ImmigrantsRubin grew up in Pennsylvania, appropriately for NDS, a company that has employed a disproportionately large amount of Israeli immigrants from English-speaking countries over the years. His undergraduate studies concentrated on physics and electro-optics at the Jerusalem College of Technology, followed by an MSc at Case Western Reserve University and a PhD in biomedical engineering at the University of Southern California in 1981.He returned to Israel permanently in 1982. There were few opportunities for building a career in bio-engineering in the country at the time. Even the local software industry was as yet undeveloped.Software start-up veterans can still recall being turned down for government grants, intended to promote new industrial ventures, simply because ministry clerks could not understand what it was that they were producing in rooms filled with young men and women tapping away at keyboards.If there is no assembly line along which tangible items are constructed, they would ask, where is the product that will go to market? Rubin, who had been involved in developing the Einstein Word Processing system in the United States, introduced its Hebrew version in Israel, successfully making the product the country’s top selling word processing software. He also founded a start-up called Micro-Support focused on PC-mainframe computer communications, before being tapped by Murdoch to lead the new company the News International chief was planning.“Murdoch was heavily involved in foreign exchange trading at the time,” says Rubin. “There was little in the way of electronic security for transactions, and what was available was relatively primitive.”Murdoch sensed a potentially huge opportunity in an untapped market, and began seeking out experts in cryptography.Cryptography, the study of secret code encryption and decryption, has a history stretching back to warfare in the ancient world. Cryptographers like to explain what they do by relating stories that go like this: Alice is trying to have a private conversation with Bob by correspondence.Calvin, an adversarial foe, wishes to eavesdrop by intercepting their letters along the way. In some variations of the story, Calvin also pretends to be Alice to lure the unsuspecting Bob into a trap by sending him false messages. To outwit Calvin, Alice and Bob need to agree on a secret code that they know but Calvin does not know. Furthermore, this code should be simple enough to enable Alice and Bob to compose and read secret messages with ease while at the same time sufficiently complicated that Calvin will not be able to crack it in a reasonable period of time.Over the past century, the methods of achieving these seemingly countervailing goals have become so sophisticated that the top practitioners are among the world’s leading mathematicians.The Shamir legend“Murdoch sent out gurus to find experts in encryption,” Rubin recalls. “There were less than 10 experts on electronic cryptography in the world at the time, and the best was in Israel, Adi Shamir, a professor at the Weizmann Institute of Science.”Shamir’s name is hardly a household word, but his groundbreaking theories on computer cryptography methods are so impressive that he has become a legend among computer scientists. At any time, millions of people around the world routinely use software programs on the Web that are encrypted and compressed using ideas developed by this one man.There were two hurdles, however, to getting Shamir to work for Murdoch. He was a theoretician who preferred solving mathematical challenges to the engineering work required for creating marketable software and, under the standard contract for academic staff, the Weizmann Institute owned the intellectual property rights to any ideas generated by his research.“Murdoch’s people told him, ‘We got the guy but he belongs to the Weizmann Institute of Science.’ Murdoch’s reply was to tell them to buy the Weizmann Institute,” recalls Rubin with a long, rolling laugh. “Murdoch thinks much larger than you and me.”The solution was to create a new company, NDS (News Data Systems), 60 percent owned by Murdoch and the rest held by Shamir, the Weizmann Institute and silent partner Michael Klinger. Nearly all of the initial $5 million investment came from Murdoch. Rubin was hired to create from scratch a company that would translate Shamir’s complex theories into a working product.“I set up the company in Jerusalem simply because I live there and it was convenient,” says Rubin about the company’s earliest days. The NDS founding fathers were Rubin and four of his former classmates at the Jerusalem College of Technology.“High-tech companies are not built on the computers they have or the technology they start with,” says Rubin. “They succeed if they have high-class, grade-A people who will go the extra mile. That was what we had on our select team of engineers, on our founding team and as the team continued to grow.”The theoretical underpinnings of NDS’s work, based on Shamir’s research, were clear from the beginning, but in its initial months of existence, the company found it difficult to identify what its central mission should be. Computer user identification? Secure monetary transfers? Online gambling?The answer to the vital question of what the company should produce eventually came from Murdoch himself. About six months after making his initial investment in NDS, Murdoch began putting together the plans for launching an international pay-for-TV satellite network called Sky Television. That immediately created a need for encrypting broadcast signals to ensure that only paying customers would be able to view the transmissions.“Companies like Disney asked Murdoch about his network’s encryption,” says Rubin. “They wouldn’t agree to their content being broadcast without that solid guarantee.Murdoch told them, ‘I just happen to have a company in the Middle East working exactly on that!’ And then I got that Friday morning call from him.”Solving the problem of cost-effective encryption of TV signals was the breakthrough that put NDS on the road to being a multi-billion dollar company. Television encryption works by scrambling the broadcast content at the source of transmission in a coded manner. Each paying customer receives an expensive decoding box connected to the TV receiver.The decoding boxes come with computer chips containing the secret keys needed for decoding the signal so that the viewer can watch the broadcast program. A non-paying pirate trying to tap into the transmissions sees nothing, unless he can obtain the decoding key.
