Posts Tagged ‘California State Teachers’ Retirement System’

Silicon Valley Reconsiders the iPhone Era It Created

January 9, 2018

Debate over iPhone use by young people reflects the misgivings some in the industry feel toward smartphones’ ubiquity

A tussle this week between prominent investors and Apple Inc. over iPhone use by young people comes amid a nascent re-evaluation of the smartphone’s social consequences within the industry that spawned it.

The smartphone has fueled much of Silicon Valley’s soaring profits over the past decade, enriching companies in sectors from social media to gaming to payments. But over the past year or so, a number of prominent industry figures have voiced concerns about the downsides of the technology’s ubiquity.

They include Apple executives who helped create the iPhone and now express misgivings about how smartphones monopolize attention, as well as early investors and executives in Facebook Inc. who worry about social media’s tendency to consume ever more user time, in part by pushing controversial content.

Those are the kinds of concerns spotlighted in a letter to Apple on Saturday from Jana Partners LLC and the California State Teachers’ Retirement System, or Calstrs, which control about $2 billion of Apple shares. The letter urged the tech giant to develop new software tools that would help parents control and limit phone use more easily, and to study the impact of overuse on mental health.

On Monday, Tony Fadell, a former senior Apple hardware executive involved in the iPhone’s creation, also called on Apple to do more, saying on Twitter that adults are struggling just as much as children with smartphone overuse. Mr. Fadell, who started publicly voicing concerns about smartphones last spring, said Apple and Alphabet Inc.’s Google should add features to their mobile-phone operating systems to allow people to track device usage.

“Just like we need a scale for our weight we need a scale for our digital lives,” Mr. Fadell said in an interview. He said he became concerned about the issue in recent years as he saw families at resorts spending time with devices rather than each other, or couples taking selfies on ski slopes rather than enjoying the views.

Apple late Monday issued a statement defending its parental controls and other protections for children who use its iPhones, noting that it started offering some of them as early as 2008. It said many of those tools can be found in the settings section of its devices.

Mr. Fadell’s comments echoed similar remarks last year by venture capitalists affiliated with Facebook, including Chamath Palihapitiya and Roger McNamee. Mr. Palihapitiya, a former Facebook executive, and Mr. McNamee, an early investor and adviser, have raised concerns about social media’s tendency to encourage users through emails and notifications to open an app, causing people to live in front of their screens.

Facebook last year acknowledged for the first time the negative consequences of time spent on its service, noting that passively consuming information on Facebook leads many users to report “feeling worse.” And Chief Executive Mark Zuckerberg pledged to spend this year working to address misuse of its products in part by “making sure time spent on Facebook is time well spent.”

“There’s a dawning realization of the effects these companies have had on us and a sense that we should no longer just go along with it,” said Roger Kay, an analyst with Endpoint Technologies Associates.

The smartphone has transformed society unlike any previous device. Its ability to substitute for the radio, TV, computer and gaming console has made it so powerful that U.S. consumers now spend more than three hours a day on average on their mobile devices, according to research firm eMarketer. That is an increase of more than a one hour from 2013.

A handful of developers have responded to rising smartphone use by introducing apps designed to help curtail time on devices, including Checky, which tracks how often users unlock a device, and Menthal, which provides a scorecard for device usage. Alex Markowetz, who co-founded Menthal, said Apple should already offer a similar time-spent measurement on the iPhone because customers increasingly want to protect their most important assets—time and intellect.

“That’s the one resource you should be willing to pay for to look after,” Mr. Markowetz said.

Mr. Fadell, who helped develop the iPhone’s hardware, said he has broken “out sometimes in cold sweats” thinking about the device’s social impact. Speaking at the Computer History Museum last May, Mr. Fadell compared creating the device to Steve Martin’s movie “The Jerk.” In the movie, Mr. Martin portrays an inventor who creates a bridge to hold glasses on people’s nose. The bridge sells well until people go cross-eyed and sue Mr. Martin’s company.

“I think about that and when the kids are looking at the digital screen and different pictures are coming up and there’s grandpa, me—am I going to be hated by them for what we created? Or are we going to be like Alexander Graham Bell?” Mr. Fadell said.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

https://www.wsj.com/articles/silicon-valley-reconsiders-the-iphone-era-it-created-1515493801

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iPhones and Children Are a Toxic Pair, Say Two Big Apple Investors

January 8, 2018

Two activist shareholders want Apple to develop tools and research effects on young people of smartphone overuse and addiction

Teens took a group selfie with a smartphone in New York’s Times Square on Dec. 1.
Teens took a group selfie with a smartphone in New York’s Times Square on Dec. 1. PHOTO: DREW ANGERER/GETTY IMAGES

The iPhone has made Apple Inc. and Wall Street hundreds of billions of dollars. Now some big shareholders are asking at what cost, in an unusual campaign to make the company more socially responsible.

A leading activist investor and a pension fund are saying the smartphone maker needs to respond to what some see as a growing public-health crisis of youth phone addiction.

