Privacy versus government surveillance – where

Transcript:Privacy versus government surveillance – where:
Privacy versus government surveillance – where network effects meet public choice Ross Anderson Cambridge Berkeley Law School Oct 6 2014 Two views of money and power The Bay Area view: money and power are all about network effects, which help you create a platform to which everyone else then adds value The Washington DC view: power is about having more tanks and aircraft carriers, which is founded on taxation capacity Almost no-one talks of network effects there, or among scholars of government! Berkeley Law School Oct 6 2014 Is this changing? 1980s: a non-aligned country like India is a democracy, but buys its jet fighters from Russia because they’re cheaper 2000s: Snowden tells us that India shares intelligence with the NSA rather than the FSB, as the NSA’s network is bigger The “five eyes” is maybe 15 eyes, or 35 eyes, or 65 eyes … Berkeley Law School Oct 6 2014 Information economics (1) The first characteristic of many IT product and service markets is network effects Metcalfe’s law – the value of a network is the square of the number of users Real networks – phones, fax, email, Facebook, Visa/Mastercard Virtual networks – PC versus Mac, Visa/MC Network effects tend to lead to dominant-firm markets where the winner takes all Berkeley Law School Oct 6 2014 Information economics (2) Second common feature of IT product and service markets is high fixed costs and low marginal costs Competition can drive down prices to marginal cost of production This can make it hard to recover capital investment, unless stopped by patent, brand, network effects … These effects can also lead to market power Berkeley Law School Oct 6 2014 Information economics (3) Third common feature of IT markets is that switching is expensive E.g. switching from Windows to Linux means retraining staff, rewriting apps And once you have $3000 worth of songs on a $300 iPod, you’re locked into iPods etc Shapiro-Varian observation: the net present value of a software company is the total switching costs Berkeley Law School Oct 6 2014 Economics of (information) security Each of network effects, low marginal costs and technical lock-in makes dominant-firm market structures more likely Together, they make them much more likely They also explain many security and privacy failures First, market races lead to “Ship it Tuesday and get it right by version 3” Berkeley Law School Oct 6 2014 Security economics (2)