Virulent Word of Mouse

September 6, 2012

Calm Economics

Filed under: Considering topical questions,Essays — Shane Greenstein @ 7:24 pm

Calm economics is a flavor of economics that prizes insight developed under the auspices of calm deliberation. Many participants in tech markets today digest calm economics daily. They know it when they see it in the Wall Street analysis, or during investor meetings, like the ones Warren Buffet conducts.

Look, I call this “calm economics” for lack of a better phrase, but the point goes beyond labels. Despite its pervasiveness, many engineers and managers find calm economics to be elusive. Especially when calm economics uses too much jargon or dry abstraction, readers find it challenging to discriminate between the good and otherwise. Yet, doing so can help formulate a firm’s strategy or analyze the market potential for profitability. Calm economics underlay fundamental questions in a wide set of circumstances.

There is no need to guess at the difference between the good and the pretender. It is possible to be systematic. As a step toward developing recognition for it, this column identifies several symptoms of calm economics done well. (more…)

April 8, 2012

The Craigslist Killer and Online Privacy

Let’s discuss the Craigslist killer, online privacy, and police procedures.

Why has this old case from 2009 gotten new attention? The murder itself was rather gruesome and unusual, and the events grabbed considerable attention at the time, especially in the Boston area where they took place. However, it all happened several years ago. Why remember them now? As it turns out, the Boston Police recently released a range of documents concerning the case (which is a good thing – kudos to the Boston Police for being transparent). A few reporters have looked closely at these documents. This has generated a series of online comments about how the police used information technology — ISPs, cell phones, Facebook, email — to connect the murder to the suspect.

Let’s bring the conversation to the attention of readers of this space. It shows how technical progress lowers the costs of performing new technical capabilities, which generate new possibilities for action. A big part of the online privacy debate concerns the simple policy question: how best can society use this new capability? The question is not new, to be sure, but it is hard to appreciate that question without understanding just what is possible. This example offers a good illustration about what online technology made very cheap and what police departments do with it.

On one level there is nothing shocking here. As it turns out, when Facebook receives a subpoena it complies. So do ISPs. So do cell phone companies. Anything anyone does from home leaves an online trace, and any determined police department can deploy subpoenas to associate that online trace with an individual. Police use this routinely when they have a good lead, and it can be useful in catching murderers.

More to the point, online privacy debates are best illustrated in the situations where the debate matters the least, such a successful criminal investigation of a murder. That is because these are the type of situations in which everyone cooperates. As the case illustrates, using comparatively routine processes to trace his actions online, police could take some impressive actions.

In brief, the case makes clear why police should have the ability to use these capabilities, and it makes clear how easy it is to do. The latter observation might be novel for many readers.

Recap and remark

In this instance, the murderer is called the Craigslist killer because he used Craigslist to find his victim. For our purposes, the case has one distinctive feature: Despite being a medical student at Boston University, which surely suggests he had some sort of brain on his shoulders, the Craigslist killer really did not understand how many online clues he was leaving for the police.

The facts of the case are straightforward, albeit gruesome. Back in the spring of 2009 a second year medical at Boston University medical school got into financial problems – due to gambling, it seems. He hatched a scheme to pay his debts through robbery. His potential victims were masseuses he solicited on Craigslist. They did not know him, and he contacted the victims with new email accounts and temporary cell phones. Once he met them, he would handcuff them at gunpoint and rob them. He did this three times before he was caught. The second of these went badly, and he shot the poor victim three times, murdering her in an upscale downtown Boston hotel. (If you want to know all the details about the Craigslist killer, read it here).

Reading this account I was reminded of a sardonic rule of thumb communicated to me by an old friend, who was a professional prosecutor: it is a good thing that most criminals are so stupid, otherwise they would never get caught. He meant the following: it is rather difficult for prosecutors to catch criminals, but many law-breakers make the task much easier by doing a range of things that connect them to the crime, namely, by NOT covering their tracks very smartly. From the prosecutor’s perspective, a thoughtful criminal only need take a small set of actions, and they are much harder to catch. Yet, most of them never think to do so.

The Craigslist killer’s actions illustrate a few such actions, especially on line. These are remarkable because of the contrast with other actions taken by the killer. He was smart enough to find vulnerable victims in Craigslist, and contact them in ways that made it challenging to identify him. He essentially did that by buying prepaid cell phones (which made it hard to trace to him in particular).

As example of one of the dumb things he did… after the murder he kept one of the cell phones at his residence (hidden, presumably, from his companion). But after the murders the police searched his residence and found it. Let’s just say it: such physical evidence is pretty damning, so it is pretty darn stupid to keep the phone at home. I am no expert — but, I dunno’ — it might have been a good idea to throw away the cell that contacted a victim.

