OpenAI Hack Highlights Rising Cyber Threats

0:00This podcast is brought to you by ReliahQuest. Cyber criminals are constantly attacking. They want your data, they want your identity, they want your innovation. ReliahQuest fortifies your business with agenteic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliahQuest, agenteic defense for the enterprise. Learn more at ReliahQuest.com that's R-E-L-I-A-Q-U-E-S-T. .com. Hacker's use anthropics clawed to break in to open AI. Plus, Russia ceases control of Nestle's operations in the country as the Kremlin cracks down on more Western businesses. And the Bank of Japan follows the Fed in hiking interest rates as more central banks see their inflation fears materialize. What they had to do is raise interest rates really quite aggressively to take an inflation that came after both COVID and then combined it by Russia's invasion of Ukraine.

1:02So this time they don't want to be caught napping again, right? It's Friday, September 18th. I'm Luke Vargas for the Wall Street Journal. And here is the AM edition of What's News, the top headline, Sam Business Stories, moving on along today. Hacker's have revealed an important vulnerability at open AI. We are exclusively reporting that independent security researchers used anthropics AI tool Claude to gain access to an open AI employees chat GPT account and change the company's core algorithmic code. The researchers reported the flaw through open AI's bug bounty program earning a $6,500 payout. Oxford Analytica, senior cybersecurity analyst Tatya Bukwadza, said the hack is concerning, but not for the obvious reasons. AI labs have been running this bug hunting programs for a while now. This is intended to identify some of the vulnerabilities that exist in their systems and then address those vulnerabilities

2:02and then help those organizations patch them. I think in some ways it is inevitable that cyber vulnerabilities are going to exist even in the most highly sophisticated systems, including AI labs like open AI and anthropic. This is just one that we heard about. I'm sure there are a lot more that security researchers have been able to identify. The more concerning part here is that these tools are becoming more and more capable. This was a vulnerability that the researchers independently were not able to exploit was the latest version of Claude. And so the more sort of worrying part beyond these tools being used for cyber defense operations is then ending up in the hands of malicious actors, like Iranian, Russian, Chinese hacking groups. We've already had reports from many of these AI labs that they were able to stop malicious operations where Russian and Iranian cyber groups were trying to leverage this Western AI tools for espionage or other kind of adversarial activity.

3:03Open AI says the issue has been resolved and that it temporarily reassigned a quarter of its production engineers to audit and bolster its internal cyber defenses. Meanwhile, there has been a major revelation in the high stakes copyright infringement case involving open AI and Microsoft. According to a legal filing on the SEAL yesterday, top executives at both companies knew that scraping news websites to train their models may eventually damage or even destroy those publications, but they did it anyway. The New York Times sued Microsoft in open AI in December 2023, alleging that copilot and chat GPT trained on millions of pieces of Times content and relied on it to serve up answers to users. The tech companies have argued that their actions constituted fair use and that their use of the material was ultimately transformative. In one internal Microsoft document, director of Applied Science Brent Hecht warned that the company's AI strategy had started a doom loop that would harm both the models

4:07and the entire web at the same time. Many publishers have historically relied on web traffic to generate ad revenue and gain new subscribers. Wall Street Journal parent newscorp has content deals with open AI and meta and two newscorp subsidiaries have sued another AI company perplexity. French airline Air Corsica is grounding newly upgraded airplanes after its pilots reported cases of suspected fumes leaking into the cockpit and cabin, causing them migraines and other symptoms during flight. Over the last year, Journal Aviation Reporter Ben Katz has been investigating so-called fume events, finding that leaks of oil and other aircraft fluids into jet engines have surged in the last decade. So what we know now is that the manufacturers, which are ATR, a joint venture between Ebersenli and NATO, and then the engine maker, Pratt and Whitney, they're busy investigating these reports into toxic fumes, the implications of which could go quite far,

5:09at least far beyond the French airline involved at Corsica, where we're looking at potentially as the manufacturer identifying an underlying design flaw that could affect the 100 aircraft that are currently in operation using these engines, particularly in Europe and Asia flying on regional routes. It's a small but important part of the industry and we're talking about planes that will see a lifespan of about 20 to 30 years, not counting the hundreds more that will come over the program's life. So the implications of whether there is an underlying design flaw could really have a rolling impact, and not just on these aircraft, but also in this more contentious debate and fight in the industry over the toxicity of these kind of fume events. Air Corsica said in a statement, it's monitoring issues affecting air conditioning on its planes, and that so far it hadn't formally established a link between pilot reports and any specific technical source. An ATR spokeswoman said its analysis of the root cause of the issue was continuing,

6:10well, spokespeople for Pratt and Whitney and Airbus declined to comment. And shares of Nestle are falling this morning after the Kremlin seized the food giants Russian assets and placed it under temporary external management. French retailers Aushan and Lee Roy Marlin were hit by similar moves. Russia in 2023 unveiled rules allowing it to temporarily take control of the assets of companies from countries that Russia deems unfriendly, a power that it used against the likes of food maker Danone and Brewer Karlsburg. As of last year, Nestle had six factories in Russia. The company said today that it's committed to protecting its rights and ensuring the continuity of its business operations. Aushan and the owner of Lee Roy Marlin didn't respond to requests for comment. Coming up, the Fed's warning on inflation reverberates around Asia. Central banks sound the alarm over price rises. More on that, after the break.

