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Why US Firms Won't Dominate the New Data-Privacy Market

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Surely somebody will profit from the online surveillance freak-out, but it likely won't be a domestic player.

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The word is out from the heart of Silicon Valley: John McAfee has invented an inexpensive, pocket-sized gadget that stops spies from accessing your personal data.

You remember McAfee. He's a serial entrepreneur, a Silicon Valley legend, a yogi, a New Age enthusiast, and most definitely a cuckoo bird. The man faked a heart attack to escape extradition to Belize for investigation on a murder charge. (He says he was set up by corrupt authorities.) The writer of a profile for Psychology Today tried to understand him by reading a book titled Almost a Psychopath, but eventually concluded that McAfee may be just a "master manipulator" who has an extreme preoccupation with sexual performance-enhancing drugs.

He also is a deeply paranoid person, possibly for good reason.

And if you want somebody to help you "go dark" on the Web, you want to get a paranoid. The kind of guy who thinks the government of Belize is out to get him.

Moreover, this is the person who created the first commercial anti-virus software program. He sold it 20 years ago, though it still bears his name, probably to the intense embarrassment of the management of Intel (NASDAQ:INTC), which now operates McAfee as a subsidiary.

McAfee describes his latest invention as a portable device that is designed to communicate with a network that floats in order to remain inaccessible to spies. The network therefore becomes a "dark Web," or at least a dark corner of the Web that cannot be accessed by conventional means. Aptly named Decentral, McAfee said it could sell for under $100, although he suspects it may be banned in the US.

He introduced the idea at a technology conference in San Jose, California, last weekend.

Since the recent revelations that the US National Security Agency (NSA) was accessing the private data of millions around the world, many people have become concerned about data security, even if they do not live lives as colorful as that of John McAfee.

Surely it's a business opportunity waiting to happen. The question is, who's making it happen?

One short and unpleasant answer is, nobody in the United States. Firms in Germany, Brazil, and many places in between hope to cash in by creating offshore havens for data, according to the Wall Street Journal.

"Countries are competing to be the Cayman Islands of data privacy," Daniel Castro, a senior analyst at the Information Technology and Innovation Foundation, told the newspaper.

In short, the US is not an appealing home base for data security operations at this point, given the reports of the NSA's spying activities.

That seems so unfair. Vastly more efficient operations based in China, Russia, and the Mideast are hacking data all over the world, bent on criminal mischief, corporate espionage, and/or political mayhem. By comparison, our spies are a bunch of cubicle moles poking around in other people's mundane data in search of the occasional terrorist sympathizer.

But there it is. No matter whose spies you're trying to evade, a search for products can lead to some good practical solutions. A brief guide from the Washington Post's Wonkblog lists five simple-to-use tools for consumers who aim for privacy in their online and phone communications.

Alas, no public companies are mentioned here, so no investing opportunities for fun and profit.

At least we can hope that some of the major American companies that are accused of opening a back door to the NSA, accidentally or on purpose, will deal with the public relations problem.

In the wake of the NSA allegations, Google (NASDAQ:GOOG) has announced it is accelerating a project to encrypt data as it is sent between its data centers. It also is reportedly testing encryption on files stored in its cloud services.

The company has certain legally mandated (but, naturally, secret) responsibilities to respond to NSA demands for information. However, the Washington Post notes, the company can at least restore its reputation as "a reliable steward" of its users' information.

It may be a losing battle, at least in terms of US spying. According to the New York Times, the NSA has poured billions into circumventing Internet encryption codes since the year 2000, when they started becoming ubiquitous on the Web.

And that brings us to another short and unpleasant fact, relevant to that question of the business of privacy protection. Various major companies offer encryption software programs. But, a writer for The Guardian points out, those widely used commercial products could well be far more vulnerable to government encryption-breaking efforts than open-source offerings.

And we're not talking about just US spies, either.
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No positions in stocks mentioned.
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