Here is another example. Though the killer successfully committed his first robbery, he committed the second one (which led to the murder) in a hotel across the street on the next day. He also used exactly the same method, giving the police a pretty good clue they were dealing with the same individual (which made identifying him much easier). He committed the third one the following night 45 minutes away from Boston (again, using the same method), in spite of the massive publicity surround the murder (which, again, made identifying him much easier).

Anyway, all of this looks pretty stupid to the prosecutors. This guy took action to make his cell phone use anonymous, and then lost a lot of anonymity through his choice of time/place. A little spacing across police jurisdictions, and little patience, and he would have been much harder to find.

But, really, his email and Facebook behavior was clueless, so let’s focus on that. It did lead to the loss of anonymity, and that is worth understanding in detail.

The Craigslist killer acted in ways that tied him directly to his emails. The emails went between him and his victim. If anonymity is the goal – and clearly he had some inkling of its importance through his cellphone purchases – then why didn’t it extend to his email behavior?

He did not behave as if he realized what a trace he was leaving. For example, he acquired his email account the day before he used it to contact his victim, and did it from his home. From his home — whoa, that is stupid. Working from his home made it easy to trace. The email provider and ISP both have access to the same IP address, and the police used subpoenas to connect one with the other.

This association is one of the more remarkable details of the case precisely because the ISP was almost uncooperative. Here is what happened. The police sent a subpoena to the ISP asking for the address affiliated with the IP address they obtained from the email provider. The police got the email address from — no surprise — the victim. In this case, the email provider was Microsoft, and the firm seems to have complied comparatively quickly. In contrast, the ISP — Comcast, in this case — gave a somewhat more bureaucratic answer. They said, in effect, that it would be a couple weeks, unless the police gave them a good reason to be in a rush. Given the high profile of the case, the police had no problem doing that. Then the ISP made an exception to its default behavior, which is a slow answer, and complied quickly.

Notice how important was the online piece. Once the police had that address they could stake out the place. That eventually let them get an ID on the individual as well as fingerprints. They also were able to get photos (from Facebook, and from records at Boston University), which they could then show to the other victims. That allowed them to solve the case in less than a week.

Summing up

There is something deeper running throughout the recent release of documents. On one level, the documents illustrate something that has become almost a standard refrain among the more experience and sophisticated Internet research community, namely, there is less privacy online than in typical offline life. This so despite the attempts of many lawyers to make the online world less vulnerable to government snooping.

The case makes that refrain very apparent: with a search warrant, government prosecutors can find out quite a lot about just about any suspect who has an active online life.

The documents also illustrate another rule of thumb about privacy online. There are two kinds of surfers present, those who seem to behave as if they DO NOT comprehend the lack of privacy online, and those who are wary about whether the Internet will become big brother-ish. The Craigslist killer seems to have been the former.

Looking behind the surface, one other theme runs throughout this case. Nobody other than the killer did anything wrong. The police got it right. They followed proper civil procedure. The firms cooperated. A murder case got solved. The entire experience should make any sensible person want to say “Hurray for civil society.”

Yet, not trivially, the situation also showcases that the improvement in information technology in the last decade is not an unalloyed improvement. Indeed, less restrained governments and police forces can easily use information technology in ways that may have little to do with enforcing criminal law. Tracing emails to political dissidents should be easy. Censoring unwanted communication is no problem. Shutting down the leadership of an electronic communication network also appears comparatively trivial. I am no lawyer, but these events give me additional respect for the importance of subpoenas and other processes to ensure that police use them only when criminal behavior provides probable cause.

December 29, 2011

Technology market awards for 2011

Filed under: Amusing diversions,Considering topical questions — Shane Greenstein @ 12:36 pm

What better way to mark the end of the year than to give out a dozen awards! This post contains a baker’s dozen. They go to firms and managers who took notable actions in technology markets in 2011.

There are three criteria for these awards. It had to involve something in 2011. It had to involve information and communications technology. It had to be notable.

The winners do not give acceptance speeches. The awards come with no prize other than a bit of dry sarcasm, which is dished out at the same time as the awards.

That is about it. If I missed any juicy events, feel free to make suggestions for additional awards this year.

Enough said. Let’s start the fun.

(more…)

November 25, 2011

Mobile mergers and insider baseball conversations

Here is a fact. The FCC recently announced it would move to have a hearing about the AT&T and T-Mobile merger. In response, AT&T withdrew its application from the FCC, delaying the hearing indefinitely (or until AT&T resubmits the application).

What is that all about? At a procedural level it is just a detail — the FCC reviews mergers involving the transfer of licensing. The Department of Justice (DOJ) has a review process too, but just a different standard of review. The DOJ uses antitrust, while the FCC considers whether the merger is in the “public interest.” Even if the FCC delays its review, the FCC must continue to do its review. The first hearing in front of judge takes place in February.

