Apple vs. The FBI

Recently, Syracuse’s Post-Standard published this article railing against Apple for their opposition to an order from the US government to build a “backdoor” into the iPhone. The article lists 5 reasons why Apple’s concerns are misplaced “in this case.”

The Post-Standard is wrong. Apple is doing right by the American people, their customers, and their own company. Technological expertise is not this author’s forte, but this article from Slate does a great job of diving into the associated technical weeds. This article will instead focus on the economics and civil rights that comprise this issue.

The Post-Standard’s article ignores entirely the fact that Apple has already been complying with all of the government’s requests which they are able. It also ignores very real constitutional issues. For years, Congress has been pressured to revise the Communications Assistance for Law Enforcement Act to deal with the increased use of encryption in internet-based devices. Thus far Congress has refused to do so. It would be wrong for the FBI to use the courts to go around Congress. Congress is the constitutional body charged with writing law, the courts are charged with interpreting law. This is the way the founders designed the federal government, and this is the way it should remain.

Further, with the rise of cyber-security issues such as those listed here, consumers are demanding greater protection from those who would want to steal valuable information. Apple’s latest operating system (iOS 8) has taken a significant step forward in meeting this demand. To create a “backdoor” into this system, Apple would effectively be creating security vulnerabilities that do not currently exist. Their customers would again demand that these vulnerabilities be remedied, and Apple would be compelled to oblige or risk losing customers. A main attraction of Apple products is continual increase in quality along with continual decrease in cost. If the government were to force Apple to create a backdoor, the need to remedy the subsequent vulnerabilities would undoubtedly add cost to their production process. This cost would necessarily be passed along to the customer. Apple doesn’t want this, and their customers certainly don’t want this.

Another problem that the Post-Standard overlooks is the setting of a very bad precedent. If Apple were to be compelled to unlock this particular phone, where do the requests end? Recently, the Manhattan DA stated that his office had collected (74) iPhones over a 6-month period that it had been unable to unlock. Extrapolate those numbers across the entire US, and Apple would have to open a whole new division just to keep up with the prosecutorial demands. Again, this would vastly increase Apple’s internal costs which would have to be passed along to their customers.

Benjamin Franklin is quoted as saying, “those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.” Mr. Franklin certainly was a wise man. Fear should not compel people to give up Liberty so quickly, for as has been seen throughout history, once Liberties are given up, they are immensely difficult to get back. Complete security is an illusion. We will never be 100% safe. If people desire complete security, they should allow the government to lock them in a concrete and steel-barred cell where no one could ever get to them. Of course, no one wants this because they would be giving up precious freedom.

The best way to reduce the threat of terrorism is not through giving government all-seeing, all-knowing powers. It is for the US government and the US military to cease its constant militaristic interventions overseas. These interventions create more terrorists than they kill and inspire blowback like we saw at San Bernardino. While that attack was tragic and sorrowful, the only way to truly honor the victims would be to attempt to understand what led to it in the first place. It would be wrong to double down on hate and fear-inspired militarism that results in scores of completely innocent people being killed at the hands of the US government. It would be right to imagine the shoe on the other foot, and to live by the Golden Rule.

Public to Private: How City Water Could Work in the Private Sector

Public to Private will be a recurring series in which we will use imagination and brainstorm to come up with theoretical private sector alternatives to existing public sector services. Below is Article #1 in which we will apply this method to the supply of water:

Larry the socialist, a recurring character in my writing (see here, here, here, and here), cannot conceive of how the free market could possibly supply water. He believes that such a service is a “natural monopoly” that can only be provided through the oversight of a central authority. This in spite of the Flint water crisis, and evidence that “every major city east of the Mississippi” is deceiving their residents about the level of contamination in their water. When confronted with the idea of privatizing water supply and taking it out of the hands of governments, he had this to say,

“…we can also not convince every household to set up 15 pipes if there are 15 water providers.”

Larry is certainly not alone in his beliefs. This lack of imagination permeates mainstream thought, and is a common rebuttal of those who would seek to have private businesses compete to provide these necessary services.

The truth is just as is seen in the technology sector and in the sectors of healthcare which are largely unregulated (i.e. LASIK eye & cosmetic surgeries), the free market always does a better job of providing high quality, low cost goods and services than central planners ever could. This includes the supply of water.

