Dec 4, 2019

Axios Login

Congrats to my colleagues Sara Fischer and Alexi McCammond, who are on this year’s Forbes' 30 Under 30 Media List! It is well-deserved recognition, though I am jealous of the "under 30" part.

Today's Login is 1,364 words, a 5 minute read.

1 big thing: Google's changing of the guard

Sergey Brin and Larry Page in 2002. Photo: Richard Koci Hernandez/MediaNews Group/The Mercury News via Getty Images

Yesterday's announcement that Google's founders, Larry Page and Sergey Brin, were leaving their executive posts at Google parent company Alphabet was a surprise more in timing than anything else, Axios' Scott Rosenberg writes.

What's happening: Page had stepped back from Google itself in 2015. From their perches at Alphabet — Page as CEO, Brin as president — the two founders oversaw the company's "other bets" on advanced technologies like self-driving cars and drones. And even then they had been all but invisible at company events.

  • Now they're dropping even that level of engagement, retaining their board seats but handing operational responsibility for both Alphabet and Google over to Google CEO Sundar Pichai. 
  • What they are doing can really only be described as retiring — though that word hangs a little uneasily on men who are 46 years old.

The big picture: Page and Brin's move marks a transition in which big tech is passing from the control of founders to the stewardship of successor technocrats. 

  • Apple's Steve Jobs died a decade ago. Bill Gates is long retired from Microsoft. Of the five dominant tech firms, only Amazon and Facebook remain under the direction of their founders.

How it works: Tech's startup culture has long embraced the thesis that founders, not investors, are best equipped to shape their companies' destiny. Google is where this approach most definitively played itself out.

  • Brin and Page designed Google's corporate structure with the idea that what happened to Steve Jobs — who got booted out of Apple by his own hand-picked CEO and board in 1985 — should and would never happen to them.
  • They granted themselves special stock with extra voting privileges that assured they would maintain an outsized influence over the company even as it took outside investment.
  • Google's fabulous success taught tech entrepreneurs to adopt this structure whenever they could. When Mark Zuckerberg built Facebook, he could and did.

Between the lines: Page and Brin's retirement raises uncomfortable questions about what happens to this structure as companies age.

  • The founding pair are becoming something like absentee owners now, retaining control over their company without managing it.
  • Yes, they're still the founders who built it. But they won't live forever (unless Alphabet's "bet" on life-extension tech, Calico, really delivers).
  • Assuming their children inherit all that super-voting stock, Brin and Page will not only have founded a company, but a dynasty.
  • The lawyers who designed the super-voting share structure borrowed it from the newspaper publishing industry. There, it helped keep families in control of their inheritances — but left companies ill-managed and ill-equipped to respond to waves of technological change.

Our thought bubble: The industry's founder-power corporate arrangements have succeeded at keeping many stellar startups from being seized by short-term-minded investors. But on a longer horizon, they look more like a plan for the establishment of hereditary corporate control — an incongruously archaic concept for a forward-looking industry.

2. DOD proposes sharing wireless spectrum with industry

Defense Secretary Mark Esper. Photo: Chip Somodevilla/Getty Images

Amid an administration-wide push to develop 5G networks, the Defense Department is exploring ways to share spectrum with wireless carriers and other businesses, as Margaret Harding McGill, Kim Hart and I reported yesterday.

Why it matters: Airwaves are limited, and government and industry either have to divvy up the scarce resource or find better ways to share. In the past, the Defense Department has had to relocate communications systems to new airwaves to make room for commercial services, and sharing would help avoid that.

Driving the news: Defense Secretary Mark Esper and Lisa Porter, the deputy under secretary of defense for research and engineering, held a private dinner with executives from AT&T, Verizon, Sprint, wireless industry group CTIA and others last week to discuss 5G, according to people familiar with the meeting.

  • The dinner was focused on the future of 5G and national security issues, according to a DOD official familiar with the gathering. The official noted that Esper has hosted a series of dinners with think tanks, media and others to discuss defense issues.
  • Spectrum sharing was one of the issues raised, the official said, and noted that the conversations were consistent with recent DOD requests for proposals on 5G pilots.
  • The pilots include a dynamic spectrum sharing project that would see the Defense Department explore sharing spectrum it uses for airborne radar systems with 5G networks.