Today’s post provides a little insider baseball about these reviews (The Wiktionary definition for insider baseball “Matters of interest only to insiders”), trying to explain the chess moves to a wider audience. Seemingly small procedural moves provide a window on the likely outcome of this merger. To paraphrase Robin Bienenstock and Craig Moffett of Bernstein Research, AT&T has not thrown in the towel, but they are acting like a firm who understands the odds of success are low. I prefer to think of it this way: economic substance does matter. This requires a brief explanation. (more…)

October 3, 2011

Postal Mail in the Shadow of Email

Filed under: Considering topical questions — Shane Greenstein @ 5:38 pm

Postal mail and electronic mail have coexisted for years, sitting next to one another in an uneasy tension. That was so thirty years ago, as it is this year. Two recent posts – one from Robert Cannon, and one from Randall Stross – offered a quick reminder about how that tension has evolved.

Robert Cannon is affectionately known as “list-serve Mom” to those of us who subscribe to his list serve about telecommunications policy. Perhaps he is as well known for the web page CyberTelecom.org, a goto site for any serious scholar of telecom policy — and that pertains to both its main threads, as well as explanations for the vast arcana and detritus of telecommunications law in the United States.

His most recent post celebrates a now long forgotten chapter of the US postal service, when it first tried to offer electronic mail as a service. The tale is amusing for its absurdities. The USPS initiated its own email service known as E-COM ; and briefly considered banning all private email service. We all know how this turned out, of course, but this is still worth a read – not due to the ending, but due to the journey. Cannon’s summary (a few paragraphs down the page) provides a good laugh.

More deeply, this examples provides an excellent illustration for how existing organizations interpret new technologies through known archictectural lenses, insisting on implimenting the invention in ways destined to fail in the market. The frontier technical aspects presents no problem. Rather, the right business and organizational processes for creating the most value do not yet exist, and the organization cannot find a way to work towards a sensible approach.

While you are on the topic follow Cannon’s article with Digital Domain, Randall Stross’ Sunday column for the New York Times. I have been a fan of Stross’ columns for years. Every few weeks he has 800 words to play with, which is not much real estate. Yet, he combines a reporter’s eye for details and a historian’s flair for storytelling,and he surprises me frequently with the variety of digital topics he covers.

(Truth be told, some years back he also quoted me in a column. I also cannot complain about that.)

The  October 2 column focused on the Postal service today, an organization with half a million employees and the largest fleet of vehicles of any organization in the world. Unfortunately, the organization also faces a mismatch between its present cost structure and the revenue it generates. The USPS may lose as much as $10 B this year.

Stross has fun comparing the USPS to the Pony Express, which had an easy time going out of business once the telegraph emerged. The postal service will not have an easy time, not if their employees have any say in it. He also quotes some public remarks by representatives of the postal union, which makes them appear out of touch with reality. Read the column yourself, and have a good laugh.

There is a deeper issue underneath it all, and I thought the lack of space did not serve Stross well. He raised the question, but did not have time to fully address it. In brief, the Postal service has seen this coming for years. If we are to believe Robert Cannon retelling, some managers in the Postal service saw this coming more than three decades ago. The problem is not lack of foresight.

Rather, for many US residences the universal postal service fills an important niche in their daily lives, while for many others, especially those who are digitally savvy, the postal service is irrelevant, as useless as the Pony Express. But those are just the extremes. I would venture to guess that most US residences fall somewhere in the middle, take for granted the postal service’s reach and ubiquity, able to live without the mail on any given day, but requiring it from time to time. Everyday a few more people switch out of this middle category and into the digitally savvy one, inexorably reducing the economic viability of the Postal service as presently constructed.

Look, even starting from scratch, it would be challenging to structure a postal service that both met the country’s various needs and covered its costs, and retailed the flexibility to change as demand continues to shift. The complexity of these restructuring issues boggle the mind, however, once these are set next to the scale of existing processes, equipment and employees.

I love email as much as the next person, and perhaps even more. And I would not want to get rid of email just to save a few dollars at the post office. But, argh, coming face to face with restructuring yields an unpleasant picture of reality. This mess will cost us all, and for many years to come.

August 10, 2011

An Honest Policy Wonk

Captured regulators routinely take the blame for the ills of regulatory policy in electricity, telephony, and broadcasting. “Captured regulator” has been a pejorative term in these industries for decades.

It’s hard to say when it happened exactly, but this conversation migrated into electronics and the commercial Internet in the past decade, as both industries melded with communications and media businesses. Pieces of the topic even show up in the net neutrality debate.

