Facebook: The Ultimate Dot-Com

Facebook: The Ultimate Dot-Com

Paternot and Krizelman, in 2001

History will record that Mark Zuckerberg wasn’t the first college student to have the idea of enabling people to set up Web pages and share stuff with their friends. Yesterday, my colleague Silvia Killingsworth wrote about the Winklevoss twins, two Harvard grads who famously accused Zuckerberg of stealing the idea for Facebook while working on their fledgling site Connect U. Before the Winklevii, there were the folks behind MySpace and Friendster. And before them, way back in 1995, there were Todd Krizelman and Stephen Paternot, who launched TheGlobe.com from their dorm rooms at Cornell.

TheGlobe.com allowed people to create their personal space online, upload pictures, and set up what came to be known as blogs. By 1998, it had more than two million members, which was then considered impressive. It also had a business plan: sell advertising. On November 13, 1998, Bear Stearns issued 3.1 million shares in the company at nine dollars each to some of its clients—the lucky ones. When Bear’s traders tried to open the stock for trading, they found it difficult to establish a floor price. As I recalled in my 2002 book, “Dot.Con: The Greatest Story Every Sold” :

Whatever price they indicated—$20, $30, $40, $50—was too low. CNBC reported that the first trade might be $70, but even this proved to be a conservative estimate. After a lengthy delay, the first trade crossed the ticker at $87—almost ten times the issue price. Even for an Internet stock, this was unheard of. Within an hour, the price had risen to $97.

TheGlobe.com’s I.P.O. marked the beginning of the dot-com bubble’s epic stage. By the time the bubble burst, in March and April, 2000, hundreds of online firms had issued stock, among them many clunkers like Pets.com, E-Stamp, and etoys.com (not to be confused with a later company that used the same name), but also many online companies that survived and eventually thrived, such as eBay, Amazon.com, and Priceline.com. The bursting of the bubble discredited the term “dot-com,” which was understandable but, in a way, unfortunate, because the term itself had come to be the expression of an attitude that saw in online communication and online commerce boundless possibilities. Facebook’s I.P.O. represents a return to that mindset. It’s the fulfillment of the dreams of the nineties—and a reminder of their potentially fatal attraction.
While the term “dot-com” disappeared, the idea survived. Before very long, it was rebranded as “Web 2.0”—a term popularized by Tim O’Reilly and John Battelle, who from 2004 onwards organized a series of conferences under this banner. Supposedly, what distinguished Web 2.0 from Web 1.0 was user control, and user collaboration, with the network serving as a “platform,” but that wasn’t really a new idea: Krizelman and Paternot had fastened upon it years earlier, as had the founders of GeoCities and other Web-hosting ventures.

What really got Web 2.0 going was the proliferation of broadband connections, the invention of top-notch search engines (Google), and the creation of idiot-proof tools for doing fun stuff online, such as sharing photos and videos, posting blogs, and creating mashups. By February, 2004, when Zuckerberg launched Facebook, the elements were in place for the Web to fulfill the hopes of the late nineties—or some of them, anyway. But if Zuckerberg was in the right place at the right time—nobody should underestimate the role that the “Harvard” brand played in Facebook’s initial growth—he seized the opportunity ruthless and brilliantly. Now, seven years later, he is about to become a billionaire many times over by selling (non-voting) shares in what is, in many ways, the ultimate dot-com.

Back in the late nineties, I used to read a lot of S-1s—official investment prospectuses produced by companies about to issue public shares for the first time. Delving into Facebook’s S-1, which it has amended repeatedly since February, when it put out an initial version, felt like old times. The numbers were different (by an order of magnitude) from those that the original dot-coms used to put out, but the basic story was the same one that had led to all those bad investments and broken dreams: a Web site expanding this fast, with this many eyeballs focussed upon it, has simply got to be worth a lot of money.

Certainly, Facebook’s growth has been astonishing. As of March 31st, some nine hundred million people—about one in eight of all the humans on the planet—used the site at least once a month. More than five hundred million people—about one in thirteen of the global population—used it daily. Every day, Facebook users upload about three hundred million photographs and generate about 3.2 billion “likes” and “comments.” People on Facebook have a hundred and twenty-five billion “friends.” For many of us, Facebook has become a part of daily life. Many use it to keep up with friends; some use it as a news service; I’m in the camp of those who utilize it mainly as a professional tool. (Once I put up this post, I will link to it on my page.)

Compared to the late nineties, there are some basic differences, of course. Unlike many of the original dot-coms, Facebook makes money—quite a lot, in fact. It sells advertising and also charges other firms that use the site to drum up business, such as the gaming company Zynga and the music service Spotify. In 2011, on revenues of $3.7 billion, Facebook generated a billion dollars in profit. In the three months to March 31st, it made another two hundred million dollars.

That’s reassuring, but does it justify a valuation of a hundred billion dollars? That’s what the company will be capitalized at if the underwriters, led by Morgan Stanley—another echo of the late nineties—price its stock at the upper end of the $34-$38 range they indicated on Tuesday. If the stock goes up when trading starts, and it almost certainly will, Facebook will be even more highly valued. While I don’t think Facebook’s stock will enjoy the sort of crazy leap that TheGlobe.com’s took, I wouldn’t be at all surprised to see it close over fifty dollars, which would value Facebook at more than a hundred and twenty-five billion dollars.

