Archive for September, 2009

Russia Outsources Domestic Policy to a ‘Futurologist’

Friday, September 18th, 2009

There are few countries on earth that do bread-and-circus diversions quite like this. One is Myanmar, which moves its capital into the jungle on the advice of astrologists. The other, of course, is Russia. To wit: in the middle of a severe economic crisis and growing unemployment, President Dmitri Medvedev has decided to modernize Russia’s economy and include dissenting voices by, yes, turning to an ornery “futurologist” (his phrase) appropriately named Kalashnikov.

How did this absurdity come about? On Sept. 10, Medvedev, a known Internet aficionado, posted a rambling, 4,000-word editorial in the online newspaper Gazeta.ru. Titled “Forward, Russia!” the piece calls on Russians to become more civic-minded and lays out vague plans to modernize Russia’s still-backward economy. Fine. For days, people here and abroad feverishly tried to crack the code: why would he write an editorial in a liberal online paper? Why now? What could this portend?
But no one expected this. You see, at the end of the editorial, Medvedev invited Russians to send suggestions to kremlin@gov.ru. And people did, including futurologist Maxim Kalashnikov, author of books like Mount the Lightning! and Forward, to USSR-2. (According to his online profile, Kalashnikov has “dedicated his life to fighting the fallout of 1991,” the year the Soviet Union collapsed.)

Medvedev seized on Kalashnikov’s letter, which recommended building a city of the future─a “bio-agro-ecopolis,” to be precise─using Russian technology and expertise to experiment in energy, building materials, and the like. This, he says will spur Russian innovation and “give the nation wings.”

His proposals were evidently so compelling that Medvedev decided to have someone look into them. He staged a “scene at the office” for the benefit of the Kremlin-friendly press corps (worth a watch) in which he hands off the letter to a deputy, who looks like a third grader in a Thanksgiving play, and asks him to follow up─since it’s important, Medvedev chides, to listen “even to people who don’t agree with us” and because the Internet “is all aflutter” about it. (It was.)

Russian rulers have, on occasion relied on meta-advisers (Nicholas II and Rasputin being the most famous), but this is not that. Rather, it is a clear and cynical play to the masses who, Medvedev clearly hopes, will feel the flush of Russian pride under the guise of sweeping Russian spirituality (on the rise, midcrisis) and a lunge toward modernization. It is also the beginning and the end of the empty gesture─not that anyone believed it─of listening to people outside the Kremlin’s echo chamber. Even Kalashnikov knows this is just a stunt. “I think it’s just PR,” he told me. He has not heard from the Kremlin, but the off chance that something comes out of this─like a bio-agro-ecopolis, say─keeps his hope of averted catastrophe alive. “Who knows,” he said, sighing. “Sometimes truly unbelievable things do happen.” In the meantime, the aflutter Russian blogosphere agrees, wondering if spring─and April Fool’s Day─came very, very early this year.

Russia Outsources Domestic Policy to a ‘Futurologist’ [Newsweek]

To Catch a Cyberthief

Monday, September 14th, 2009

Hacking used to be so quaint. In the old days (the early 90s) the villains typically were attention-seeking computer geeks infecting computers with viruses that were a headache for consumers and tech departments to debug.

Today’s cybercriminals are out to inflict real harm: They can be commercial entities breaking into competitors’ records, or international crime rings stealing valuable data like credit card numbers and email passwords.

And because such cyber-heists extremely lucrative – some estimates put the size of this underground economy at $1 trillion –more players are getting into the game, developing increasingly sophisticated ways to crack into computer systems and exploit their ill-gotten gains. Viruses alone can take trillions of forms, and spam, the most popular way of infiltrating computers, accounts for some 90% of all e-mail traffic.

All of which makes it harder for computer security companies to stay one step ahead of these evolving threats. “Clearly, it’s an arms race,” says Enrique Salem, CEO of Symantec, (SYMC) the world’s largest software security company. “They’re always trying to find ways of getting around our technology, so we’ve got to keep innovating” – and getting inside the criminal mind.

Symantec, based in Cupertino, Calif., continues to deploy a set of tried and true tools to keep digital risks at bay: Last year the company generated 1.6 million automated signatures –signatures are virus-specific cures– to block known attacks. Its software also automatically blacklists and filters bad programs and sites. And the company applies advanced behavioral technology to monitor and shut down malicious software just before it’s about to do something really harmful, thereby minimizing the impact on a corporate computer system or even an individual user.

But even this aggressive, multi-pronged approach isn’t enough to stop the bad guys. Blacklists are not fast enough to catch brand-new malware; “white lists” of safe software are too restrictive. And cybercriminals now generate malware automatically so that every visitor to, say, a bad website gets a slightly different version of the bug, making individualized cures highly impractical, if not impossible.

