Tech Brew Ride Home - Fri. 03/22 – Apple Antitrust Suit Fallout

Episode Date: March 22, 2024

Everyone is analyzing the DOJ’s case against Apple. An unpatchable vulnerability in Apple Silicon has been uncovered. Threads joins the Fediverse. How that whole Microsoft hiring the Inflection AI team actually maths out. And, of course, the Weekend Longreads Suggestions. Links: Apple CarPlay is anticompetitive, too, US lawsuit alleges (The Verge) U.S. versus Apple: A first reaction (Six Colors) Unpatchable vulnerability in Apple chip leaks secret encryption keys (ArsTechnica) Threads’ fediverse beta opens to share your posts on Mastodon, too (The Verge) Microsoft Agreed to Pay Inflection $650 Million While Hiring Its Staff (The Information) Weekend Longreads Suggestions: 8 Google Employees Invented Modern AI. Here’s the Inside Story (Wired) China’s Super-Cheap EVs Offer Hope for Average American Buyers (Bloomberg Businessweek) Indie, rocked (The Verge) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Friday, March 22nd, 2024. I'm Brian McCullough today. Everyone is analyzing the DOJ's case against Apple. An unpatchable vulnerability in Apple Silicon has been uncovered. Threads joins the Fediverse, how that whole Microsoft hiring the inflection AI team actually maths out.

And of course, the weekend long-read suggestions. Here's a Chimis today in the world of tech. So the fallout from the DOJ suit against Apple is roiling. Lots of people are taking note of the fact that in its lawsuit, the government alleges car play lets Apple exert too much control over the auto industry. Some analysts say the DOJ may be misunderstanding car play or that this is flat out wrong, but this is an interesting detail. Quoting the verge, the DOJ says that like smartphones, vehicle infotainment systems have become a new way in which Apple exhibits anti-competitive behavior to harm consumers as well as its competitors. Apple's plans to introduce a more immersive version of CarPlay in which the system displays key aspects of the vehicle's functions like Speed and HVAC are further evidence of the company's illegal monopoly over smartphones, prosecutors say.

By applying the same playbook of restrictions to CarPlay, Apple further locks in the power of the iPhone by preventing the development of other disintermediating technologies that interoperate with the phone but reside off device, the lawsuit says. The inclusion of CarPlay, as well as digital key functions through Apple's wallet feature, came as a surprise to some analysts who say that the DOJ may be misunderstanding the utility and functions of the phone mirroring system. This is especially true for the next-generation version, which prosecutors described insidiously as, quote, taking over all of the screens, sensors, and gauges in a car forcing users to experience driving as an iPhone-centric experience if they want to use any of the features provided by CarPlay, end quote. That's misleading. Sam Welsamid, principal analyst at Guidehouse Insights and an expert on vehicle software said, quote, even with the next generation systems, OEMs don't actually have to let Apple

take over all the screens, he said, in an email. They can limit the interface to whichever screens they want, end quote. Automakers still need to build a basic software interface so vehicle owners can adjust their air conditioning, change the radio station, or operate native navigation maps, Abel Samid said. They can't assume every vehicle owner has a smartphone, let alone an iPhone, that they'll project on their car's infotainment screen, and the car needs to be able to function in the absence of a smartphone, end quote. I will note the news, though, recently that GM was abandoning car play in coming years and ginning up its own Android-based system. Not saying this is related to that, but maybe notable. Over at Six Colors, Jason Snobes. Jason Snobes.

Nell says that the DOJ's case has some strong points, but also makes silly arguments like Apple affecting the, quote, flow of speech via Apple TV Plus. Quote, the document alleges that Apple talks a good game when it comes to privacy and security, but that it favors them when it's convenient and not when it's not. It calls Apple's privacy and security justifications and, quote, elastic shield that can stretch or contract to serve Apple's interests. The examples in the document include continuing to rely on the insecure SMS protocol for cross-platform texts and letting Google be the default search engine when more private options are

available. Many of the DOJ arguments come down to this. Every feature that Apple builds that makes it harder to switch to an Android phone is fundamentally anti-competitive. It's clear that the DOJ envisions a competitive smartphone market, or, if that doesn't work, performance smartphone market as one in which there's as little friction as possible when jumping between platforms. This would mean Apple offering third-party app access to features it currently keeps for itself. One could argue that Apple's behavior has already begun to change due to pressure as it launched its new journal app alongside an API that gives other apps access to the same data as its own app. It also suggests that policies against game streaming and web apps would also come under scrutiny.

