies to intercept.  Because you put a back door in—

Iain:  Particularly, you put a back door in and you tell people you're putting a back door in, it's going to be like the Manhattan project, to find this back door.  The whole thing is toast. 

Ben:  It's worse than that.  If you think about the incentives and what the addressable market is to use business terms, for the government, they are trying to prevent something from not happening.  Which is already problematic from an insider perspective.  Two, they're looking for the proverbial needle in the haystack.  If you're a criminal looking to skim of credit details or whatever personal information might be, the world is your oyster now.  You can attack every one, and not only that, but there's a very high incentive from a monetary perspective to do so.  So, almost by definition, there's going to be way more break ins and successful ones.  Not like terrorist bad guys, just run of the mill bad guys. 

Leo:  Or Voyeurs.  People who want to snoop!

Ben:  Totally.  Just from a pure incentive and theory perspective, it's clearly going to fall very heavily on the vast majority of people who aren't involved.  We haven't talked about the most obvious thing, which is how many people have died of terrorism in the last 10/15 years?  How many people have died from car accidents or alcohol?  It's a total lack of perspective that is a—gets back to much more fundamental questions about society and what motivates people and what the incentive here, and who's really benefitting.

Leo:  We should point out that the ministers, part of having encryption is that it has no back door.  There's no issue for them.

Iain:  Yes.  If you look through the number of people that have PCP and standard encryptions, they're all using them and that's fine.  If it goes to the general populous, then things can get rowdy.

Leo:  Then you go to Apple and say messages have to either have a back door or you have to leave your iPhone at the border.  You're going to have to Microsoft to say BitLocker either has to have a back door or no Windows sales in the UK.  It's unenforceable.  Clearly, Cameron must know that.

Iain:  The thing is, I've got a worrying feeling that he doesn't. 

Leo:  That's worse.

Iain:  I've got a feeling he came up with this idea. Right.  That will show them.  Tough on cyber crime as he likes to call it.  But, the fact is if GCHQ wanted to get your encryption keys they could do it, either by physically breaking into your house, or by hacking the system.  There's no real need for this.  GCHQ is pretty damn good at this.

Leo:  Here's what scares me.  Cameron is in the United States meeting with Obama.  The president had a press conference two days ago, where it sounded like Obama was sympathetic. 

Iain:  I read that, and I was like wow.

Leo:  He said we're going to have to find ways to make sure if an Al Qaeda affiliate is operating in Great Britain or the US that we could try to prevent real tragedies.  I think the technology companies want to see that as well.  They're patriots.  They have families they want to see protected.  He does mention there are technical issues.

Iain:  Does he say think of the children?

Leo:  He practically says think of the children.  Think of the women and children. 

Iain:  We've had this for the last year or so.  Law enforcement saying it would stop us from rescuing kidnapped children.

Leo:  It is to be fair, Cameron didn't invent this.

Iain: No.  It's—

Leo:  The FBI called for this a couple months ago, and frankly the FBI has been calling for this for decades.

Iain:  We were fighting this battle decades ago.  We thought we had won it, but they keep on coming back with this, and it's designing good crypto is hard enough.  Designing good crypto with a back door that no one else can exploit—forget about it.  It's never going to happen. 

Ben:  It's impossible.  It's literally impossible. 

Leo:  Is it safe to say, based on this—I'll ask Serenity as well—that this is just politics and no one really intends for such a thing to happen.

Serenity:  I think yes and no.  On one hand, you do have the president and the prime minister basically having a certain amount of pressure from security agencies saying, "Hey.  If you put your voice behind it, this will mean a lot more."  It's more weight, maybe the public is more receptive than the big mean over arching security agencies being like we really need this.  The fact of the matter is—the lack of understanding, which Ben mentioned, is the real danger.  I just, I don't think the majority of people on the hill in DC have any good idea of how ridiculous putting a back door into high crypto system.  It's baffling to me.  It just doesn't work.

Leo:  What's fascinating at the same time, the Guardian had this story, there was 5 years ago a secret report on cyber security from the United States.  I think it was the DOD, in which it said that strong encryption is necessary to protect the United States. 

Iain: The FBI had that on their website until 2011. 

Leo:  Then they thought, wait.  Oops.  Take that down. 

Ben:  This is the question they said about—that the companies ought to be patriotic. 

Leo:  to me, that's scary.

Iain:  Last refuge of a scoundrel.

Ben:  Yes. 

Iain:  They have families. 

Ben:  There's lots to unpack there.  Number one, these companies are all serving people around the world.  There's obviously an implicit valuing of some countries' lives over others.  As someone who lives abroad who is married to someone who is not a US national, that certainly is frustrating to hear.  The other thing, though, is that even if they are protecting citizens, this is making, as Cory Doctorow wrote, this is making citizens less safe.  If we're going to get all cold and analytical about this, if you take the expected value of a terrorist attack, the minute percentage it's going to happen and the chance that you or someone you know are going to die in that terrorist attack, and compare that to the expected loss per person of having bad encryption or these "backdoors" then, the reality is you are hurting people.  So you asked if this is politics or is it analogy—it's probably both.  I suspect like Serenity said, it's not really understanding how this works.  You're asking for a Unicorn here.  It also is—this is endemic in our politics—terrorist attacks are scary.  Standing up against them is brave.  It's easy.  It's easy in that it really doesn't require meaningful sacrifices from a political perspective even if it is hurting us in all these other ways.  It's all very frustrating, and it's frustrating in a small and big picture perspective. 

Serenity:  It's the same idea of saying, "yes.  We need to be safe from all attacks."  Or, "we need to bring down the national debt."  Ok, how?  "We'll just put in a back door."  Yeah, you know that doesn't actually work.  "We’ll do it.  It's fine."

Leo:  Let me be a little bit of a devil's advocate.  I understand the technical issues here.  It's hard to do— it's very hard to do.  If the mandate, and our government has been protect us:  NSA, CIA, FBI—protect us, isn't it critical that there be some way— we know that the electronic monitoring of communications has been useful.  It' does help protect us, does it not?

Iain:  In terms of the doing it on a mass scale, the jury is still out. 

Leo:  It's like torture.

Ben:  These are two different questions, right?  I think the mass surveillance; yes the jury is still out.  But, that’s a completely different question than mandating the insertion of backdoors. 

Leo:  Is it possible for these agencies to do their job if criminals and terrorist can communicate freely?

Iain:  Terrorists are always going to be able to communicate.

Leo:  They can't stop that?

Iain:  Not really, no, without banning telephone, mail access to the Internet.  Fundamental problem is that mass surveillance brings a deluge of information.  The chances of picking an actual terrorist conversation from that —

Leo:  I'll give you an example.  After the attacks at Charlie Hebdo, one of the things that we heard:  the NSA is now going to go back through this massive pool of information and try to make connections.  Now we have the endpoint—and try to backtrack from the end point to prior communications, which they would not have had had they not been collecting this information all along, and perhaps figure out who planned this attack, who are co-conspirators, where other attacks may be coming from—isn't that valuable information?  That comes from the mass collection of data.

Iain:  Yes, but you're talking about going back after the event, so it's not exactly keeping us safe.  What they should have been doing—

Leo:  It could be keeping us safe going forward.  Maybe you find out there are other co conspirators, maybe you find the ring. 

Iain:  If these guys went to Yemen and came back, they should have been on a watch list anyway. 

Ben:  They were on a watch list.  The government had been watching them, they had recorded tons of conversations.  The issue, there was nothing additional that tech companies could have done to prevent what happened in Paris, as tragic as it was.  It was a fall down after the fact, which by the way was the same thing with 9/11.  The fall down there was not in getting enough information it was going to happen, it was actually putting the pieces together and stopping it.  It's another example of—I think this is an easy thing to ask for, even though it is impossible. 

Leo: Easy to ask for, hard to do.  Let me ask this question—

Ben:  It's a lot harder to do good police work and to prevent this from happening.  This is a good way to distract attention from the fact that it happened.

Leo:  Just give us these technological means and somehow, magically this will work better.

Serenity:  They're not asking for the tech to help them sort through the data, they're asking for the raw data.  We've seen already that having a raw stream of data, it's like looking at the Twitter fire hose.  Without good tools to sort and understand.  You go back to WWII and the Enigma machine. 

Leo:  But you've got to presume that they are working very hard on data mining techniques.  There are very smart people.  A lot of the stuff is stored presuming we'll have better data mining techniques in the future. 

Serenity:  Yes.  But it's interesting to me that they're calling specifically for that.  "Oh we're going to call for the thing that the public will understand better and will make us look more sympathetic to the cause of freedom." Rather than, "Let's actually say we're going to put our money where our mouth is.  Let's actively recruit at MIT and let's actively recruit and say we're looking to make things better."

Leo:  I think they do that.

Serenity:  I think they're doing it.  They're just not publicizing it.  Instead of getting all the data, let's talk about getting—let's get smarter algorithms and smarter people.  Let's focus on making the system the best it possibly can be.

Leo:  Wandog in the chatroom says, "then the bad guys use paper mail, because in the US, that's strong protection."  Much better protection for paper mail than e-mail.

Iain:  David Cameron says we've always had the ability to read your mail.  Also, if you actually had the ability to open the mail, if you're writing an encryption to someone else, they've still got to write the encryption in the first place.  So, they're kind of asking for a free pass on this.

Leo:  Let me ask this. You're so close to China, you might know, Ben.  Is there any country in the world currently and effectively pursuing this strategy?  Backdoors encryption?  Nobody is doing it.  You've got some of the most suppressive regimes.  I'm sure China would love to do this.  They're not doing this, are they?

Ben:  That's a complicated question. 

Leo:  I don't want to get you in trouble.  By the way, you can pay attention now.  The game is over.  Don't say who won. 

Ben:  I'll try to keep the glum look off my face.  This is a positive for the US that we're even having this conversation.  I was going to say something similar along these lines.  The relative freedom we have on the net or anywhere else is light years ahead of a place like China where everything is trapped.  Everything is looked into.  The other issue is, because these companies are based in the US, because our technology industry is so strong, that's where the pressure can be applied.  If there are services that don't—it's very questionable.  If there are services that don't comply in China, China can ban them.  They've banned Google, they've banned Twitter, they've banned Facebook.  They've banned other messaging services, and when it comes to ones that do work there, like we chat, it's assumed among everyone that lives there that the government is tracking everything.  So relatively speaking, if you compare civil rights in China, our freedoms are still far ahead.  The government is being far more egregious in violating whatever privacy you may or may not have.  I guess in that way, everything is relative.

Leo:  What is the sense—I know Iain you live here now, but sometimes I feel like GCHQ is worse than the NSA. 

Iain:  It's a subject of some debate.  The two work closely hand in hand.  GCHQ hasn't faced the publicity that the NSA has. 

Leo:  There was no Edward Snowden.

Iain:  there was no Edward Snowden, and they've had a parliamentary inquiry into mass surveillance, and GCHQ was cleared.  Everything they were doing was entirely in the law.

Leo:  The CIA is in an eternal investigation of the CIA folks who broke into Congress's computers and said, "Oh no.  They're OK."

Iain:  Everyone says that the Americans don't get irony.

Leo:  That's beautiful irony.  We did an internal investigation.  There's nothing to see here, move along. 