“Most of it is generated by virus-generating software,” says Steve Trilling, a former stand-up comedian and software engineer who runs Symantec’s STAR team, short for Security Technology and Response. “There are now many tens of millions of viruses out there, and you just can’t keep scaling at that rate.”

New protection codenamed “Mr. Clean”

And so last week Symantec launched the latest version of its Norton products with yet another layer of protection called Quorum (known internally as “Mr. Clean”). Quorum works in much the same way that the Zagat’s restaurant guide does, by relying on reputation. If you want to download a program that very few people in the world have, Quorum will recommend you stay away from it but leaves the ultimate choice to the consumer. After all, the program could be a randomly generated virus – or a highly-customized piece of software.

To prevent the program from blocking good software (what’s known as false positives), Quorum checks in with the back end and, if a program checks out, Quorum will not block it and slow the user down.

Symantec is able to calculate reputation with such confidence because, for the past year, 29 million Symantec customers have been using a Quorum prototype and automatically relaying data to the Symantec mother ship, where it is anonymized and crunched.

This provides Symantec with a large database from which to compute a program’s standing – and, with nearly 60 million Symantec customers around the world, that database is going to grow at a fast clip once the software is released on a wider market. And because the calculation is fully automated and based on a massive data base, hackers will have a difficult time distorting the real number of people who have downloaded their software.

This program also takes up less space and so can be run on mobile devices, which have yet to come under extensive attack. (Though the prospect is increasingly likely, industry watchers say, the mobile-device market is still too fragmented to be profitable for security companies; nor do people make many financial transactions on their phones – yet- making cell phones and BlackBerrys less likely to be attacked.)

Thwarting the Cult of the Dead Cow

But even cutting-edge software and a massive global infrastructure staffed by 17,500 employees cannot stop every single threat. To cut down on future breaches Symantec tries to educate school kids on smart web-browsing techniques. And it works with Congress and international governments to create a uniform legal standard to bring cybercriminals to justice. (The famous case of the ILOVEYOU Bug, in 2000, illustrates the need. When Symantec brought forward information pinpointing the Filipino hackers behind the globally infectious virus, all charges were dropped because the Philippines have no laws banning cybercrime.)

But as the cybercrooks get ever smarter, Symantec also is devoting more resources to the digital equivalent of “black ops” – folks who spend their days attending hacker events and trolling the ‘net for secretive chat rooms where the bad guys boast of their conquests and tactics. Every summer, for instance, hackers gather in Las Vegas for the Defcon Conferences – and Symantec goes, too.

One year, as a hacking group named Cult of the Dead Cow presented their new hacking techniques by lobbing informational discs (and hunks of raw meat) into the audience, Symantec reps ran them back to the hotel where a team of Symantec programmers sat churning out signatures, hobbling the tactics almost as soon as they were introduced.

It may sound a bit surreal, but CEO Salem tries to put the war on computer crimes into perspective: “You’re never going to eliminate crime,” he says. “You’re never going to eliminate cybercriminals and that’s going to be an ongoing challenge.” But to paraphrase an old saw: you have to think like a cyber criminal to catch a cybercriminal.

To Catch a Cyberthief [FORTUNE]

Call of the Wolf

Tuesday, September 8th, 2009

Long before Martin Wolf became the chief economics columnist for the Financial Times, he wrote the newspaper letters–lots and lots of letters. It was the early 1980s, the height of the Thatcher era, and Wolf was running research at a think tank in London that was sympathetic to the government’s pro-trade agenda. The FT’s letters section became the ideal place to take to task all those who would stand in the way of the first waves of globalization.

With a British gentleman’s cutting subtlety, Wolf parried with other letter writers over everything from tariffs to agricultural subsidies to the German textile industry. He assailed the arguments of a Mr. Mitchell as “ ’codswollop’ raised to a high power.” Taking apart the logic of one Mr. Calvert, Wolf quoted nineteenth-century French economist Frédéric Bastiat: “Absurdity is the limit of inconsistency.” Arguing with a Mr. Smith about the oil shock of 1983, Wolf’s didactic style was on full display:

How does Mr Smith reach his conclusion? The unstated argument appears to go as follows: in order to prove the economic optimality of competitive general equilibrium, one needs to assume a full range of contingent and future markets. A full range of such markets does not exist. Consequently, the actual equilibrium is not optimal. Centralised co-ordinating agencies might, therefore, improve on the market. The actions of the Japanese and other governments are generally held to improve on the workings of the market. Accordingly, co-ordinating action by the British Government would improve on the market.

When stated in the above way, the argument looks a little silly.

