November 2, 2010

Were you to believe the media, Americans have little love left for taxes. It's just not their cup of tea. Were the media doing their job, they would expose this as a collective delusion. Hide them cleverly and even the most rabid right will gladly pay taxes in the United States.

Truth may be delivered in a sound bite, it does not follow its proof is as concise. Reader, allow me a whole fillip.

At bottom one needs to understand how challenging it is to comprehend privacy and security. Even highly educated, articulate people fail in this regard. Perhaps one will object those privileged to write for the Financial Times represent a very suspect sample. Let my critic conduct a more scientific study. I dare say I will proven right.

Read Lucy Kellaway on security (*). Backed with a pleasant style and an abundance of primary sources, her normal remit is to expose corporate abuse of both English and logic. Now she wittily tears apart "a story posted on the Bank of America Merril Lynch staff website" as proof of "what a muddle companies get into when they start thinking about security".

The story is about an employee whose home has been robbed. The thief "pinched [...] three family laptops" while leaving behind her "company laptop [...] attach[ed] with a security cable to the leg of a heavy piece of furniture". Lucy Kellaway's irony targets the employee's lack of caution towards her own goods, the futility of securing data with a steel cable and the probable lack of interest in whatever data was on the bank computer.

On the first point, is Lucy Kellaway suggesting the employee should have drilled a hole into the case of her own computers, which must have lacked the proper attachment for this type of cable? On the second point, the columnist confuses physical goods security with data security. For the price of a special attachment and a steel cable, the company kept its fully loaded laptop, probably worth several thousand dollars. Not bad a deal.

Lucy Kellaway correctly underlines that physical security measures alone will do little to deter a determined data thief. Still, slowing him down increases his risk and one may assume the bank took care of deploying strong enough an encryption scheme on the laptops it owns.

As for the last point, Martin Lukes's brilliant creator forgot her own plot. Wasn't this high flyer first brought down to earth by data found by the police on his Blackberry (1)? Back to her day job, Lucy Kellaway thinks that, because it is mundane, data is of "no conceivable interest to anyone".

Given the Merril Lynch employee had used a grand piano as the recommended "piece of heavy furniture" and her family owned at least three computers, is it far fetched to imagine she could have been personally targeted by a knowing thief who intended to reap some insider's information?

What about the challenge she tosses to us regarding her own company computer? She is no Winans, whose "Heard on the Street" columns moved markets, and her professionalism prevents her from storing data on her Financial Times computer if it relates to the bank on whose board she sits. How could her rough drafts prove valuable to anyone but her usual readers, who would rather wait for the finished product?

I do not need to answer her challenge. I only want to state that most, not necessarily all, mundane data may be of interest to some. But I cannot resist asking her whether she carries three smart phones at all times, one for each job and one for her private life. Will she soon need a caddie?

Her conclusion may be too close to the truth to be disputed. But her faulty reasoning adds to the muddle she decries about security. It is not what she meant to do, yet beating a drowning man on the head with the stick in her hand is what she does in the end.

Much as Most is not the same as All, the existence of One invalidates statements about None. Unfortunately the slip of logic Lucy Kellaway committed is common enough and goes a long way to explain why data aggregators can gorge themselves on our personal information. How more mundane can it be? Therefore, aggregators impress upon us, it presents no conceivable danger to our privacy.

They have convinced Michael Skapinker. In a recent and otherwise fine column in honor of print (**), he does note that "it is impervious to viruses, hackers and other electronic intruders" but ignores privacy, the most favorable argument to his cause. A connected device totally secure from all "intruders" still cannot be used without allowing the provider to record one's every move at his end of what Jonathan Zittrain calls a tether. I do not say Amazon does it today with its Kindle, or for that matter the Financial Times with its online edition. I state they may and can at their own will.

Thus privacy is held in general low esteem. "The Federal Trade Commission decided to drop its investigation into Google's allegedly inadvertent collection of consumer data during street mapping in 2007" write Stephanie Kirchgaessner and Richard Waters (***). Who believes Mark Zuckerberg is losing any sleep over Miguel Helft's report that he lets "marketers [...] glean private data on Facebook" (****) (2)?

Privacy benefits however are not only to avoid negatives, measured by the cost of potential blackmail and id theft, but also to record positives, cashing in part of the added value the parties to a transaction create and split between themselves and their trusted intermediaries.

Take personal advertising. Assume for simplicity's sake my attention is free (3). If this minute is worth $1 to A, $40 to B, $80 to C and $100 to D, my seeing an ad can add up to $100 worth of global value. Trust the advertising network to extract $80 from D with an auction, leaving nothing to me and $20 to D (4). Sure the "free" service I receive from the intermediary has some residual value to me but where is the market to assess it?

On a fair market, I would conduct the auction myself, mindful that my confidential profile, however attractive, competes with all other users for finite ad budgets. The market organizer which would provide the underlying mechanism to both consumers and advertisers would strive to minimize the price of its services to remain competitive. Any attempt to steal information from market participants would be deemed a breach of fiduciary duty.

However, when "Kleiner Perkins [...] create[s] a $250 million fund to invest in social start-ups", per Miguel Helft's report (*****), it is not in a belief in fair and efficient markets. Three years ago, when Facebook value was less than $10 billion, Brad Stone had already figured out it implied capturing the added value created by consumers and advertisers. This requires in turn to exploit both consumers' private data and their naivety.

When economic agents are consistently compelled by force or stealth to give up money to a more powerful party, some call it a rent. I see it as a tax. Given the popularity of Facebook, despite blunder after blunder, I conclude Americans love taxes as long as they stay hidden in plain sight.

Unless the winner of the current US elections owes data aggregators, is there a better tax to eliminate with absolutely no loss in revenue?

Philippe Coueignoux

• (*) ......... The thief, his victim and her company laptop, by Lucy Kellaway (Financial Times) - November 1, 2010
• (**) ....... It is in print that our words will live on, by Michael Skapinker (Financial Times) - October 26, 2010
• (***) ..... Watchdog ends Google probe, by Stephanie Kirchgaessner and Richard Waters (Financial Times) - October 28, 2010
• (****) ... Marketers Can Glean Private Data On Facebook, by Miguel Helft (New York Times) - October 23, 2010
• (*****) . A Fund to Invest in Social Start-Ups, by Miguel Helft (New York Times) - October 25, 2010
• (1) in fairness, Martin Lukes was up to dodgy insider trading, which Lucy Kellaway strongly recommends against,
  ..........but insider information is not dodgy per se. Its presence on many professional laptops is quite reasonable and, for hoi polloi, quite mundane.
• (2) a formal process is necessary to prevent advertisers from subrepticiously targeting personal profile data which is either irrelevant or illegal
  ..........for more details see the role of a tEC domain maker.
• (3) in real life it is not, as my most limited resource carries opportunity costs, but my reasoning still stands.
• (4) in a Google adWords auction, the auction winner pays the price offered by the next highest bidder.