For such a figure to make sense, given the risks attached to the technology industry, you have to assume that, within a few years, Facebook will be making not a billion dollars a year in profit but five billion dollars, or ten billion dollars, or even more. Apple, the world’s most valuable company—its market cap passed six hundred billion dollars briefly last month, and is currently hovering at a little more than five hundred billion—generated more than twenty-five billion dollars in profits last year. Microsoft, which is valued at less than half of Apple, made more than twenty-three billion. Google, valued at about two hundred billion, made nearly ten billion.

If it is to compete with these giants, Facebook will need to find a much better way to monetize its vast user bases. At the moment, it generates barely four dollars a year in revenues per user, primarily in the form of charging fees to advertisers. Maybe it can gin up more of these revenues, but there are still questions about the effectiveness of ads on social-networking sites. General Motors’ decision to pull its advertising from Facebook, which was announced yesterday, is hardly encouraging. Neither is the fact that Facebook still hasn’t properly figured out how to deliver ads to mobile users.

Simply relying on attracting more and more people to the site won’t do the trick. As the site’s audience approaches the saturation point in many advanced countries—more than sixty per cent in the U.S. and the U.K.; more than eighty-five per cent in Chile, Turkey, and Venezuela—its rate of expansion is inevitably slowing down. Between March, 2009, and March, 2010, the number of monthly active users rose a hundred and fifty-four per cent. Between March, 2011, and March, 2012, the growth rate was forty-one per cent. Quarterly figures confirm the slowdown. In the first quarter of 2010, the growth rate was 26.5 per cent. In the first quarter of this year, it was 8.9 per cent.

Another disturbing sign—and one very familiar to students of the dot-com bubble—is that Facebook’s costs are rising considerably faster than its revenues. Between the first quarter of 2011 and the first quarter of 2012, as it hired more engineers and sales people, and continued to invest in the site, its costs shot up ninety-seven per cent. Revenues rose by forty-five per cent. Consequently, Facebook’s profits in the three months to March were actually lower than they were a year earlier: two hundred and five million dollars compared to two hundred and thirty-three million.

None of this necessarily means that Facebook will be a bubble stock, or that it will meet the same fate as TheGlobe.com, which saw its market capitalization shrink to virtually nothing in 2001 before it closed down for good in 2008. Despite the recent slowdown in its growth, Facebook is an innovative, profitable company, which has established a unique and ubiquitous online presence that it may be able to exploit in ways that nobody, not even Zuckerberg, has yet dreamed of. I’d be willing to bet that in ten years’ time Facebook will still be around, and it will be a big player on the Web.

But how big? In Silicon Valley, many people view Facebook’s Web site, and its trove of user data, as the next key technology platform, something akin to Microsoft Windows and Apple iOS, which the company will leverage to create its own economic ecosystem—one that generates huge monopoly rents. Perhaps this will happen. For now, though, Facebook is basically an online media company, and there are some legitimate questions about its prospects. In purchasing its stock, as with buying the original dot-com stocks, investors will be laying out their cash primarily on the basis of hope and optimism rather than a clearly defined and firmly established business plan.

To me, at least, that has echoes of the past.

src:~http://www.newyorker.com/online/blogs/johncassidy/2012/05/facebook-the-ultimate-dotcom.html

 

 

MACHINE POLITICS

The man who started the hacker wars.

Radical hackers took up Hotz’s fight, although he never considered himself a cause.

In the summer of 2007, Apple released the iPhone, in an exclusive partnership with A.T. & T. George Hotz, a seventeen-year-old from Glen Rock, New Jersey, was a T-Mobile subscriber. He wanted an iPhone, but he also wanted to make calls using his existing network, so he decided to hack the phone.

Every hack poses the same basic challenge: how to make something function in a way for which it wasn’t designed. In one respect, hacking is an act of hypnosis. As Hotz describes it, the secret is to figure out how to speak to the device, then persuade it to obey your wishes. After weeks of research with other hackers online, Hotz realized that, if he could make a chip inside the phone think it had been erased, it was “like talking to a baby, and it’s really easy to persuade a baby.”

He used a Phillips-head eyeglass screwdriver to undo the two screws in the back of the phone. Then he slid a guitar pick around the tiny groove, and twisted free the shell with a snap. Eventually, he found his target: a square sliver of black plastic called a baseband processor, the chip that limited the carriers with which it could work. To get the baseband to listen to him, he had to override the commands it was getting from another part of the phone. He soldered a wire to the chip, held some voltage on it, and scrambled its code. The iPhone was now at his command. On his PC, he wrote a program that enabled the iPhone to work on any wireless carrier.

The next morning, Hotz stood in his parents’ kitchen and hit “Record” on a video camera set up to face him. He had unruly curls and wispy chin stubble, and spoke with a Jersey accent. “Hi, everyone, I’m geohot,” he said, referring to his online handle, then whisked an iPhone from his pocket. “This is the world’s first unlocked iPhone.”

Hotz’s YouTube video received nearly two million views and made him the most famous hacker in the world. The media loved the story of the teen-age Jersey geek who beat Apple. Hotz announced that he was auctioning off the unlocked phone. The winning bid, from the C.E.O. of Certicell, a cell-phone-refurbishing company, was a 2007 Nissan 350Z sports car and three new iPhones. Later, on CNBC, Erin Burnett asked Hotz if he thought that day’s uptick in Apple stock was due in part to his efforts. “More people want iPhones now if they can use them with any sort of provider,” he said, and added that he “would love to have a talk right now with Steve Jobs” about it.
“Man to man?” Burnett said.
“Man to man.”