Yes, but: The Defense Department doesn't run U.S. spectrum policy.

  • The Commerce Department's NTIA coordinates government use of airwaves, while the Federal Communications Commission oversees private sector spectrum use.
  • The wireless industry may be skeptical of DOD, given the push to include a controversial provision in an annual defense spending bill that wireless companies fear would give the military an unprecedented role in spectrum management.

Background: In the past, sharing of the same airwaves between business and government has been thorny and limited.

  • One of the more notable examples is FirstNet, a first responders' network that took years to get going. AT&T operates the network, and can use the airwaves commercially when they're not needed by the first responders.
  • Spectrum sharing has been a technical challenge that forces difficult decisions over who has priority access to the airwaves. For example, consumers and government will both want first dibs during natural disasters or emergencies.
  • But with 5G, spectrum sharing is becoming easier. Carriers are already designing networks to allow for 4G and 5G devices to operate at the same time in the same slice of airwaves. In the past, they had to assign each generation of network its own block of spectrum.
3. Postmates exits Mexico City, cuts some U.S. jobs

Screenshot: Postmates

Postmates confirmed Tuesday that it is pulling out of Mexico City and has cut some jobs in its U.S. operations.

Why it matters: Following the bumpy Wall Street debuts of Uber and Lyft, the on-demand industry is under pressure to prove that it can not just grow, but eventually make money.

"We made the difficult decision to end operations in Mexico City as we focus on our continued growth in the U.S.," the food-delivery service said in a statement, adding that it continually reviews its overall staffing levels "and have made small adjustments as a result."

CNBC reported Tuesday that the company laid off "dozens" of employees.

4. DHS renews facial recognition plans

Illustration: Aïda Amer/Axios Visuals

The Department of Homeland Security recently updated its proposal to include U.S. citizens in facial recognition databases when entering or leaving the country, Orion Rummler reports.

The big picture: This move is part of the agency's long-term plan to upgrade the TSA's biometrics and identification technology, which has included facial recognition testing at over a dozen major airports.

Where it stands: U.S. citizens can opt-out of having their picture processed at airports to verify their identity, per Customs and Border Protection (CBP) policy.

Yes, but: ACLU senior policy analyst Jay Stanley described incidents from the past few months in which two U.S. citizens were told by CBP officers they were not allowed to opt-out of entering the TSA's facial recognition database.

What's new: The department's latest proposal cites the duties of the CBP commissioner as part of why it would have the legal authority to require U.S. citizens to participate in facial recognition at points of entry — as opposed to its nearly identical 2018 proposal.

Background: CBP says it has used facial recognition to match travelers' photos with their identity documents at more than 20 U.S. airports. The agency was testing its biometric exit program at 13 major airports in June of last year.

  • CBP says it discards all photos of U.S. citizens within 12 hours of identity verification.
  • All of DHS’ biometrics and fingerprinting data is processed by Amazon Web Services, according to Jason Kello, AWS senior public relations manager.

The bottom line: DHS has extended its timetable to August 2020 to implement its new facial recognition rules.

Meanwhile: Portland, Oregon, has proposed what would be the nation's most restrictive ban on facial recognition, prohibiting its use by both businesses and local government.

Go deeper: House Democrats ask DHS to address use of facial recognition on U.S. citizens

5. Take Note

On Tap

  • Amazon's AWS re:invent continues in Las Vegas.
  • Qualcomm's Snapdragon Summit continues in Maui, Hawaii.
  • The Senate Commerce Committee is holding a hearing on digital privacy. Witnesses include two former FTC commissioners: Julie Brill, who is now a deputy general counsel at Microsoft, and Maureen Ohlhausen, who is now co-chair of the 21st Century Privacy Coalition, along with representatives from academia, business and privacy groups.

Trading Places

  • Online fine art marketplace Artsy named Everette Taylor as chief marketing officer.


6. After you Login

Yesterday we offered you the bright side of the impending holidays, with the heartwarming tale of a little drummer boy. Today, we present the downside.