Your daily "dose of crypto conspiracy theorizing"

Cryptography is not exactly my thing. But I really enjoyed this article. Basically, the NSA spent the last 20 years pushing for the adoption of a set of cryptographic standards called Suite B "the first public cryptography standard to include non-classified algorithms certified for encrypting Secret and Top Secret data."

Then, all of a sudden, in August the agency freaked out, and "updated the Suite B website to announce a rapid transition away from Suite B, and to a new set of quantum quantum-resistant algorithms in the coming years."

However, experts agree that there has not been any major breakthrough in quantum computing, and hence the official justification is not believable. So why such a sudden transition away from a standard that they pushed so hard for? Is it possible that this standard had some weaknesses--by design--that now are known not only to the NSA but also to someone else?



"The Terrible Beauty of Brain Surgery"

Knausgaard follows neurosurgeon Henry Marsh to Albania, where he performs a new type of surgery in which the patient is awake the entire time.

"His job is to slice into the brain, the most complex structure we know of in the universe, where everything that makes us human is contained, and the contrast between the extremely sophisticated and the extremely primitive — all of that work with knives, drills and saws — fascinated me deeply. "

Beautiful pictures too. By the way, my own thoughts on Henry Marsh's book "do no harm"

The Nazi war on Xmas

"Jesus had been taken care of, but Santa Claus was not so easily forgotten. Tracing his roots to St. Nicholas of Myra, a fourth-century Greek Christian bishop from Turkey, Santa was both explicitly Christian and very definitely not Aryan. Even so, Santa was so beloved that not even the Nazis felt that they could wage a war against him. Instead, they changed his name. Nazis argued that the white-robed and gray-bearded figure who came to people’s houses and gave them gifts on Christmas Day was really the pagan god Odin. Christians had merely stolen him, but now he had been reclaimed"


Hot or not? Definitely not

"... how perceived hotness of professors affected their RateMyProfessors evaluations for teaching quality. As part of this exercise, Felton et al. ranked (Table 2 in their paper) the relative hotness quotients of 36 different academic disciplines"

The blockchain, disruption and money

Last week the Economist joined the groups of blockchain enthusiasts, announcing that the blockchain will change everything.  I fully agree with this forecast. However, contrary to what most people think, who will make profits – and if there are profits to be made – is far from obvious.

What is the blockchain

The blockchain is the technology that powers the bitcoin network. Think of a huge spreadsheet with two columns: a name (or an ID) and a number representing the number of bitcoin owned by each name. This spreadsheet is continuously updated to reflect transactions being made across the network.

The problem with such spreadsheet is how to make sure that all the transactions are legitimate, voluntary and there is no double spending. Before the invention of the blockchain, the only way to maintain such spreadsheet was to have a trusted (often regulated) intermediary that maintains a “master” copy, and strictly regulates who has access to it, when/how transactions can  be recorded.  The blockchain instead allows to perform these same tasks is a fully decentralized way, where all people participating in the bitcoin network verify and record transactions. 

Why it matters

The blockchain matters because it can be applied to all situations in which a “central trusted party” is necessary for the market to function. For example, the second column may represent USD, or stocks in a company, or ownership of a car, .... Hence, the blockchain has the potential of radically change the allocation of market power in many industries.

To understand why, consider these two pictures.






The first one represents a so called “star”: a network in which all the transactions among different nodes must go through a central node. The second picture instead is a “fully connected network” in which each node can communicate directly with all other nodes. The important thing to note is that, in the star network, the central node has market power. Because all parties trust the central node but do not trust each other, the central node becomes the only enabler of transactions and therefore can charge a fee for its service. In the “fully connected network” instead each node can deal directly with every other node and a “trusted third party” is not needed. No node has market power.

The blockchain will transform the structure of several markets from a “star” to a “fully connected network”. Interestingly, this transformation is not new: it has already happened in the market for information with the advent of the internet. Before the internet, the central nodes (traditional medias such as newspaper, TV, Radios) where controlling the information flowing across the network. In other words, if you wanted to get a piece of news across, or wanted to know about it, you had to go through these traditional media. The internet completely transformed this market: now every person can communicate directly with everybody else. The blockchain will bring about the same type of change in the financial sector (no more swift, western-union, credit card networks, …), public services (registry of ownership),  platforms (amazon, uber), ...

Where is the money?

The point I want to make is that it is far from clear who will make money out of this disruptive process (and if there is money to be made!). To illustrate my argument, suppose it is the late '80s and someone is pitching you the following business idea: 

“We are planning to use this awesome new technology (the internet) to deliver information way more efficiently. Think of all the costs that traditional media companies have to sustain to print, air, distribute their content. We can achieve the same outcome basically for free. Our goal is to replace these incumbents and make tons of money.”

This pitch is incorrect, because it fails to realize that the introduction of a new technology will reshape the market. In other words, the pitch assumes that there will still be a “central node” regulating the flow of information, and is planning to replace this central node. The problem is: such central node won't be there anymore. There is no money to be made by simply delivering information. Many blockchain proponents sound a lot like the above pitch. Simply replace “traditional media companies” with “credit cards”, “swift”, “central exchanges”, “platforms”, …

So, is there money to be made with the Blockchain? And where is it? Honestly, I do not know. But a parallel with the market for information is, again, useful. As it turns out, when information is available to everybody for free, the scarce resource becomes people's attention. Hence, the companies making money in the internet age are the ones that can control this new scarce resource: your attention. In the blockchain era, trust will not be a scarce resource anymore and no trusted third parties will be needed. What will be the scarce resource then? Who will make money in the new blockchain era depends on the answer to this question. 

