Fraud on Cyber: An annotated sample of Gordon's Notes

For the past fifteen years I've been fascinated by how the information technologies of the late 20th century supercharged old frauds. I suspect that our current depression, and the Depression of the 1930s, have enabling technologies as one common cause.

It takes time for law and custom to adapt to new technologies and complexities, and until they do frauds as old as the human mind take on new forms and power.

For almost ten of those fifteen years I've been publishing notes here. In honor of a post I'm working on now I've assembled an annotated biography. There's a sort of grouping order to the list, it's not chronological ...

• Causes of the crash of '08 - how much fraud? (Feb 2009).
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III (April 2008) - The rising wealth of China and India is the best news of the past century. Information technologies, like agriculture, writing, and the printing press, enable both the good and the bad in humanity - including new innovations in fraud. Together they have turned our world upside down.
• Lewis and Einhorn - repairing the financial world (Jan 2009). We didn't do the repairs.
• Michael Lewis on the End of Wall Street. My God (Dec 2008). When we could still be shocked.
• Global finance and parasites (Sept 2009)
• The subprime mortgage story: a problem of the weak (Nov 2007) We are all marks, but some suffer more than others.
• Memphis mortgages, complexity attacks and long term consequences (May 2010) - Information asymmetry is at the heart of IT enabled complexity attacks.
• Emergence: how entropy and incentives create scams (Nov 2009) IT enables complexity, complexity, entropy and emergence yield happy accidents.
• Malice, incompetence, and happy accidents (May 2011) I love this Dilbert cartoon on emergent fraud through IT enabled complexity attacks
• Complexity attack – the illustrated version (Dec 2009) Dilbert again. Scott Adams at his best.
• Emergent fraud: Anthem and automatic payment denials (Oct 2010) - a handy example of a complexity attack
• The Health Savings Account preventive visit scam (Nov 2010) - Complexity attacks are ubiquitous
• When the market is your deity, there is no such thing as corruption (July 2009) Marketarianism defined
• Brad DeLong: Principles for enlightenment 2.0 (March 2008) - One of my earliest Marketarian posts, before I started using that term.
• Scylla and Charybdis: Corruption, health care reform and climate change. (Dec 2009) - Alas, we lost.
• Campaign Finance Reform - The Publicly Owned Politician (Oct 2008) - Treat politicians as publicly traded corporations
• The Empire Strikes Back: complexity, mobile phone plans, and Apple defeated (June 2008) - few remember that Apple lost its war on the phone companies. I think if Jobs health had been better he'd have made another go at this.
• Mobile phone fraud - The accidental data charge and other scams (Nov 2009) - The list of mobile phone related scams is amazing. Perhaps everything we need to know about the past twenty years could be understood from this list.
• InfoUSA and Wachovia Bank sell out the vulnerable elderly (May 2007)
• Marked! Where did all our investments go? (Nov 2008) - we'd already had a lost decade
• Melamine sickened infants: 53,000 and counting (Sept 2008) - Not just an American problem, but the GOP removed much of our ability to respond
• Toxic heparin: fraud is looking likely (Mar 2008). I'm still amazed so little came of this.
• Pet food poison and pithed America (Mar 2008). When I realized Americans were overwhelmed.
• Fraud and Globalization: Toy Story III (June 2007) Do you think this has stopped?
• Poisoned Toothpaste from China: this would be a good time to start freaking out (May 2007). We never did.
• 21st century deception and the evolution of the emergent mind (June 2007). Deception and response made the human mind. So what will our time make?
• Credit card scammers: the story continues (Jan 2007). Yawn.
• Stop net fraud - make the banks pay for the externalities (Oct 2005). Easy to fix.
• Security costs money, it's cheaper for banks to pay the crooks. (May 2005)
• We've come a long way -- fraud 2008 (May 2008) - Yep, we knew.
• The Land of Rand (April 2005) Before the crash.
• Mob scams 200 million in small charges, shades of Netfill (Feb 2004) Yawn.
• Credit Card Fraud explodes -- Yawn. (Sept 2003). We had lots of warning of what was coming.

Managing the Depression: A national small business generation service (again)

I wrote this almost three years ago. It sank without a trace ...

