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Power Sheet – February 22, 2016

The fight between Apple and the FBI has become so hot that it has captured the mind of the public, which means that it’s being oversimplified and distorted. In order to evaluate the leadership of Apple chief Tim Cook, we need to remember what’s different and significant about this case.

A line of argument getting lots of traction is that Apple has opened many phones for law enforcement – 70, it’s widely reported – so why won’t it open the phone of one of the San Bernardino terrorists, Syed Rizwan Farook, who killed 14 people, as the FBI is requesting? The answer is in two parts. First, those phones that Apple opened previously were earlier models with different, weaker, security. The phone in question, an iPhone 5C, can’t currently be opened by Apple or the FBI or anyone else; that super-strong security is an important reason why iPhones are increasingly used by enterprises – companies, schools, hospitals, governments. The phone in question is owned by Farook’s employer, San Bernardino County.

The second part of the answer is that the FBI isn’t asking Apple to open the phone. It’s asking Apple to create an operating system just for this case, which could then be loaded into the phone and would enable the FBI to try every possible passcode until it finds the one that works. (Without a special new operating system, the phone would wipe all the data on the phone after ten incorrect attempts.) This is a significant feature of the case that could have broad, large implications. The FBI isn’t asking Apple for information that it has and that would open the phone. It’s asking (and a court is now ordering) Apple to create something that would be useful to the FBI. As the New Yorker’s Amy Davidson writes for the magazine’s website, “If it [the government] can tell Apple, which has been accused of no wrongdoing, to sit down and write a custom operating system for it, what else could it do?” That is, could any of us be compelled by the government to create something new?

That’s the question that Cook, in seeking relief from the court order, is forcing the courts, the government, the tech industry, and the society to confront. He cannot know the result. This is becoming a public relations battle – the government filed a motion on Friday accusing Apple of defying the court for marketing reasons – and it could go in any direction. So far neither side is winning the public’s hearts and minds. Pro-Apple demonstrators plan rallies tomorrow in 30 cities worldwide, but a USA Today poll shows that 51% of Americans favor the FBI.

Given the notoriety of the case, it’s plausible that Cook already believes the eventual unlocking of the phone is inevitable, and he just wants as much influence as possible over the terms on which it’s done. It’s certain that he understands the magnitude of the issues involved and knows that they must be resolved in order for him to run Apple. That’s responsible CEO leadership. Whether he’s forcing these issues for larger reasons is beyond knowing – we can’t read his mind – but the effects of any resolution will extend far beyond Apple.

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What We’re Reading Today

Tim Cook speaks about Apple’s future and cars 

In an interview with Fortune (conducted before the current conflict with the FBI over opening a terrorist’s iPhone), CEO Tim Cook discussed how he reacts when Apple’s stock falls when the company earns $18 billion in profit. Investor worries include the company’s reliance on iPhone sales, which account for 75% of revenue. But Cook says he doesn’t monitor the product mix, concerning himself only with the quality of the devices. While he wouldn’t officially announce the rumored iCar, he did speak about automobile manufacturing business models. Fortune

Takata recalls could expand

Regulators are investigating whether Takata airbag inflators in 70 to 90 million vehicles need to be recalled. With 29 million vehicles already recalled following nine U.S deaths, the potential recall would extend the safety concern to nearly all 120 million vehicles in the U.S. with Takata inflators that contain ammonium nitrate. CEO Shigehisa Takada and the company said little in response to the news, in line with their actions throughout the crisis. Reuters

Psychiatrist report apparently supports Redstone’s mental decline

A 37-page report by a psychiatrist that examined Sumner Redstone was filed by former companion Manuela Herzer. While the results of the findings are sealed, Herzer’s submission of the report suggests it supports her notion that Redstone’s  mental capacity has declined. Herzer argues that she was dismissed as a health-care agent for Redstone when his diminished mental state left him susceptible to the direction of Viacom CEO Philippe Dauman, his daughter Shari Redstone, and his nurse. WSJ

The woman trying to take down Trump

TD Ameritrade founder J. Joe Ricketts‘s wife Marlene Ricketts has almost entirely funded a super PAC called Our Principles PAC. The group targets Donald Trump, creating attack ads and mailers in Iowa, New Hampshire, and South Carolina. Run by Katie Packer, who helped manage Mitt Romney‘s 2012 campaign, it’s now looking for opportunities to attack Trump in the lead-up to Super Tuesday. USA Today

Building a Better Leader

The booming business of monitoring employees

Efforts to notify bosses when workers search Facebook or vacation rentals on the job may boost the monitoring industry from $200-million-a-year to $500 million in four years. Boston Globe

HSBC is under investigation in the U.S…

…for hiring people with ties to Chinese government officials. Fortune

How to reduce nervousness

Investor James Altucher pretends that everyone he meets will die tomorrow. That way, no matter what he does, they won’t remember. Quartz

Worth Considering

Facebook tries to upend the telecom industry

Mark Zuckerberg‘s company is teaming with Nokia, Intel, and others to develop an open-source software platform (with some licensing required) to increase the ease with which telecom firms build networks. If successful, the effort could drastically impact telecom equipment makers like Hans Vestberg‘s Ericsson and Chuck Robbins‘s Cisco.   Fortune

Rubio and Cruz vie to position themselves as the Trump-beater  

With Donald Trump‘s decisive victory in South Carolina on Saturday and Jeb Bush withdrawing from the race, Marco Rubio and Ted Cruz are arguing that a coalition needs to form. Rubio, who finished 2nd in South Carolina, says the race has only begun, while Cruz says party leaders should support him as the only person to have beaten Trump so far, in Iowa. NYT

U.S. tried to enter peace talks with North Korea before nuclear test 

The talks, intended to end the Korean War officially, were proposed despite North Korea’s refusal to scale back efforts to build a nuclear weapon, a long-standing condition. The Obama administration wanted discussion of the weapons program to be part of the talks. North Korean leader Kim Jong Un declined, and the U.S. offer was rescinded after the country’s missile test last month. WSJ

Fortune Reads and Videos

Washington state sues Big Food 

It argues that the Grocery Manufacturers Association launched a secret campaign to prevent GMO labeling in the state.  Fortune

Rubio’s the man of Wall Street

He has raised more from bank employees — $4 million — than any other candidate. Donald Trump has raised the least. Fortune

Selfie-pay becomes a thing

Mastercard is increasing the use of the selfie to boost security. Fortune

Yahoo could approach bidders for its Internet business…

…starting today. On Friday, it created a group of independent directors that would explore strategic options. Fortune

Today’s Quote

We don’t have to spend large amounts to explore….But when we start spending large amounts of money, we’re committed at that point. But we explore things with teams of people. And that’s a part of being curious. Part of exploring technologies and picking the right one is becoming so familiar with it you can see ways that it can be used. And for us, we’ve never been about being first. We’ve been about being best. So we explore many different things, many different technologies. And at first we might not know what product it might wind up in. And then later we’ll see that that really cool technology enables maybe things that we’re doing today to take on something bigger, maybe something new. But once we start spending gobs of money—like when we start spending on tooling and things like that—we’re committed. – Apple CEO Tim Cook discussing how the company spends on its innovation efforts.  Fortune

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Produced by Ryan Derousseau
@ryanderous
powersheet@newsletters.fortune.com