Some arguments in the document seem silly. A section describes how Apple will use its sinister market powers to dominate the automotive industry by inflicting CarPlay 2.0 on users. Not only is Apple struggling to get CarPlay into cars by major American manufacturers, but I'm not sure how better integrating our phones, which we love, into our car infotainment systems, which we frequently do not love, is some sort of tragic outcome. Update, Nilai Patel of the verge suggests the implication is that Apple won't let carmakers support carplay in the future unless they let Apple take over the entire auto interface. That would certainly be a power move, but the DOJ will need to prove that for it to become more than another scary story told around

a campfire. And then there's the danger of Apple, tech giant, affecting the quote, flow of speech? How, you might ask? The answer is Apple TV Plus, where Apple has committed the grave sin of, quote, controlling content. Be right back. Got to find some pearls to clutch, end quote. And finally, I'll share these threads from Ian Betteridge, quote, Lord, this Apple DOJ stuff is reminding me of writing about Microsoft DOJ and Microsoft European Commission a lot. You start to be able to read the subtle between the lines, parts of statements. For example, when Apple says in its response. The accusations, quote, threaten who we are. It's not just fluffy words. It's sending a signal to the DOJ that it regards this fight as existential, and so an early cheap settlement is unlikely.

It's like reading runes. So much fun. Aside, it's worth remembering that the DOJ historically loves a quick consent decree over a long trial. What few people remember is that Microsoft DOJ kicked off in 1993 and was settled with a consent decree in 1994. It took Microsoft breaking that consent decree to take the case back to court, end quote. Unrelated, but I'll note here that researchers have found an unpatchable vulnerability in Apple's M series of chips that lets attackers extract secret keys from Macs during cryptographic operations. Quoting Ars Technica, the flaw, a side channel allowing end-to-end extractions when Apple chips run implementations of widely used cryptographic protocols, can't be patched directly because

it stems from the microarchitectural design of the silicon itself. Instead, it can only be mitigated by building defenses into third-party cryptographic software that could drastically degrade M-Series performance when executing cryptographic operations, particularly on the earlier M-1 and M-2 generation. The vulnerability can be exploited when the targeted cryptographic operation and the malicious application with normal user system privileges run on the same CPU cluster. The attack, which the researchers have named GoFetch, uses an application. that doesn't require route access, only the same user privileges needed by most third-party applications installed on a macOS system. M-series chips are divided into what are known as clusters.

The M-1, for example, has two clusters, one containing four efficiency cores and the other for performance cores. As long as the Go-Fetch app and the targeted cryptography app are running on the same performance cluster, even when on separate cores within that cluster, Go-Fetch can mine enough secrets to leak a secret key. The attack works against both classical encryption algorithms, and a newer generation of encryption that has been hardened to withstand anticipated attacks from quantum computers. The GoFetch app requires less than an hour to extract a 2048-BrSA key and a little over two hours to extract a 2048-bit Diffy-Helman key. The attack takes 54 minutes to extract the material required to assemble a Khyber 512 key

and about 10 hours for a dilithium-2 key, not counting offline time needed to process the raw data. The Go-Fetch app connects to the targeted app and feeds it inputs that it signs or crypts. As it's doing this, it extracts the app secret key that it uses to perform these cryptographic operations. This mechanism means the targeted app need not perform any cryptographic operations on its own during the collection period, end quote. Meta has rolled out threads Fediverse integration into beta in the U.S., Canada, and Japan, letting users cross-post and view likes from federated platforms like Mastodon, quoting the verge. Threads previewed its Fediverse integration earlier this week during the Feda Forum. As outlined on its support page,