Apple and A.T. & T. remained conspicuously silent. Unlocking a phone was legal, but it could enable piracy. Many hardware manufacturers sell the devices at a loss, recovering the costs through monthly contracts or software sales. When Steve Jobs was asked at a press conference about the unlocked iPhone, he smiled awkwardly and said, “This is a constant cat-and-mouse game that we play. . . . People will try to break in, and it’s our job to keep them from breaking in.” Hotz never heard directly from Jobs.

Steve Wozniak, the co-founder of Apple, who hacked telephone systems early in his career, sent Hotz a congratulatory e-mail. “It was like a story out of a movie of someone who solves an incredible mystery,” Wozniak told me. “I understand the mind-set of a person who wants to do that, and I don’t think of people like that as criminals. In fact, I think that misbehavior is very strongly correlated with and responsible for creative thought.”

Hotz continued to “jailbreak,” or unlock, subsequent versions of the iPhone until, two years later, he turned to his next target: one of the world’s biggest entertainment companies, Sony. He wanted to conquer the purportedly impenetrable PlayStation 3 gaming console, the latest version of Sony’s flagship system. “The PS3 has been on the market for over three years now, and it is yet to be hacked,” he blogged on December 26, 2009. “It’s time for that to change.”

“My whole life is a hack,” Hotz told me one afternoon last June, in Palo Alto, California. He had moved there the previous month. He was now twenty-one, stocky, and scruffy. He wore a gray T-shirt under a gray hoodie, ripped bluejeans, and brown suède moccasins. “I don’t hack because of some ideology,” he said. “I hack because I’m bored.”

The word “hacker,” when it was applied to technology, initially meant college students and hobbyists, exploring machines. At worst, a hacker was a prankster. In the early nineteen-seventies, Wozniak, the hacker archetype, built a system that let him make free phone calls. Among others, he called the Vatican, pretending to be Henry Kissinger, and managed to get a bishop on the line. Over time, “hacker” acquired a more sinister meaning: someone who steals your credit cards, or crashes the electronic grid. Today, there are two main types of hackers, and only one is causing this kind of trouble. A “white hat” hacker—an anti-virus programmer, for instance, or someone employed in military cyberdefense—aims to make computers work better. It is the “black hat” hacker who sets out to attack, causing havoc or ripping people off. A recent series of attacks on Brazil’s largest banks, which took down their Web sites for a short time, is an example of the malicious black-hat type. The number of black-hat intrusions is rising: in the U.S., the Department of Homeland Security has reported a spike—fifty thousand between October and March, up ten thousand from the same period last year.

Hotz likes to hack according to the early definition of the word: getting inside a machine to see how it works, and changing it. To him, hacking is almost a sport, played against someone in a position of authority. “It’s a testosterone thing,” he told me. “It’s competitiveness, but it isn’t necessarily competitiveness with other people. It’s you versus the system. And I don’t mean the system like the government thing, I mean the system like the computer. ‘I’m going to stick it to the computer. I’m going to make it do this!’ And the computer throws up an error like ‘No, I’m not going to do this.’ It’s really a male thing to say, ‘I’m going to make you do this!’ ”

We were sitting in Hotz’s apartment, on the ground floor of a building near Stanford. Red Bull cans and take-out menus littered the kitchen. Plastic wrappings, scattered cash, and empty computer boxes covered the living room. One box was overturned and being used as a dining table. A blue air mattress sagged in a corner. Hotz tossed a wad of cash from his pocket to the ground and sat with his legs crossed on a desk chair before three giant computer monitors. He held an iPad 2 that he had bought that afternoon at the Apple Store on University Avenue. Around the room, whiteboards were filled with scrawled notes and algorithms. One had a list labelled “Morning Routine”: “7:15 a.m., one snooze? . . . shower . . . floss/brush/wash . . . vitamins . . . dress nicely . . . water plants.” Another list, labelled “Uncomfortable Things,” included “Call Therapist” and “Join Gym and Use It.”

Hotz talked about how he wrote his first computer program when he was five, while sitting on his father’s lap at their Apple II. By fifth grade, he was building his own video-game console with an electronic-projects kit from Radio Shack. His parents often found household appliances (remote controls, answering machines) gutted. “He always liked learning stuff, and if that was how he did it, great,” his father, George Hotz, Sr., a high-school computer teacher, told me. Hotz, bored with his classes and letting his grades slide, became known at school as an inventive joker who rolled down the hallways in wheeled sneakers and once hacked several classroom computers to simultaneously play Beethoven’s Ninth Symphony. His mother, Marie Minichiello, a social worker, told me that although she punished him for his acts of mild disobedience, she always supported him. “I didn’t want school to kill his passion,” she said.

When Hotz was fourteen, he beat thousands of students from more than sixty countries to reach the finals of the Intel International Science and Engineering Fair. He appeared on the “Today” show with his invention, a small robot on wheels that could plot the dimensions of a room using infrared sensors, and wirelessly transmit the information to a computer. “Well, I think it’s very cool to be good in science,” Katie Couric told her viewers, as Hotz, in an ill-fitting dark suit, stepped forward, “and George Hotz is an example of that.” Couric asked if the technology could improve automated vacuum cleaners. But Hotz was more excited about helping soldiers fight terrorists. “They can send it into a complex before the military infiltrates it!” he said, his voice not yet broken. “Well, I’m impressed, George,” Couric replied, nudging him in the shoulder. “You’re a little brainiac, you.”