Iain:  GCHQ has a long record of doing this stuff.  Phone monitoring, opening people's mail—

Leo:  I feel very strongly that probably most of them if not all of them are patriots and do want to do the right thing and protect people from terrorist attacks. 

Ben:  The Patriot is a challenging one.  The reality is that these revelations, particularly the Snowden regulations, have hurt US tech companies.  We're only just seeing that hurt manifest itself, because lots of countries, including countries like Brazil, understand that it took significant efforts to extricate themselves from dependence on US tech companies, in order to avoid this.  I think one company in particular that's been hurt is Sysco, for example.  You don't think about, but China is well underway, and has really been accelerated by the Snowden revelations to having their entire infrastructure be completely home grown.  That's literally dollars and cents that are not flowing into the US.  They are not flowing into the US economy, and that's one example of many where this has hurt the US and has hurt US tech companies.  The reality is it's US tech companies that have born the greatest cost of the Snowden revelations to date, and it's a little rich that they're going back to the well, as it were.  The whole patriotic question is a little fraught.  You can make the argument that these US companies were established and thrive because of being in the US and the environment there, and that sort of thing.  At the same time, their customers in many cases, a majority of their customers are not in the US, so there's a lot of tension here.  I don't think it's any company's charter to further a particular country, so there's a lot of tension there for companies as well. 

Leo:  Can we safely conclude this by saying enforcing this is a non-starter?  Politically as well as technically.

Ben:  Politically it's a great idea.

Leo:  I think Congress would be reluctant, and I think Parliament would be reluctant to pass a bill that would not only be technically unenforceable, but would be flouted so widely that it would become a joke.

Iain:  They have done it before.

Ben:  That's such an optimist.

Leo:  I try to be. 

Iain:  The UK government has done this before.  They didn't call it this, but they introduced what's called a palm filter across the entire country, so that if you wanted to receive an unfiltered Internet stream, you had to opt in and see what was going to your telecommunications equipment.

Leo:  How is that going?

Iain:  To be honest, I think about just under 15% of people have opted out and said, "no I don't want anything naughty on my—” When they've tried to enforce, when they actually implemented it, they blocked perfectly normal sites, which were false positives.  It's easy enough to get round with a VPN, to be honest, it keeps certain sects of the Conservative party's populous happy, and it's widely ignored by everyone else.  The danger with this is if they actually tried to enforce it, it would destroy the IT industry in the UK.  Nobody would want to sell us products, because they would have to do so much to them to make them comply.  Like I was saying, it's one of those things that sounds great, but actually to do it—

Leo:  I believe so too.  I get a lot of e-mail and a lot of Tweets from people.  Oh you're an optimist, Leo.  They'll pass this in a heartbeat.  I feel like that's a risky business.  Put yourself in a very difficult situation with the rest of the world.

Iain:  the UK is 60 million people.  Who is really going to change the world?

Leo:  OK.  You want iPhones?  No problem.

Serenity:  It's encouraging US tech companies to venture elsewhere.  Oh yeah, this is going to be a problem?  Not so much.

Leo:  Although, I have to say, Google got out of China for five minutes.  These companies are not great at—

Serenity:  they need money.

Leo:  They're going for the money.  It's a business.  Let's take a break.  Serenity Caldwell is here from imore.com.  Great to have you, as always.  From the register, Iain Thomson.  First time on the show.  Nice to have you.  theregister.co.uk, or @Iainthomson.  Extra letter in the Iain, no P in the Thomson. 

Iain:  I know.  My parents—we've had words.

Leo:  And then Ben Thompson who does have a P from Stratechery.  stratechery.com.  A great panel, and Ben is going to dry his eyes for a moment and compose himself. 

Ben:  I'm actually grateful.  I first moved to Taiwan in 2003.  I was here for six years, went back to the US, and came back.

Leo:  Are you from Wisconsin?

Ben:  Yes.  I was a sports nut when I came.  I had no choice but to lay off a bit. 

Leo:  What is the big sport there?

Ben:  There's no sumo.  Baseball and basketball are pretty popular.  There's also stuff like ping-pong and pool.  In general, it's less of a sporting culture.  I think it was good for me personally to have forced sobriety as it comes to sports.

Leo:  There is a tech angle here.  I'm watching them receive the trophy for the NFC championship.  Lo and behold, there's Paul Allen, who owns the Sea Hawks.  Former chair of Microsoft partner and billionaire.  There he is, talking right now. 

Iain:  He built the yellow submarine. 

Leo:  Paul Allen who also owned Tech TV and sold us to the highest bidder down the river.  Strangest person I've ever met.  Very odd.  He also owns the Portland trailblazers.  So there you go.  But I think if you've got unlimited funds owning a sporting team is probably fun.

Ben:  I would totally buy a team if I had the money.

Serenity:  That's one of the things in your portfolio.

Leo:  Let's form a coalition, the four of us.  Who should we get?  There's got to be a soccer club—

Ben:  The Oakland raiders?

Leo:  The Oakland Raiders are going cheap right now.  Absolutely.  Let's buy the jets.  Actually, I'm going to buy a mattress from casper.com.  Yes, Casper, the online retailer of premium mattresses for a fraction of the price.  We have a couple of Caspers.  I have one at home.  Do you have the video of me opening my Casper box?  I liked it so much I got one for my son in college.  Casper saves you money by selling you mattresses over the Internet.  You might say, "Wait a minute!  That's no good.  How am I going to get it?"  It comes in a nice box.  This is a Queen-size mattress in a box.  It's smaller than a college refrigerator.  You take it out, you open it up, and it becomes a beautiful, luxurious, queen-size mattress.  You might say, OK, that's fine, Leo.  You can get it to me, but what if I don't like it.  Well this is really cool.  So much better than just lying on a mattress in a show room for five minutes.  You have 100 days to try your beautiful comfortable Casper mattress.  If for any reason you don't like it, they'll take it back.  They make it easy to return.  It's completely risk-free.  Free delivery—

Ben:  I think this would be blocked by the UK porn filters, by the way. 

Iain:  It's kind of sensual in a disturbing way.

Leo:  It's sensual!  I loved it.  I love my Casper.  They're watching the video of me falling blissfully into my Casper.  The dog liked it too.  Free delivery, painless returns with a 100 day period, and they're made in the USA.  Lisa liked it too.  Look at that.  She just fell right asleep.  Latex and memory foam come together to give you the best of both.  A mattress with just the right sync, just the right bounce, just the right firmness and support, and just the right comfort.  I can't describe it.  You've got to get it.  $500 for a twin, $950 for a King size.  That's a great price compared to what a mattress in a mattress store is going to cost you.  You'll save an additional $50 by going to casper.com/twit.  Use the Promo Code:  TWIT and save $50 on your Casper purchase.  Casper.com/twit.  Promo Code:  TWIT.  It is a great night's sleep.  We love our Casper.  I think maybe more important than the encryption issue is the issue of cyber warfare.  We've stopped talking about Sony and whether North Korea was involved or not.  Either way, it's clear that we are about to enter a digital arms race.  The latest Snowden leaks from Der Spiegel talk about how the NSA is arming for future digital wars. 

Iain:  Arming, but not preparing for defense. 

Leo:  Well it's so hard to prepare for defense.

Iain:  It's not as sexy.

Leo:  Not as sexy as attacking. 

Ben:  It's worse than not preparing for defense.  We are actively weakening our defenses.  This is directly correlated to the last thing we just talked about.

Leo:  So they call them D-weapons.  Is D data?  Digital?  By the way, the Geneva Convention, even though the Geneva Convention blocks A, B, and C weapons— (atomic, biological and chemical weapons)—there's no mention of D weapons because they didn't know.  What's D weapons? 

Iain:  There's no mention of flying laser canons either.  That means we can do this now?

Leo:  So you can do it!  Marshall McClewen wrote about this in 1970.  World War III is a Gorilla Information war with no division between military and civilian participation.  In 1970 he said that.  It's absolutely part of it.  Right now, we're in phase zero, which is the surveillance phase. 

Iain:  It's going to get very busy very quickly.  There's already been the first reports of somebody in ISIS trying to use this to track down on opponents. 

Leo:  Is that the problem that it escalates?  This is why you have the Geneva courts.  If one side uses chemical, the other side does, and then it becomes untenable. 

Iain:  I'm not sure it's a direct correlation so much.  That stuff becomes so cheap and easy to use.  You can buy off the shelf malware for a couple hundred bucks on the black foreign right now.  If you use that to keep track of your personal opponents or the people you're trying to rule over—the defenses are so unsophisticated that pretty much anything could get through.  Now that it's been kicked off, everyone else is now saying, "right.  We've got to get in the game."  Earlier this week, the Danish government said that it was going to spend $73 million developing a cyber attack and defense system.  The Danes.  No one has invaded them since the Germans; they took them over in 8 hours.  The Danes can now punch their weight because it's digital.

Leo:  All you need is a University, some CS graduates... According to these documents from Edward Snowden seen exclusively by Der Spiegel, "they are planning for wars of the future in which the Internet will play a critical role, with the aim of being able to use the net to paralyze computer networks and, by doing so, potentially all the infrastructure they control, including power and water supplies, factories, airports or the flow of money...The US Army, Navy, Marines and Air Force have already established their own cyber forces, but it is the NSA, also officially a military agency, that is taking the lead"  As with much of the Snowden material, it's not completely up to date.  But, the 2013 secret intelligence budget the NSA projected it would need 1 billion dollars to dedicate to this computer network attack operations. 

Ben:  This is a—you put it in the context of that ABCD thing previously, but this is a difference of type.  It's a problem in particular for the United States most of all.  When it comes to digital warfare, everyone is on the same starting position.  There's no inherent advantage to having a big military.  There's no inherent advantage to having a large Industrial lease.  It's cheap and it scales.  In fact, the US is probably in a worse position, because we have the most things to attack.  It's completely flipped on its head where the a-symmetric actor, the one that is small and hard to catch can inflict a lot of damage, and the one that is large is the one that is easier to be attacked.

Leo:  In a gorilla war, this is why Vietnam was so difficult; it's the mobile person who understands the terrain better.

Iain:  You can disappear in and out of sight and do enormous amounts of damage.

Leo:  It's analogous to gorilla warfare. 

Ben:  The skills and what's needed don't really cost money. 

Leo:  I just want to tell Denmark right now, not on my watch.  Not on my watch.  So get this—

Iain:  They'll have you drinking Heineken before you know it. 

Serenity:  It's all downhill from there.

Leo:  That would be so bad.  A little bored here.  Politerain.  This is a project funded by the tailored access operations, or TAO or digital snipers, are looking for Interns.  Listen up kids.  This would be a great Internship.  They're looking for people who would be into breaking things.  Potential Interns are told that research into third party computers might include plans to degrade or destroy opponent computers, routers, servers, and enable Network devices by attacking the hardware.  There is a program called passionate polka that will allow you to brick network cars.  Always handy.  With programs like Berserkr they would implant "persistent backdoors" and "parasitic drivers". Using another piece of software called Barnfire, they would "erase the BIOS on a brand of servers that act as a backbone to many rival governments."  An intern's tasks might also include remotely destroying the functionality of hard drives. Ultimately, the goal of the internship program was "developing an attacker's mindset."  This listing is eight years old, but you have to think they found some people. 

