CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

Lawmakers just keep trying to undermine the security of everyone’s conversations, putting Big Tech in an impossible position

May 13, 2022, 10:26 AM UTC

Good morning. David Meyer here in Berlin, filling in for Alan.

“I have to write The Story again,” I sighed to my wife a couple days ago. Yes, it’s back: For the gazillionth time, lawmakers are proposing seriously undermining the security and privacy of everyone’s communications.

This time, it’s not in the name of national security or the fight against terrorism, but rather to protect children. The European Commission has proposed a law under which the likes of WhatsApp and Signal would need to scan people’s encrypted messages for child sexual abuse material (CSAM), and even for signs of possible “grooming.”

Both of these things are real problems, make no mistake. However, as cybersecurity veteran and Europol adviser Alan Woodward put it to me when I was interviewing him for my article, the EU executive is suffering from a case of “do-something-itis” and—if the proposal is not significantly changed during the legislative process—the result will be a law that puts Big Tech in “an impossible position.”

There are two ways to do what the proposal asks for. One is to weaken the end-to-end encryption of people’s messages to allow occasional access, which would be enormously and self-evidently dangerous. The Commission claims it isn’t trying to do this and wants to keep everyone’s communications private.

The only other way is to have the app maker scan people’s messages before or after they are encrypted, again removing the privacy of everyone’s conversations.

This is called “client-side scanning”—you may be familiar with it thanks to the Apple privacy debacle last year—and the proposal would leave safeguards up to the tech companies. Good luck applying those safeguards in an authoritarian country whose government would be delighted to be handed access to its citizens’ secret messages.

“The Commission’s draft is not compatible with our European values and collides with applicable data-protection law,” tweeted Ulrich Kelber, Germany’s federal data-protection commissioner.

What the Commission has come up with is “a nice political solution,” Woodward told me, but it doesn’t match technological reality: He recalled the immortal words of former Australian Prime Minister Malcolm Turnbull who, when confronted over the security paradox in his plans to force encryption back doors, said: “The laws of mathematics are very commendable, but the only law that applies in Australia is the law of Australia.”

Remember when, during Brexit negotiations, the U.K. claimed there would be no problem with customs checks on the Irish Republic–Northern Ireland border because some as-yet-uninvented technology would sort it all out? That never happened, and the underlying conundrum of how to have customs checks without a hard border now threatens to blow up the U.K.’s trading relationship with the EU.

I see a similar lesson in these two situations: You can’t make a long-standing paradox disappear by shouting “Technology!” and praying for the best—and trying to do so can be beyond dangerous. More news below.

David Meyer
@superglaze

david.meyer@fortune.com

TOP NEWS

Powell warning

Jerome Powell, freshly confirmed for his second term as Fed chair, has warned that the central bank’s soft-landing plans could be jeopardized by geopolitical events, which are “going to play a very important role in the economy in the next year or so.” (We noticed.) Fortune

Twitter delay

Elon Musk says his Twitter takeover is on hold until he can see details supporting Twitter’s claim that less than 5% of its accounts are spammers or fakes. Twitter’s share price dove 11% on the tweet. (Bonus read: Two senior Twitter executives have been defenestrated ahead of Elon Musk’s takeover: consumer division chief Kayvon Beykpour, who was on paternity leave, and revenue product lead Bruce Falck.) Bloomberg

Corporate greed

The CEO of Norway’s oily $1.2 trillion sovereign wealth fund has declared war on excessive pay. Nicolai Tangen: “We are in an inflationary environment, where we are seeing many companies with pretty mediocre performance coming out with very big pay packages. We are seeing corporate greed reaching a level that we haven’t seen before, and it’s really becoming very costly for shareholders in terms of dilution.” Financial Times

Crypto turmoil

Bitcoin has rebounded above $30,000, but the recently popular Luna cryptocurrency is now worth $0—rest in peace. Fortune

AROUND THE WATERCOOLER

Flexing Arm

Fortune’s Jeremy Kahn investigates how SoftBank is trying to push its Arm subsidiary, which already powers 95% of the world’s smartphones, into new markets: “The pioneering chip-design company faces challenges that would keep most executives tossing and turning.” Fortune

Madonna NFTs

Madonna launched some weird NFTs along with the artist Beeple, featuring scenes of the singer giving birth to trees, butterflies, and robotic centipedes. Some people see this is as a good time to call the end of the NFT craze, though it should be noted that the proceeds go to good causes. Fortune

Tory donor

Art dealer Ehud Sheleg, a former treasurer for the U.K.’s ruling Conservative Party, allegedly made a $630,225 donation to the party in his own name despite the cash coming from his father-in-law’s Russian bank account. The father-in-law is a foreign citizen and reportedly not registered to vote in the U.K., which could make the contribution illegal. New York Times

Reading the room

PlayStation chief Jim Ryan sent employees an email referencing abortion rights, in which he refused to take a stance on the issue but did spend several paragraphs talking about his cats, in an attempt to “share something lighthearted to help inspire everyone to be mindful of having balance that can help ease the stress of uncertain world events.” Some workers were less than thrilled. Fortune

This edition of CEO Daily was edited by David Meyer.

This is the web version of CEO Daily, a newsletter of must-read insights from Fortune CEO Alan Murray. Sign up to get it delivered free to your inbox.