In high school, Hotz built the Neuropilot, a sort of Segway controlled by brain waves, which you could drive around by thinking about it. Companies had explored similar technology for controlling video games, but building hardware controlled by brain waves still seemed like science fiction. The Neuropilot worked, though the movements were not always precisely translated from the driver’s brain. During his senior year, in 2007, Hotz built a “Star Trek”-inspired 3-D display called “I Want a Holodeck,” which again made him a finalist at the International Science and Engineering Fair. This time, he topped the electrical- and mechanical-engineering category and won fifteen thousand dollars. Before a Forbes photo shoot for a story about his achievement, Hotz smoked pot for the first time. In the photograph, he told me, smiling, “my eyes are bloodshot. It’s great.”

While he was talking, Hotz had been playing with the iPad 2. He planned to spend the night hacking it but needed computer cables. We drove to Fry’s Home Electronics. It was around midnight, and as we approached a desolate intersection, hip-hop cranking from the car’s sound system, the light changed to red. With an angry swerve of the wheel, he cut through an adjoining parking lot and kept driving, muttering, “Fuck these assholes. Stupidest red light ever. It makes no sense at all.
“I live by morals, I don’t live by laws,” he went on. “Laws are something made by assholes.”

After high school, Hotz enrolled at the Rochester Institute of Technology but dropped out a few weeks later, to take up an internship at Google, in Silicon Valley. “We were not surprised or disappointed when he decided to leave school,” his father told me, though he admitted that he sometimes worried about his son, who spent a lot of time alone. Hotz supported himself through donations from people who had downloaded software he’d written and given away free; one program let people jailbreak the iPhone 3GS. His hacks generated enough income that he was able to buy an old white Mercedes. But after a few months he grew bored at Google and in 2009 moved back home to New Jersey. Since his iPhone feat, geeks often sent him devices just to see if he could hack them. That year, someone mailed Hotz a PlayStation 3 video-game system, challenging him to be the first in the world to crack it. Hotz posted his announcement online and once again set about finding the part of the system that he could manipulate into doing what he wanted. Hotz focussed on the “hypervisor,” powerful software that controls what programs run on the machine.

To reach the hypervisor, he had to get past two chips called the Cell and the Cell Memory. He knew how he was going to scramble them: by connecting a wire to the memory and shooting it with pulses of voltage, just as he had when he hacked his iPhone. His parents often gave him gifts that were useful for his hobby: after he unlocked the iPhone, they bought him a more expensive one. For Christmas, 2009, they gave him a three-hundred-and-fifty-dollar soldering iron. Sitting on the floor of his room, Hotz twisted off the screws of the black PS3 and slid off the casing. After pressing the iron to the wire, he began pulsing the chips.
Next, he had to write an elaborate command that would allow him to take over the machine. Hotz spent long nights writing drafts of the program on his PC, and trying them out on the hypervisor. “The hypervisor was giving me shit,” he recalls. It kept throwing up an error message—the number 5—telling Hotz that he was unauthorized. He knew that, if he got through, he’d see a zero instead. Finally, after several weeks typing at his computer, Hotz had composed a string of code five hundred lines long. He ran it on the PS3 and nervously watched the monitor. The machine displayed a sublime single digit: 0. Hotz called the code his “Finnegans Wake.”

On January 23, 2010, a little more than a month after posting his challenge, Hotz announced on his blog, “I have hacked the PS3.” He later posted instructions for others to do the same, and freely distributed the code. Hotz had hacked the two most iconic and ironclad devices of his generation. “Nothing is unhackable,” he told the BBC. “I can now do whatever I want with the system. It’s like I’ve got an awesome new power—I’m just not sure how to wield it.”

Sony responded by releasing a software update that disabled OtherOS, the feature through which Hotz had accessed the hypervisor. OtherOS enabled the machine to run Linux, the alternative operating system to Microsoft Windows and Apple OS. Running Linux essentially turned the PS3 from a single-purpose gaming console into a desktop computer, which people could use to write programs. They were furious that Sony had robbed them of this capability. “I am EXTREMELY upset,” a comment on Sony’s blog read. Some wanted to rally around Hotz, and organize: “THIS IS MADNESS!!! HACKERS UNITE!!! GEOHOT WILL LEAD US INTO THE LIGHT!” But many were angry at Hotz, not at Sony. “Congratulations geohot, the asshole who sits at home doing nothing than ruining the experience for others,” one post read. Someone posted Hotz’s phone number online, and harassing calls ensued.

Recalling the controversy, Hotz seemed genuinely unfazed. “All those people flaming me, I could care less,” he told me. He spent the summer of 2010 biking through China, and that fall, back at his parents’ house, he read Ayn Rand, which he said made him want to “do something.” “We let him get away with murder,” his father admitted. “But he never did bad things. He always did what he felt was right, and we were happy with that.”

In late December, Hotz decided once again to try to hack the PS3 in a way that would give him total control and let him restore what Sony had removed. On New Year’s Eve, Hotz and some high-school buddies played beer pong and watched the Times Square ball drop on TV. He woke up hung over on the couch at a friend’s house, with a towel stretched across him as a blanket, and stumbled back to his parents’ to fix some macaroni and cheese and think things through. Hotz wanted control of the PS3 metldr (pronounced “metloader”), a part of the software that, functioning like a master key, “lets you unlock everything.”
Hotz knew that the metldr key was hidden within the PS3, but now he realized that he didn’t necessarily have to find and break into the secret place. He could run a special decryption program in a different part of the machine, and make the key appear there. He had to figure out how to speak to the metldr, and then command it to appear. Within ten minutes, he had coded the PS3 hack.