Meta says that you must have a public account to turn on Fedaverse sharing, which will allow users to share to other servers, to search for and follow your profile, view your post, interact with your content, and share your content to anyone on or off their server, end quote. There are still a few limitations, though. The beta currently doesn't let users view replies and follows from the Fediverse, for example. Meta also can't promise that when you delete a federated post on threads, it will also get deleted on the other platforms it was shared on, end quote. More interesting details on that whole Microsoft hiring Mustafa Soleiman and the inflection team. A source says Microsoft agreed to pay inflection around $650 million when hiring its staff,

mostly via a licensing deal that makes inflection's models available for sale on Azure, quoting the information. The startup is using the licensing fee to help provide its investors with a modest return on their capital, according to a second person who has briefed on the arrangement. To cushion the blow for its investors, inflection has promised to pay them more than the value of their original investment, while allowing them to retain equity in the startup, an unusual move for a company that hasn't been acquired or liquidated. Investors in the company's first major round of funding, a $225 million investment from venture firm Greylock, hedge fund, Dragonere Investment Group,

and others will receive one and a half times their investment, according to the person involved in the deal. Investors in a subsequent $1.3 billion funding, round last year will receive 1.1 times their investment, the person said. Microsoft invested in both rounds, but the vast majority of the funding came from other investors such as former Microsoft CEO Bill Gates, former Google CEO, Eric Schmidt, Nvidia and Inflection co-founder Reid Hoffman, which together led the later round. Inflection likely hasn't spent much of that capital, which means it could also use that cash to give the investors a return. In addition to a $620 million licensing fee, Microsoft has also agreed to pay inflection about $30 million.

to waive any legal rights related to the mass hiring, and it renegotiated a $140 million line of credit that aimed to help inflection finance its operations, as well as pay for Microsoft services, said the person involved in the deal. The details of the inflection deal provide a window into the intricate partnerships inked between major providers of cloud services and AI startups, which have voracious computing needs related to their large language models. Microsoft, Google, and Amazon have poured billions of dollars into AI startups such as OpenAI and Anthropic. Those startups in turn pay the cloud companies for compute services and also sometimes benefit from revenue sharing agreements. These deals, whose terms are often closely guarded, have given big tech companies access to highly coveted AI technology and researchers.

They have also allowed those big companies to sidestep the type of antitrust scrutiny that waylaid potential tech acquisitions such as Adobe's $20 billion attempted purchase of design software company Figma. The Federal Trade Commission, however, has recently said it is looking into some of the cloud provider's startup investments. This is the new way the magnificent seven tech stocks are going to do acquisitions. You get the intellectual property and team without FTC scrutiny or approval, said Venke Gannesman, a managing director at Menlo Ventures, which recently led an investment in Anthropic, a rival to Infliction that has received funding from Google and Amazon. Microsoft's arrangement with Inflection is another reminder that many investments in generative AI may not enjoy the same rocket ship trajectory as OpenAI,

whose monthly revenue topped $130 million last year. There are increasing signs that many of these startups will find it challenging to grow revenue in a crowded market. Inflection has said it struggled to find an effective business model, end quote. Quick omnibus section here to note that the Microsoft event yesterday was sort of a big nothing sauce for our purposes. They unveiled the Surface Laptop 6 and Surface Pro 10, largely targeting enterprises, adding a copilot key, a neural processing unit for Windows 11's AI.

features and more. And Reddit closed up 48% on its first day of trading yesterday at $50.44 per share valuing the company at about $9.5 billion on a fully diluted basis. Hitting your valuation is one thing. First day pop is another. Shows that public market investors are salivating for certain types of opportunities, and I would have maybe suspected Reddit was maybe one of the weaker ones. As the Morning Brew thread I re-threaded yesterday said, looks like IPOs are back on the menu, boys. Time for the weekend long-read suggestions, and I won't quote as much today, just for the purposes of time, but I still have plenty for you. First up, Stephen Levy has an in-depth look at the 2017 Attention is All You Need Paper, the breakthrough that led to this AI

moment and what will probably go down as epic making and defining in the history of technology. He also profiles the eight Google researchers who co-authored the paper, quote, Ushkorite thought a self-attention model could potentially be faster and more effective than recurrent neural nets. The way it handles information was also perfectly suited to the powerful parallel processing chips that were being produced en masse to support the machine learning boom. Instead of using a linear approach, look at every word and sequence, it takes a more parallel one, look at a bunch of them together. If done properly, Euscorate suspected you could use self-attention exclusively to get better results. Not everyone thought this idea was going to rock the world, including Eusekoyt's father, who had scooped up two Google Faculty Research Awards while his son was working for the company.

