The Pebble and the Avalanche

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Current Revolutions in Business and Technology

by Dr. Moshe Yudkowsky,

author of The Pebble and The Avalanche: How Taking Things Apart Creates Revolutions


Tue, 2005-Dec-20, 10:01

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Diamonds: Carat, Color, Clarity, Cut — and Corruption

The Gemological Institute of America (GIA) is embroiled in a bribery scandal. The GIA provides independent ratings of diamonds, but a handful of inspectors were recently cashiered for taking bribes. I expect that the institute will weather this problem because they are addressing it head-on — and their customers are smart enough to insist that they do so.

The GIA disaggregates appraisals of diamonds from the act of selling diamonds, which generates trust; unfortunately, they also are in a near-monopoly position, which means little competition to keep them on their toes. In response to the scandal, they've instituted a new "compliance" position, but I'll be interested to see if they find themselves hiring outside auditors to futher disaggregate authority and rekindle trust.

Mon, 2005-Nov-14, 09:40

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Sony's Actions Shine Spotlight on Blu-Ray

The revelation that Sony installed "rootkits" — a particularly dangerous form of malicious software — on consumer's computers, without their knowledge, raised a firestorm of protest against Sony. At best, Sony's actions were incredibly self-destructive; at worse, Sony executives face criminal prosecution.

All this raises questions about Blu-ray, which Sony is pushing (along with other manufacturers) as the next generation of DVD. Blu-ray will definitely contain "digital rights management" provisions; but Sony's high-handed actions highlight two important questions:

  • Will Sony treat customers fairly?
  • Will Blu-ray be safe and secure for customers to use?

As for the first question, we can dance around the word "fair" forever; I will just bring up a few points about Blu-ray and digital rights management. The players can be disabled at the whim of the industry. The "content providers," of which Sony is one, say that they are concerned that once again someone will crack their copy protection scheme; this is simply "protection" as far as they are concerned. There's no clear understanding of what constitutes grounds for disabling a player; for example, it's entirely possible a player could be disabled if you attempt to make a copy of a Blue-ray DVD — and regardless of what rights you might have under a "fair use" doctrine.

The idea that players can be disabled, and then have new software installed, raises fascinating security problems. If a Blu-ray player is networked to the rest of your computer gear, the player must be trustworthy — and so does Sony. Given that (a) Sony's "rootkit" is already being exploited by evildoers and (b) Sony demonstrated that they can't be trusted not to put malicious software on your machines, it's far to state that a Blu-ray player in your home may very well constitute a severe security risk. Not to mention, of course, what may happen to your machine if evildoers figure out how to maliciously disable it.

Let me close with an example of what Sony apparently considers "fair." Years ago I saw a nice Sony MP3 player that was the size and shape of a pen. I asked the owner what he though of it, and the owner replied that he liked it — but he could only play a song three times, and then had to download it again. This was Sony's way to "protect" itself against "stolen" content.

Standards bodies usually engender trust by removing authority from the hands of a single company and placing it into the hands of a consortium, but that trust only infuses the people who are able to inspect the standards and participate in the decision-making process. Everyone else's trust may be earned by transparency and by good deeds. Unfortunately, I can't even download the Blu-ray specification without a license, and I'll bet even those specifications do not cover all the details of what a particular manufacturer may choose to do in the name of "digital rights management."

Blu-ray may be technically interesting, but as a consumer, I'll avoid it if I possibly can.

Tue, 2005-Oct-11, 07:30

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The Flow of Money

The majority of trading in stock shares of Mexcian companies is done on U.S. exchanges, according to the print edition of today's Wall Street Journal (page A15). The U.S. stock exchanges have better rules and better enforcement of those rules; traders rightly feel more comfortable trading on the U.S. exchanges than the Mexican ones. The Mexican companies choose to abide by the stricter U.S. rules to increase the company's stock prices.

The ability of companies to list their stock on another country's stock exchanges breaks the historic relationship between location of the company and the accounting rules the company must follow — a disaggregation of authority as well as location. Breaking the relationship allows companies to be more creative in how they regulate their affairs: Some relocate to off-shore havens with lax accounting rules, and others relocate to places with stricter, more trustworthy, and hence more valuable accounting rules.