The cursor blinked, indicating that Hotz had the power to do anything with the PS3: install OtherOS, play pirated games, or run obscure Japanese software. He prepared a Web page and a video documenting what he had done. But he hesitated. Although Apple had never sued anyone for jailbreaking, Sony had reacted fiercely to previous modifications of the PlayStation. Sony had also long boasted about the security of the PS3. Hotz wasn’t just undoing years of corporate P.R.; he was potentially opening the door to piracy.
With this concern in mind, Hotz wrote code that disabled the ability to run pirated software using his hack and added a note in his documentation: “I don’t condone piracy.” Still, he wanted a second opinion. Before he put the site live, he signed into an online chat channel where hacker friends hung out, and asked them whether he should release his hack. “Yeah,” one told him. “Information should be free.” Hotz told me, “This is the struggle of our generation, the struggle between control of information and freedom of information.” Also, on the day of the hack, unbeknownst to his parents, Hotz was high. He told me he had taken Vicodin and OxyContin, which filled him with a sense of invulnerability. “You just feel good about everything,” he recalled. He pushed a button on the keyboard and uploaded the instructions for his PS3 jailbreak.

On January 11, 2011, Hotz was playing Age of Empires II on his computer in New Jersey when he received an e-mail from Sony announcing a lawsuit against him. The company requested a temporary restraining order for violating the Computer Fraud and Abuse Act and facilitating copyright infringement, such as downloading pirated games. According to the Entertainment Software Association, piracy costs the industry eight billion dollars a year. Sony was also seeking to impound his “circumvention devices,” and it wanted him to take all the instructions offline immediately.

As soon as the news hit the Web, geeks rushed to Hotz’s site, seeking the tools while they could. At Carnegie Mellon University, David Touretzky, a computer scientist and proponent of freedom of information online, made copies of Hotz’s files. Touretzky blogged that Sony was “doing something breathtakingly stupid, presumably because they don’t know any better. . . . Free speech (and free computing) rights exist only for those determined to exercise them. Trying to suppress those rights in the Internet age is like spitting in the wind.” The Electronic Frontier Foundation, a digital-rights advocacy group, released a statement saying that the Sony v. Hotz case sent a “dangerous message” that Sony “has rights in the computer it sells you even after you buy it, and therefore can decide whether your tinkering with that computer is legal or not. We disagree. Once you buy a computer, it’s yours.”

But Sony believed that Hotz’s hack was sending a dangerous message of its own. If people were free to break into their machines, game creators would be cheated out of royalties. Cheaters could tweak the games in order to beat everyone who stuck to the rules. Riley Russell, the general counsel for Sony Computer Entertainment of America, said in a statement at the time, “Our motivation for bringing this litigation was to protect our intellectual property and our consumers.”

On January 14th, Hotz went on “Attack of the Show,” a popular news program for gamers on G4, a cable-television network. When the host asked what he was being sued for, Hotz joked, “Making Sony mad.” He was serious, though, about his mission to keep information free. Later, he uploaded a hip-hop video on YouTube, which he titled “The Light It Up Contest.” He sat in front of his Webcam in a blue sweatshirt, his computer in the background. “Yo, it’s geohot,” he rapped, as the beat kicked in, “and for those that don’t know, I’m getting sued by Sony.” It was a surprisingly catchy tune about a complex issue from a whiz kid brazenly striking a pose. Hotz went on, bouncing in his desk chair, “But shit man / they’re a corporation / and I’m a personification / of freedom for all.”

Hotz’s rap earned him sympathy in chat rooms but not in the courts. A California district court granted Sony the restraining order against Hotz, preventing him from hacking and disseminating more details about its machines. It also approved a request by Sony to subpoena information from Twitter, Google, YouTube, and Bluehost, Hotz’s Internet provider, including the Internet Protocol addresses of anyone who downloaded the instructions from his site—a move that further incensed digital-rights advocates. Sony also gained access to records from Hotz’s PayPal account. In some circles, the rebel leader was becoming a martyr. As one fan of Hotz’s posted: “geohot = savior of mankind.”

Martyrs win devotees, and soon Hotz had gained the allegiance of the most notorious hackers: a group called Anonymous. In the past few years, the group has become famous for engineering elaborate online attacks and protests, often in the name of free speech and “lulz,” which is Internet-speak for laughs. Group members fought against the Church of Scientology, which they believed to be suppressing free speech online, and shut down government Web sites in defense of WikiLeaks. More recently, coders have joined the Occupy Wall Street movement, and threatened to release a list of people collaborating with the Zetas, a Mexican drug gang. At the time of the Sony hack, Anonymous had become its own pop-culture meme. On Comedy Central, Stephen Colbert called Anonymous members a “global hacker nerd brigade.” Others referred to them as “the paramilitary wing of the Internet.”

Anonymous is an international, decentralized, shape-shifting hive. All you have to do to join is say you are part of it. No one goes by his or her real name. As in any shadowy group, some members are more extreme than others. A few years ago, I was invited to attend a secret meeting of Anonymous activists, at an Indian restaurant in Hollywood. While Anonymous is often characterized as a group of malicious cyber-terrorists, they struck me more as a group of earnest young protesters with a dark sense of humor and a brilliant knack for viral marketing. Anons, as members call themselves, are the best publicists on the Internet: through social media, they mobilize, inform, outrage, and entertain in ways that the Yippies could never imagine, and they do it all really fast.