Today, Martin Wolf has moved on to bigger targets than Mr. Smith. Hired as an editorial writer by the FT in 1987, he is arguably the most widely trusted pundit of the current economic crisis. Consider the people who count themselves fans of his column. Larry Summers: “He is probably the most deeply thoughtful and professionally informed economic journalist in the world at this point.” Harvard economist Kenneth Rogoff: “He really is the premier financial and economics writer in the world.” Mohamed El Erian, CEO of PIMCO, the world’s largest bond investor: “He is, by far, the most influential economic columnist out there. His columns are eagerly anticipated.”

Knowing that Wolf is widely read and highly esteemed, major players in the economic world court his approval. The day after Treasury Secretary Timothy Geithner announced details of the Public-Private Investment Program, he called his old friend Wolf, who he knew was working on his Wednesday column. Geithner wanted to explain–and defend–the initiative. Wolf listened politely and, the following day, slammed the program as the “vulture fund relief scheme.”

“You cannot measure influence, but you can feel influence,” says University of Chicago economist Raghuram Rajan. “And I think he has it.” What makes this influence so fascinating is that, more than two decades after he became a full-time journalist, Wolf’s columns resemble nothing so much as his frantic, dense, cutting letters to the editor. They are learned, baroque, and quite frequently terrifying.

Wolf was born in 1946 in London. His father Edmund had been a playwright in Austria but managed to slip out of the country before the Holocaust wiped away most of his family. In London, he met Martin’s mother, a Jewish refugee from Holland whose family had also been killed. Growing up in the shadow of World War II and the Holocaust, Wolf was wary of anything outside the reasonable center. “It made me extremely suspicious of political extremism, on both the left and the right, a strong believer in democratic freedoms, which was very much my father’s position,” he told me.

A vivid memory of doom may have also driven Wolf into economics, which he sees as the underpinning of everything that can possibly go wrong. He was, he says, “very, very much formed by the sense that the catastrophe that befell my parents’ generation was in large part because of the Great Depression, which itself was the result of huge economic policy blunders.” References to the 1930s pervade his writing.

After studying economics at Oxford (where he identified as a social democrat), Wolf got a job in 1971 at the World Bank, which was then under the stewardship of Robert McNamara, the disgraced former U.S. defense secretary. McNamara, in Wolf ’s telling, was a forceful leader. “He was utterly and completely in control of the institution, of the facts, of the objectives that he wanted to achieve,” Wolf recalls. “And that made him quite impressive—I mean staggeringly impressive.”

According to Wolf, McNamara had a very firm idea of how to fix poverty in the developing world: Poor countries were poor because they didn’t have enough capital. Ergo, raising investment levels was the key to creating prosperity. To achieve this goal, McNamara pushed for loaning more and more money to developing countries, leading them, eventually, into massive debt crises in the 1980s.

Wolf was disgusted enough by these policies that he began to move to the right, and he eventually left the Bank in 1981. He says the experience taught him that “it’s really, really, really hard for large institutions to make intelligent decisions.” Wolf swore he’d never work in such a bureaucracy again.

In 1987, after working for six years at a pro-free-trade think tank in London, Wolf was courted by Sir Geoffrey Owen, then editor of the Financial Times. Wolf had written a few stories—and more than a few letters—for the paper, and Owen wanted to take him on as his chief economics editorial writer. Wolf, who shared the FT’s basic free-trade stance (although he was to the right of the paper), accepted. For nine years, he wrote with no byline, occasionally advocating stances he did not espouse, which rankled after his experience at the World Bank. Finally, in 1996, Wolf was given his own column on international economics.

It has been 28 years since Wolf left the World Bank, but he still sees his journalistic work as an antidote to the top-down style of decision-making he witnessed there. Now, he sees the same destructive behavior in the private sector. “If you go from Chuck Prince”—the former CEO of Citigroup—“to the people who were actually designing these securitized assets or, even more, the people who are making the subprime loans, you’ve probably got ten or eleven layers . . . that the people have at the bottom to get all the way to the top—filtered through all the people in between, whose job it is to give the impression to the people at the top that everything’s going smoothly. Because that, of course, is what they’re being rewarded on,” he says. “So, if there are minions at the bottom . . . saying, ‘Well, actually, this isn’t making any sense,’ if there were people like that, this information simply wouldn’t get up through the machine.” His job, he says, is to give voice to those minions who are unable to send their criticisms up the chain of command.

Moreover, the current crisis has re-awakened Wolf’s dread of the 1920s and ’30s. “I never expected, I have to say, to be as close to those experiences again in my lifetime,” he explains somberly. As a result, he has swung back toward Keynes—closer to his ideological roots— and he frequently criticizes the Obama administration from the left.

