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Power Sheet – February 18, 2016

Just a brief note today in praise of Apple CEO Tim Cook. His decision to defy a court order in an extremely high-profile case is probably not as big a gamble as it may first appear, but it’s still one of those major decisions that cause a leader to swallow hard first. He’s showing courage and leadership – though that doesn’t mean this will all turn out well.

The case is that of last October’s terrorist shooting in San Bernardino, California, so it triggers plenty of powerful emotions. The FBI wants to see the data in the iPhone of one of the attackers, but it can’t get past Apple’s security features. So at the FBI’s request, a court has ordered Apple to create software that would enable the FBI to get into the phone. Cook says no.

In defying the order, Cook takes the position that he’s protecting his customers against evil-minded hackers and, without saying so, against governments that may or may not be motivated by noble intentions. He’s thus aligning himself with very broad constituencies. He’s also defending the Apple engineers who are proud to have created the invulnerable security features and who would be deeply demoralized if forced to write new code to defeat them. Above all, it appears, Cook is trying to avoid a precedent that would encourage governments around the world to demand that Apple break into customers’ phones. He also wants to avoid creating break-in code for the FBI that could conceivably fall into the hands of others.

Those are all solid, sensible stances for Cook to take. And as Apple’s lawyers fight back, they might win. The obvious danger is that if they don’t, the resolution could be one that Cook really hates.

So Cook’s leadership decision here is that it’s time to resolve this momentous issue one way or the other. The circumstances could make this an epic case. It pits the world’s most valuable technology company, possessing what seems to be the strongest security measures, against the U.S. government over the investigation of a particularly famous and horrific crime. Some commentators think it could go to the Supreme Court. It could also lead to new laws written for the digital age.

Cook has chosen to put himself and Apple at center stage on an issue of central importance to the technology industry, criminal justice, and society, with no assurance of where this choice will lead. He apparently just believes it’s time this issue got confronted head-on. That’s leadership behavior, and whatever the outcome, it elevates Apple’s status.

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What We’re Reading Today

Yahoo cuts digital magazines 

Global editor-in-chief Martha Nelson announced that a number of Yahoo titles will cease publication, including Yahoo Food, Health, and Parenting. It appears the company will focus on moneymakers, such as Yahoo Sports, Finance, and News. It’s the end of a big bet on digital magazines by CEO Marissa Mayer, which she heralded when it launched in 2014. Fortune

Obama to visit Cuba

In an effort to begin trade talks, President Barack Obama will travel to Cuba within the next few weeks. The potential meeting with Cuban President Raul Castro would be intended to expand commercial opportunities between the nations after a 54-year hiatus. Presidential candidates Marco Rubio and Ted Cruz, both born to Cuban immigrants, oppose the efforts because Cuba hasn’t made political reforms. Reuters

Toyota recalls 2.9 million Rav4s

In a head-on crash, seat belts in the vehicles can be cut by a metal frame in the seat. For Akio Toyoda‘s company, it’s the latest in a string of recent problems. Four months ago, the company recalled 6.5 million vehicles for power window switches that can catch fire, and it has recalled cars equipped with faulty Takata airbags. CNN Money

There’s no clear leader for a Brexit

U.K. euroskeptics have long wanted to secede  from the European Union, but lack of a clear leader has hindered their cause as a vote approaches this summer. Prime Minister David Cameron opposes withdrawal, leaving younger lawmakers making uncoordinated efforts.  NYT

Building a Better Leader

The smaller the company…

…the more each hire matters. In a startup, a bad hire can take a company backwards. The American CEO

Josh Bruno left venture capital, shunned Harvard…

…and created a startup that hopes to revolutionize senior home-care. Bruno‘s biggest hurdle is convincing investors that hiring caregivers as full-time employees makes business sense. Fortune

Nest CEO comes under fire for bullying employees

Some former employees have claimed they have PTSD like symptoms from CEO Tony Fadell‘s management style. Fast Company

Responding to Apple’s Fight

Apple’s decision is good business

One reason CEO Tim Cook will fight efforts by the FBI to provide a back door into the San Bernardino shooter’s iPhone is to protect the company. Since Apple insists much of the data on customers’ phones stays on customers’ phones, creating software to hack an iPhone would counter its sales pitch of easy and safe use, potentially hurting sales, especially to corporate customers. Wired

Google CEO signals support for Apple  

Sundar Pichai seemed to support Cook‘s decision, calling the FBI’s request a “potential troubling precedent” in a series of tweets. Other tech heads, including WhatsApp founder Jan Koum, strongly support Apple. Pichai’s tweets recognize the need to support law enforcement but suggest that this request goes beyond past ones.  Fortune

Republican candidates disagree 

GOP candidate Donald Trump said Apple should bend to the FBI’s wishes and the court order. “In that case, we should open it up. I think security overall — we have to open it up, and we have to use our heads,” said Trump. Ted Cruz agreed. Marco Rubio acknowledged that the government needs a way to move forward in these investigations but recognized the security concern. CNN

Up or Out

Channing Dungey has been named president of ABC Entertainment, replacing Paul Lee. NYT

Adidas hired former Lululemon Athletica CEO Christine Day as a strategic adviser. WSJ

Fortune Reads and Videos

15 entrepreneurs who are disrupting their industries 

Pay attention, Fortune 500 companies. Fortune

Boeing gets a $1-billion order for new planes…

…from China’s Okay Airways. The order is for 12 Boeing 737s. Fortune

Fandago agrees to buy Rotten Tomatoes and Flixster

Expect movie reviews to start showing up on your ticket orders. Fortune

Playboy has built a strong business in China…

…without ever publishing there. Fortune

Today’s Quote

“He wasn’t acknowledging that this was a bad state to be in and he wasn’t taking responsibility…And ultimately if you’re asking your people to work weekends, it’s not their fault, it’s upper management’s fault.” — A former employee of Nest, in response to co-founder Matt Rogers’s reasoning for having employees work weekends. Nest CEO Tony Fadell is under fire for his management style at the home-security company owned by Alphabet.  Business Insider

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