Benjamin Friedman:

What is sorely missing from the protracted debate about how to clean up after the latest crisis is any real discussion of what function our financial system is supposed to perform and how well it is doing that job - and, just as important, at what cost.

For years, much of the best young talent in the western world has gone to private financial firms. At the individual level, no one can blame these graduates. But at the level of the aggregate economy, we are wasting one of our most precious resources.

These talented and energetic young citizens could surely be doing something more useful.

Economic decisions are supposed to turn on weighing costs and benefits. It is time for some serious discussion of what our financial system is actually delivering to our economy and what it costs to do that.

Richard Hamming:

If you do not work on an important problem, it's unlikely you'll do important work.

Alan Kay:

If the children are being instructed in the pink plane, can we teach them to think in the blue plane and live in a pink-plane society?

J. Peder Zane:

The notion of an aspirational culture, in which one endeavors to learn what is right, proper and important in order to make something more of himself, is past.

Pico Iyer:

It seems that happiness, like peace or passion, comes most freely when it isn't pursued.

Why Not Do Something Useful?

Simon Johnson and James Kwak:

For the past 30 years, financial innovation has increased costs and risks for both individual consumers and the global economy. Today's challenge is to rethink financial innovation and learn how to separate the good from the bad.

The main purpose of financial innovation is to make financial intermediation happen where it would not have happened before. We cannot say that innovation is necessarily good simply because there is a market for it. The fact that there was a market for new houses does not change the fact that building those houses was a spectacularly destructive waste of money. Therefore, when it comes to financial innovation, we must distinguish beneficial financial intermediation from excessive, destructive financial intermediation.

The key to any successful regulatory regime is discerning the difference between good and bad financial innovation. The presumption should be that innovation in financial products is costly and should have to justify itself against those costs.

Instead of a regime where any product is allowed so long as it is sufficiently disclosed, we should consider a regime where only certain types of products are allowed to exist, and they are allowed to vary only along specific dimensions.

The Economist:

Financial progress is about learning to deal with strangers in more complex ways.

Paul Graham:

Don't just not be evil. Be good.

Simon Johnson, in the May 2009 issue of The Atlantic:

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong.

Robert Levine:

The Great Depression brought the New Deal to the United States. It brought the rest of the world Nazism and universal war. This time, though, many nations have nuclear weapons.

"Maybe we could" is the limit of optimism in this paper. The world ahead looks difficult.

An exchange among siblings:

Lisa: "Can't you see the difference between earning something honestly and getting it by fraud?"

Bart: Hmm, I suppose, maybe, if, uh ... no. No, sorry, I thought I had it there for a second."

A final thought from the bankers:

Revolutionize your heart out. We'll still have this country by the balls.

Finance: Before the Next Meltdown

Gautam Mukunda:

The crisis shows that while networks can substantially improve organizations' efficiency and performance, they can also leave them vulnerable to an unpredictable cascade of failures. The network-centric approach promises to allow commanders to understand battlefields with unprecedented clarity and fidelity. The financial crisis, however, shows that these tools can mislead as well as illuminate due to their simplification of a far-more complicated underlying reality.

The fog and friction of war push today's force, as they pushed all of its predecessors, toward generalization. The force deals with the unexpected, so its individual components retain the ability to succeed at a variety of tasks, rather than focusing on performing a single mission with the highest degree of effectiveness. Leverage for a financial institution is, in two crucial ways, akin to specialization for a military unit. The more specialized any organization is, however, the less slack capacity it will have to deal with unanticipated contingencies, and the more it will have to transform itself when unpredicted events occur.

Nassim Nicholas Taleb:

Many hedge fund managers ... are just picking up pennies in front of a steamroller. And sometimes the steamroller accelerates.

Michael Schrage:

The economics of 'information-rich' environments inherently inspire perverse incentives that frequently generate unhappy outcomes. The military must rigorously guard against the threat of 'diminishing returns' on its net-centric investments. Drawing on the author's private sector experiences with net-centric transformations, several approaches for reassessing the military value of information transparency are suggested.

Ross Anderson:

Information insecurity is at least as much due to perverse incentives. Many of the problems can be explained more clearly and convincingly using the language of microeconomics: network externalities, asymmetric information, moral hazard, adverse selection, liability dumping and the tragedy of the commons.

Gautam Mukunda:

The "fallacy of misplaced concreteness", first articulated by the influential philosopher and mathematician Alfred North Whitehead, played a key role in the financial crisis and poses a threat to the network-centric military of the future. The fallacy is captured by the phrase "the map is not the territory." A map is a simplified representation of the territory it describes. A more detailed map is not necessarily a more useful one. More detail provides a closer reflection of reality, but it can also confuse those who do not need such complete information. The fallacy of misplaced ... [ Read More (0.2k in body) ]

Caught in the Net: Lessons from the Financial Crisis for a Networked Future

Katie Shilton:

Participatory sensing opens the door to entirely new forms of granular and pervasive data collection. The risks of this sort of data collection are not always self-evident. Even if we give people options for managing their data, they may not understand the benefits of doing so. Data literacy must be acquired over time through many avenues. Public discussion and debate about participatory sensing will be critical to educating participants about the risks and possibilities of sensing data.

Because time is such a critical factor, application interfaces should encourage participants to engage with the data from the point of collection through analysis, long-term retention, or deletion. Systems should enable continued engagement to allow participants to change their data practices as their context changes. The crux of engaging individuals with decisions about their data is refusing to put that data in a black box. Instead, analyzing, learning from the data, and making ongoing choices about the data become the goals of sensing.

Two from 1999:

Deployment of ubiquitous computing technology will increase rapidly over the next decade, reaching epic proportions and raising challenges in dealing with a deluge of sensor data and real-time context/metadata.

