2 July 2018

The Morning Download: Quantum Computing Will Scramble Cyber Warfare, Hayden Says

By Steve Rosenbush

Good morning, CIOs. Retired Air Force General Michael Hayden, a former director of the NSA and CIA, says the development of hyper-powerful quantum computing technology will remake the dynamic of cyber warfare. For companies that daily face attacks by nation-state actors, that is a sobering message. He sat down with Jennifer Strong of WSJ Podcasts to talk about the future of cyber warfare (more on that below), and likened quantum to previous revolutions in battlefield technology. Highlights:


The impact of a tank. “When machine guns arrived it clearly favored the defense. When tanks arrived? That favored the offense. One of the tragedies of military history is that you’ve got people making decisions who have not realized that the geometry of the battlefield has changed because of new weapons. And so you have the horrendous casualties in World War I and then you’ve got the French prepared to fight World War I again and German armor skirts the Maginot Line.”

The known unknowns. “Now I don’t know whether quantum computing will inherently favor the offense or inherently favor the defense, when it comes to encryption, security, espionage and so on, but I do know it’s going to affect something.” For more on the security implications of quantum computing, see this and this reporting from London by Sara “Quantum” Castellanos.

More from Mr. Hayden: Don’t forget the humans. Emerging technologies such as quantum computing are expected to have a sizeable impact on the digital battlefield, but not every weapon in the cyber defense arsenal is tech-based. “We can’t let data crowd out wisdom,” says Mr. Hayden. “And so when I talk to people in the intelligence community who are going all out for big data and AI and algorithms I say, ‘you really do need somebody in there somewhere who understands Lebanese history, or the history of Islam.’ Put all the silicon you want into this process but remember it’s all designed to support the carbon-based machine at the end of the process.”

Podcast: Hacking as warfare. Foreign governments are targeting our information, our infrastructure and even our democracy. But what constitutes an act of war in the digital age? When does espionage become an outright attack? Jennifer Strong, together with CIO Journal’s Sara Castellanos, talks to the soldiers in the fight for cyber security.

One year after NotPetya, firms wrestle with recovery costs. The malware, which combined ransomware and wiper software that destroys data, invaded corporate networks June 27 of last year. Some of the world’s largest companies are still dealing with the aftermath, the Journal’s Kim S. Nash, Sara Castellanos and Adam Janofsky report.

FedEx Corp. The delivery company has spent roughly $400 million in remediation and related expenses, the company told analysts in an earnings call last week.

Merck & Co. The cyberattack cost Merck about $670 million in 2017, including sales losses and manufacturing and remediation-related expenses, according to the company.

A.P. Moller-Maersk A/S. The Danish shipping giant saw infections in part of its corporate network that paralyzed some systems in its container business and prevented customers from booking ships and receiving quotes.

Equifax ordered by eight states to beef up cybersecurity. Equifax Inc. must improve how it manages cybersecurity risk, regulators from eight states said Wednesday, responding to a 2017 data breach that exposed the personal data of nearly 148 million consumers. The consent order, the first major regulatory punishment for Equifax, gives the credit-reporting firm 90 days to strengthen its information-security defenses, the WSJ’s Lalita Clozel reports. Equifax will have to issue reports to the regulators by July 31, detailing the steps it has taken to respond to the breach.

Lessons in automation. Tesla Inc. invested $80 million to $90 million in an automated warehouse system at its Fremont, Calif. factory only to rip out part of it and hire more workers after engineers struggled to make everything work. “You really want to get the process nailed down and then automate, as opposed to assuming you know what the process will be, then automating that,” CEO Elon Musk tells the WSJ’s Tim Higgins and Susan Pulliam.

Amazon drives deeper into FedEx, UPS turf. The online retail giant on Thursday said it is inviting entrepreneurs to form small delivery companies employing up to 100 drivers and leasing between about 20 and 40 Amazon-emblazoned vans, the WSJ’s Laura Stevens reports.

Ford to work with Baidu on AI platform. Ford Motor Co.‘s decision to team up with the Chinese internet-search provider comes as the auto maker’s sales continue to slide in the world’s largest auto market, says the WSJ’s Aisha Al-Muslim. Under the partnership, the companies will work together on in-vehicle “infotainment” systems and digital services, using Baidu Inc.’s DuerOS conversational AI platform.

Facebook loses track of data. Three months after CEO Mark Zuckerberg pledged to investigate all apps that had access to large amounts of Facebook Inc. data, the probe is hitting a fundamental roadblock: The company can’t track where much of the data went after it left the platform or figure out where it is now.

Say what? Some developers tell the Journal’s Deepa Seetharaman that they have little incentive to respond to requests to cooperate with the probe, either because they are out of business, have moved on to other projects or are uneasy about allowing Facebook to look at their servers.

Slack hit by outage. For several hours Wednesday, the popular workplace messaging platform was offline, the Journal’s Aisha Al-Muslim reports.

Apple and Samsung settle seven-year-old iPhone patent dispute. The companies filed a notice in a California federal court on Wednesday saying that they had reached an resolution and agreed to drop the legal case with prejudice, the WSJ’s Maria Armental reports. Terms of the agreement weren’t disclosed. In 2011Apple accused Samsung of stealing key elements of Apple’s iPhone.

Facebook has just a handful of vetters for Mexico’s election. The company has hired thousands of content moderators, rooted out bad accounts and deployed AI to fight misinformation in the U.S. in preparation for the midterm elections. South of the border it is a different story, where vetting “falls to a small group of third-party fact-checkers, whose job is to play whack-a-mole,” says the Washington Post’s Elizabeth Dwoskin. The challenge in Mexico ahead of its July 1 presidential election, shows how an “aspiration to keep elections honest globally is still out of reach for the social network.”

Google sets rules to curtail employee debates. After years of encouraging free expression and giving employees access digital tools to share and debate ideas, Google is struggling to keep those debates under control. The WSJ’s Douglas MacMillan reports on new guidelines stating that the company will discipline any employee discriminating against or attacking colleagues or engaging in discussions that are “disruptive to a productive work environment.”

Count Intel’s interim CEO out. Bloomberg reports that Intel Corp.CFO Bob Swan, who took the chip maker’s top spot last week following quick the resignation of Brian Krzanich, has told the company that he does not want to hold the job permanently.

EVERYTHING ELSE YOU NEED TO KNOW

Justice Anthony Kennedy’s retirement sets the stage for a monumental battle over the nation’s constitutional direction. (WSJ)

The Justice Department approved a Walt Disney proposed $71 billion acquisition of Fox assets, on the condition that Disney divest Fox’s regional sports networks. (WSJ)

Business investment in equipment is showing no signs of accelerating six months after lawmakers overhauled the tax system with the intent to spark such spending. (WSJ)

A Supreme Court ruling bars contracts requiring public employees to pay union dues, in a blow to perhaps the strongest remaining redoubt of the American labor movement. (WSJ)

The Morning Download cues up the most important news in business technology every weekday morning.

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