In early April, an Anonymous member created an Internet relay chat room called Operation Sony, or #OpSony. “It is the duty of Anonymous to help out this young lad, and to protest against Sony’s censorship,” the mission statement read. Around the world, curious coders logged into their phones and laptops to discuss plans.

As the chat room filled, Anons began digging up personal contact information on Sony’s lawyers and debating the most effective tactics: Flash mobs outside Sony stores? Sending black faxes, which would waste all the ink in their machines? Eventually, they settled on a distributed denial of service, or DDoS, attack, overwhelming Sony’s Web sites with simultaneous visits until they crashed.

On April 4th, Anonymous announced the plan to the public in a press release: “Congratulations, Sony. You have now received the undivided attention of Anonymous. You saw a hornets nest, and stuck your penises in it. You must face the consequences of your actions, Anonymous style.” Within hours, both Sony.com and PlayStation.com were down. Anonymous posted a video on YouTube with its demands: Drop the case against Hotz and allow for modifications on the PS3. Over an image of a Guy Fawkes mask, which the group uses as a symbol, text read, “Leave Fellow hackers like geohot alone.”

Internet protests, like street protests, have a way of spinning out of control. People chant peacefully, but then someone throws a rock through a window and rioting begins. No sooner had the hacker war begun than one Anon declared a splinter faction, SonyRecon, calling for personal hacks against Sony employees and the judge in the geohot case. Other Anons posted the phone numbers, family-member names, and addresses of Sony executives. They even published a description of the C.E.O.’s house, and proposed various methods of attack:

<sonyrecon335> We’ll shit on his doorstep, then run away
<e-hippie741> dude
<e-hippie741> you’d shit on someones doorstep
<Hit_X> ring the kids school and pull a prank like hes been rushed in hospital:
<e-hippie741> do you love geohot that much


Back in his parents’ house, in front of the glowing computer screens in his cluttered bedroom, Hotz clicked with mounting apprehension through the news of Anonymous’s plans. “I hope to God Sony doesn’t think this is me,” he remembers thinking. He didn’t believe in secretive online warfare, much less in defecating on someone’s doorstep. “I’m the complete opposite of Anonymous,” he told me. “I’m George Hotz. Everything I do is aboveboard, everything I do is legit.”

On April 11th, Sony announced that it had reached an agreement with Hotz, who denied wrongdoing but consented to a permanent injunction barring him from reverse-engineering any Sony product in the future. But Hotz’s supporters felt that the injunction was a form of censorship. Some of his defenders made “FREE GEOHOT” shirts, and others went to Sony stores in cities such as San Diego and Costa Mesa to protest. Black-hat hackers called for more destructive attacks against Sony.

At 4:15 P.M. on April 19, 2011, technicians at the San Diego offices of Sony Network Entertainment noticed that four of their computer servers were rebooting without authorization. The team took the systems offline and began examining the activity logs. Their investigation confirmed that someone had broken into the servers, and possibly into others. Sony immediately shut down the PlayStation Network, their online-entertainment hub. The company concluded that it had been the victim of a sophisticated attack that had exposed the addresses, passwords, birthdays, and e-mail addresses of seventy-seven million PSN subscribers, who pay to play games and watch movies. “While there is no evidence at this time that credit card data was taken, we cannot rule out the possibility,” Patrick Seybold, a company spokesman, wrote in a blog post on PlayStation’s Web site. Though it remained unclear whether someone from Anonymous was responsible for the hack or whether it was just someone taking advantage of the chaos, the events were clearly linked.

Security experts called it one of the biggest data breaches of all time. Sony announced that it would keep the PSN down indefinitely—at an estimated cost of ten million dollars in lost revenue per week—as it raced to plug the holes. Anonymous denied responsibility and temporarily suspended its campaign against the company.

At 4:51 A.M. on April 28th, Hotz uploaded a lengthy rant against the PSN hackers. “Running homebrew and exploring security on your devices is cool,” he wrote. “Hacking into someone elses server and stealing databases of user info is not cool. You make the hacking community look bad, even if it is aimed at douches like Sony.” Hotz was pointing out the distinction between white- and black-hat hackers. Still, he knew he had helped loosen a boulder that was now crashing down a hill.

On May 1st, the company discovered a data breach on the Sony Online Entertainment service, exposing twenty-four million personal accounts. Technicians also found a file that had been planted on one of their servers as a kind of digital graffiti. It was titled “Anonymous,” and read, “We Are Legion.” At a press conference in Tokyo that day, Kaz Hirai, the chief executive officer of Sony Computer Entertainment, and two other executives walked onto a stage and faced the packed crowd. “We offer our sincerest apologies,” Hirai said and, setting his microphone on a table, bowed low with the others for eight seconds as the cameras flashed. They said that some network services would be back up in a few days. But it took two weeks to fully restore the system.

Sony soon had a new force to contend with: an Anonymous splinter group called Lulz Security, commonly known as LulzSec. Members were like the merry droogs of the net; on their Twitter feed, nicknamed the Lulz Boat, they identified themselves as “the world’s leaders in high-quality entertainment at your expense.” Their first bit of dark comedy came on May 30th, when they hacked the PBS Web site, in retaliation for what they thought was unfairly negative coverage of the WikiLeaks founder, Julian Assange. They posted a fake news story reporting that the late rappers Tupac Shakur and Biggie Smalls had been hiding out in New Zealand. “Local townsfolk refuse to comment on exactly how long or why the rappers were being sheltered,” the story read. “One man simply says ‘we don’t talk about that here.’ ”
The day after the PBS prank, the group began tweeting a series of warnings to Sony. “Hey @Sony,” one read, “you know we’re making off with a bunch of your internal stuff right now and you haven’t even noticed? Slow and steady, guys.” Some saw the warnings as more geohot backlash for the company. “The group is sending a message to Sony for messing with one of their own, hacker George Hotz,” a blogger wrote.

