Technology and National Security – A Modern Dilemma
Technology continues to evolve at an unprecedented pace, encompassing all aspects of our lives, from social interactions to financial and health information. Even for those born prior to the turn of the millennium, the amount of data on the individual level has created digital footprints that are likely more accurate than what we see in the mirror. Our consumption, digestion, and composition of information that we use as a foundation for action is almost entirely digitally driven. This emersion into a digital world has been escalated by the recent COVID 19 pandemic, with work and education moving almost entirely digital. Technology has flattened the world more than any previous innovation and, up until recently, this phenomenon has been embraced on a global scale. But as barriers are removed through technology, so are the possibilities for significant national security threats increased. We are starting to see some very interesting reactions take place with the biggest players on the world stage.
Technology’s Double-Edged Sword
The reason the world has adopted technology so quickly can be condensed down to three (3) main characteristics: Access, Communication and Cost.
Access: E-commerce expanded access to goods and services to anyone in the world with internet. Social networking gave you access to anyone and everyone instantly. Wikipedia offers immediate access to the largest database of information ever collected in history. Not to mention the power of Google search and Maps. Technology has increased access to all things for all people.
Communication: Technology brought a direct line of communication to almost every person with mobile phones. This was expanded through AOL instant messenger and chat services, improved with Skype and VoIP communication, and continued to evolve with Slack, Zoom, Teams and other multi-media collaboration tools. We can now talk face-to-face with anyone in the world at any time thanks to Technology.
Cost: Historically, such improvements in access and communication came at increased cost, but Technology has had the opposite effect. As it removes barriers and opens doors, Technology also reduces the cost to the individual for all of this, often providing products and services for free.
But there is a double-edge to Technology’s reduced Cost to Access and Communication, put simple “You’re the Product”, or more accurately, “Data is the Product”. Some derivation of this concept has been used or repeated as it relates to consumers’ relationship with technology going all the way back to network television. However, this “Data as the Product” downside is not simply a consumer problem, but a corporate and national problem.
Misuse of Data and Recent Trends
Technology’s ability to collect and store such large amounts of data has made companies like Facebook and Google some of the richest in the world, but it has also created a huge opportunity for cyber criminals and other forms of misuse. These malicious attacks on data started as blunt attacks on personal information for individual financial gain of the hackers. One of the most notorious was Albert Gonzalez and his “Operation Get Rich or Die Tryin” hack of Heartland Payment Systems. But the value of data is not simply financial or monetary. The data is not solely personal, but increasingly corporate and potentially national. We saw an early indication of this play out with the 2014 hacking of Sony Pictures, which was allegedly backed by North Korea in an attempt to prevent the release of The Interview, a satirical movie about Kim Jong-Un.
Recent events have shown us that the new trend is no longer centered around stealing data either, but propagating “misinformation” or acquiring the data indirectly through financial investment into technology corporations themselves. The most notable “misinformation” campaign was the Russian meddling in the 2016 US election, which caused a years long probe through a special counsel and significant changes to Facebook’s platform.
But the more concerning trend for global trade and M&A relates to the indirect acquisition of data through financial investment. We have seen two major actions taken in the last 18 months against technology companies due to underlying national security concerns. In May of 2019, the US took action against Hauwei to prevent the Chinese telecom giant from providing network equipment for the 5G roll-out. Equipment that was theoretically capable of allowing the Chinese government to spy on cell phone communication in the US. There was a host of other underlying issues, such as IP theft and Iran sanction violations, that impacted the decision, but the core threat was a potential Chinese national investment into network infrastructure.
And just this summer the US sought to block ByteDance, the Chinese parent company that owns TikTok, from operating the app in the US and has forced a sale of its US assets, all under the name of national security. The widely popular generation Z content sharing platform is seen as a potential backdoor for copying or accessing personal information.
Not all acquisitions of data are leading to high profile arrests, forced divestitures and trade embargos, however. There was also the less subtle Russian FaceApp last summer that was reportedly collecting millions of facial images for facial recognition software for the Russian government. Could that be used for future deep fake manipulation? No one really knows, but the trend of acquiring data is alarming for national security.
Conclusion
As much as the Technology revolution has flattened the world, the implications on national security could create a drag on the global benefits of Technology. Data theft, manipulation and/or misuse will continue to be a national security threat and we will likely see more and more announcements around the nationalization of technology. And as the power of Technology continues to expand, with true Artificial Intelligence no longer science fiction, this nationalistic trend may become increasing prevalent in our daily use of Technology.
Written by Sampford’s Mike Lambrix.
About Sampford Advisors
Sampford Advisors is a boutique investment bank exclusively focused on mid-market mergers and acquisitions (M&A) for technology, media and telecom (TMT) companies. We have offices in Toronto, ON, Ottawa, ON, and Austin, TX and have done more Canadian mid-market tech M&A transactions than any other adviser.