Iain:  Well, they recruited.  It's always interesting to see the NSA stand there.  You talk to people who are attending the show, and it's like, on the one hand you get access to all this cool stuff.  And on the other hand, you might blacken your soul a bit.  Snowden was working in Hawaii on a six-figure salary.  It's got to be putting some people in. 

Leo:  Exactly.  It starts at zero.  They show that the aim of the surveillance is to detect vulnerabilities in enemy systems.  That's going on right now.  Looking around, snooping around.  Kind of what happened in the spring at Sony pictures entertainment.  The first break in was easily ignored because nothing seemed to go wrong.  The bad guys, whether from North Korea or anywhere else, were able to log in and get passwords and logins, and it wasn't until the fall that the secondary attack, (phase 3). 

Iain:  It's battle.  You've got reconnaissance, battle plans, and whoosh, you're in. 

Serenity:  Then you take everything.

Leo:  Once "stealthy implants" have been placed to infiltrate enemy systems, then allowing permanent access.  This is exactly what happened at SPE.  This is the Sony hack.  Then phase three, a phase headed by the word "dominate" in the documents. This enables them to "control/destroy critical systems & networks at will through pre-positioned accesses (laid in Phase 0)." Critical infrastructure is considered by the agency to be anything that is important in keeping a society running: energy, communications and transportation. 

Iain:  Very interesting research on sewage systems.  Once you stop a sewage system, you can make a city uninhabitable in a matter of weeks.

Leo:  These are very vulnerable targets.  We already know this.  Our power grid, many of the power companies in the US are run by not governments but third parties enfranchised by the government.

Iain:  They're using software from the 60s and 70s.

Leo:  Windows XP machines sitting unprotected on the Internet. 

Iain:  It's worse.  This is Windows 3.1.

Leo:  That would be safer.  That couldn't do anything.  This is just a shell.

Ben:  The problem with security in general, and if there's a silver lining to the Sony hack, it's this:  successful security is something not happening.  And that's really hard to attach a value to.  The cost of having effective security is quite expensive.  You talked about companies being moneymaking enterprises; you look at the balance sheet.  On one side, there's this huge expense to have security and the other side:  what is countering that?  How do you put a price on not being hacked?  There's a fascinating article from 7 or 8 years ago with the head of Sony pictures security basically saying that we're not going to spend too much.  What's the point of spending 10 million dollars?  It's all a balancing risks and benefits.  Is this really worth it?  Should we take a chance?  In retrospect, he completely underestimated the damage that could be caused.  His approach was hilarious in retrospect, but it was very rational.  Lots of companies take that approach.  It's not a "we need to be secure."  It's a "we need to balance the costs and benefits."  The problem is that costs have been dramatically undervalued.  If there is one thing that comes out of Sony it's that people will start to properly evaluate just how much it costs to be insecure, which will result in a lot more investment in security.  If that does happen, that's the equation that's going to make it happen.

Leo:  One of the things we want to watch closely is this week's State of the Union speech.  A lot of interesting stuff going on.  There's a bunch of stories around this, including the incredible social media strategy the Obama white house is using.  They're going to give interviews to three YouTube stars—because they realize that fewer people are watching the state of the Union on the TV.  They want to get those ten year olds who watch a lot of YouTube, so he's going to give interviews to three YouTube stars as part of this huge social media, Twitter, YouTube—

Iain:  Reddit will get on there as well.

Leo:  I'm sure it will.  He's going to be interviewed, according to the LA times, by a grumpy cat.  A teen style guru, a video blogging nerd, and a green lip stick wearing comedian who says she's ready because she's been watching Veep.  Wow.

Iain:  there's going to be some tough questions asked there.  So what's your favorite color?

Ben:  Let me be an opposite voice here.  I don't get why we're being so skeptical.  It wasn't that long ago that it was the weird geeks on the Internet with a podcast and a blog and a message board.

Leo:  They've skipped past the podcast.  That's all.  I'm just jealous.

Ben:  That's reasonable.  I do find it interesting how quickly many geeks and nerds (whatever term we want to use) are so quick to turn around and mock and judge.

Leo:  Here's why.  By the way, the presidency has always been a fairly astute—Nixon beat Humphrey in 68 because he brought in a lot of add men.  He learned his lesson from 1960 in the TV debate against Kennedy.  This isn't going to happen again, and I'm going to market myself as a product, like Tide or Coke, and I'm bringing in add men.  It was the first time that add men arrived in the White House, and it was very successful.  I think what's happened is the Obama White House is digitally literate.  Very similarly, they've said we've got to go to the people where they are.  Nothing wrong with that.  There is one concern, which is you might tend to pick people who aren't going to ask tough questions.  You might say we're going to end around the critics, the tough informed reporters by going to people who are just life style reporters.  That's not an unusual strategy.  That's why Bill Clinton played the saxophone on Leno.  It was on MTV.  That's where you go.  Nobody is going to ask him hard questions, but he's going to play the sax and everybody is going to go hey he's cool.  I'd like to have a beer with him. 

Serenity:  Even with soft questions, I feel like being able to have the dialogue opened up to folks who aren't politically literate is important.  If there are young kids, guys and girls who are watching YouTube tutorials on make up or whatever, and that's their first exposure to listening to what the president has to say outside of catching half of a blog post somewhere, no.  They may not be the toughest questions you might get from the room, but then again, the room is filtered anyway.  It's one of those things where I feel like exposure in this case, especially—the graph of young Americans who are interested in politics and interested in participating and making their voice heard goes up and down.  There has been some decline in 2012 and going on.  Keeping people under 30, keeping them in debate and being able to get energized to pay attention to local fears is going to be key in the next 20 years.  They're going to be the generation.

Leo:  You're absolutely right.  I stand corrected.  That's absolutely true.  I hope they will ask the President about the law, he'll supposedly address during the State of the Union, he's proposed new laws against hacking, which will make it a federal felony to intentionally access unauthorized information, even if it's just a link on Twitter.  This is a post on security by Robert Graham who tweeted, "Ha ha.  NY times accidentally posted their employee database to their website, and he said if you click on this link, you're committing a felony."  Or you would be under this new regime. 

Iain:  It's not as though sentences are particularly liked by hackers as it is.  They can manage to get 35 years for Aaron Schwarz to face, then I don't think that they need to be upping those sentences that much more.  Some of the things that they're talking about—we've got a real problem now.  The first generation that bought their music on iTunes are ready to die.  When that happens, who gets hold of the iTunes password?  Technically you don't own that music.  What most people do is leave their passwords to the next generation, but technically that would be illegal.

Leo:  Right.  You don't actually own those.  That's your account.

Iain:  Under these charges, sharing passwords in that way could be construed as a criminal offense.

Leo:  One major concern is that he will propose upgrading hacking to a raqueteering offense.  As you know, these RECO rules were made to help the department of justice fight organized crime.  They've been used widely to enrich police departments who grab houses or boats.  I think you were hanging out with a bad guy.  You could be guilty of being a hacker by just acting like a hacker.  For instance, hanging out in an IRC chatroom, giving advice to people, could make you a member of a criminal enterprise, which means the FBI could confiscate all your assets without ever charging you with a crime.  He says if you clicked on that Twitter link and you think you can defend yourself in court, prosecutors can still use the 20-year sentence of a raqueteering charge in order to force you to plead down to a one-year sentence for hacking.  There's some real issues here.  This is a good article to read, I hope the YouTubers who interview the president get a chance to read this and ask some good questions. 

Iain:  It goes back to the question of politics as you and Ben were saying.  Politically, this sounds great.  Let's get tough on hackers.  In practice, the whole thing is A) pointless and B) counterproductive.

Serenity:  Yeah.  If you look at it from a realistic point of view, there are things that we could be making laws against.  We could be focusing on doxing.  We could be focusing on all the things that are actually physically harmful to people day to day rather than focus on the big nebulous picture of the hacking menace.  There are still—you see all the stuff that's been going on with GamerGate the last six nine months.  The fact that it's still so difficult to get sentencing for threats on the Internet.  There are different kinds of problems of Internet crime and Internet hacking that haven’t been addressed at all by the justice department.  They seem to be not necessarily turning a blind eye to, but not being able to adequately address in the lower courts.  If you want to make new laws and you want them to be hacking focused, there are options and topics that you can focus on. 

Leo:  The UK has arrested another guy in conjunction with those Christmas day D doxes on Christmas day.  An 18 year old, arrested near Liverpool, he was also accused of Swatting via Skype.  Who knew you could swipe in from the UK and get somebody swatted in the United States.

Iain:  This is a big discussion from last year.  It's disturbingly easy to do, because the actual security on the systems that alert SWAT teams is quite simple to spoof if you know how to do it.  Another one of my countrymen getting arrested.  It's such a proud week for us.

Leo:  It's 2 now.  Members in the UK, a 22 year old was arrested in London in the last month, and a Finnish man has been interrogated over the attacks.

Iain:  It's dark in Finland, there's not a lot else to do.  Probably got a bit drunk and thought yay.

Leo:  Dude, you can hack Sony, but do not mess with our PlayStation network.  Do not, or the full wrath of the United States and England will come down on thy head.  Let's take a break.  Got a great panel here.  Iain, it's nice to have you.  I hope you'll come back.

Iain:  Thanks for having me, certainly.

Leo:  You have a nice posh accent to the mix.  I love the snark from the Register.  What is your bead at the Register?

Iain:  I cover mainly security, science, and a little bit of politics.

Leo:  You're here on exactly the right day. 

Iain:  Works for me.

Leo:  I will note that he is using a Chrome book.  Not just any Chrome book, but a Chrome Book pixel as his laptop.  Is that your day to day?

Iain:  No.  This is my e-mail, carry around since it's nice and light.

Leo:  You don't care if you lose it computer.

Iain:  Ultimately no.  Not much.  I like it, don't get me wrong, but I've got a proper system back home that's decently locked down. 

Ben:  I love the pixel.

Leo:  I do too!  That's my breakfast computer.

Iain:  The one thing I hate about it is without Internet access; it's a very expensive paperweight.

Leo:  But a beautiful one. 

Ben:  What computer isn't though?  It's like a security blanket.  The reality is if I don't have Internet, I'm not sitting around creating collages in Photoshop or something. 

Leo:  One reason it's good to be in studio Iain is that we have snacks.  It's snack time. 

Iain:  Sweet!

Leo: Well they could be sweet, they could be salty, they could be spicy.

Iain: America, they’re probably going to be sweet.