Antidote to The Great Recession: A national small business generation service

Robert Reich asks "Shall We Call it a Depression Now?" ... Brad DeLong says ... not yet.

... In the Great Depression the solution to economic stall was World War II. That's like treating pneumonia with malignant melanoma. Let's not try World War III.

So we can do all the things that have been tried here or elsewhere, depending on how cooperative the rump of the GOP is.

That's good, but maybe we should try a few new things too.

Imagine a national small business generator. A web site built around a knowledge-base of tens of thousands of business plans. Plans for franchise businesses, plans for manufacturing, plans for service businesses. Plans for businesses that need a lot of startup money. Plans for businesses that need a credit card and a mega-Kiva (it's the US, not Uganda) microloan. Plans for all the things people need in bad times, and plans for the good times to come. Plans for business that write the business plans that go into the knowledge-base.

The plans are organized by pre-requisites. Some are tagged for special skills, others for grinding hard work. They come with packaged loans, like the ones the Small Business Administration already offers - and maybe with grants as well. They come with packaged legal infrastructure, and an expedited incorporation package that greatly simplifies current law - a kind of augmented LLC with simplified tax filing. IP protection, the whole nine yards.

Add an option to invest. So would-be investors can browse these small business startups, and choose which to invest in. Optional online skills based training, or sign up with the people who've just launched, you know, teaching businesses.

Most importantly, the plans are tied to a federal health insurance program, modeled after the Minnesota small-business plans available to any two people starting a business.

It's a web site of course.

So one day you're out of work.

Take a day off. Then go to the knowledge-base.

Login. Browse. Search. Compare some plans. Get some advice. Pick on, click, click, sign.

You're in business now. A grant to start. Health insurance. A loan.

It's not new. Similar programs have been very successful in developing nations. It's just a bit bigger.

It could be done.

It's still a good idea, except now I'd add an indemnity program [1] against IP lawsuits combined with reform of the patent process. A reform that might take down the modern plague of Nathan Myhrvold. I know that anything I invent is going to violate somebody's patent. This is poison to high value startups.

The Depression is not going away. I think historians will say it started with the dot com crash, and it feels like we're in the middle of it. It's past time to try something like a national small business generation service combined with patent reform.

[1] For example, the small business generation program would include loans to support payment into a national patent defense program. When a patent attack is launched, government funded lawyers do the fighting. Loans would be repaid from future revenues. It's a form of IP insurance program.

See also

• Uncertainty and Long Depression II - June 2011
• Answering Krugman: Why the Obama administration isn't panicking about the elections - Aug 2010. Not bad for an amateur.
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III - April 2010.
• Employment in the Great Stagnation - Aug 2010. A review, with a focus on education and training and its limitations.
• Krugman on globalization: how to manage the losers - Dec 2007. Back then Krugman was concerned about structural causes of unemployment. For political reasons he doesn't like to mention this now.
• American crisis – imagining a way out - Feb 2010. A sane government could do a lot. American voters gave us the modern GOP, the anti-American party.

Israel's uprising: Is it about the failure of 21st century democracies?

Governmental failure, which is an outcome of a failure of citizenship, is not merely an American phenomenon. Even nations that are not falling empires are feeling the pain.

Israel is our latest example. Like the Wisconsin protests, this is best understood, I think, as a collective protest against a failure of citizenship. It's the middle class beginning to realize that the top 0.5% owns the game.

I hope this movement visits America soon.

Computing's calculator price collapse at last?

My worst predictions have been about the price of personal computing.

I blame it on age.

No, not on age-related dementia. I've been wrong about the price of personal computing since my brain was new. Age related experience rather.

I'm old enough that my first calculator cost the equivalent of a modern laptop, was much bigger and heavier than my MacBook Air, had no batteries, and could add, subtract, multiply and divide. My next calculator cost 1/3 the price and had many more "functions". After that the price of four function calculators went to about zero; they showed up in cereal boxes [1].

It was by far the greatest price collapse in my life. Curiously, a scholar.google.com search didn't find any articles on the collapse of calculator pricing. Scholarship is weird.

That first monster calculator has warped my thinking ever since. The 64KB (not 64MB, not 64GB) Commodore PC I first used was cheaper than my first calculator. I expected the price to collapse. Instead the entry level price of personal computing rose quickly as Commodore and Atari left the market.