To understand Wolf’s influence, one must first understand his audience. They are dedicated Financial Times readers, and Financial Times readers are some of the top earners, spenders, and decision-makers in the world. “I’m writing for the people who are doing these things, who are running these things, both governmental and politicians and financiers,” he told me while vacationing in Liguria, Italy, where he has spent summers since childhood. (His family has a house there, and, every August, Wolf returns. “It’s an important break,” he says. “Unlike Americans, I believe in long breaks for reading and thinking. I don’t understand the American culture of one-and-a-half or two weeks of holiday a year at the maximum.”)

Befitting someone who writes for insiders, his style is brazenly dense. His FT columns come with footnotes and charts. Moisés Naím, the editor of Foreign Policy, recalls working with Wolf on a cover story on the coming market crash in 2000. “He makes no concessions to the reader,” Naím says. “There was a bit of back and forth about what he felt was ‘self-evident.’ ” His prose, even to the educated layman, can be hard to crack. “He’s writing for very well-informed readers,” says New York Times columnist Paul Krugman. “Obviously, I have a similar space, and I don’t write things that look like what Martin writes because I think I’ll lose too many of my readers.”

Wolf is staggeringly well-connected within the elite circles he is writing for. El Erian was a Wolf protégé, as was current British education minister Ed Balls. Wolf’s circle of friends and acquaintances includes the likes of Indian Prime Minister Manmohan Singh and Mervyn King, governor of the Bank of England. “I don’t know if there’s any significant central banker I don’t know,” he told me with a flat matter-of-factness. But part of his appeal is that he doesn’t hesitate to criticize friends. He is close with Geithner and Summers yet has repeatedly attacked their policies for not going far enough.

His fans cite his logical rigor, a faculty he loves to engage face to face. In FT editorial meetings, he’s known for packaging an extreme position in provocative language in order to make others clarify their own stance. “He starts by summarizing your argument, and, two minutes in, he’s trashed your argument,” says FT business columnist John Gapper, who used to be Wolf’s editor. “And that’s when you realize he’s only just getting going.” FT editor Lionel Barber says he stands up to Wolf, whom he calls “Two Brains,” “once every five years.”

It is these qualities—the deep erudition, the sense of proximity to the temples of power—that have made his columns about the financial crisis so impossible to ignore. When the bolts of rhetorical thunder emerge from his dense cloud of prose, you take notice. A typical column warns that we risk nothing short of “the mother of all meltdowns” or the end of “liberal trade.” Passages offer ominous predictions:

Yet the idea that a quick recession would purge the world of past excesses is ludicrous. The danger is, instead, of a slump, as a mountain of private debt. . . topples over into mass bankruptcy. The downward spiral would begin with further decay of financial systems and proceed via pervasive mistrust, the vanishing of credit, closure of vast numbers of businesses, soaring unemployment, tumbling commodity prices, cascading declines in asset prices and soaring repossession. . . . This would be a recipe not for a revival of 19th century laissez faire, but for xenophobia, nationalism and revolution.

By the time you put down a Wolf piece during the worst of the crisis, you could have been forgiven for thinking that we were hurtling toward a disaster of even more cataclysmic proportions. Although he may have written his columns with an audience of technocrats in mind, his jeremiads—clearly informed by Wolf ’s fear of repeating the Great Depression— broke through to a much wider audience. (They constantly rank among the most read on the FT’s website, and even Matt Drudge, the least academic man in the world, links to them.) What’s more, it is their very denseness that commands attention. To the broader public, suffering from grave confusion and outright panic, his pieces may be frightening, but their learnedness also provides a sense of odd comfort: Here is a solid view of the path ahead.

When columnists are too close to power that’s usually cause for concern. The classic example was Joseph Alsop, who used his op-eds to fight bureaucratic battles on behalf of his high-ranking friends. But Wolf’s readers feel a sense of gratitude for his closeness to the world’s central bankers and finance ministers and other denizens of the Davos set. Because when he zings them, or pushes the panic button, at the very least, we know they are listening.

Call of the Wolf [TNR]

Moving to Moscow

Tuesday, September 8th, 2009

Come Friday, the brief bio on this site will be incorrect. Come Friday, I will be moving to Moscow for almost a year on a Fulbright grant to do some journalisming, maybe even gather some string for a book. If you’re so inclined, you can follow me on Twitter under the name “ioffeinmoscow.” I don’t promise salient insights on the bulldogs under the Kremlin rug, but I do promise to update it — and this blog — with the abounding absurdity of that wonderful city.

(And yes, that’s me in the picture. It was taken when I was a first-grader — and Octoberist — shortly before my family moved to the US. Incidentally, I will celebrate the 20th anniversary of that event in the place they abandoned, a fact which never ceases to, understandably, distress them.)