Leo: Wait a minute, sea salt pop-pops. Sea salt and popcorn kernels. That sounds pretty good. Whole bean, sunflower oil, and sea salt. That’s it. These are Nature Box. These are not your average go-to-the-vending-machine get-a-candy-bar snacks. These are the kinds of snacks you want to have available. Delicious, nutritious honey Dijon pretzels. You want sweet? We have sweet blueberry almonds. Because you get the antioxidants of the almonds along with the sweet that your mouth needs. I have to say Nature Box is awesome. Here’s coffee kettle popcorn. The cool thing about this is they’re in re-sealable bags. They lock back up. And what’s really great is they’ll deliver these to your door every month. Hundreds of delicious nutritionist approved snacks. Never any artificial flavors, colors or sweeteners, zero grams trans fats, no HFCs-high fructose corn syrups. And if you want snacks with bold flavors, my friends, you will get them: chocolate banana chips, Kung pow pretzels. You’d probably like those there. I see your pictures on Instagram, Ben. Delicious meals in Taipei. A little Kung pow pretzel, hum? Or lemon pucker pistachio. Nature Box: you can even get snacks for vegan, gluten-free. They’ve got them all. Naturebox.com. Here’s the deal, I’m going to get you a complimentary sample box right now if you go to naturebox.com/twit. You’ll get five snacks, get an idea of the tastes available. Just pay $2 for shipping, that’s it. Naturebox.com/twit. Stay full, stay strong, start snacking smarter. Which one do you want? You can have any of them.

Iain: I’ll go for the sea salt actually.

Leo: You like that?

Iain: Yea, the coffee looks interesting but I’m allergic to coffee.

Leo: No! Here you go, sea salt sun crunch. That’s another one. You can choose, puff-puffs. Or sweet blueberry almonds.

Iain: I’m more of a savory chap, so.

Leo: It’s tough isn’t it?!

Iain: I’m crackling into the microphone.

Leo: I’d send these out to you, Serenity if I could.

Serenity: I know, of all the days to be on the East coast.

Leo: I know. Is it snowing in Boston?

Serenity: It’s not but there’s snow on the ground.

Leo: Oy.

Serenity: All winter.

Leo: How cold is it getting in Taipei? Are you in Taipei? I’m just assuming that, Ben.

Ben: Yea, I’m in Taipei.

Leo: Do you get snow?

Ben: No, it will snow on the top of very high mountains every couple years. No, the coldest times are probably about in the 50’s. Which doesn’t sound bad but the problem is it’s very chilly because it’s rainy. And there’s no heat, no insulation. So inside your house is just as cold as outside your house. So it’s actually a bit miserable but it doesn’t last that long. And I will definitely take it over it being zero degrees and snowy on the ground. I’m by no means complaining.

Leo: Where do I see those great… it’s Monk Ben on Instagram. Those pictures of amazing stuff you get to eat.

Iain: Oh I’m jealous.

Leo: I know. Look at this.

Iain: Oh, good sculptures as well.

Leo: Of course.

Serenity: This is just torture.

Leo: Malt whiskey, 21-year old.

Ben: That’s a Japanese one and it’s quite good.

Leo: Yea, Monk Ben is Ben’s handle on Twitter and on Instagram. Is that a chicken foot you’re actually biting into there?

Ben: It is a chicken foot.

Leo: Tasty?

Ben: It is good. I’m not… some people are massive fans. I’m not going to go out of my way for it but it’s good.

Leo: Crispy?

Ben: No, it’s very soft. That’s actually why I don’t like it as much. I find it too soft.

Iain: I was going to say surely eating chicken’s feet, that’s a sign that somebody has stolen the rest of the chicken.

Leo: It’s all that’s left!

Ben: We got some barbeque last night and one of the best things is chicken butt. On a skewer with four or five of them right on there. Think about it, it’s very muscular. It’s good. It’s really good.

Iain: I’m trying really hard not to think about it.

Ben: There’s a tiny bit of gristle in there which is discerning.

Iain: Oh suddenly I’m not hungry.

Serenity: Way to kill snack time, Ben.

Leo: Yea, save them for later. Let’s see, you were at CES, Serenity. Did you see anything… we’ve talked about it last week of course but did you see anything you really enjoyed? Or were you stuck at that booth the whole time?

Serenity: I actually got a fair amount of time to walk around Wednesday, Thursday, and Friday. I was thinking before the show the big thing that I sort of had the take-away, walking away getting to try the Oculus Rift’s new prototype. Which is really impressive and it makes me more and more excited for the eventual release. Maybe we’ll see it this year, maybe. But it was really something spectacular. People talk about seeing next generation technology actually in action. And the Oculus, the headset I wore was still tethered and I was confined to a certain amount of space. And it was just a pre-role demo, but even so, that’s the first technology that I’ve seen in a while at CES that really made me go oh man. We are actually like… this could change a lot of things about the way that we game, about the way that we interact with people. It’s just, it’s a really cool system. They’ve done some amazing work.

Leo: So this is the Crescent Bay…?

Serenity: The Crescent Bay prototype, yea.

Leo: We’re by the way watching a video created by Tested. It’s on their YouTube site, of them using this. I have the original Oculus Rift.

Serenity: The DC model? Is that right?

Leo: Whatever the Kickstarter thing was. So what is different in here?

Serenity: For one thing, they’ve greatly improved in terms of the motion sickness and the field of vision is much better.

Leo: Is the resolution higher? Because it was 720, I think.

Serenity: I believe the resolution is slightly higher. To my eyes it felt like full-frame HD. But I’m not personally qualified to be able to be like yes, it was this many pixels. But it’s very immersive and one of the great things about this prototype is that they’ve added in stereo sound.

Leo: I see you have headphones on.

Serenity: Yea, little tiny half-speakers that you put on when you put on the headset. And it does absolutely immerse you. You talk about people film-making 101. Good sound design and good sound experience is the thing that makes or breaks you getting sucked into a movie. With the Oculus, having a stereo sound experience, both the sound effects and the music they chose for each segment, completely immersive. Absolutely; as I was saying before the show, there’s one segment in the 6.5-minute Crescent Bay demo, where you’re standing on top of an 80-story building. And you can hear the city. You can hear all the whirs, you look up and you can hear air-balloon, like a Zeppelin passing over by. You hear the traffic, the city noise, the rain. It’s incredible what they’ve been able to do. It really is.

Leo: I think sound is interesting.

Serenity: It is. It’s an extra step onto the VR experience that I wasn’t really expecting. And especially, this was my first time being able to play with an Oculus prototype. I know they’ve been at CES the last couple years but I’ve been taking a quick CES break. And so when I saw that they were at the show this year, I jumped at the chance to try it. But sound adds such an interesting additional experience to virtual reality. Because again, there’s only so much that your eyes can trick you into believing. Like, I can stand at the edge of a virtual building, but without the sound I still hear the humming of my air conditioner or something close in my room. You add speakers, you add headphones, and not only do you have background sound, but you have immersive sound. And I think it’s the difference between a stereo sound system that you get in the theater and something that’s actually being piped directly to your ears that’s encasing you almost fully in this world.

Leo: Wow. And did you ask them how the Facebook relationship has been? Because of course Facebook bought Oculus last year. And a lot of people were a little perturbed by that, the notion that Mark Zuckerberg might steer the development.

Serenity: Yea, well you know… go ahead.

Iain: I was going to say a lot of people who invested in the original Kickstarter weren’t happy with that as well.

Leo: Yea, me included.

Iain: Do you think they got their money’s worth?

Leo: Mark’s got money to burn. He doesn’t have to ask that question, right?

Serenity: The thing that I think is really important for a bigger company, sort of putting in development resources into Oculus; Facebook had me a little worried because it’s Facebook. It’s not exactly your first choice if you’re saying a VR game-development company…?

Leo: Perfect!

Serenity: Yea, perfect guys! And with all of Facebook’s myriad concerns. But it makes sense for me from a wider perspective. If you take away Oculus just being for video games and movies and you consider it more of a world-reaching general day-to-day help tool, you think about there have been tons of books written about this over the years-but I think about running player one and I think about the idea of people being able to have virtual classrooms, who can’t necessarily get to college and actually being able to interact with students. I think about retirees who maybe have some kind of disability that prevents them from getting outside the house and being able to put on a headset and interact with someone who may live down the street or 100 miles away in the same sort of recreational center. Being able to talk to a therapist or something like that without having to leave your house. I mean yes, in some respects this sounds maybe very anti-social. But for people who legitimately can’t leave the house for one reason or another, people with disabilities, autism, anyone with…

Leo: I’m going to be in the nursing home in a couple years. I want to still be able to go to Paris with my VR helmet.

Serenity: I think there are a lot of possibilities for virtual reality beyond your traditional let’s put it on and feel like we’re really in an alien environment and shoot people. I think that’s what Facebook’s really interested in; they’re not looking at… Mark Zuckerberg for all of his flaws, he’s a smart kid. He knows that Facebook’s current model scrolling and talking to friends, and typing and all of that, that’s not going to be around forever. And they need to figure out, alright if we’re really focused on the social experience, if that’s our method, our voice for the next 20-30 years, how do we stay vital and how do we survive in the future in this next generation of tech. And I think VR is definitely a potential solution. It’s not perfect yet but for a version-one, a real version-one, a shippable version-one, I’m really impressed by Crescent Bay.

Leo: No question that Zuckerberg and Facebook are all in on this. In fact, Mark was in Colombia this week and Reuters snagged an interview with him and found out that they’re listings for 54 new positions in the Oculus division alone. In fact Facebook-according to this exclusive story on Reuters-is set to swell its ranks by as much as 14%, 1200 new employees. And virtual reality is one of the key areas slated for growth.

Ben: There’s a really fundamental question here. First off, no I haven’t used Oculus. I don’t think this would-when you hear what I say-I don’t think it will change what I have to say. But I’ll have that out there. From a gaming perspective or from an experience perspective or from some of the great examples that Serenity just listed-going to a classroom or going on a trip-I think that for sure it’s the future. It’s very compelling. But all those are destination-sort of activities. They may be more immersive and more there but they’re still… you are deciding to… in the very action of wearing one of these, you have to go get it and put it on and then you have an experience. And I think there is certainly room for this and we see this right now. We see amazing video game systems. We see traveling things through the internet. Obviously a lot of it sucks right now because it’s not fully immersive. And it will be way better when virtual reality comes along. So from that perspective I think it’s interesting. Where I question Facebook in particular when they bought it, Mark Zuckerberg-and I’m quoting here-strategically we want to start doing the next major computing platform that will come after mobile. There are not many things you can do on a platform-this is a long-term bet on the future of computing. And that’s where I’m a little more skeptical. And the reason I’m skeptical comes back to kind of just a fundamental philosophy I have about computers. And about computing. And that is I don’t think that for most people computers are a destination. Computers are a means to better live their life, to accomplish the things they want to accomplish. To talk to the people they want to talk to. To waste time they want to waste. Whatever it might be, I think most people view computers as a tool to steal Steve Jobs’ words as a bicycle for their mind. But the point, the point is still the mind. The point is still what you’re doing. And so I think Oculus is interesting and will and absolutely has a future. But I see that future as being more of an additive destination-type future as opposed to the controlling feature in our day-to-day lives, which mobile very much is today.

Leo: Yea, but Facebook kind of missed the boat on mobile initially and I don’t think they want to miss the boat on whatever is next. I imagine it’s more than one investment and more than…

Ben: Which is a great way to assume bad decisions because they have questionable incentives.

Leo: They have a lot of room though. They can afford it.

Ben: Which is fine. Again, the technology itself is fine. I’m just skeptical that this is the future. And Facebook wanting it to be the future doesn’t make it more likely to be the future.