When I bought a Palm III, solid state, rugged and elegant, I expected the price to fall. After all, it was made of sand and oil; no complex moving parts. Competition would drive the market downwards I thought.

Instead the price for a PDA rose until they merged into phones (I loved my Samsung Palm flip phone) and then vanished.

Netbooks were next. I saw cheap Linux Netbooks at Target and I knew, at long last, I'd be right. They cost about as much as that first Commodore, and they had no moving parts. Price had to fall. ChromeOS was proof. By 2011 we'd be buying our kids $125 battery-free Chromebook.

Right. This month I bought my "netbook". I forked over $1100 to that fruit place.

So you'd think I'd give up.

That would underestimate my cognitive dysfunction. Surely, having lost the last five tosses, the wheel will come up black this time!

Two years ago, inspired by a Gasee post, I decided calculator style price collapse was coming in the form the $80 Android phone. Today Asymco is tracing smartphone growth. Look at the Samsung Bada phone and Android.

Even a stuck (analog) clock is right twice a day.

[1] Then the low end vanished into software, and standalone calculator became a relatively costly specialty item. Like the desktop PC.

See also:

• http://www.faughnan.com/scans/040314_PalmArchive.pdf: PDF of an archived web page from my 1990s Palm days. Nostalgic suffering.

Lion as a sign of post-Jobs Apple

Every review I read uses OS X iCal and Address Book as examples of the worst aspects of Lion. This one is from Macintouch... (emphases mine)

Macintouch: Mac OS X 10.7 Lion Review (Part IV)

... Others, including iCal and Address Book, are downright horrid to use, no matter how pretty they may look. It's as though everyone at Apple was given the directive "make it like iPad", but nobody coordinated the ensuing work...

iCal was awful in Snow Leopard. I didn't think it could get worse, but it is. Address Book was never a great app, but now it's moved into the "horrid" range.

In my use of Lion I get the same feeling of uncoordinated work. Some features seemed aimed at power users, others at people who'd never used a computer before. There's good work, but there's also the kind of incoherence I expect from a Google or even a Microsoft product.

This is, most assume, the first version of OS X where Steve Jobs wasn't available to enforce a narrative. It's a sign of what Apple is likely to be post-Jobs -- less like the Apple we know, more like Google.

iPhone 6: Make it less precious

This morning I heard the bell toll for my iPhone 4. It sounded like "This accessory is not optimized for this iPhone”.

This, of course, is how an iPhone tells you it is water damaged. The warning message will appear intermittently even though there's no attached accessory.

My son's SIMless iPhone has done this for two years. That's not a surprise, it was a gift from a friend after a white bowl swim.

My iPhone 4 though, it's never been swimming. It has, however, spent a summer in Bangkok CO2-enhanced Minneapolis. It's had to live with sweaty pockets and big swings in temperature and humidity. It's acting like a wet phone, even if that is from ambient moisture.

I turned it off for a while, and a cooler drier time of day it seems well again. It's out of warranty, so I'll wait and see how it goes. (I did use a sturdy wooden toothpick to remove some rock-like lint from around the base connector. [1])

This is annoying. Multiply this annoyance across a family of five and annoyance becomes  a serious problem. The iPhone is just too damned "precious".

I doubt iPhone 5 will be any better. If there's hope, it's for iPhone 6. If Apple wanted to, they could make that phone a much less tender flower.

Why should they want to though? After all, the more tender the iPhone, the more are sold. Until, of course, the brand gets such a reputation for fragility competitors begin to run ads showing "this accessory is not optimized for this iPhone". (Hint, hint).

There's reason for hope. Apple is very good at taking just enough blood -- but not too much. After years of fragile laptops they did move to the more robust uniblock aluminum body.

iPhone 6, please be less precious. In the meantime iPhone competitors, stop talking about apps and start talking about moisture resistance.

[1] Anyone know of an non-builky iPhone case that seals the dock connector? I am consider the OtterBox Commuter.

Update 8/4/11: I wrote a tech post.on wet iphone prevention and treatment.