On June 2nd, LulzSec hacked the Sony Pictures Web site, compromising what it claimed to be more than a million passwords of consumers who had put their personal information on the site. (Sony later put the figure at thirty-seven thousand.) The group’s purpose, it explained in a statement, was not to come across as “master hackers” but to expose the continued weakness of Sony’s security systems. Lulz’s statement said that Sony was “asking for it,” because the company stored the passwords in plain text, instead of encrypting them. The statement went on to encourage fellow-hackers to “tear the living shit out of it while you can; take from them everything!” LulzSec members broke in using a rudimentary technique called SQL Injection, which allowed them access to unauthorized data on the Sony Pictures site. “From a single injection, we accessed EVERYTHING,” they said. “Why do you put such faith in a company that allows itself to become open to these simple attacks?”

Black-hat hackers began posting corporate e-mails, and, during the summer of 2011, attacks on media, technology, and other institutions came almost daily. Nintendo got hacked, and so did Sega, Electronic Arts, the News Corporation, Booz Allen Hamilton, NATO, and Lady Gaga. Even the C.I.A. was hacked, LulzSec claimed. It was the Summer of Lulz. Hotz didn’t mean to inspire a hacker war, but he doesn’t regret what he did. One night at a restaurant in Palo Alto, he clarified his position on the attacks against Sony. “If being a techno-libertarian leads to online anarchy, so be it,” he said. “I’m not a cause. I just like messing with shit.”

Hotz defines a hacker as “somebody with a set of skills,” and points out that the skills alone don’t make you good or evil. It’s up to you to decide how to use them. Facebook’s Mark Zuckerberg may be his generation’s most famous hacker, but Hotz most embodies its original spirit. He hacks for the technical challenge and the fun. He doesn’t identify as white-hat or black-hat, preferring to think of himself more like someone twisting wrenches under a sink. “Hacker is to computer as plumber is to pipes,” he once blogged. When I met him again, later in the summer, at DefCon, a hacker convention in Las Vegas, he wasn’t at a bar with guys in long black coats, plotting some corporate takedown. He was alone on a couch in a back room, coding on his laptop.

A month after his settlement with Sony, last spring, Hotz moved back to California to take a full-time job at Facebook. He wouldn’t say what he worked on, other than design technology to improve the site. Some saw his transition as a shrewd move by Facebook to co-opt a hacker before he might compromise the company. Others flamed him for cashing in. “You have to love the amount of suck and sell-out that George Hotz contains within his flimsy nerd shell,” a detractor wrote online.

One of my interviews with Hotz took place in Palo Alto just after he’d started the Facebook job, before word had leaked online. He showed up wearing a new blue-and-white Facebook T-shirt, a member of the Valley’s coolest frat. He was waking up early (as his “Morning Routine” whiteboard reminded him) to get to work. “Everything is very fast-moving and the culture is young,” he said, and then handed me his business card, which read, “I am the most illegal circumvention device of them all.” Eight months later, Hotz quit. He didn’t want to discuss why, but suggested that having a day job didn’t suit him. “Facebook is a fun place to work,” he told me, “but I wonder how people stay employed for so long.” He travelled in Panama, then returned to Palo Alto. He wouldn’t say what he was going to do next, only that he won’t be sharing his exploits on the Internet anymore. “I’m through with all that,” he said.

He wasn’t the only one. On March 6, 2012, U.S. officials announced the indictment of six élite hackers from Anonymous and LulzSec. A federal law-enforcement official told me that the arrests were “very significant—these are core members.” Hotz had never made contact with LulzSec or Anonymous members, even when they were crusading on his behalf, and he was agnostic about their fate. The brash young man from the rap video who described himself as “a personification of freedom for all” had retired from battle. He refused to make what he called “a moral judgment” of the indicted hackers. “I’ll make a technical judgment,” he told me. “If they were that good, they wouldn’t have got caught.”

Even with the arrests, other Anons have sworn to keep up the campaign. Companies are working hard, too. “The last year has demonstrated how sophisticated cybercriminals can be,” Jim Kennedy, the senior vice-president of strategic communications for Sony Corporation of America, wrote me in an e-mail. Sony created a new position—a corporate executive in charge of global-information security and privacy—and promoted Nicole Seligman, who as general counsel had been targeted by hackers, to president of the Sony Corporation of America. Kennedy admits that security remains an unceasing fight. “In the end, it must be recognized that no system is absolutely foolproof,” he wrote. “Constant vigilance is essential.”