Leo: Here’s what’s really clear. There’s two big trends; and you see them going on. You certainly see the movement of CPU power from a centralized position, the mainframe computer farther and farther out on the peripheral. Personal computer is the first step. And the internet of things is kind of the most recent step where chips are so small, so powerful, so low-power, that you can put them in almost anything. Now you see CPUs in almost anything. The other trend is towards immersion. And this is not just for gaming but for content of all kinds. The idea of going to a movie and having it be immersive, whether it’s an IMAX screen or 3D. Playing a game and having it surround you. But I think immersive doesn’t just have to be consuming content, but it can be participating in content.

Ben: I disagree with you. I think you skipped what is the trend, if I may be so blunt.

Leo: Please do! You’re so good at this; that’s why we read Stratechery every week.

Ben: The trend is to be more and more personable. Yes, when you went from a mainframe to a PC, what was compelling about that was that it was accessible to more people. And then from a desktop to a laptop, it was not just accessible for people, but accessible in more places.

Leo: Mobile too.

Ben: That’s what is so meaningful about mobile. You say mobile first; Facebook is the best example. We’re going to be mobile first. And they’ve done a fantastic job at executing and doing that. But mobile first is not just about apps. It’s not just about services. It’s about how every single aspect of a person’s life and every single business in the world is changed by the fact that people have a computer with them all the time. You see everything from the way small businesses will market themselves, or the way that they’ll do services, or the way they will reach customers or do orders. You go to a place like China, you pull out your mobile phone and you can go on the Reach application and literally order food from the deli down the street. You can order tickets. All the stuff that people are announcing here in the U.S., they’re way ahead there. Part of it is because for so many people, the smartphone was their very first computer. But what’s key about this and what makes the mobile so compelling is that the smartphone goes with you into your actual life. Yes, there’s an aspect of on the subway I’m looking at my smartphone; am I really present? But the fact of the matter is we’re becoming more engaged with the real world. Not less.

Leo: I like that.

Serenity: That’s actually my pitch for the Apple Watch is the idea and connected technology in general, wearable computing. The idea that not only do you have computers that you can put in your pocket, but contextual computers. Computers that are smart enough to know what you want to do, when you want to do it, or sometimes even before you want to do it. Google Now is a little bit of a creepy version of this. And of course there’s this line to walk, right? Because a computer doesn’t want to be… you don’t want your service to be so intelligent and so predictive that it makes you feel unsettled about using it. But at the same time, having something that’s keenly aware of what you like to do and what you’re interested in, and presenting you with the correct options. And something that you can communicate with constantly. My ideal future computer is something that’s like a combination of something like a mobile tablet or a watch and a Kinect. Where you have an ability, not even Minority Report-style but something where you’ve got the ability to create whatever you want wherever you are. If I’m sitting on a subway, I can pull up a screen or tablet and instantly start sketching whether or not I actually have a physical implementation in my hand. That would be really cool. The idea that you can just pull things from wherever they’re stored in your life. That may be super-future talking, but we do have a variety that already exists in our current technology. On my phone, I can pull up almost every book I’ve ever bought digitally. Which is most of the books I have physically in this room as well. I can pull up my social life, I can doodle, I can sketch, I can pull up files from my computer. I can pull up my computer screen. I can share with my media server. We have all these connections; it’s just a matter of building the right tools that can actually help us interact day-to-day. And I agree with you, Ben. I don’t think Oculus in its current form is something where when snow crashes, I’m going to constantly use it all the time.

Leo: The metaverse! I want the metaverse!

Ben: I think Leo’s right. There are two paths. Again I was probably arguing more with the one; one is personal. And there’s always been the diversionary path. We’ve gone to movie theaters. We’ve sat down to watch TV.

Leo: Isn’t VR the more personal version of that? When you’re wearing an Oculus Rift, it’s as personal as you can get.

Ben: No, the distinction is what is as Serenity just laid out; what are ones that are a part of your life? And which ones to you are destinations. I put Oculus in the destination category.

Leo: Well you’re not going to walk around with one.

Ben: Exactly. And while that’s compelling…

Leo: Maybe augmented reality or a heads-up display?

Ben: The analog here is Microsoft focusing on Xbox for example. They’ve been relatively successful but everyone things the company’s last 10 years were a big problem because they missed mobile. Because mobile is way more important. And the reason mobile is way more important is because mobile is part of your life at all times. And Xbox is something you make an appointment with and it’s something you sit down and do. And I put Oculus in that category. Perhaps I’m biased, I hope we don’t have a future where it’s like, what’s the Pixar movie? Where they’re up in outer space?

Iain: Wall-E.

Ben: Like that.

Leo: I want Wall-E. I can sip my soda and where my visor.

Iain: This is where the Oculus is quite clear on where they’re going with this. They gave a presentation last year and said what we want is putting on sunglasses which give you the full virtual reality and augmented reality view. And they’re quite clear, it’s 10-15 years in the future. You need massive computational power, huge bandwidth, and the battery life to make it work.

Leo: It doesn’t feel like it’s that far off.

Serenity: 10-15 years isn’t really that far away.

Leo: Well it is for me. Like I said, I don’t have much longer to live.

Serenity: Oh, Leo.

Leo: But it’s like demon, it’s like in that great book, Demon and Fried ATM, you’d be walking around people’s reputation score would be hovering over their head. I would look at somebody like Iain, and immediately assess your credibility, your integrity, your body mass index, and your blood sugar. I feel like I understand what you’re saying. Certainly right now mobility is clearly what’s going on. But I don’t think that’s to the exclusion of the expansion of processing into everything. Which creates this mesh of intelligence and awareness that we can then participate in as we walk around.

Ben: If you think about the internet of things and what’s compelling about that, it actually fits with this personal thesis. I mean, what happened with gadgets for lack of a better word, is they all got some stuff from the smartphone. There’s a picture that’s been floating around of all the stuff in our smartphone. And that’s been the process of the last 6-7 years, is gadgets going away. But you think back, where those gadgets come from, those gadgets were all like video recorders, MP3 players, all these things were meant to plug into a PC. Because the problem with a PC is that ultimately the PC isn’t mobile. A laptop isn’t mobile. At the end of the day you have to sit down, put it on a desk, turn it on, and use it. A thing like the MP3 player did was it took a specific function of the PC-in this case listening to music-and it made that specific function mobile. Or a video recorder took a recording function and made it mobile. You can bring it back to the PC, plug it in, and do stuff with it. What’s been compelling about the smartphone is it took all that stuff and it also made the computer mobile. So now it’s all in one. There was no point in having things separate and plugging in. This by the way is why I think a no-port MacBook Air makes a ton of sense. It’s all on your phone anyway. If you think about the-I don’t know why my printer is going crazy-internet of things, what I actually think gadgets are getting more interesting now, it’s because previous gadgets made an immobile PC mobile. Now you can assume that everyone has a mobile computer with them all the time. And now what’s interesting is all the objects that can’t move can become smart in a meaningful way. So your garage door can become smart, your lock on your door can become smart, your car can become smart. And it becomes smart not independently I think in the long run, it becomes smart when a smartphone gets close to it.

Leo: I remember talking very early on in this transition with Paul Delaney, who was then the CEO of Intel, and I said what’s the future of the personal computer in a world like this. And he said oh we’ll always be the hub. Wrong! And Intel, so they thought, Intel’s playing catch-up on mobile all of a sudden. What a surprise. You have a great post, I want to point everybody to it, Ben Thompson, on Stratechery called Mobile First in which you talk about this type-C port, this single port MacBook. And actually I want to take a break because this will be a good time to Segway to our next subject, something you were very interested about. You talked to Hugo Barra, who was formally the guy who did all the demos at Google and then up and left and went to a Chinese company, Xiaomi. He’s the VP of International now at Xiaomi. And you talked to him on Friday about their strategy. They announced the new, what’s it called, the Mi? The Mi-pad?

Ben: The Mi Note.

Leo: The Mi Note. Well we’re going to take a break. I know this is something that’s near and dear to your heart; and I would love to get your insight on this. I just wish we could get one in the United States. We’ll have more in just a bit. Lots to talk about today. Our show brought to you by Lynda.com. There’s lots to learn as you can probably see. The world is a rapidly changing place. Lynda.com empowers you to learn by giving you courses you can visit at your own pace, 4,500 courses now on all kinds of stuff. It started with web development and design. That’s what Lynda Wyman who created Lynda.com was all about. We used to interview her all the time on the Screen Savers. She’s great. She expanded though to Photoshop, photography, design. Now they have courses in business skills too, like negotiations and resume building and time management. Software training like Excel, WordPress, Photoshop. All their courses taught by the best people in the business. Bert Monroy, if you’re going to take a Photoshop class, you’re taking it from the best in the business. We had him on Triangulation. He talked a little bit about his… they’ve got free courses from Bert on Lynda.com. And then his more elaborate courses including the step by step walkthrough of how he made his newest painting, Amsterdam Mist. This is a Photoshop master showing you how to do stuff with Photoshop you didn’t believe was possible. There’s also the weekly Office workshop series, the Monday productivity pointers, photography 101. It’s for hobbies too. The creative quick tips series. That’s Justin Seeley. He gives you little five-minute tutorials on improving your creative skills in Photoshop and Illustrator and WordPress. What’s your plan for 2015? Would you like to get a better job? A raise? Would you like to explore a new hobby, set new financial goals? Lynda.com will get you there. Every single Lynda course has complete searchable transcripts so you can jump right to the part of the course you want. It’s easy to take the courses with you with the Lynda app on your iPhone, iPad, Android device. So many great topics in programming… there’s music, and music theory and design. You can see I’ve got a bunch of courses going on. I’ve got Bert Monroy’s up and running with Light Room 5, the swift program language. I think this old Excel 2007 essential training one I can get rid of now. That didn’t work out so well for me. I’m not good with spreadsheets it turns out. Do something good for yourself in 2015. Sign up for our free trial: 10 days of complete access to everything at Lynda.com. Go to Lynda.com/twit2 with your membership, unlimited access to every course. And Android, iOS playback, and all the new courses. They add hundreds of courses every week. Lynda.com/twit2. Cinema 4D, wow. Up and running with Snap Chat. I need a course on how to use Snap Chat. If your kids are using Snap Chat and you want to know what it’s all about, they got a course on it. Lynda.com/twit2. Xiaomi is a really interesting story. I think sometimes people feel like they’re a copycat company. Ben, tell us, is Xiaomi the number one hardware phone manufacturer in China?

Ben: I think the way this number… they’re number three in the world behind Apple and Samsung.

Leo: Wow not just China, the world!

Ben: Right but they sell almost completely in China. I think 98 or 99% of it…

Leo: I look at some of these phones and what did we get, Jason? We got a…

Jason: The Mi4 I believe it was.

Leo: It would sell hugely in the United States.

Jason: It was really nice; I liked it a lot.

Leo: Are they planning to come into the U.S. or the rest of the world?

Ben: The rest of the world, yes. Not the U.S. or Western Europe at least for a while. They’re kind of setup to date has been to offer very-well spec phones that are nice for a price that’s half the cost of a top-of-the-line Samsung or iPhone.

Leo: They do TVs, too. They do tablets.

