The Huawei-an Islands...

Yesterday, at the close of the "Transformational Trends 2013 and Beyond" conference hosted in Washington by the Foreign Policy Group and the Department of State, Secretary Clinton offered a wide range of observations on pressing international issues and trends.

When speaking to the issue of the contested Senkaku (Japanese)/Diaoyu (Chinese) islands in the East China Sea, and while stressing that the U.S. has not taken a position on which country has legal sovereignty over the disputed isles, the Secretary offered a colloquial recounting of a  Chinese counterpart having suggested that if Japan could simply "nationalize" the East China Sea islands (which are actually little more than large, yet strategic, rocks), then why could not China lay claim to Hawaii?

Secretary Clinton reported having responded something to the effect of "go ahead, and then we'll go to arbitration and prove that we own them."  Her point, she went on, is that while the U.S. has not taken a position on the ownership of the Senkaku/Diaoyu, the U.S. feels strongly that the dispute should be settled according to legal principles.  Indeed, she made more than one such reference to the need for China to address such and related matters on a "rules-based" basis.

Bravo.

So, recapping, if I understood the Secretary correctly, if China claims sovereignty over the disputed rocks then China should follow rules-based processes to prove its claim.

(For anyone who has been reading this blog over the last two years, you doubtless know where this is going...)

My employer, China-based Huawei Technologies, has for a number of years suffered unfounded, unsubstantiated U.S. Government claims that the company is somehow a threat to U.S. national security.  No proof.  No rules-based process.  Not too different from China staking a wild claim to the Hawaiian islands.  With all due respect to the Secretary, the U.S. can't have it both ways.

If we want China to behave according to certain norms, then it is incumbent upon us to set the right example.  If the U.S. Government believes that Huawei is somehow more vulnerable to compromise than its competitors which, regardless of country of headquarters, are all also researching and coding and manufacturing in China, then the U.S. Government should follow a rules-based process to prove its claims.  And, when those claims are proven to be no less wild than a hypothetical Chinese claim to Hawaii, the U.S. Government should accept reality and bring an end to its opaque, rule-less, market-distorting Huawei blockade.

Just sayin'...

Thai Food, Credit Card Security and Huawei

I went to a local Thai restaurant for lunch today. When it was time to pay, my credit card was declined. Puzzled, I offered an alternative card, paid, and returned to the office.

Straight away, I called the credit card company about the first card and, after jumping a number of very appropriate security hurdles to establish my identity, I was informed my card had been suspended due to suspicious activity.

Expressing my thanks, I asked about the suspicious activity and it was explained that four identical purchases for $30-something dollars had taken place at a jewelry store in Austin Texas. I confirmed that I hadn’t been in Austin Texas so the charges were obviously bogus. I asked, however, why someone would use my account for such petty charges. The fraud team representative explained that this is a common approach – small charges that won’t be noticed, ramping up over time.

She then asked if my family was in possession of all of the cards on the account. I said I thought so. Checking the record, she then noted that it appeared as if no card had been presented for the transaction, that my account number had been entered manually, so whoever did it didn’t need my card, just the number. Then, she tossed out: “Or it could have been on an online transaction.”

Click…

I asked about the jewelry store. She gave me the name. I Googled it. Yes, the store did sell jewelry – class rings. As well as caps and gowns, yearbooks and other graduation-related paraphernalia. And, notably, the “store” was an e-tailer, not a store - a one-time mail-order shop.

Click…

Now that I’d figured out what was going on, I explained to the fraud team representative that I am the proud father of 17-year-old quadruplets, each half a year shy of graduating. A quick check with home confirmed that the kids had recently ordered caps or gowns, which I further relayed to the fraud rep, asking her to remove the hold on my card since the purchases were legitimate. I expressed thanks for the strict procedures that the credit card company had in place and she apologized to me for any inconvenience.

The intent of the security measures was sterling – prevent fraud and theft. The filters were good: An unusual location and an unusual purchasing pattern. And the prophylactic was powerful – shut it down. Yet, some of the assumptions were flawed: no card presented doesn’t mean hand-keyed. And the due diligence was scant: Just because an outlet sells jewelry does not mean it is a jewelry store. But these were afterthoughts, embellishments - the location/pattern profile was enough.

But, best intentions aside, the profile was wrong. Not because the system couldn’t comprehend or was ignoring the facts, but, rather, because the system is blind. But, importantly, as demonstrated in the above, it can be corrected.

There is an interesting if indirect analogy in this story that applies to Huawei and the treatment it has received in the U.S.

The credit card fraud prevention system blocked a transaction because the nature of the transaction didn’t meet an acceptable profile therefore it was suspicious. Huawei, based in China, has been blocked from doing business in the U.S. because it’s Chinese heritage does not meet an acceptable profile for a multinational technology company, and therefore is deemed suspicious.

The cap and gown transaction need not have been blocked, and, indeed, was approved once it was explained that while it was unusual, it was not suspicious. The profile – a one-size-fits-all – was understood to have been incorrect.  Huawei is in a similar situation, but has thus far been unable to help customer service accept the facts. Rather, the fraud team is insisting, based on flawed assumptions and a lack of due diligence, that if it doesn’t meet the profile, it can’t be approved. The profile cannot be corrected.

Quadruplets are unusual and beyond the average persons’ frame of reference. So too are privately-held multinationals with a Chinese heritage. Just as the number of multiple births has increased over the last decade, so too will the number of independent Chinese multinationals. With time, “acceptable profiles” will evolve. What are we waiting for?