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Weekly Column

Defending Your Life: Why Terrorists Trade Stocks

Status: [CLOSED]
By Robert X. Cringely

Five years ago, I began work on a new documentary for PBS called "Electric Money." I mention it this week and next because the show will air for the first time on October 3rd, and I want you all to see it. In the course of those five years of production, our story about how information technology has altered the world of money changed only slightly. In that time, the financial markets accelerated through one of the biggest booms in history. Computers got faster, but the trends they followed were already set. Yet in the past 10 days — days that followed by several months our completion of the show — much has been brought into question because of the terrorist attacks in New York and Washington. I have gone from promoting an interesting little show about a subject that touches all of us to defending it. "How does this continue to be relevant?" ask the reporters who might have written stories, but now aren't quite so sure. This is a challenge I never expected to face.

"Electric Money" is relevant because markets are open, stocks are being bought and sold, people are writing checks and using credit cards. The economic basis of our culture is unchanged. Nor will it change as a result of terrorist acts. And here is a very important point: NOR DO THE TERRORISTS EVEN WANT IT TO CHANGE. A thief who steals money relies on the institutions of the state to give value to that money. Otherwise, it is only paper. If terrorists, as has been rumored, are shorting stocks to fund their ambitions, then those ambitions don't extend to destroying the economic system, or they'd never get to take any profits. Which brings us back to the subject of our program, how information technology has changed the world of money. The issues we raise and the events we describe will affect us for the next century. Understanding how the world of money really works just makes us all stronger.

Two important themes in our show are "liquidity" and "transparency." Money is moving around the world faster than ever, and this mobility (liquidity) has been generally good for the world's markets and investors. At the same time, we now have systems in place that can trace this fast-moving money and that helps provide transparency — the ability for all parties to be equally informed about what is happening in the market. Terrorist groups may have shorted stocks in an effort to benefit financially from their horrible acts. Liquidity makes this possible, but transparency makes it traceable. Investigations are taking place right now to see if such market manipulation has taken place. If it has, I doubt very much whether the terrorists will be able to retrieve their gains.

More next week about the show, which is well worth watching even if it does go up against "The West Wing." It could be worse: "Triumph of the Nerds" faced the NBA finals.

While technology may allow us to keep track of money, it sure didn't keep those jetliners from being hijacked and destroyed. Why not? With all the billions spent on aviation safety, why couldn't we have kept this disaster from happening? My job here is not to be an apologist, but technology can't always save us from significant changes in human nature. Our aviation security systems, whether or not they were efficiently run, were based on the idea that a hijacking, if it took place, would be survivable. The assumption was that hijackers would either seek ransom for passengers or passage to another country. Passengers were hostages. The security systems were not built with the idea that a hijacker would want to destroy the airplane and die, himself, in the act. But that's the new reality. The game has changed and with that the technological alternatives change, too. There will be new security measures implemented not just at airports, but on airplanes. My ultra-smart readers this week overwhelmingly endorsed the idea of defeating madmen hijackers by building a wall in the airliner to physically isolate the pilots from the passengers. "If the only way to reach the cockpit is by going outside," one reader argued, "then no planes will be hijacked." This makes good sense to me.

What doesn't make good sense are some of the proposals being floated for additional electronic surveillance by America's intelligence and law enforcement agencies supposedly to combat terrorism. To be honest, the formal proposals have not yet been made public, but from what has been said in the press, they generally involve an increase in wiretaps and adding back doors to encryption programs.

Let's take those two points in reverse order, looking first at the issue of back doors. Think of these as master keys. The idea is that in a public/private key encryption system like the RSA algorithm that underlies most electronic commerce, there would be a third key, available to officials only under a court order, that would open any encrypted data. This is a very bad idea, but probably not for the reasons you are thinking. Sure, back doors are invasions of privacy and would probably lead to abuse. But worse than that, they are unenforceable.

There are two enormous problems with mandated back doors to encryption programs. First, there is getting people to use the programs with the knowledge that they aren't secure from official snooping. People will find alternative programs and those programs will probably come from other countries and be downloaded over the Net. Keeping such programs out would be impossible. And if you mandate the use of specific encryption software that includes back doors, well, that requires monitoring and enforcement. Would many of us stand for random sampling of our e-mail by the FBI to make sure we were using the right software? I wouldn't.

Of course, the FBI would rather monitor ALL our mail, not just a sample, which brings us to wiretaps. There are an average of fewer than 2,000 federal wiretaps authorized each year, yet the FBI long had on the table a request to increase that number to 10 million. Sorry, but in the interest of fighting terrorism (or communism, or racism, or white collar crime, etc.) we don't need a 5,000-fold increase in the number of wiretaps. Yet that's exactly what Congress will likely authorize in the next few weeks.

How many bad guys can you monitor with 10 million wiretaps? Figuring four phone lines per bad guy (main line, mobile line, home line, and Internet) that would allow us to keep electronic tabs on 2.5 million people at a time or just under one percent of U.S. residents, including children. If there are 2.5 million subversives working right now in America to change forever our way of life, they'd probably do a much better job of that by voting and running for office than by blowing things up. There simply aren't that many bad guys, and authorizing wiretaps to that extent is asking for abuse by law enforcement. But as a former FBI director once told me when this level of wiretapping was first proposed, it wouldn't be subject to abuse because, "That would be illegal."


Now against this backdrop of recovery and revenge, we were just hit by another computer worm, this one called Nimda. It is the worst of its type, with four different modes of propagation.

What makes this worm interesting to me is that it doesn't just wreak havoc over external connections, but also pays attention to what is happening inside the corporate firewall. Nimda is probably right now poking around your company's internal intranet. Fortunately, it is doing very little real damage. But a more evil worm or virus that runs over an inTRAnet could be profoundly destructive because the infected users have access privileges to data.

IT people care a lot about their equipment that is directly connected to the Internet because that's where they think the maximum vulnerability is. They also care about their most important critical systems, generally servers. But these same IT people pay no thought at all to the remaining 80 percent of their systems, primarily PCs. Many of these systems have default admin accounts, non-updated software, no security patches, etc. An inTRAnet based virus or worm attack will eventually find these systems, and all hell will break loose.

The worst is yet to come.

So there we have it. Terrorists want to subvert our system, but probably not destroy it because then they'd be poor. Intelligence and law enforcement officials want authorization to make impossible demands on computer users and monitor more terrorists than could possibly exist. A new type of worm is poised, in its next iteration, to destroy some or all of America's corporate data. But we could probably avoid future hijackings just by putting an extra wall and outside door in most airliners.

Well, at least one of those statements is positive. I'll get my rivet gun.

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