Ben: Right, that’s what’s interesting. It’s kind of been a question: how is this company going to make money. On services, but the problem is that doesn’t really add up. When it comes to services in China, all the money is being made by Ten Cent through their We-Chet application. That’s a dominate search there. And there’s really not a lot of money left over to be made in services in how we traditionally think about them. So that leaves the money that Xiaomi just raised at the end of last year valued at $46B. One billion larger than Uber to take the title. And the question is where is this valuation coming from? How are they going to make money? That’s what makes the company so interesting. I think there is, like any startup it’s not guaranteed, but there’s a compelling opportunity here. And it gets back to what we were just talking about which is the internet of things. And what happens if you start a company with the assumption that the smartphone is the center of everything. And what Xiaomi is doing, it’s interesting, you know about and you mention things like the TV. They sell things like air purifiers and routers. At their last announcement on Thursday, which I was in Beijing to attend, they opened it up by talking about their partnership with Midea, which makes air conditioners and things like that.

Leo: Although when you drive through Beijing, everybody has an air conditioner.

Ben: Yes, and everyone needs an air purifier.

Leo: It’s big business there.

Ben: What’s happening here is, I wrote about this a couple weeks ago, is it’s incomplete to think of Xiaomi as a smartphone company. They’re much more of a lifestyle company. And their lifestyle company for a specific set of customers. It’s customers that can’t afford an iPhone, care about things like specs and features and stuff like that, and tend to be young and about to move into their own places. About to buy their first home.

Leo: Interesting. So this is really like their first computer.

Ben: Right, it’s the center of their existence. And Xiaomi has to a very impressive extent, in a way that few other companies in technology broadly, much less in China, have built a very strong and meaningful brand. A brand that people scribe to and are proud to be associated with. It’s very Apple-like in that way. Now you have these people that are moving out and are starting to buy things. What kind of things are they going to buy? The Xiaomi air purifier, the Xiaomi TV, the Xiaomi air conditioner. Xiaomi is not going to make, even the majority of these, are going to be white-labeled or sold through partnerships. Now they have all this stuff and they’re all smart and tied together via Xiaomi software, the VUI. What you actually have here is an Android maker that’s actually building meaningful stickiness in a meaningful moat around their products. Because they have actual physical products that are tied together by software and now it actually is different to own a Xiaomi phone as it is to own something else. And so you think about it, it’s really like the first internet of things company. They’re selling you the whole house, the whole lifestyle.

Leo: They have home automation too.

Ben: Exactly. It’s the sort of company that will only make sense if it was born with the assumption that the phone is in the center. And that’s the advantage of being a startup. They started 4.5 years ago. Now you have this week, they had an announcement, the Mi Note, the Mi Note Pearl. An unfortunate name to be sure; we can talk about that in a moment. It’s an excellent phone and not a copycat of anyone. The build quality is a significant step up from the Mi4, which was good.

Leo: I like the Mi4. The battery life is the best in the business. Very important feature.

Ben: The build quality and specs are amazing.

Leo: So Mi UI is the Android. How pure is it? How much like… would we recognize it?

Ben: To a degree. It looks different and there’s lots of skins you can apply. This is something that’s popular in Asia, broadly, to do this sort of customization. So it’s a little complicated. Within China it’s AOSP Android and it has all their own services. It has Xiaomi app store.

Leo: No Google services.

Ben: Well you can download the Google Play Store. But no they don’t come pre-installed. And so outside China like in India where they’re making a really big push right now, they greatly exceeded their expectations anyway, according to Hugo Barra. In the last four months of the year last year. There they, outside China, they do run Google’s version of Android. I mean you can do quite a bit of customization and still stay in bounds. You see that with Cyanogen mod and with Xiaomi’s external version. But it’s okay there. And I think this is really hard for people to understand. People are so stuck on the Android version and iOS battle. That’s kind of self-contained within the smartphone. Where Xiaomi’s differentiation isn’t the smartphone, it’s the ecosystem of stuff tied together by the smartphone.

Leo: Do they sell music? Do they have a music store?

Ben: They do. They have a music store, a video store, all those sort of services. And they are looking to make money from those types of services. But you have to look at them from a different frame of reference to understand what they’re doing and trying to accomplish.

Iain: In terms of the data they collect, are they monetizing that in any way? You can build up a very accurate profile of someone’s personality if you tie n their phone, TV, music and video-buying habits, how often they use their air purifier. Are they actually marketing that data as well or is it being stored? Or is it private.

Ben: Not that I know of. I would presume they’re probably storing it. The other thing too is we’re still at the very much… you’re seeing the outlines of this strategy come in the picture. There’s a very long road of execution and actually seeing it work out to justify that valuation. At least you can start to see what they’re trying to do. That’s certainly an option for something they can do. I don’t’ think they’re doing it now.

Leo: Why not the U.S. market?

Ben: Well there’s a couple reasons. One just from a business perspective, the U.S. market, everyone has appliances in their homes. And it’s not that big of a market. I’m serious, if China and India combined-their two main markets right now-are 12 times the size of the U.S. market.

Leo: It’s like asking why not the Madagascar market? Why? When?

Ben: It’s true.

Leo: Isn’t that interesting. It’s something hard for us in the U.S. to get used to.

Ben: One, it’s one size. And two, it’s people that are buying this stuff now. They’re buying appliances; and there are people getting their first computers. And it’s very mobile-first in a way that the U.S. isn’t. The U.S. has much more of a PC hangover as it were. And if you go from no computer to a smartphone, you’re going to buy into that mobile lifestyle in a much more substantial way than if you go from a PC that you’ve used for many years to a smartphone which is more mobile and better. But you still have a lot of old habits and ways of doing things. That’s number one. Number two is IP. They have an IP problem. Some of it’s legitimate; some of it’s not legitimate. That’s a whole philosophical discussion.

Leo: Isn’t it sad that patent wars keep us from getting the best stuff?

Ben: I tend to fall on this side of things when it comes to Xiaomi. Apple PR does an excellent job in framing Xiaomi as tech leaders in their conscious. I think people in the media are probably familiar with that. On one hand I’m uncomfortable with technology patents in general. And the reason is because the whole patent is inherently a bad thing. It is a government-granted monopoly. And monopolies aren’t great. There’s a reason why patents exist; it’s because they’re meant to spur innovation. To make it worthwhile to invent, to do new things. In technology, no one needs a spur. There’s so many gains from being first to making the market that I feel pretty confident that if there were no patents, there would be no slowdown in innovation. And if you’ve questioned the fundamental premise, then it’s like well yea, why should Xiaomi be limited in this perspective. So I do have a problem from the we have to pay license fees perspective. From a copying perspective, that’s something that Xiaomi quite frankly needs to do better at. I think it’s a cultural thing in some respects. The idea of copying isn’t nearly as frowned upon or even thought to be a bad thing in China. And a lot of this is very much a cultural thing. If you look back at history and the way art is valued, copying is not considered a morally bad thing like it kind of is in the west. And there’s a lot of things I’m on my soapbox and monologuing. The fact of the matter is when the U.S. came to power, we stole a whole lot of IP from England and lots of other places.

Iain: Yes, thank you.

Ben: It’s a little hypocritical to be on our high horse now. It’s understandable but it’s certainly hypocritical.

Iain: I’m with you. Charles Dickens spent a lot of time coming over to America, doing book tours, lecture tours, to get his earnings up in the U.S. Because the minute American printers got all of his stuff, they just slapped out their own copies. And you could see it from that perspective. But over the last 10 years in this country, IP is more about lawsuits to protect your market than it is to reward the inventors of anything. It’s got way out of control.

Leo: Did you, Serenity I’m sorry, did you have…?

Serenity: No, I generally agree with all of that. Especially the last couple years, I have a couple people who I’m pretty close to in the community, who are developers. And the fact that the patent trolls going after them for things like paltered fresh, it’s very frustrating.

Leo: Yea.

Ben: The problem with Xiaomi from a copycat perspective, it’s a business problem. They may be okay in China. Their founder is a rock star and people follow him. And he’ll be on their social media presence is excellent. And so it works very well there. But if they want to go abroad and succeed in a meaningful way, they’re going to need to depend much more on the worth and value of their products. And copying doesn’t work in that respect at all and it hurts.

Leo: Look at this headline from In Gadget which is a perfect example of how the tech press buys Apple’s line. Xiaomi mocks Apple with its very own premium phablet, as if Apple created the phablet. They were late to the game! They just got into that!

Iain: The first iPhone when it came out from a hardware perspective was junk, compared to the rest of it.

Leo: In other words, Apple can dictate this story line here in the United States and it’s picked up.

Ben: It’s interesting. I think it’s a little more complicated than that. I think that Apple has been active pushing the line that Xiaomi rips off Apple. And Johnny said something very explicit to that regard and he was outraged and offended. And I agree, particularly with the most recent generation, the Mi4. Xiaomi took way to many design cues from Apple. And that said, from a business model-perspective, they’re already very different. From a software perspective, they’re different. To actually use a device is completely foreign compared to an iPhone. But I think it’s justifiable and it’s a problem or Xiaomi from a hardware perspective. That said, I think Xiaomi is aware of this. And this new product, again the name’s unfortunate. They’ve had a Note for a while. For what it’s worth, almost all big phones in China by all the known name manufacturers are all called Notes. That’s kind of the name for a phablet now. But we all know where that came from. And it’s a stupid move to be perfectly frank. That said, the hardware is totally unique. It’s glass on both sides and when I say that, it’s like an iPhone 5. It’s curved, it feels unlike other phones that I’ve felt. And that’s a good thing for them.

Leo: What’s the price?

Ben: This is what’s really interesting. The regular Note is $270, I think. Which that said, I think it’s more expensive than any Xiaomi phone has been. They also did a top of the line one but they don’t expect to sell many. It’s basically the best of the best; it’s got the Snap Dragon 810. It’s got four gigabytes LDDR RAM or something like that which is brand new to market and super-expensive. That’s selling for over $500.

Leo: So half of what Apple would charge?

Serenity: Yea.

Ben: It’s interesting. It’s both really cheap and really expensive. It’s really cheap compared to other manufacturers but expensive when compared to Xiaomi.

Leo: Thank you for that, great insight on Xiaomi. And I really want to keep covering it because I think it’s fascinating.

Ben: I think there’s lots of challenges in thinking about it. One is just the market perspective. It’s a different market; everything that works there is different. Two, it’s the business model perspective. They’re not following an Apple or Google business model. It’s something different. And then three, it’s this mobile perspective. It’s really a company that only makes sense if you start with the premise that a computer is an accessory. It’s not the center of what you do. And I think for geeks in particular, that’s something that’s really hard to wrap your head around. But that’s very much the reality for more and more people in the west. And vast majority of people in a place like China.

Iain: How do you rate it going in internationally, in Indonesia, India… India in particular? Tough market for China to crack I would have thought.