New York City, with its nearly 8.5 million residents, would be a great place to test this hypothesis:

Imagine that those who hold political power in NYC had a revelation, admitted that they are corrupt, do a generally terrible job, and are incapable of managing not only the city’s finances, but also its vital services. That they too, like Flint, have been deceiving residents of the city about the quality of their water supply. They announce that they will be systematically transitioning sovereignty away from government towards the individual. They announce that they will immediately be cutting taxes, spending, and auctioning off government property and services. All revenue from these sales will go towards paying down the city’s debt and buying out former government employees’ pensions.

Coca-Cola, Nestle, and Pepsico engage in a bidding war to take over the city’s existing water supply, with Coca-Cola ultimately winning with a $1.85 billion offer. Initially, they are (like the government before them) a monopoly, and are able to charge high rates to supply water.

Nestle, seeing the opportunity for profits, and knowing that NYC’s vast underground sewer and subway systems would make laying new piping relatively easy, decides to invest $1.5 billion towards a competing system. They sign a lease with a nearby water supply, rent space in the sewer and subway systems to run supply piping, and build a brand new state-of-the-art water treatment facility. Less than a year after the government sold the existing system to Coca-Cola, Nestle enters into the market and provides competition.

To gain market share, Nestle sets their prices 15% lower than Coca-Cola’s, offers to cover the cost of connecting the buildings of new customers into their supply lines, and guarantees water quality. Their guarantee includes a promise to cover the health care costs of anyone who gets sick from consumption of their water. Nestle hires Marc Edwards and his Virginia Tech environmental engineering team to verify the quality of their water. Nestle also publishes a list of more than 100 other private laboratories that customers can use to independently verify the cleanliness of the water they provide.

Customers start switching from Coca-Cola to Nestle in droves. Soon, Coca-Cola’s monopolistic profits are disappearing, and the company comes to the brink of losing money on their operation. In order to win back Nestle converts, Coca-Cola offers a similar quality guarantee, undercuts Nestle’s prices by 10%, and hires the same Virginia Tech team (which has by now become the Underwriters Laboratories of private water supply).

Pepsico, having chosen to forgo the large initial investment of installing new water supply infrastructure, instead markets home delivery of drinking/cooking water in 5-gallon containers. Their prices are significantly less than Coca-Cola’s and Nestle’s, but since they are unable to supply toilet, shower, and bath water their market share doesn’t become large enough to truly threaten Nestle and Coca-Cola. Still, their low prices convert a number of individuals over to using Pepsico for drinking and cooking water. Pepsico, with its small market share, is still able to earn significant profits.

Over the next few years, Coca-Cola and Nestle enter into a fierce competition to steal customers away from each other in their desire to increase profits. They decrease internal business inefficiencies, improve the quality of customer service, and lower prices all in the name of winning customers and increasing profits. Pepsico is greedy, though; and dreams of winning a larger share of NYC’s massive market.  While Nestle and Coca-Cola compete amongst themselves, Pepsico hires a team of the finest engineers that MIT, Tsinghua University, UC Berkely, RPI, and other top universities have to offer. They vigorously pursue an efficient and cost-effective method of water desalination.

After much hard work and investment, Pepsico’s engineers achieve a breakthrough in desalination technology. Using the capital they had saved from forgoing water supply piping infrastructure along with profits from their water delivery service, Pepsico purchases land on Long Island’s north shore and constructs a first-of-its-kind desalination facility on the banks of the Atlantic Ocean. With an unlimited supply of water to provide, Pepsico couples their desalination plant construction with the installation of supply-line infrastructure in a portion of the Queens Borough. Now competing directly with Nestle and Coca-Cola, Pepsico slashes the price of water supply to never before seen levels, and quickly steals customers away from their competitors. As their profits increase, they expand their supply line infrastructure into the rest of NYC. Before long, Pepsico has gained a market share of nearly 90%.

In order for Nestle and Coca-Cola to compete, they hire their own desalination engineers, poach existing engineers from Pepsico, and copy Pepsico’s business model of providing desalinated ocean water at ever decreasing costs.

Less than five years is what it took for NYC’s water supply system to be completely transformed, and less than ten for life-changing technological breakthroughs to take place. Residents of the city are now drinking water directly out of the tap without having to first run it through filtration devices. They have the highest possible quality water, and are able to purchase it at ever decreasing costs. They have the peace of mind of knowing that if one company stops living up to their expectations, they are free to take their business elsewhere.

People all over the country, seeing the transformation of NYC’s water supply system demand that their own local governments do the same. The problems that came to light through the Flint Water Crisis become a distant memory.