Jana Partners LLC and the California State Teachers’ Retirement System, or Calstrs, which control about $2 billion of Apple shares, sent a letter to Apple on Saturday urging it to develop new software tools that would help parents control and limit phone use more easily and to study the impact of overuse on mental health.

The Apple push is a preamble to a new several-billion-dollar fund Jana is seeking to raise this year to target companies it believes can be better corporate citizens. It is the first instance of a big Wall Street activist seeking to profit from the kind of social-responsibility campaign typically associated with a small fringe of investors.

Adding splash, rock star Sting and his wife, Trudie Styler, will be on an advisory board along with Sister Patricia A. Daly, a nun who successfully fought Exxon Mobil Corp. over environmental disclosures, and Robert Eccles, an expert on sustainable investing.

The Apple campaign would be unusual for an activist like Jana, which normally urges companies to make financial changes. But the investors believe that Apple’s highflying stock could be hurt in coming decades if it faces a backlash and that proactive moves could generate goodwill and keep consumers loyal to Apple brands.

“Apple can play a defining role in signaling to the industry that paying special attention to the health and development of the next generation is both good business and the right thing to do,” the shareholders wrote in the letter, a copy of which was reviewed by The Wall Street Journal. “There is a developing consensus around the world including Silicon Valley that the potential long-term consequences of new technologies need to be factored in at the outset, and no company can outsource that responsibility.”

Obsessive teenage smartphone usage has sparked a debate among academics, parents and even the people who helped create the iPhone.

Two teenage boys use smartphones in Vail, Colo., in June 2017.
Two teenage boys use smartphones in Vail, Colo., in June 2017. PHOTO: ROBERT ALEXANDER/GETTY IMAGES

Some have raised concerns about increased rates in teen depression and suicide and worry that phones are replacing old-fashioned human interaction. It is part of a broader re-evaluation of the effects on society of technology companies such as Google and Amazon.com Inc. and social-media companies like Facebook Inc. and Snap chat owner Snap Inc., which are facing questions about their reach into everyday life.

Apple hasn’t offered any public guidance to parents on how to manage children’s smartphone use or taken a position on at what age they should begin using iPhones.

Apple and its rivals point to features that give parents some measure of control. Apple, for instance, gives parents the ability to choose which apps, content and services their children can access.

The basic idea behind socially responsible investing is that good corporate citizenship can also be good business. Big investors and banks, including TPG, UBS Group AG and Goldman Sachs Group Inc. are making bets on socially responsible companies, boosting what they see as good actors and avoiding bad ones.

Big-name activists increasingly view bad environmental, social or governance policies as red flags. Jana plans to go further, putting its typical tools to work to drive change that may not immediately pay off.

Apple is an ambitious first target: The combined Jana-Calstrs stake is relatively small given Apple’s nearly $900 billion market value. Still, in recent years Apple has twice faced activists demanding it pare its cash holdings, and both times the company ceded some ground.

Chief Executive Tim Cook has led Apple’s efforts to be a more socially responsible company, for instance on environmental and immigration issues, and said in an interview with the New York Times last year that Apple has a “moral responsibility” to help the U.S. economy.

Apple has shown willingness to use software to address potentially negative consequences of phone usage. Amid rising concerns about distracted driving, the company last year updated its software with a “do not disturb while driving” feature, which enables the iPhone to detect when someone is behind the wheel and automatically silence notifications.

The iPhone is the backbone of a business that generated $48.35 billion in profit in fiscal 2017. It helped turn Apple into the world’s largest publicly listed company by market value, and anticipation of strong sales of its latest model, the iPhone X, helped its stock rise 50% in the past year. Apple phones made up 43% of U.S. smartphones in use in 2016, according to comScore , and an estimated 86 million Americans over age 13 own an iPhone.

Jana and Calstrs are working with Jean M. Twenge of San Diego State University, who chronicled the problem of what she has dubbed the “iGen” in a book that was previewed in a widely discussed article in the Atlantic magazine last fall, and with Michael Rich of Harvard Medical School and Boston Children’s Hospital, known as “the mediatrician” for his work on the impact of media on children.

The investors believe both the content and the amount of time spent on phones need to be tailored to youths, and they are raising concern about the public-health effects of failing to act. They point to research from Ms. Twenge and others about a “growing body of evidence” of “unintentional negative side effects,” including studies showing concerns from teachers. That is one reason Calstrs was eager to support the campaign, according to the letter.

The group wants Apple to help find solutions to questions like what is optimal usage and to be at the forefront of the industry’s response—before regulators or consumers potentially force it to act.

The investors say Apple should make it easier and more intuitive for parents to set up usage limits, which could head off any future moves to proscribe smartphones.

The question is “How can we apply the same kind of public-health science to this that we do to, say, nutrition?” Dr. Rich said in an interview. “We aren’t going to tell you never go to Mickey D’s, but we are going to tell you what a Big Mac will do and what broccoli will do.”

Write to David Benoit at david.benoit@wsj.com

Appeared in the January 8, 2018, print edition as ‘Investors Prod Apple On Child iPhone Use.’

https://www.wsj.com/articles/iphones-and-children-are-a-toxic-pair-say-two-big-apple-investors-1515358834