Apple (NASDAQ: AAPL) CEO Tim Cook took a huge risk by refusing to comply with an FBI-inspired court order to decrypt an iPhone on February 16, 2016. The refusal was a controversial move because the phone belonged to one of the terrorists behind a December 2015 killing spree in San Bernardino, California.

Cook and Apple were almost immediately attacked by a variety of politicians including presidential candidate Donald Trump and US Senator Tom Cotton (R-Arkansas). Trump called for a boycott of Apple, while Cotton tried to label the company as unpatriotic.

“Apple chose to protect a dead ISIS terrorist’s privacy over the security of the American people,” Cotton alleged.

Cook refused citing privacy rights which are guaranteed by the Fourth Amendment to the US Constitution. He refused to go along to protect the security of Apple’s products and customers.

Was it really a Business Decision?

Mr. Cook’s actions were promptly hailed by privacy advocates, but the bold move was as much a hard-headed business decision as it was a principled political stand. He was taking a risk to protect his company’s business as much as average Americans’ rights.

Encryption and security are one of the iPhone’s main selling points. One of the major reasons why people are willing to pay more for an iPhone is that they believe it is very secure. The device’s reputation for encryption is one of its most popular features; especially in countries like China and Argentina where nobody trusts the government.

The iPhone is Apple’s signature product and cash cow, upon which the company’s whole business model is based. It is also selling very well: Statista is projecting that iPhone sales are set to reach a record level of 74.78 million units during the fourth quarter of 2016. It is obviously too early to tell if the encryption fight is driving some of those sales but it could be.

Or was it a Marketing Ploy

Cook, Apple, Apple’s encryption efforts and the iPhone itself received a vast amount of free publicity during the decryption battle. Apple was shown in a positive light; putting its customers’ privacy first, and the iPhone’s security was proven to be so tough that even the FBI could not crack it.

Instead of destroying encryption the FBI and the US Justice Department gave Apple a vast amount of free publicity and possibly made the practice even more popular. Hundreds of million people around the world learned that the US government could not crack an iPhone and that Apple would not cooperate with any government even its own.

That sent a powerful message to would-be Apple buyers in countries like China and Russia where people live in fear of secret police and surveillance. It also sends a message to people in nations like Germany, Poland and Chile where people have memories of dictatorships and oppression.

Apple was able to position itself as the company that puts its customers’ needs ahead of everything else. Cook also showed the world that Apple is serious about encryption and its customers’ interests.

The Risks were not that Great

The risks taken were actually rather minimal because if the encryption battle had continued the main result would have been a court fight. The fight would have involved lawyers Apple already has on retainer, so the cost would not have been small.

Cook would have gained hundreds of millions of dollars if not billions of dollars’ worth of free publicity for the price of a few million dollars in legal fees. There was also a good chance that Apple would have won in court because the legal case the government was making was not that great.

The Federal government was trying to use an old law called The All Writs Act passed in 1789 and signed by President George Washington to force decryption. The All Laws Act was enacted before the Fourth Amendment went into effect in 1791, so it is probably no longer valid. The government would have suffered an embarrassing defeat in court and Apple would have looked all the better.

Tim Cook is a Very Shrewd Businessman and a Brilliant Marketer

At the end of the day somebody in Washington, probably President Obama, realized what was going on and pulled the plug on the debacle. The FBI announced it had decrypted the iPhone by “other means” supposedly an Israeli security company, but most likely a spy agency such as the National Security Agency (NSA) or Her Majesty’s Government Communications Headquarters (GCHQ) in the United Kingdom.

Cook won and looked and very good, the government looked very bad. Apple enhanced its reputation, sold a lot of iPhones and embarrassed the government.

When looked at from a business standpoint, Cook’s decision to fight decryption was a very wise one. Tim Cook may or may not be a freedom-loving idealist but he is a very shrewd businessman and a brilliant marketer.


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