Data Sheet—Samsung's Murky Future Despite Big Profits Now
Good morning.
It’s the start of a busy week on multiple fronts, and I’d like to share thoughts on two stories I’m following closely and find fascinating.
The first is the resignation late last week of Kwon Oh-hyun, the influential CEO of the semiconductor business of Samsung Electronics. Kwon is 64 and did a couple of unusual things on his way out the door. He stepped down unexpectedly, and he also fired a public warning shot across his own company’s bow, saying the company “needs a new leader more than ever,” given the imprisonment of third-generation scion Jay Y. Lee. Kwon also said: “We are hard-pressed to find new growth areas right now from reading the future trends.” This a shocking admission that even as Samsung racks up impressive profits based on its past innovations, one of its top leaders doesn’t think the company is well positioned for the future.
I interviewed Kwon two years ago at his office near some of Samsung’s massive semiconductor manufacturing facilities. He is a technocratic leader, an engineer who reveled in the technology he was producing while keeping a relatively low profile of someone who knew the difference between a hired hand like himself and Samsung’s founding Lee family.
The Samsung drama continues.
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The second is a long profile by veteran journalist Dexter Filkins of U.S. Secretary of State Rex Tillerson from The New Yorker that I feasted on over the weekend. All executives with global businesses will want to read it for its revealing details. Two stood out.
One is a passage that describes Tillerson’s meeting with President Trump, who is in a lather over “federal laws that prohibit American businesses from bribing officials overseas; the businesses, he said, were being unfairly penalized.” This, of course, is the U.S. Foreign and Corrupt Practices Act, a hallmark of ethical behavior and a chief commercial way the U.S. projects its values abroad. That any U.S. president would fulminate against it is startling.
The other is the assertion that “at least three hundred career diplomats have departed,” the State Department, “including most of the upper tier.” Few have been replaced. If this were a big company, it would be like driving out from executive-management ranks everyone who knew anything about how the organization works without hiring anyone to do their jobs.
This reminded me of the central thesis of David Halberstam’s epic Vietnam book, The Best and the Brightest, which because so many Asia experts had been chased from the State Department during the “Red Scare” of the 1950s, there weren’t sufficient numbers of diplomats to correctly analyze the complicated situation in Vietnam in the 1960s.
It’s no stretch to imagine what crises will be tough to figure out in years to come.
Adam Lashinsky @adamlashinskyadam_lashinsky@fortune.comNEWSWORTHY
Wireless worry. There’s a big problem with Wi-Fi security. A flaw in the popular Wi-Fi Protected Access II, or WPA2, standard allows hackers to eavesdrop on communications between a user’s computer and a base station. Known as the KRACK exploit, the flaw undermines the encryption used to secure the wireless data, the U.S. Computer Emergency Readiness Team warned.
Taking the high road. You might still be able to get an Uber in Montreal. Reversing an earlier decision, The company said on Friday it would not abandon the province of Quebec, after a new transportation minister took office. The move to stay and negotiate over driver rules it opposes may mark a shift in tactics by new CEO Dara Khosrowshahi.
Charting a rocky course. With leadership turmoil still roiling online lending startup Social Finance, the company decided now was not the time to seek a banking charter and withdrew applications with state regulators in Utah and the Federal Deposit Insurance Corp. Co-founder and CEO Mike Cagney resigned last month after two former SoFi employees filed lawsuits alleging sexual harassment.
Unsaved. Twitter may have deleted tweets and other data of “potentially irreplaceable” value to the congressional probe into Russian election meddling, Politico reported on Friday. The company deleted the information in accordance with its privacy policy requiring that data be erased when a user deletes their account.
Adolescent love. Teenagers love Snapchat. That’s one of the takeaways from Piper Jaffray’s semi-annual survey of the habits of upper and middle income kids. Some 47% of teens said Snapchat was their top social app, up from 35% a year ago. Almost half, 49%, say Amazon is their favorite web site, up nine points from last year.
Hitting at the source. Qualcommescalated its global legal battle with Apple again, seeking to have the sale and manufacture of iPhones banned in China due to intellectual property violations. Apple has stopped paying royalties to Qualcomm for mobile technologies in the phone, and the two companies have sued each other across the globe.
Deloitte
Gig Economy – Here to Stay?
Tom Friedman, Cathy Engelbert, and John Hagel explore the work of the future and the need for life-long learning as work is being extracted from jobs, and jobs and work are being extracted from companies.
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FOOD FOR THOUGHT
We use an ancient metaphor to describe how bitcoin and other digital currencies are created: mining. But all the minting of virtual coins actually happens in powerful computers all over the world. And running those computers uses a surprisingly huge amount of electricity–500 megawatts or enough to supply over 300,000 homes, by one estimate. Peter Fairley digs into the mining energy consumption question for IEEE Spectrum magazine and finds the tech industry looks for ways to process cryptocurrencies using less electricity. Michael Reed, head of blockchain technology for Intel, has some ideas.
The Bitcoin leech sucking on the world’s power grids has been held in check, so far, by rapid gains in the energy efficiency of mining hardware. But energy and blockchain analysts are worried about the possibility of a perfect storm: Those efficiency gains are slowing while bitcoin value is rising fast—and its potential transaction growth is immense.
There’s a silver lining, though: This troubling energy picture is inspiring innovators such as Reed to come up with energy-saving approaches that would unleash the technology behind Bitcoin, allowing it to expand into applications for which it was never intended. Developers of blockchains for such disparate applications as health care management and solar-power trading see Bitcoin’s energy-intensive design as a nonstarter and are now crafting more sustainable blockchains.
BEFORE YOU GO
The harm of global climate change continues to spread across the world. Now under threat is the famed Nile River, as the great Ethiopian rainfalls that feed the waterway are shrinking due to our warming planet, the BBC reports. Denial, it’s not just a river in Egypt.
This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortunenewsletters.
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