Eight Of America's Most Secretive Companies

Secrecy is critical to more businesses than most people might imagine.

Entire industries are based to some extent on the process of creating goods and services and then putting them behind walls of secrecy. The defense industry is first among these. Defense contractors are required to take secret information from the military to build weapons and surveillance systems. This information is often important to national security, and defense contractors set up elaborate systems of protection to ensure the military’s orders and their products remain secret.

The nature of a news scoop, essential for media outlets to capture readers attention and gain subscribers, requires the quiet acquisition of information and the protection of it until it can be published. If  competing media have the same information, their edge with consumers is lost.

Patents are used so that secrets can be disclosed and then protected from use by a company’s competition. When a patent expires it can have a destructive effect on corporate value. A firm that manufactures generic drugs essentially takes drugs with expired patents and creates a nearly identical product that is less expensive. Once a drug can be replicated, it often takes away much of a company’s sales for that drug.

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The success of much of the tech industry is also based on this ability to keep product design and components secret. Analysts spend days breaking down components of new devices like the iPhone to figure out how the product works and what the components cost. Apple’s edge and success in consumer electronics would be lost if this information was available before a product launch. Almost every consumer electronics launch is preceded by months, if not years, of keeping designs and components private.

The need for secrecy in business has led to a shadow industry known as industrial espionage. The practices of “spying” used to be physical. A spy would have to be near the product to describe or photograph it. Electronic surveillance replaced this in the second half of the 20^th century and “bugs,” wire taps, and digital theft of documents became more popular.

Today, espionage is incredibly sophisticated. Chinese code hackers broke into Google servers at the end of last year. The ability of marketers to collect online data from people using the Internet has become highly sophisticated. Privacy today is often a matter of blocking systems that are complex enough to break though encryption walls. The wars between hacker and protector of digital data has become progressively more sophisticated.  Obviously, the federal government has developed encryption to protect its information.

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This is a list of eight of the most secretive companies in America,  firms which rely heavily on keeping secrets. A breach of their most confidential products or services could damage their current business value and, over time, even destroy a company.

1. Apple Inc.

Apple’s marketing tactics rely on secrecy.  The less that is known before an announcement, the more interest in the announcement the company creates. Information regarding product details and plans is highly classified. And the company goes to great lengths to protect it from the press, the public, and most of its own employees.  The company has been known to plant false information among its workforce. If the bait is taken and phony information leaks to the press, the guilty party can be identified and fired. Apple has also sued several bloggers for covering the company. Recently, the company encouraged a swat team raid of Gizmodo reporter Jason Chen’s home after he wrote about the iPhone 4G prototype that he had acquired before its release.

2. Xe Services LLC

Xe Services, formerly known as Blackwater Worldwide, is the largest of the State Department’s private security contractors.  Best known for its involvement in the Iraq War, the company deals with highly classified information and works on top-secret military assignments. At times, Xe’s level of secrecy extends even beyond the reach of Congressional oversight. In 2004, the CIA hired Xe Services to take part in a secret program to locate and assassinate top Al Qaeda operatives.  This information was not released to the public until it was reported in the New York Times in August, 2009.

3. Renaissance Technologies LLC

Renaissance Technologies is one of the largest hedge funds in the world, with a portfolio of over $15 billion in assets. Like many large hedge funds, Renaissance is known for using a secret “black box” formulas. These black boxes are the cornerstones of the ability of these funds to predict price changes and market movement. The equations are produced by many specialists with non-financial backgrounds, including mathematicians, statisticians, physicists, and even astrophysicists. Theses “secrets” are the keys to out-performances of the market, and their success or lack of success puts billions of dollars of client investments at risk, or helps bring more capital into these investment operations. Hedge funds like Renaissance are known for being extremely careful with security entering and leaving the office, often prohibiting employees from bringing in personal computers, cameras, or flash drives which they could use to steal company algorithms.

4. Google Inc.

Google is so dominant in the search engine business that the company’s name has become synonymous with searching the Web.  As a result of its success entire industries have been established to help improve companies improve search engine results for their websites.  To maintain its superiority, the company keeps its search algorithm shrouded in secrecy. And in order to keep search engine optimizers guessing, Google frequently improves upon their algorithm, with 550 improvements in 2010 alone.

5. Boeing Co.

It’s not a surprise that the government keeps military information confidential.  This holds true for publicly held companies who work with the military as well, including aerospace and defense corporation Boeing.  The company keeps its research projects under wraps to shield sensitive military operations and to stay ahead of its competitors. The company is responsible for top-secret technology including the Milstar II, a surveillance plane capable of producing high-detail satellite maps in-flight, and key components for the strategic missile defense system. The company’s employees have such high security clearances that the Chinese government inserted one operative to work as an engineer. Former Boeing employee Dongfan “Greg” Chung, was convicted this summer of “six counts of economic espionage and other federal charges for storing 300,000 pages of sensitive papers in his Southern California home. Prosecutors alleged the papers included information about the U.S. space shuttle, a booster rocket and military troop transports.”

6. Monsanto Co.

The Monsanto Company, an international, agricultural, biotechnology super corporation, has gone to great lengths over the years to protect its valuable intellectual property. According to the company’s website, its researchers pioneered genetic engineering in plants, discovering how to transfer a specific piece of DNA from one organism to another to do create “value-added biotech traits.” In order to protect its intellectual property, the company has sued about 150 farmers over patent infringement.  The company also has a history of bribing officials to avoid government investigations. In 2005, the company was fined $1.5 million for having Indonesian officials bribed to avoid an environmental impact study on its cotton crops.

7. PGP

PGP (Pretty Good Privacy) is a data encryption company owned by Symantec, one of the world’s largest security software companies. PGP uses a secret, complex algorithm to encrypt email and other priority files sent between businesses. In recent investigations, the FBI, British police, the Italian police and US Customs agents were unable to access files encrypted with PGP and were forced to demand the electronic key to decode them. In 1996, a well-regarded cryptographer characterized an earlier version of PGP’s algorithm protection as “the closest you’re likely to get to military-grade encryption.”

8. The Coca-Cola Company

When Coca-Cola was first created 120 years ago the recipe was kept so secret that only two men knew what actually went into it. According to Mark Pendergrast’s “For God, Country & Coca-Cola,” the labels were removed from the ingredients so not even the employees knew what was being used to make the tonic. In the early 20th century, then company chief Ernest Woodruff, made Coca-Cola’s “secret formula” critical to its image, distinguishing it from other brands and appealing to customers’ desire for something special and unique. Although a number of recipes have been published as the original, the company refuses to acknowledge or even consider their authenticity.

-Charles B. Stockdale, Michael B. Sauter, Douglas A. McIntyre