Google seeking feedback on the new Google Calendar look

Give us your feedback on the new Google Calendar Look is a thread created by a Google Employee to get "feedback" on the new Google Calendar look.

You know, the "look" that uses about half of an 11" screen to show a search bar.

My theory is she hates the wasted screen real estate and needs ammunition. So, please help. Post your comments. Don't hold back.

Unless, of course, you don't want to see your calendar items. Maybe they make you feel stressed. In that case, just relax. Don't bother posting.

If you do post, please mention that the "old" look had far too much wasted white space to begin with.

Nature: daily science news and opinion

I used to read the Scientific American science news feed, but periodically I'd tap on an article title only to find it was a subscriber-only link.

So I switched to Nature science news. Only to find they're doing the same thing - mixing public with subscriber-only posts.

So I'm back to reading other science bloggers.

Does this strategy actually work for publishers, or are they paying good money to bad consultants?

American health care costs: dog, man and Rimadyl

The good news is that Kateva's creatinine is back where it should be and her stomach is holding out. The bad news is that, even if all goes well, her feast on a friend's Rimadyl will end up costing over $1,500 for a straightforward 3 day hospital stay.

Please remember this. Rimadyl, an ibuprofen-like drug sold in the US veterinary market, is beef flavored. It's dog candy, just like the yummy children's aspirin that poisoned my childhood peers. We're used to our evil canine cur stealing food, but we misclassified the drugs as ... not food. She had a different classification. (Unfortunately, she's learned to hide food wrappers, so it took us a day to figure out where the Rimadyl went.)

Poisoned medicinal candy precautions are one lesson from Kateva's folly. It's not the only lesson though.

Once upon a time $1,500 would have covered the costs of a similarly routine human hospitalization. Around that time a time a similarly troublesome dog would have received much less care for much less money.

Health care inflation in the US applies to humans, dogs and cats alike.

Which suggests a natural experiment. We know a lot about rising human health care costs in the US. Why not compare those costs to rising costs of companion animal (aka "pet") care? American dogs and men, for example, have similar health care habits and obesity rates. American dogs and men get the same medications for roughly the same costs.

On the other hand, veterinarians are paid substantially less than physicians. Veterinary care has much less regulatory overhead, and is much more efficient. There is minimal marketing, very simple billing, and a largely market based payment system.

Most of all, the care of the aged is very different. A demented incontinent dog gets a brief and painless house call. A demented incontinent human meets a far crueler and more costly fate.

It would be interesting to plot the trajectory of American veterinary and human health care cost inflation. I think the curves would look quite different, largely due to lower end of life costs. I don't know though; there may be surprises. Curiously, I don't think this study has been done.

What killed Intuit's Quicken?

Quicken is dead.

Yes, you can still buy something called "Quicken" for Windows -- though not in the UK where the produce was terminated four years ago. No matter, Quicken is dead. The failure to produce a reasonable product for OS X is just another nail in the coffin.

Intuit itself may well continue. Their share price has done well over the past two years, and the company has moved well beyond their original product line. They may even be earning money (one way or another) from Intuit's Mint.com, a read-only Cloud product with a few *cough* privacy and security issues

It's not just Quicken. Back in the 80s and 90s personal financial software was a hot product niche. At one point Microsoft Money was a serious player, until antitrust concerns and a failed acquisition left it mortally wounded.

So what happened to personal financial software? Why did it become a niche market for vendors like iBank for OS X?

I suspect it was more than one thing. This would be my guess ...

1. The banks stopped cooperating. I've worked for ventures that relied on transaction and interface agreements; it can be hard to keep both parties motivated and the transaction system healthy. Perhaps at some point in the 90s the banks wanted this business for themselves, and saw internet banking as a competitive advantage. Why cooperate with a vendor that put all banks on a more-or-less even footing?
2. The ability to visit web sites and find current investment values was sufficient for a significant fraction of Intuit's customer base.
3. The American middle class fragmented as wealth concentrated in less than 1% of the US population.

The last of these is, of course, the most interesting.

Quicken is not an interesting product for people with millions of dollars to manage. They will largely use professional money managers. Quicken is not an interesting product for people with very limited savings and investments, particularly if the investments are largely concentrated in 401K accounts. The natural market for Quicken was individuals and families with significant financial complexity but not wealth.