Working more, producing less.

We already knew that, in most professions, people work to the point of negative productivity – in the sense that had they worked less they would have produced more. Myself and a coauthor even have a paper about this, in which we speculate that workers signal their ability at the expenses of current output - think about signing up for a new project when you are already fully committed to other stuff and unable to properly do it, in order to add an extra line to your CV and become a better candidate for a future promotion or future job.

Unsurprisingly, I very much enjoyed a recent article which nicely summarizes the scientific evidence regarding the optimal length of the work week (as it turns out, it is around 40 hours). Thanks to the article, I also discovered some interesting studies dealing with the perception of productivity. As it turns out, people are quite bad at measuring objectively the quality/quantity of their output, and they become worse at it the more they work. Hence, as they extend their work week, they think they are still producing something valuable well beyond the point in which they stop being productive. 

This evidence seems to confirm casual observation. However, the puzzle remains: workers' judgment is bad in many dimensions (estimating risks, staying awake, …) and there are many systems to compensate for this. Think about systems to prevent drivers from dozing off, or mandatory health and safety regulations. So the question is: why are long working hours actually encouraged in many workplaces, if not explicitly via peer pressure? Isn't the problem rather that employers are bad at estimating their workers' productivity?

UPDATE: an interesting development from Sweden.


The Ashley Madison hack, common knowledge, and the explosion of coordinated actions.

Two events last week: I finished the book "rational rituals" by Michael Suk-Young Chwe, and the Ashley Madison data started circulating. A fortunate coincidence, because I think one is very informative with respect to the other. 

The end of privacy: government's secrets have been leaked multiple times (same for firms and various organizations). What is new about the Ashley Madison hack is that it exposed the secrets of millions of common people. In other words, your neighbor's secrets (and maybe yours as well) are now in the open. Far from being a one-off event, these types of leaks will become more and more common.

Knowledge and common knowledge. In my opinion, the end of privacy has less to do with knowledge, and more to do with common knowledge. Suppose you become suddenly aware that your neighbor is having an affair. Unless his/her spouse is someone you are very close to, you probably keep quiet and mind your own business (or, at least, I would). After all, we all know that affairs are hardly something rare. 

Things really do not change much if the entire neighborhood knows that your neighbor is a cheater, because most likely they would all behave like you. Hence, the knowledge of the affair is not particularly disruptive of the life of the neighborhood.

Now, imagine that someone runs through the street shouting loudly that your neighbor is a cheater. This is a disruptive fact because, at this point, everybody realizes that everybody else must know about the affair. They also realizes that everybody in the neighborhood know that they know about the affair, and so on. In other words, the affair becomes common knowledge in the neighborhood.

Common knowledge is required for coordinated actions. Why is moving from knowledge to common knowledge so disruptive? The book "rational rituals" by Michael Suk-Young Chwe is all about the following observation: knowledge is not enough in order to achieve coordination, what is required is common knowledge.

Here is an example. Suppose you live under an oppressive regime. You also suspect that other people in your country know that the regime is oppressive, but you are not fully sure. Would you go out and protest? Well, probably not because you risk being the only one there – nobody is sure that other people also know that the regime is bad and therefore nobody is willing to make the first step and start a protest. If instead there is some well publicized event – for example, images of police brutality bouncing all over Facebook and Twitter – the fact that the regime is oppressive is common knowledge. Everybody knows that everybody saw the images of brutality. Furthermore, everybody knows that everybody knows that everybody saw the images of brutality. All of the sudden, common knowledge of political oppression emerges, and coordinated actions against it become possible.

The above example follows closely the narrative of the Arab spring, but can be applied to many other contexts. For example, advertising can be seen as a tool to create common knowledge about products – especially those that require some coordinated adoption to be successful. The book has a tons of other examples.

The end of privacy and coordinated action. Going back to our unfaithful neighbor, what happens once the affair moves from knowledge to common knowledge? My speculation is that coordinated actions against your neighbor become all of the sudden possible. For example, a minority of your neighbors may have strong religious feelings and decide to camp in front of the cheater's door until he/she moves out. Note that this kind of coordinated actions against a common individual are not exactly new, see for example the protests against the dentist who shot Cecil the lion. My point is that the end of privacy will make coordinated actions against normal people more common.

Is this bad? Common knowledge and coordinated actions are not necessary bad. To start,  tons of people constantly release information publicly in the hope to generate common knowledge (or “make it go viral”). There are also cases in which the involuntary creation of common knowledge about politicians and governments was instrumental in bringing democracy to many countries. 

However, I note here that:

(1) those involved in the Ashley Madison hack did not want these secrets to become common knowledge – probably because they anticipated some negative consequences for them.

(2) In addition, we are talking here about normal people who can be productive members of society despite their secrets. Hence, I do not see here any “greater social good” coming from naming and shaming bus drivers, accountants, secretaries, …

On the other hand, maybe having someone protesting in front of your door because you eat meat, you have a pet parrot, you live in an open relationship, and what not will be the norm in the future, and nobody will care about it. Who knows.

p.s. just a clarification: clearly the Ashley Madison hack also generated knowledge -- for example a wife may discover that her husband is a cheater. However, the post is not about that. It is instead about the creation of common knowledge.