I'm glad we're now discussing our
assumptions about what Echo can/does do.
You present a scenario that I certainly did not imply, namely that Echo must be performing voice recognition in the cloud. Also, you make it out as though that is the conceivable alternative possible to on-chip voice recognition, from a privacy point of view.
Let me present another scenario to you - Echo keeps "listening" to all our conversations - on-chip of course - but creates additional metadata that is stored locally and uploaded to Amazon servers periodically.
What might theis metadata be?
- Audio streams that were close enough to Echo's threshold for "Alexa", but not quite, thus got rejected (perhaps some of them were falsely rejected, so let's keep a copy to feed our algorithm).
- Data on how often Echo heard voices in the house, from which rooms and at which times. Perhaps Amazon would like to know when a household wakes up, when it likes to listen to music or when to order groceries. Why should Google Now have all the fun?
I could give many more scenarious why Echo might want to retain some data from ambient conversations, so as to make itself more "useful". It needn't store the entire audio stream in these cases, but just metadata or logs.
Such a scenario falls outside your 1 vs. 2 design options; is plausible; useful; and fairly easy to program too. I'm sure there will be many others like that.
My point is - don't implictly trust a closed-source device that is inside your house and always listening in all directions. If Amazon were so careful about the Echo user's privacy, wouldn't they have mentioned the word at least once in the entire page? So let's not rush to give them a free pass till we know they even want it, much less earn it.
P.S. My profile says I'm a "recovering" engineer, not a "recording" one :)