Last May, engineers from Sony invited Hotz to a meeting at its American headquarters, a half hour’s drive north, in Foster City. (“We are always interested in exploring all avenues to better safeguard our systems and protect consumers,” Kennedy told me.) Nervous but curious, Hotz walked into the building eating from a box of Lucky Charms, dropping marshmallows across the lobby. “If there were going to be lawyers there,” he recalled, “I was going to be the biggest asshole ever.” Instead, he found a roomful of PS3 engineers who were “respectful,” he said, and wanted to learn more about how he had beaten their system. During the next hour or so, the man who had started the hacker wars described his methodology.



src:~http://www.newyorker.com/reporting/2012/05/07/120507fa_fact_kushner?currentPage=all

 

Steve Jobs - The Most Anal CEO Ever

Steve Jobs - The Most Anal CEO Ever

The Most Anal CEO Ever

Steve Jobs was a true obsessive. He pored over every tiny detail of every product, every ad, every store, every thing related to Apple.

His attention to detail and craft apparently came from his father who told him it was important to craft the backs of fences and cabinets even though they would never be seen. Jobs told his biographer Walter Isaacson, "He loved doing things right. He even cared about the look of the parts you couldn't see."

While that's an important lesson to learn, Jobs may have taken it a little too far. The Jobs biography is loaded with examples of Jobs zeroing in on even the most insignificant detail just to get things right.

For instance, when Apple was starting to open new retail stores, his ad partner Lee Clow said, "Steve made us spend a half hour deciding what hue of gray the restroom signs should be." It's good to get the color right, but there's no reason to take a half hour agonizing over such a small detail. Pick a nice shade of gray, move on.

Of course, that's why he was Steve Jobs and we're not. Here are a few more examples of his attention to detail.

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He "agonized" over the way the title bars at the top of files and windows looked

He wanted the bars to have pinstripes. Bill Atkinson, one of the main Mac developers, said, "We must have gone through twenty different title bar designs before he was happy." Eventually Atkinson and another employee complained about wasting time on endless small tweaks.

Jobs freaked out on them, shouting, "Can you imagine looking at that every day? It's not just a little thing, it's something we have to do right."

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He insisted on making the circuit board inside the Mac look great

Nobody but Apple's engineers would know what the printed circuit board inside the Mac would look like, but Jobs was critiquing it based on how it looked.

An engineer said to him, "The only thing that matters is how well it works. Nobody is going to see the PC board." Jobs response according to Isaacson: ""I want it to be as beautiful as possible, even if it's inside the box. A great carpenter isn't going to use lousy wood for the back of a cabinet, even though nobody's going to see it."

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He wanted the exact right shade of beige for the Apple II

Apple's manufacturing partner had 2,000 shades of beige. None of them were good enough. So he came up with his own.

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He customized the interior of his private plane and drove the designer crazy

It took him over a year to design the interior of his Gulfstream jet. The reason? He insisted that there were no buttons that toggled. He also hated stainless steel buttons, so he had them replaced with brushed metal buttons.

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He insisted the original Mac make rounded rectangles

One of Apple's Mac engineers busted his butt to make the computer do oval and circle illustrations. Everyone in the Mac group was proud. Not Jobs. All he could say was, "Well, circles and ovals are good, but how about drawing rectangles with rounded corners?" The engineer said, "I wanted to keep the graphics routines lean and limit them to the primitives that truly needed to be done."

Jobs flipped out. He said rectangles with round corners were everywhere. He dragged the engineer out of Apple's office and took him for a walk pointing out 17 examples of rectangles with round corners within three blocks.

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The floors in Apple stores are made of stone from a quarry outside of Florence

Here's how much detail Jobs put into the floor of Apple stores:

In 1985, as he was being ousted from his first tour at Apple, he had visited Italy and been impressed by the gray stone of Florence's sidewalks. In 2002, when he came to the conclusion that the light wood floors in the stores were beginning to look somewhat pedestrian-a concern that it's hard to imagine bedeviling someone like Microsoft CEO Steve Ballmer-Jobs wanted to use that stone instead. Some of his colleagues pushed to replicate the color and texture using concrete, which would have been ten times cheaper, but Jobs insisted that it had to be authentic. The gray-blue Pietra Serena sandstone, which has a fine-grained texture, comes from a family-owned quarry, Il Casone, in Firenzuola outside of Florence. "We select only 3% of what comes out of the mountain, because it has to have the right shading and veining and purity," said Johnson. "Steve felt very strongly that we had to get the color right and it had to be a material with high integrity." So designers in Florence picked out just the right quarried stone, oversaw cutting it into the proper tiles, and made sure each tile was marked with a sticker to ensure that it was laid out next to its companion tiles. "Knowing that it's the same stone that Florence uses for its sidewalks assures you that it can stand the test of time," said Johnson.

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He put similar attention to detail on Pixar's HQ

The building's steel beams were going to be exposed, so Isaacson says Jobs look at samples of beams from around the country. He picked beams from Arkansas, and made sure the steel was blasted to its pure color. Then he made sure the truckers didn't leave any marks on the beams. He also insisted the beams were bolted together, not welded, and then clear coated.

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When he was hospitalized he rejected masks because they were ugly

We're not sure if he was delirious, or what here, but this is taking things too far:

Even when he was barely conscious, his strong personality came through. At one point the pulmonologist tried to put a mask over his face when he was deeply sedated. Jobs ripped it off and mumbled that he hated the design and refused to wear it. Though barely able to speak, he ordered them to bring five different options for the mask and he would pick a design he liked. The doctors looked at Powell, puzzled. She was finally able to distract him so they could put on the mask. He also hated the oxygen monitor they put on his finger. He told them it was ugly and too complex. He suggested ways it could be designed more simply. "He was very attuned to every nuance of the environment and objects around him, and that drained him," Powell recalled.

~src:http://gawker.com/5854161/the-most-anal-ceo-ever?tag=valleywag