Quite a bit of nuance got lost in the migration. While many episodes in the history of telephony and broadcasting illustrate regulatory capture, even the theory’s proponents know about exceptions—namely, situations that ought to have been captured but were not. For example, consider the Internet’s birth. There were numerous opportunities for regulatory capture in the Internet’s transfer out of government hands, and, yet, capture theory only explains part of the events and not the entire outcome.

I will refer to other episodes below, but for now, take that example as motivation for modifying the popular theory of regulatory capture. When does the regulatory environment work despite the tendencies toward regulatory capture? As best I can tell, the explanation has something to do with the presence of an honest policy wonk.

(more…)

July 25, 2011

Two graphs show newspaper revenue decline

What happened to newspaper revenue? This short post contains an answer in two graphs. The graphs show the growth and decline in aggregate newspaper revenue.

More to the point, the graphs illustrate the timing of the decline in revenue and also the acceleration in decline. The graphs provide useful information about changes in the composition of revenue, which helps explain why revenue declined.

The graphs come to this space from my esteemed colleague, Tom Hubbard, who is the John L and Helen Kellogg Professor of Management & Strategy. Tom teaches a class on advanced strategy for MBAs, and had compiled the data for a module in the class.

In brief, Tom read a previous post in this space about the decline in newspaper revenue, and we got to talking about how a small amount of well chosen data can illustrate insightful analysis.  He showed me what he had collected and I was impressed. He graciously offered the graphs as additional evidence for the conversation. (more…)

July 11, 2011

Did one invention lead to the decline of newspapers?

Filed under: Considering topical questions,Internet economics,Short observations — Shane Greenstein @ 7:50 pm

Did one invention lead to the decline of newspapers? What is economic myth and what is true?

Don’t get me wrong. The decline of newspapers is NOT an economic myth. The business continues to lose more revenue each year, and so does other advertising-supported media, such as magazines. Much of this happened in the last decade. It is  unclear if executives at any newspaper have any good strategic choices. None of this is a secret.

But one invention and one firm did not produce this outcome. The typical story blames Google and Internet search, and does so a little too blithely. There is a grain of truth in the common story, but it misses a lot. While it is correct that the firm to profit the most from this trend is Google, Google alone did not kill the newspaper.

This post is not an apology for Google. Rather, it presents a broader economic history than typically found in public discussion. As more issues get debated in public it important not to premise decisions on a distorted view of how we got here.  (more…)

June 22, 2011

The Open Internet Order

After a year of hearings and considerable public discussion, the Federal Communications Commission (FCC) adopted the Open Internet Order on December 21, 2010.

Fireworks flared on the blogosphere almost immediately. Net neutrality advocates cried that the order betrayed and sold-out sacred principles, while Tea Party supporters heaped scornful criticism at government activism. Both sides made intemperate and grim forecasts about the Internet’s future.

Levelheadedness left the political sphere as well. Pushed hard by Tea Party sympathizers, the House of Representatives passed House Joint Resolution 37 in April 2011, largely along party lines, disapproving of the order. As of this writing, the Senate hasn’t yet taken up the measure. President Obama promises to veto it.

Frankly, this conversation needs a calm and considered middle ground, not utopian visions abutting practical considerations. The Internet has never lacked government oversight, and Internet participants have occasionally compromised on neutrality to function. There are subtle economic issues to debate here, and simplistic absolutes don’t contribute much to finding reasonable economic solutions. (more…)

May 2, 2011

The Direction of Broadband Spillovers

Revenue for US Internet access more than doubled during the first decade of the millennium owing to some simple arithmetic: the number of households using the Internet increased, and prices for broadband access averaged twice those of dial-up. More concretely, in the summer of 2000, while 37.1 percent of US households connected with dial-up, only 4.4 percent had broadband. By October 2009, 63.5 percent of US households connected with broadband.

The upgrade to broadband initially led most US households to spend more time online. At first, much of that new time went into the same activity found in dial-up (for example, checking e-mail, reading news, and shopping). Only gradually did users add activities that dial-up couldn’t handle (such as watching YouTube video, downloading music, or reading many blogs). By now, the transformation is rather apparent: broadband has created more online users and, moreover, these users are more valuable users of electronic commerce and advertising-supported media.

The relationship between broadband’s growth and other online markets is what economists call a growth spillover—that is, growth in one market spilled into another. Spillovers can be negative or positive. For example, broadband’s diffusion produced negative spillovers for the printed magazine and newspaper business, and it produced a positive spillover for online video sharing, such as YouTube.

Spillovers don’t need to be confined to a geographically local area, so they’re often challenging to observe and trace. This column focuses on understanding the geographic direction of the positive spillovers from broadband to online retailers and advertising-supported media, about which we know very little. To whom did the positive gains flow, and where?

(more…)

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