Ben: Yea, they have a… it’s hard for any Chinese company in India for lots of reasons. But they’ve done quite well. Again, this is not objective information but according to Hugo Barra, they went into India with 100,000 units. Assumed that would last them or six months and sold out in two weeks. Something they’ve had a lot of success with in India: their product resonates. You hesitate to get too much into country… their marketing is kind of a geeky in a positive sort of sense. They mark themselves on their components and on their specs and being a very good value for the fantastic performance that you get. And that’s something that they found that really resonates in India. And they’ve made good in-roads into that. What they do is they lead with these high-end products from a spec perspective that are still great value. And then they come in the bottom with their red Mi which is like $100. So you get a smartphone for $100. It has the Xiaomi brand and software and interaction with the ecosystem. But obviously it’s built on a media-tech chip. Although they have Qualcomm ones as well; it’s lower-cost components. And that makes up the volume of their business. It’s very much a… they have a very clear segmentation. They really build their brand on the Mi brand. And then they fill the market perspective with the red Mi. It’s been pretty successful to-date. Their growth slowed slightly last quarter. Part of that is because they’ve just so-thoroughly eviscerated Samsung in particular in China. They need to go international but I think they’ve pulled back from other markets mainly because they want to spend so much more time on India. And it’s a pretty nice option to go from a $1.3B market to a $1.1B one.

Leo: We’re going to take a break. We’ve got Ben Thompson from Stratechery. From the Registry, Iain Thomson. I know it’s confusing; the Thompson twins I’d like to call it. Weren’t there three in the Thompson twins?

Iain: There were.

Leo: Yea, very confusing. And Serenity Caldwell who’s just getting over her cold from CES.

Serenity: Yes.

Leo: I just, I hear it, I feel it. I sympathize. We had a fun week this week on TWiT. We had some fun with David Cameron among other things. Take a look. That was fast, but it was a quick week.

Previously on TWiT: Tech News Tonight: U.K. Prime Minster David Cameron has promised a new law that would either ban apps sending encrypted messages or force the creators of such apps to provide a back door for the U.K. government. So Cameron said we are not going to permit encrypted communications like What’s App, like iMessage. Security Now: oh, Leo. I worried about the future. Marketing Mavericks: racing specifically of all sports is so brand-intensive. Think of any other sport that literally logos are thrown into audience’s face non-stop. And the audience loves it. Tech News Today: the top scientist have signed a letter of warning talking about artificial intelligence and the potential dangers. Now the big question here Mike, is whether Skynet is going to honor this letter once it comes online. Triangulation: ten basics that you think everybody knows but they really don’t. Even Bill Gates doesn’t know! I’ll bet he doesn’t know about the number keys when you’re watching YouTube. No, I have no idea, what can I do with them? Oh thank God, I got Leo on one of these. This is your brain. This is your brain on TWiT. Any questions?

Leo: So great talking to David, it was nice to see him. By the way, Triangulation tomorrow: Ron Wayne. The guy who was one of the founders of Apple Computer with Steven Wozniak and Steven Jobs. And who sold his share, he got a little nervous. Said I don’t think this thing is going to work, for $800. This is an amazing story, Ron Wayne joins us tomorrow on Triangulation to talk about that and lots more. We’ve got a big week ahead. Mike Elgin, what’s coming up?

Mike Elgin: Coming up this week, tomorrow’s Monday, January 19^th. And it’s the last day you’ll be able to buy the Explorer edition of Google Glass. Google says they’ll launch a more consumer-version of Glass at an unknown date in the future. To buy the current version of Glass just search the Google Play Store for Google Glass. IBM and Netflix report earnings on Tuesday, January 20^th. eBay reports on Wednesday, January 21^st. Also on Wednesday is Microsoft’s big Windows 10 rollout. Megan Maloney and I will cover the event live starting at around 8:45am Pacific at live.twit.tv. And finally, the data storage company Box Inc. will officially launch their IPO on Friday, January 23^rd. That’s what’s coming up this week. Back to you, Leo.

Leo: Thank you. Mike Elgin, our news director and host of Tech News Today every Monday through Friday, 10am Pacific, 1pm Eastern time, 1800 UTC. For your daily dose of tech news. We’ll be covering that Windows announcement, Windows 10 consumer preview. Not only with Mike and Megan in the morning, we’ll go through the lunch hour and then they go to closed sessions. We’re doing a special edition of Windows Weekly with Paul Thurrott and Mary Jo Foley; they’re there. And we’ll have the details of their briefing I’m thinking about 4:30 Pacific, 7:30 Eastern time, 24:30 UTC on twit.tv. So a special late edition of Windows Weekly on Wednesday. There’s also a note that the One Plus folks are going to have two-hour invite-free sales of One Plus on Tuesday, January 20^th. So just make a note. I can’t remember what time it is. You should check the One Plus site.  They’ve done this before. When you get there it’s usually crazy. Is the One Plus still a thing? The One Plus One? We all had them and moved on.

Ben: I’m moving back. Because I shattered my Nexus 6. But you know what, I’m not too sad to move back. It was a great phone.

Leo: I’m tempted to buy another one! I love it! And nothing, at least in the U.S., maybe the Mi4, nothing has near the battery life of the One Plus. And Cyanogen, said Steve Kondik of Cyanogen, has said they’re doing a Lollypop version for the One Plus One which will be available next month. Android 5.0, CM11 or 12, whatever they call it is great on the One Plus. It’s just a wonderful operating system; I really like it.

Ben: I got one and the SIM tray was broken. They wanted to charge me $270 to repair it.

Leo: It’s a cheap phone so they give you no support, basically.

Ben: Yea, so I’m scarred.

Leo: I think it’s an interesting story. I never did quite figure it out why they didn’t go beyond this invite system; it doesn’t look like they ever will. Someone said they’re such a small company, they just want to make sure they have sales for every one they manufacture. For a while, I thought it was because the screen was the same that was on the iPhone 6 Plus and they were constrained by Apple’s huge demand. But they’re still invite-only.

Ben: Well and ramping’s hard.

Leo: Yea but they’ve been ramping for a year. That’s not ramping, that’s just floating. That’s hovering.

Ben: No, I think we see companies like Apple do it so easily that we forget that especially for a new company…

Leo: Some people are complaining on this Nexus 6 by the way that the back is coming off. There are maybe some manufacturing problems with the Nexus 6 and that shattering is an issue.

Ben: Just yesterday, Google Plus was like did this happen to you? I’m like no, thank God. Then I saw it today and I was like man if I can go back in time.

Leo: Tomorrow! What did you hit it on?

Ben: Well it shattered on the concrete in front of the front door on my way into work here. And it hid in an uneven part of the sidewalk so I don’t even think a case would have saved it. It was just destiny.

Leo: If a point hits glass hard enough.

Ben: And you know, I’m tall so it hits from a higher distance.

Leo: Yea, you dropped it from like eight feet.

Ben: Practically. Almost, give or take.

Leo: I’m trying to find your picture of it. Oh my God. That is sad. It’s one spidered screen.

Serenity: Oh.

Ben: That’s it. I’ll tell you the sound it made when it hit, I still hear it echoing in my brain. It isn’t just an object hitting the ground.

Leo: It’s the sound of a heart breaking.

Ben: It’s like banshees screaming.

Leo: Let’s take a break. When we come back, we have some final stories and final words. But first, a word from Gazelle.com. Jason, you might be interested in this.

Jason: I’m listening.

Leo: Gazelle’s the place you go; and we’ve mentioned this many times before. They sell your old gadgets and give you cash for your old gadgets, your old iPhones, Galaxy phones, iPad, Surface. But they also now sell stuff. You may wonder well what happens to all this stuff people trade in at Gazelle. Well Gazelle takes the very best and sells it. So that is great. They have two conditions, certified new and certified good. You can save some money with certified good because there’s some signs of wear. Everything they sell has already been put through their rigorous 30-point inspection to make sure they’re fully functional, they work as expected. Look at that, $85 for a new Moto X or a certified pre-owned Moto X. They’re also backed by a 30-day risk-free return policy so you’re never on the hook. See if One Plus had had that, you wouldn’t have had a problem, Ben. Got a new gadget, maybe you got something for the holidays, Gazelle will buy your old iPhone, Galaxy phone, iPad, MacBook. Trading in your devices after the holidays, that’s like getting a second gift. Here’s some cash in your pocket. Don’t throw it in a drawer, that’s like taking $100 bills and stuffing it in your shorts. You’ve got to go to Gazelle, gazelle.com. Risk-free in fact if you forget to wipe your data they’ll do it for you. They even buy broken iPhones and iPads, and I’ll tell you, they’ve paid out something like $200M to over a million customers at gazelle.com. Fast shipping, fast processing. Shipping is free! Gazelle. Look at that, that’s money off your iPhone 6 and go out and buy a Mi Note. Gazelle.com. Google Glass dead. You saw that they’re halting sales tomorrow. Last chance. $1,500, you think there’s like a rush of people saying I’ve got to get my Google Glass!

Serenity: I really need it!

Leo: I need my Glass!

Iain: When they first put them on sale at IO, I called up my wife to be and said how sold are you on honeymoon? Could we just delay for a year? But yea, it’s a cute idea killed by bad implementation and bad marketing. It’s just not there yet.

Leo: And maybe, let’s face it, a product that just doesn’t appeal.

Ben: Just to go back to before, it inserted itself in your actual life. It made itself the center instead of sitting back…

Leo: Making my life better.

Ben: Exactly.

Leo: Is there a way to design this so that it doesn’t do that?

Ben: I’m fundamentally skeptical on anything on your face in the long run. Just because again, it’s too intrusive. Maybe when we get the contact lenses that are virtual reality, we’ll have something to talk about.

Serenity: It’s so super-distracting. On top of that, it feels alienating.

Leo: Let’s face it, you look like an ass when you where Glass.

Serenity: Yea.

Iain: But also you make other people feel uncomfortable. The big mistake they made was either having it… they should have left the camera out the front of it or put a clear cap over the camera. So that if you’re wearing these things, people think they’re videoed the whole time even if they’re not. Whereas if you didn’t have a camera or a cap over it, you’d just be whoa check out the guy wearing the glasses rather than oh, are they possibly recording me. And I think that caused a social backlash against it. But it just wasn’t a clear use-case for it. Yea, it would be great in a geek discussion. But in the widest…

Leo: Once you actually made it, it’s like not so great. And I have to say, I was kind of thinking smartwatches were going to go down the same road. But a lot of functionality of Glass is notifications always available. I like Android wear a lot! I wear it all the time. I don’t see you wearing a watch.

Iain: I tried the smartwatch for the first month and I found it made me incredibly rude. Every time a notification would come up, I would check my watch. And it’s one of those twitch things you do. But if you’re talking to someone, it’s incredibly rude to be constantly looking at your watch the whole time.

Leo: I’m sorry, what were you saying?

Iain: Exactly.

Serenity: Can I ask, because I only very briefly played around with the Moto 360, does it allow you to select certain notifications like VIP?

Leo: Two things, there’s an app you can use on the phone. But also many notifications, if you swipe them over it says you don’t want to see this ever again, do you? And it will never come up. You can’t choose like when the phone rings, anybody’s going to show up. So you can’t say I only want to see my VIPs when the phone rings or texts. But by app, you can say I don’t want to see notifications by that app.

Iain: But you still have to carry around a smartphone.

Leo: Yea. Well I did wear the Samsung whatever it was, Gear, that had a phone built into it for a while. That was really awful.

Iain: Yea, because you have to have a Samsung phone to go with it.

Leo: And it was huge. It was like wearing a curved iPhone on your wrist. I feel like Apple’s going to have some competition. I think Android wear, because it’s been out for a long time and they’ve learned a lot, I think it’s actually a pretty useful, smart product. It looks good. Maybe not as well as an Apple Watch, but it looks good. But Apple’s going to have some competition. Not that I’m not going to buy it. Thank God I have two wrists.