Over the past fifteen years that market went away. The saving grace for niche Mac vendors is that, insofar as some remnant of that market still lives, it's now largely using Apple products.

In the end, I think the collapse of the American middle class killed Quicken.

See also:

• Why Wesabe Lost to Mint - Marc Hedlund's blog 2010 - Privacy, financial habits and entertainment. A cautionary tale for those trying to both do good and win.

Roots of the irrational in American politics: pre-dementia and religion

I've written recently about the role of religion in the reasoning of the GOP base. This is an elephant in the room; pundits will discuss the role of American's exceptional fundamentalism in the context of abortion politics, but not in the context of debt politics. The mainstream media is missing an important ingredient in our political paralysis.

There's another elephant out there, and it will grow over the next ten years. The average American voter will become increasingly demented. Demented people rarely vote of course, but most dementia is the end stage of a very long process. Before a voter is disabled, they will lose the ability to process information, recall all but the most recent events, and adjust their beliefs based on evidence. They will, in other words, become less rational.

How big a factor is this?

We can make some estimates by starting with the end-stage state of clinical demential ...

Prevalence of Dementia in the United States: The Aging, Demographics, and Memory Study

... The prevalence of dementia among individuals aged 71 and older was 13.9%, comprising about 3.4 million individuals in the USA in 2002. The corresponding values for AD were 9.7% and 2.4 million individuals. Dementia prevalence increased with age, from 5.0% of those aged 71–79 years to 37.4% of those aged 90 and older...

... The elderly population (those aged 65 years or older) in the USA is expected to double from approximately 35 million today to more than 70 million by 2030...

Of course these numbers are only a start. What we really want are numbers expressed in percentages of voters, and we want the average disease duration from judgment impairment to disability. Personally I suspect that's about 20 years, but the best data I could find was on a relatively rare and aggressive form of early dementia ...

Pre-dementia clinical stages in presenilin 1 E280A... [Lancet Neurol. 2011] - PubMed result

... Pre-dementia cognitive impairment was defined by a score 2 SD away from normal values in objective cognitive tests, and was subdivided as follows: asymptomatic pre-MCI was defined by an absence of memory complaints and no effect on activities of daily living; symptomatic pre-MCI was defined by a score on the subjective memory complaints checklist higher than the mean and no effect on activities of daily living; and MCI was defined by a score on the subjective memory complaints checklist higher than the mean, with no effect on basic activities of daily living and little or no effect on complex daily activities. De

... Median age at onset was 35 years (95% CI 30-36) for asymptomatic pre-MCI, 38 years (37-40) for symptomatic pre-MCI, 44 years (43-45) for MCI, and 49 years (49-50) for dementia. The median age at death was 59 years (95% CI 58-61). The median time of progression from asymptomatic to symptomatic pre-MCI was 4 years (95% CI 2-8), from symptomatic pre-MCI to MCI was 6 years (4-7), from MCI to dementia was 5 years (4-6), and from dementia to death was 10 years (9-12). The cognitive profile was predominantly amnestic and was associated with multiple domains. Affected domains showed variability in initial stages, with some transient recovery in symptomatic pre-MCI followed by continuous decline.

In this disorder asymptomatic pre-MCI started at age 35, and disability (dementia) at age 50. So the aggressive form has a 15 year course. I would expect less aggressive forms have a longer course, so I'll go with 20 years.

So by these very rough guesstimates about 15% of 50 year old voters will be impacted by "asymptomatic pre-MCI", an early form of cognitive disorder that will impact their judgment. That prevalence will go up with age. Since GOP voters are much older than Dem voters, this, like religious fundamentalism, will be concentrated in the GOP base and it will strongly impact GOP politics.

If you don't understand the two factors of religious fundamentalism and pre-dementia cognitive impairment you will have a hard time understanding the future of the GOP.

Jon Udell on G+'s distracting chatter

Jon Udell has been testing G+. He nails it in two words ...

Distracting chatter is useful. But thanks to RSS (remember that?) it’s optional. « Jon Udell

... I came to accept a lot of distracting chatter as the price of discovering things to read. But Google+ seems to be the camel’s-back-breaking straw. The price has gone too high. So I’m rediscovering what made the blog network so thrilling to me a decade ago: unmediated access to people writing for the love of it in their own online spaces. Distracting chatter has its uses. But it’s optional.