Thad Starner has suggested that a possible solution to these privacy problems is to make information collection systems wearable. If the user carries all of his computer and context tools on his person, he alone has the ability to decide who gets access to this information and who does not.

And where are we now?

The number one privacy risk associated with suspicionless Customs searches of laptops is the fact that Customs officers will view innocent people's personal information.

Bruce Sterling:

Poor folk love their cellphones!

Samantha Power:

There are great benefits to connectedness, but we haven't wrapped our minds around the costs.

Decius, in August 2008:

Don't worry about privacy ... privacy is dead ... there's no privacy ... just more databases ... No consequences, no whammies, money. Money for me ... Money for me, databases for you.

Noam Cohen's friend, in February 2009:

Privacy is serious. It is serious the moment the data gets collected, not the moment it is released.

Steve Bellovin et al:

Architecture matters a lot, and in subtle ways.

Decius, in March 2009:

What you tell Google you've told the government.

Nouriel Roubini:

Things are going to be awful for everyday people.

Four Billion Little Brothers?

Kurt Kleiner:

Time for a pop quiz.

Jack is looking at Anne, but Anne is looking at George.

Jack is married but George is not.

Is a married person looking at an unmarried person?

* Yes
* No
* Cannot be determined

Christopher J. Ferguson:

Many people like to think that any child, with the proper nurturance, can blossom into some kind of academic oak tree, tall and proud. It's just not so.

Kleiner:

How a question is asked dramatically affects the answer, and can even lead to a contradictory answer.

Steve Bellovin et al:

Architecture matters a lot, and in subtle ways.

Kleiner:

Your algorithmic mind can be ready to fire on all cylinders, but it can't help you if you never engage it.

Brian Ulrich:

Over the past 7 years I have been engaged with a long-term photographic examination of the peculiarities and complexities of the consumer-dominated culture in which we live.

Kleiner:

We are all "cognitive misers" who try to avoid thinking too much.

Walter Russell Mead:

The difference between fundamentalists and evangelicals is not that fundamentalists are more emotional in their beliefs; it is that fundamentalists insist more fully on following their ideas to their logical conclusion.

Why Smart People Do Stupid Things

Janet Napolitano:

Today [27 August 2009] I announced new directives to enhance and clarify oversight for searches of computers and other electronic media at US ports of entry -- a critical step designed to bolster the Department's efforts to combat transnational crime and terrorism while protecting privacy and civil liberties.

The directives, available at DHS.gov, will enhance transparency, accountability and oversight of electronic media searches at U.S. ports of entry and includes new administrative procedures designed to reflect broad considerations of civil liberties and privacy protections -- measures designed to ensure that officers and agents understand their responsibilities to protect individual private information and that individuals understand their rights.

From the 10-page CBP Border Search of Electronic Devices Containing Information:

In the course of a border search, with or without individualized suspicion, an Officer may examine electronic devices and may review and analyze the information encountered at the border, subject to the requirements and limitations provided herein and applicable law.

Officers encountering business or commercial information in electronic devices shall treat such information as business confidential information and shall protect that information from unauthorized disclosure.

If after reviewing the information ... there is not probable cause to seize it, any copies of the information must be destroyed, and any electronic device must be returned.

Without probable cause to seize an electronic device or a copy of information contained therein, CBP may retain only information relating to immigration, customs, and other enforcement matters if such retention is consistent with the privacy and data protection standards of the system of records in which such information is retained.

DHS Secretary Napolitano Announces New Directives on Border Searches of Electronic Media

From the Loose Tweets Sink Fleets Department:

Something very strange is underway. I went to get cash out of an ATM this morning, and the ATM had no cash. So, I went to another ATM, and it too had no cash. Strange, right?

What in the world is going on? Oh, it's a hacker causing all of this chaos. A hacker has gotten into the U.S. Federal payroll system and electronically issued paychecks ... to himself! totaling billions of dollars!

How did a hacker get into our network? Did you lose a laptop or PDA? Or maybe you gave out DoD systems information to a salesman?

From the archive, The Horror, The Horror:

Owner: Take this object, but beware it carries a terrible curse!

Homer: [worried] Ooooh, that's bad.

Owner: But it comes with a free Frogurt!

Homer: [relieved] That's good.

Owner: The Frogurt is also cursed.

Homer: [worried] That's bad.

Owner: But you get your choice of topping!

Homer: [relieved] That's good.

Owner: The toppings contain Potassium Benzoate.

Homer: [stares]

Owner: That's bad.

Information Assurance Awareness

Remember kids! In order to maintain an untenable position, you have to be actively ignorant.

People who learn slang secondhand will tend to use it incorrectly.

Mr. Hanson has no truck with those who do not mow their lawn, keep their music down or clean their cars regularly.

Mr. Hanson does not cotton to getting too involved in his neighbors' lives.

I'm kind of a farmer -- I start with dirt and make it grow.

Why, I wondered, had I bought into the "weed" label? Why had I so harshly judged an innocent plant?

This time, I decided to set the rules aside.

"It's one of a number of substances that we'll be taking a hard look at."

But will anything really change?

There's something very scary about having millions of people waiting to see what you're going to do next.

"I wake up in the middle of the night thinking, 'How did it ever get to this point?'"

It is easy to give in to despair.

You don't follow your bliss. You learn not to follow your bliss, to let your bliss follow you.

The truth is we're lousy at recognizing when our normal coping mechanisms aren't working. Our response is usually to do it five times more, instead of thinking, maybe it's time to try something new.

If you really care about somebody, you give them constructive feedback. And if you don't care about somebody, you only say positive things.

If you are not found, the rest cannot follow.