Serenity: You just stack them up. Do the super-futuristic style.

Leo: Then I say, hey want to buy a watch?!

Serenity: I think Android wear from what I’ve seen and played with it, it’s very cool. My main beef is like the Moto 360, it’s like this on my wrist. It looks like I’m wearing a Power Rangers bracelet or something.

Iain: You should see the LG one. I tried that and my wife called it a woman repeller. Just a huge square…

Leo: I will grant you that. I feel like Apply may have the right idea. They have two sizes for each edition, right? A little bit smaller one.

Serenity: The 38 and the 42. The 38 actually fit on my wrist.

Leo: See there you go.

Ben: I think you’re on to something when you talk about the tons of notifications being distracting. Anything like that I think is not going to be where this wins if it wins at all. Because a smartphone… what’s the big problem about a smartphone? The big problem is pulling it out and the fact that it is kind of distracting.

Leo: I don’t know how it is in Taipei but don’t people just constantly… aren’t they walking around looking at their smartphone anyway?

Ben: That’s what’s really compelling. I’m really interested in the taptic engine. I thought the most compelling thing in the entire presentation was the idea of walking around with the Maps app. And it tapping you in the direction you want to go.

Leo: This is the Apple Watch. Although Android wear does do that. So if you-I did this in London-do some nav, I want to get to the Tower of London. The watch will buzz you when it’s time to turn left or right. It’s great on foot. On driving it probably wouldn’t be useful. But on foot, it’s actually really great. And it shows this thing that says turn here. I found that incredibly useful.

Iain: The one thing I did really like about the smartwatch was we had been out to dinner that night. My wife was driving and it just sort of actually gave this thing… well I wasn’t that drunk. Get me out of here!

Serenity: One of the things that really excites me about the Apple Watch is at least when I pull out my phone, I’m like yea, I’m going to get directions to go home. And then three minutes later I find that I’m checking Twitter and maybe I’ve gotten directions by that point. Or maybe I just got completely lost because the phone, despite the fact that it’s a single-target app, you still have so much accessible on the phone that it’s very easy to subconsciously try and do a whole bunch of tasks. Whereas the watch, the watch is so single-focused that either it buzzes you for something really specific or you have to request something very specific. You can’t just be like I’m going to play around. And it does feel less intrusive to me to general, natural, conversation, than pulling a smartphone out and having one around.

Leo: I figured out what the killer app on the phone is. I realize I very often pull out my phone hoping to be delighted and amazed, impressed, excited, and I look at it and I go no, there’s nothing here for me today. And I put it back in my pocket. Somebody should make an app that you guarantee every time you tap it, you’re delighted.

Serenity: Adorable kitten.

Leo: Adorable kitten app. And then I would use it all the time. I’m just saying.

Ben: That’s actually the rationale for Twitter putting in random tweets in your screen if you scroll to the top. If you’re doing that pull-down, you want that dopamine hit.

Leo: Yes, dopamine. It’s all about the dopamine, baby.

Iain: It’s like Reddit. It’s the most concentrated form of cuteness on the planet because everyone is piling in there. Yea, the whole watch thing… don’t you get irritated having to recharge it every 24 hours?

Leo: No! I have to do that with everything. I go to bed, put my watch in its charger, my phone in its charger, and wake up and it’s all done.

Iain: Yea but we’re both old enough to remember a watch where you change the battery once a year.

Leo: I know but who cares?

Ben: I remember phones that lasted a week on a charge as well. And I have no desire to go back to that.

Leo: I remember when we used to boil soup in the fireplace. It doesn’t necessarily have to stay that way and it’s not such a big deal. I never understood that frankly. You just take it off. What, it’s too much trouble to put it in the dock?

Iain: No but you’ve got to think you’ve then got to carry the dock around with you if you go off hiking for a week.

Leo: That’s one thing on the Moto 360, it is a Chee charging device. So any Chee charger will charge it wirelessly. And I’ve got those all over the place. I love Chee.

Iain: I’m coming around to it myself. I got my first charger.

Leo: It’s pretty cool. You get the right charger, it’s good. Monument valley, I love this; U.S. two games was unusually transparent in talking about… this was the game of the year on iOS and Android. Monument Valley, I’m sure you played it. Great puzzle game. They talked about how much money they made, how much it cost to make, how many sales they had. 2.4M sales that was mostly iOS: 1.7M iOS. Only 300,000 on Google. Although they came later to Android. Big day when Amazon gave it away for free in their app store, 407,000 sales. But this is the sad news, lots of piracy. 10M unique devices, which means 75% of all installs were pirated installs. That doesn’t mean they didn’t make money. Highest one day revenue was on launch day on iOS. They talk about how much it cost to make which is kind of interesting.

Iain: That was unusual.

Leo: Yea, I really love this. It took them 55 weeks to develop the original game. It cost $852,000. It’s 18-members based in London. Then they did the Forgotten Shores add-on. And that took 30 weeks almost and cost $549,000. So the total cost is just a little bit… I’ll do some quick math, $1.4M. But they made $5.8M. Not so bad, I think. Good return. Most of it, 81% of it from iOS.

Iain: Well this is the problem. Amazon, sorry, Android seem to have much bigger problems with piracy.

Leo: Yea, you have to wonder what were those 10 million devices, were they Android devices?

Iain: Almost certainly I thought. Apple has such a tight lock on their app ecosystem. Whereas Android is all over the place and that’s bad news for piracy.

Leo: I should point out that 10 million installs, some of those are legit, family sharing. I buy it once and put it on all my phones. So, that actually doesn’t save the full cost of the piracy. 50% of players who started the game completed it. That’s a very high number, I’m surprised.

Iain: For a mobile game.

Serenity: Yea.

Leo: 2.2 million totems were drowned. I don’t know what that is but that probably makes…

Serenity: Alright you totem!

Leo: And what’s interesting is only a quarter of the players bought the second pack, the puzzle pack. Did you finish the game? You obviously did.

Serenity: Oh yea. I love that game.

Leo: It’s a great game!

Serenity: It’s adorable. I appreciate it in this day and age, you’ve got your Flappy Bird, your Desert Golf. You’ve got your crazy games that you’re playing forever and you’re drowning into… but at the same time, Monument Valley is self-contained. And it’s a little cute story and it’s delightful.

Leo: Yea, it’s challenging and thoughtful. But at the same time it’s soothing and calm. There’s no timer. Instagram on iOS, 17,965 people posted their pictures of their quest on Instagram. Just so you know. Only 14,000 on Twitter. So another big win for Instagram.

Iain: People with way too much time on their hands.

Leo: Look how I’m doing! I love that. We’re going to wrap it up. I want to make one little note. A young guy who worked for us for a couple years and really a sad story, he passed away about a year ago. We only just started learning about it thanks to Ewen Rankin on the British Tech Network where Eric Lannigan made some appearances. He informed me about it and he has created a condolence blog. He had spoken to Eric’s dad. I was at first a little concerned; I don’t want to announce someone’s passing unless we’re absolutely sure. But Ewen said he spoke to Eric’s dad David, and did find out that Eric had passed away. Very sad story. Young guy, very passionate, very smart, cared a lot about tech. And I know many of our TWiT family members were big fans of Eric Lannigan. And he stopped participating in social media a couple years ago. And I think a lot of us wondered what ever happened to him. So sad to know; we now know. So please, if you were a fan, you can visit Ewen’s website, it’s britishtechnetwork.com. Ewen said his father would be interested in seeing a book of condolences. And so, we’ve all left a little bit of something there, memories of Eric and so forth. It’s very sad and a great loss. And so young. RIP Eric Lannigan. That is it for this show. I thank you so much for being here.

Iain: Thank you for having me.

Leo: Iain Thomson came all the way from Great Britain, six years ago to be on this show.

Iain: It’s been a long and winding road, certainly.

Leo: But please come back. I didn’t know you were in San Francisco. We love the Register, register.co.uk. Always snappily written but lots of great information. It’s a really great place to go. So thank you for being here. Thanks so much for getting up early, Ben Thompson. And missing the game, I’m so sorry!

Ben: No, I didn’t miss anything.

Leo: Yea, apparently not. Those… okay spoiler alert, I think the Seahawks are going all the way. When I saw last week, I know nobody wants to talk sport-ball. When I saw last week, they’re blocking the punt. There’s a guy who comes running 100 feet down the thing and jumps over the line to block the punt. I thought, that’s a team that really wants to win. Alright, you don’t care. Sorry about that, Ben. Aaron Rogers is great. He’s coming back. He’ll be back next year. Lots of future! Unfortunately so is Russell Wilson. Serenity Caldwell is the queen of roller derby in beautiful bean town. Did you have to take a little bit of a break to recover?

Serenity: I did. I’ve not been on skates for four weeks. We have try-outs next week. So yea, I’ve got to get back to it.

Leo: Is there a website? How can we learn more about roller derby in Boston?

Serenity: You can learn more about roller derby in Boston at bostonderbydames.com.

Leo: Of course you can!

Serenity: You know, very simple like that.

Leo: I think roller derby is making a comeback. I know a lot of people who do this now.

Iain: Sorry, I’ve never heard of it until I came here. And it just looks like a big fight on wheels.

Leo: Yea, what could be more fun?

Serenity: Yea, both of you need to go see he Bay Area Derby Girls. I know their season is starting up in a couple months.

Leo: I grew up watching the Bay Area Bombers. You probably have no memory of them but they…

Serenity: I know who they are, yea.

Leo: And that was like a professional sport. Is it only women that do this? Or are there still guys that do it?

Serenity: There are men’s teams and women’s teams; they’re two separate organizations.

Leo: But you are tough. You are tough.

Serenity: I try to be.

Leo: What’s your team?

Serenity: My team is the Boston Massacre. We’re the A-level travel time. We’re ranked I believe 27^th in the world.

Leo: Yes, look at this. There you go.

Serenity: And I also play on a home team for Boston called the Cosmonaughties. We’re the best soviet-themed science team around.

Leo: I love the names. You’re bested by only one team, the Arkham Horrors. The Cosmonaughties, the Wicked Pisses. A classic Boston name. And the Nutcrackers. I don’t know what that means but maybe they like Christmas music.

Serenity: Yea, ballerinas who got kicked out of the academy.

Leo: So nice to have you, Serenity. You’re great. Imore.com. Thank you for being here.

Serenity: A pleasure.

Leo: Thank you all for being here. We do TWiT every Sunday afternoon, 3pm Pacific, 6pm Eastern time, 2300 UTC. Please stop by and watch. We love having you in the chat room. That’s a lot of the fun of the show. And also, I get a lot of my best lines from the chat room. So come on in and visit. You can also visit us live in the studio, a very nice studio audience today. All you have to do is email tickets@twit.tv and we’ll put a seat out for you. But if you can’t do either of those, don’t worry. On-demand audio and video is always available of all our shows on the network at twit.tv. That’s our website. And wherever you get podcasts. Of course there are great apps on iPhone, Android, even Windows Phone, and Roku. We’ve got you covered. Just search for TWiT. Thanks for joining us; we’ll see you next time! Another TWiT is in the can. Take care.