G+ reminds Jon, and me, of why feeds aren't dead yet ...

... Last night’s 17-course meal was a selection of recent essays by Gardner Campbell, Brian Dear,Lorianne DiSabato .... Paul Ford, Cliff Gerrish, Ned Gulley, Eugene Eric Kim,Adina Levin, Hugh McGuire, Cameron Neylon, John Quimby, Antonio Rodriguez, Scott Rosenberg, Doc Searls, Ed Vielmetti, and Ethan Zuckerman... [2]

G+ needs to become useful. If iG+ were integrated into Google Reader, so Google Reader Shares became G+ shares, I'd go back to using it. To do that though, Google would have to support topic stream subscription as well as access controls (circles). Likewise, if G+ replaced Blogger Comments I'd definitely use it.

At the moment however, G+ is an inferior version of Facebook (no group/org Pages) without the (shrinking) number of my friends and family who post on FB [1].

[1] My experience of FB is changing. At first friends and family were sharing and it was useful for that. Most have stopped though. On the other hand, "Pages" for clubs and schools and local kid teams are more important. It's moving away from being a social network to a pub/sub group sharing network -- which starts to look like a simplified version of the web with much less anonymity. Rather a lot like late 1980s AOL and CompuServe.
[2] Great list of new names. I'm exploring each of them.

God's Will and the debt limit

Theocratic states are, by definition, not rational. Stalinist Russia, Fascist Germany, Mao's China, Kim's Korea, Revolutionary Iran -- they all believed God or History would preserve them against all odds.

Israel and America aren't theocratic states, but both nations have a strong strain of theocracy. In the US that strain is concentrated in the GOP. A belief that God is on your side can lead to some otherwise inexplicable and irrationally self-destructive behaviors.

I don't think the US will default - but we are rather close to the edge. We need to understand not only how the GOP got to crazy, but why. Why does a significant portion of the GOP believe that America should do this?

For many Republicans it's their version of Mao, Marx and Mohamed. They are American Marketarians, believers in a peculiar 21st century American fusion of Christian fundamentalism, evangelical capitalism, and calvinism. They believe they are doing God's will, that progressive taxation is the greatest sin -- opposing God's will and justice. They believe that God will save America -- if America follows the true course. Even if they don't personally believe that Obama is the anti-christ, they know he is not a Believer.

They can't make a deal, because they'd be denying God.

That's why we're in trouble.

I went to Hogwarts

Many ages after graduation, it occurred to me that I went to Hogwarts.

It went something like this:

• Gryffindor: Page/Fleming
• Hufflepuff: Ruddock
• Ravenclaw: Blacker
• Slyterin; Dabney/Lloyd

It's not exact of course. Even during my tenure Lloyd was changing character, and Dabney wasn't so much evil as geek-goth.

Still, it is remarkable.

Incidentally, in writing this I was surprised to learn that my Corona still exists ...

In the 1980s, Lloyd had two off-campus alleys, one named "The Place" and one named "Corona" (in reference to the corona of the sun as a metaphor for the outer reaches of Lloyd). The Place used to exist on the corner of Michigan Ave and Lura St; it was removed around 1988 and is now a parking lot. Corona used to be on the east side of Holliston Ave; it was removed in 1992 and the location is now the new parking structure. Because of Pasadena preservation laws, both houses were moved to other places in Pasadena. The Corona house was donated to a minister (for free) who restored it at 1792 Newport Ave, Pasadena, CA. The house is no longer owned by the minister, but it still exists.

I had no idea, when I last visited I saw only the parking log.

Checkmate.

The GOP has been playing voter poker with the debt limit. Obama has been playing a different game: Obama Campaign/DNC Raise $86 Million in Second Quarter.

The American voter has a 3 month memory. Tea Party voters in particular remember what they're told to remember.

Donors though, they think ahead. Corporations can see Obama has given them almost everything they could hope for, while the GOP promises global economic ruin.

GOP leaders know this. That's why McConnell caved. There are still moves to be made, but the game is over.