People raised their eyebrows because it dumped out all of the existing neural architectures. Jacob Eusekoyte says, say goodbye to recurrent neuronets, hearsay. From dinner table conversations I had with my dad, we weren't necessarily seeing eye-to-eye. In the higher echelons of Google, the work was seen as just another interesting AI project. I asked several of the Transformers folks, whether their bosses ever summoned them for updates on the project. Not so much. But, quote, we understood that this was potentially quite a big deal, says you's correct. And it caused us to actually obsess over one of the sentences in the paper towards the end where we comment on future work, end quote. That sentence anticipated what might come next, the application of transformer models to basically all forms of human expression.

We are excited about the future of attention-based models, they wrote. we plan to extend the transformer to problems involving input and output modalities other than text and to investigate images, audio, and video. A couple of nights before the deadline, Use Corrite realized they needed a title for the paper. Jones noted that the team had landed on a radical rejection of the accepted best practices, most notably LSTMs, for one technique, attention. The Beatles, Jones recalled, had named a song, All You Need is Love. Why not call the paper, attention is all you need? The Beatles? I'm British, says Jones. it literally took five seconds of thought. I didn't think they would use it, end quote.

Business Week takes a look at the super cheap electric vehicles, China, is currently churning out. Quote, no American car buyer today can purchase a Chinese brand's electric vehicle, and no one is really sure when these EVs will arrive on U.S. shores, but the prospect of cheap Chinese-made EVs is already causing sleepless nights in Detroit. The primary threat comes from cars such as BYD's Seagull hatchback, which features angular styling, a two-tone dashboard shaped like a Seagull's wing, and six airbags. There's even a 10-inch rotating touchscreen for its infontainment system. BYD's company slogan, Build Your Dreams, is embossed on the rear of the vehicle.

But the car's most extraordinary feature is its $9,698 price tag. That undercuts the average price of an American EV by more than $50,000, and is only a little more than a high-end VESPA scooter. Such aggressive pricing by BYD, which, surpass Tesla in late 2023 to become the world's largest producer of electric vehicles is indicative of how Chinese auto manufacturers will likely force U.S. makers to pivot away from mainly producing expensive second cars for the affluent and toward more reasonably priced EVs for the everyman. For now, the Chinese onslaught is being kept at bay in America by stiff tariffs and moves to erect even tougher trade barriers against the U.S.'s geopolitical adversary, but the Chinese market

accounts for about 70% of all EVs sold globally, so China's push to lower prices is causing a ripple effect that can't be ignored in the long term, even if political maneuvering by American lawmakers manages to slow the Asian giant's automotive advance towards the U.S. the world's most profitable car market. End quote. Finally, not tech, but the verge takes a look at the sad, slow death of the seminal music blog, Pitchfork. Quote, Pitchfork didn't stop doing good work, But another wave of changing tech in music and on the broader internet has seriously reduced its power as a tastemaker. As a result, the internet native publication was acquired and then bungled by an old-school

magazine publisher. Speaking with former pitchfork staffers and music writers, I wanted to know what is the purpose of a music magazine now. And more critically, without journalism, what happens to music? After conversations with eight people, I have come to believe that Condé Nast certainly doesn't know, does anyone else? End quote. No, weekend bonus episodes for you.

this weekend for the second week in a row, our distinguished guest had to reschedule, which means that we might have two bonus episodes next weekend. We shall see. Ah, scheduling and admin, how the sausage of podcasting is made. Talk to you on Monday.