7:13When you're ready to take AI further, faster, your infrastructure should be ready too. Spectrum business delivers the network and the tools to help you expand at the rate innovation demands. Learn about the Spectrum AI Accelerator at Spectrum.com slash AI. The Bank of Japan today raised its benchmark interest rate to its highest level in 30 years. And no matter that that's just one and a quarter percent now, because as journal Tokyo Bureau Chief Jason Douglas is here to discuss, still a shift that could have far reaching effects. Jason, I'd love this quote that you got from analyst Rory Green, who said that the yen super tanker is turning. I assume he is referring there to the potential that, albeit slowly, Japanese investors here could respond to this rate hike by beginning to bring their money home. That's exactly right. So the super tanker is $5 trillion worth of foreign assets accumulated over many years. That stocks and bonds in the US and in Europe and all over the world.

8:16And all that money has flowed out of Japan in search of better returns. And it did that whenever interest rates here were pinned near zero. And there wasn't a lot to be had here. So the concern is that this money will start to flow back towards Japan as interest rates rise. That Japanese investors will be tempted to sell some of their foreign holdings and put them back in Japan into Japanese bonds, into Japanese stocks, which after all are doing very well. I don't think at this point we need over state or over egg. How big these worries are. This is the beginning of what will be a probably relatively shallow hiking cycle. Right? The B.O.J. is really normalizing policy. It isn't kind of hiking rates aggressively as we've seen with other central banks recently. The other thing to bear in mind is that there's still a bit gap between the yields you can get here in Japan and the yields you can get elsewhere in the world. So 10-year bonds here are on 3%. The yield on treasuries is around 5% to 10 years. So there's still all of attraction to foreign assets for some Japanese investors. And then the other thing, of course, is there's an AI boom. And that's the sort of thing that keeps people interested in stock markets in particular in the US.

9:20So super tankers, a good way to think about it. It's a very big but very slow moving phenomenon. Slow moving. And we should be very clear. A move that the US Treasury Secretary wanted the bank of Japan to take. So clearly Washington isn't singularly concerned here about asset repatriation. That's right. So Treasury Secretary Scott Bessent hadn't even made it very little secret of the fact that he would like to see higher rates in Japan. He assisted Tokyo in propping up the Yen over the summer. I think his real concern was that if Japan was forced to sell treasuries all of a sudden, then that's the kind of thing that could be problematic for the Treasury market that might cause a spike in yields. Might spill over into other assets, that kind of thing. Got it. And Jason, I know you mentioned earlier, the expectation is that the BOJ's rate hiking cycle here is likely to be relatively shallow. But what if it isn't? After all we heard from the governor of the Reserve Bank of Australia today, she was warning that the bank's concerns about stubborn inflation were in fact materializing. A sentiment that we actually sort of seem to also get from Fed Chairman Kevin Warsh earlier this week,

10:25justifying the Fed's rate hike. Let's hear a clip from him. There's no hiding from hot spots around the world. And our judgment about what is the most likely or least likely of the geopolitical situation has changed. Jason, are we likely to hear more central bankers sounding the alarm over inflation in the coming months on the backs of that geopolitical situation, the war in the Middle East, especially? Yes, I think we probably are. So central bankers were stung pretty badly in 2022, right? When energy prices showed up and they were generally considered to be very slow to raise interest rates. And so if you remember what they had to do as raise interest rates, really quite aggressively to tame the inflation that came after both COVID and then compounded by Russia's invasion of Ukraine. So I think what we're seeing is a real effort by central banks to kind of get ahead of things in a way that maybe they didn't last time these kind of problems came up. I've been speaking to Wall Street Journal Tokyo Bureau Chief Jason Douglas. Jason, I appreciate you. Thanks so much. My pleasure, Luke. Thank you.

11:25And finally, we all know that escaping the daily grind feels good. But according to a growing body of research, travel may be a legitimate tool for improving mental health. And while no doctor is writing prescriptions for a week in Portugal just yet at least, contributor Heidi Mitchell says that vacations could practically be considered preventive medicine. It can decrease loneliness. It can help you with resilience. It can make you feel like you can master things that you never thought were possible. And all these things can translate to other skills when you get home. According to research, people who traveled far away, rather than staying at home, scored roughly 15% higher on a standard of well-being. International travelers also reported fewer symptoms of depression with even the stressful moments of a visit to a new and far away place proving beneficial. And so, instead of going to the market in Thailand and navigating food that is unfamiliar to you

12:25or driving somewhere where the signs are not in your native tongue, and all these things that you figure out that you can do, you can handle stress. And you can recover from things that are unexpectedly stressful. That's called psychological resilience. And the last per, they say up to maybe four months. Another research drawing on 66 interviews with cruise passengers also came to the conclusion that travel helps people to feel more themselves. At home, we have all these roles like mother, father, worker, boss, gym instructor. But when we are traveling, we kind of shed all of that. And we are just our authentic self. And that can be really good. And that's it for what's news for this Friday morning. Today's show was produced by Daniel Bach and Hadi Moyer, our supervising producer, is Sandra Kylhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Otherwise, have a great weekend. Treat it like an escape if you can. We'll see you back here on Monday.

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