Combating pirates“In theory it sounds nice,” says Rubin. “But all it takes is one pirate to break in, discover the secret code and share it with other pirates – and then all those $300 boxes are useless.”To combat the pirates, NDS offered clients a dynamic response system to enable them to stay a step ahead in what is in effect a never-ending encryption-decryption arms race. The team of top-notch engineers at NDS continuously implements encryption innovations to ensure that even if a hacker manages to crack the scrambling code, his victory will be short lived because NDS will simply roll out a new, better and more impregnable code.Encryption changes can be made on the fly, often through the cable lines without customers even being aware they are occurring.Rubin describes the development of NDS’s signature TV smart cards as “a stroke of genius.” The smart card is a credit card-sized rectangle with an embedded micro-chip containing the crucial decryption codes. The card is easily installed or extracted in a second through a slot in the decoding box. It is light and small enough to be carried in huge stacks by cable company technicians.“In the worst case,” says Rubin, “companies can recover from piracy by removing the smart cards and replacing them with new cards.” Since the cards can cost as little as $5 each, compared to $300 for the decoding boxes, the savings attained by replacing cards instead of boxes are measured in orders of magnitude.“We always made the point to our customers that by working with us they will make more money,” he says.Three years after the company was founded, Murdoch bought out his partners for $8 million, making him sole owner for a total investment of about $13 million – an incredibly small amount of money relative to the valuation that NDS would eventually achieve. With NDS now a totally Murdoch operation, from ownership to customer base, the NDS management set its next sights on obtaining a major non-Murdoch customer, and put in a tremendous effort to make a sale to DirecTV, a California-based satellite television service provider that had over 10 million viewers at the time.“I spent 18 months shuttling between Israel and the US to persuade DirecTV to hire NDS,” Rubin recalls. “It was that important. That is what put us on the map. Our only customer until then was Sky. Proving that we could provide the encryption for a major customer not owned by Murdoch was like the difference between night and day.”After the DirecTV contract was signed, NDS began to grow rapidly. By 1999, it was ripe for a public offering on the NAS - DAQ exchange with a valuation of over $600 million.“The public offering was also a way of rebranding the company,” Rubin explains. “We couldn’t continue to be seen as part of Murdoch’s news corporation, because we were marketing to networks and companies that perceived Murdoch as their competition. Psychologically, that was very important.”The public offering took place in the midst of the dot-com boom of the late 1990s, which was a mixed blessing. At its peak, NDS was trading at $100 a share.“As a company we were actually making money almost from the start,” Rubin says. “We were raising money not to become wealthy but to expand our market. But we had to work hard just to persuade people we were not another dot-com.”Murdoch cashes outMurdoch cashed out most of his investment in NDS in 2008, giving Permira, a European private equity firm, controlling interest in the company. With losses of nearly $6.2 billion mounting on his investments in the “Wall Street Journal” at the time, the sale of $2.2 billion worth of NDS shares helped restore some health to Murdoch’s balance sheets, as well as proving what an excellent bet he had made in setting up NDS in the first place.Rubin chose to leave NDS in November of that year, after nearly 21 years at the company as co-founder, vice president and general manager. He did not retire to a life of ease, preferring instead to work in yet another start-up. “I went back to my roots in bio-engineering. I wanted to contribute more to humanity than enabling secure TV viewing,” says Rubin.He is now CEO and president of Itamar Medical, a medical device company, which develops and markets diagnostic medical devices based on non-invasive methods of monitoring the cardiovascular and autonomic nervous systems. Its latest products are a wrist device for diagnosing sleep apnea and another device for early detection of heart disease. Rubin commutes daily from his home in Jerusalem to the company’s headquarters in Caesarea.“I find it exhilarating to see the joy on people’s faces when our medical devices help them,” he says about his new job. “I can’t describe the feeling.”Is he proud of his work at NDS? Absolutely.“NDS employs a diverse group of employees, from earrings to earlocks, religious alongside secular,” he says. “We have more than 1,300 employees in Jerusalem. That supports a lot of families. The corporate and income taxes paid by NDS probably amount to more than all the income tax revenues in a small Israeli town.”