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==Context==
 
==Context==
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* [[Capitalism]] as been through a wide range of interpretations and manifestations since David Hume and Adam Smith. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the  the Wealth of Nations'' (1776-03-09) William Strahan publisher Went through 5 revisions, some major. A Translation into Modern English, Industrial Systems Research, 2015. ISBN 978-0906321706</ref> defined an alternative to the zero sum politics of the Feudal age. They were right and an age of capital growth began that has itself gone through many iterations, but remains the dominant way for humans to organize themselves. Technology became easier to fund with the joint stock companies that flourished since the 1700's.
  
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* New risks created by new technologies are not new. As steam power rose in importance, the need for human power dwindled. The disruptions to the working population rose and fell as each wave of technology was absorbed by the human [[Ecosystem]]. Unfortunately it seems that the rate of technology change continues to accelerate, making it increasingly difficult for humans to adapt.
  
 
==Problems==
 
==Problems==
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*Since executive compensation is often predicated on shareholder value, any risk must be measured strictly in that metric to become an important consideration for executive action by the bulk of public companies. A similar calculus will apply to public enterprises because of pressures from the population at large and thanks to the investigations of a free press where it still exists. In both cases [[Conduct Risk]] is a growing discipline that [[Enterprise]]s have learned to fear through the experiences with general business cases describe on the page [[Conduct Risk]] as well as those cases that are specific to service providers.
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This enumeration of the problems originated with Peter Neumann<ref>Peter Neumann, ''Computer-Related Risks and Remediation Challenges''  '''CACM 66''' No. 6 (2023-06)</ref>
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*The executive are not held accountable by any force but the risk that their bonuses will be cut. In a few cases, the company was put at existential risk of failure, but the executives generally do not suffer. Until the boards hold the executive accountable for this sort of action, there will be no change. Today the boards seem to be more worried about take-over attempts by dissident shareholders who are more concerned with next quarter's earnings than they are with the continued existence of the company.
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# Using technology to solve problems that are not inherently technological, like [[Bitcoin]] and other crypto assets to avoid the use of existing financial organizations that increasingly seem disconnected from the needs of their customers. The problem is that the desire to avoid regulation is resulting in the following problem.
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*Consumers are starting to take action based on data breaches. In a Ping Identity study<ref>Ping Identity ''2019 CONSUMER SURVEY: TRUST AND ACCOUNTABILITY IN THE ERA OF DATA MISUSE,'' https://www.pingidentity.com/content/dam/ping-6-2-assets/Assets/Misc/en/3464-consumersurvey-execsummary.pdf#study</ref> it was found that "81% would stop engaging with a brand online following a breach (up 3% from 2018), and 25% would stop all interaction whatsoever." In spite of this trend, breaches continue to occur on a daily basis. At a 2019-10-28 identity meeting-up there was consensus that the challenge in getting companies to spend money on security was showing a decrease in costs rather than a decrease in risk. CEO's, like Boeing's<ref>Michael A. Cusumano, ''Boeing's 737 MAX: A Failure of Management, Not just Technology'' '''CACM 64''' (2021-01)</ref> or GE's, have focused on short term financials rather than the overall health of the company. Both of those have fallen from highly successful to badly damaged based on misunderstanding the real objectives of the CEO's office.
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# Using technology to facilitate crimes that already existed before the technology was introduced. The crypto capabilities and lack of regulation result in unexplained losses to the unsophisticated players who repeat the mistakes of the past, and also the increasing use of the unregulated value flow by drug dealers, pedophiles and other unsavory members of society.
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===Technology===
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# Using technology in well know areas, like elections or the rollout of a Medical Insurance web site by the US Gov't can be disastrous. While the Office of the Inspector General listed 10 reasons for the disaster, the real problem is that it tried to do something new in all its complexity rather than to start small and successful, and then build on that success. This is the primary reason major projects fail, they try to do it all at once even when they have not created a working system to start from.<ref>Jennifer Pahlka, ''Recording America: Why Government Is Failing in the Digital Age and How We Can Do Better'' Metropolitan Books (2023) abstract at https://bigthink.com/smart-skills/complex-project-galls-law/</ref>
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Many of the risk factors arise because management is not equipped to deal with the rapid changes in technology and the impact that can have on business operations and customer expectations. For example both Google and Microsoft issued warnings in their recent filings on the risk that bad outcomes are highly likely as [[Artificial Intelligence]] becomes an increasingly large component of their operations.<ref>Tom Simonite, ''Google and Microsoft Warn That AI May Do Dumb Things.'' (2019-02-19) Wired Magazine https://www.wired.com/story/google-microsoft-warn-ai-may-do-dumb-things</ref>
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# Using technologies that are not yet trustworthy or occur because management is not equipped to deal with the rapid changes in technology and the impact that can have on business operations and customer expectations. For example both Google and Microsoft issued warnings in their recent filings on the risk that bad outcomes are highly likely as [[Artificial Intelligence]] becomes an increasingly large component of their operations.<ref>Tom Simonite, ''Google and Microsoft Warn That AI May Do Dumb Things.'' (2019-02-19) Wired Magazine https://www.wired.com/story/google-microsoft-warn-ai-may-do-dumb-things</ref>
 +
# Using technology to create businesses that exploit the customer's (or citizen's) lack of familiarity with the way that the new technology enables bad behavior. Specifically the [[Contract of Adhesion]] requires the customer to accept terms as dictated by the business, or the new feature is not available. Basically black mail the user.
 +
# Using technology with business models that focus on short-short term optimization and not on building a business that values its employees and customer enough to ensure their own long-term stability. The focus on next quarter's corporate earnings, or the next election cycle is due, in part, to the excision of ethics and morality from business championed in 1970 by Milton Freidman<ref name="Friedman" /> at Chicago a hard-core capitalist who felt the only function of a corporation was to maximize profits. It turns out that the change in business practices started at about that time.
  
 
===Privacy===
 
===Privacy===
 
For example, since the 2016 US presidential election Facebook has been called on the carpet in several countries for numerous privacy lapses that continue to grow.<ref>Kevin Roose, ''No gentile Giant, But a Juggernaut Playing Hardball.'' (2018-12-06) p. B1 New York Times</ref><ref>Adam Satariano +1, ''Leveraging User Data To Show Favoritism Among Its partners.'' (2018-12-06) p. B1 New York Times</ref> When Facebook reported that 3 million users in Europe had abandoned them it lost $120 Billion in market value and the stock has continued to lose value throughout 2018.<ref>Over $119bn wiped off Facebook's market cap after growth shock. The Guardian https://www.theguardian.com/technology/2018/jul/26/facebook-market-cap-falls-109bn-dollars-after-growth-shock</ref> The loss to Equifax market cap after their privacy breach is more that 30% with some experts doubting that the company can continue in existence after all the legal cases are settled.<ref>''Equifax’s stock has fallen 31% since breach disclosure, erasing $5 billion in market cap.'' (2017-09-14) Market Watch https://www.marketwatch.com/story/equifaxs-stock-has-fallen-31-since-breach-disclosure-erasing-5-billion-in-market-cap-2017-09-14</ref>
 
For example, since the 2016 US presidential election Facebook has been called on the carpet in several countries for numerous privacy lapses that continue to grow.<ref>Kevin Roose, ''No gentile Giant, But a Juggernaut Playing Hardball.'' (2018-12-06) p. B1 New York Times</ref><ref>Adam Satariano +1, ''Leveraging User Data To Show Favoritism Among Its partners.'' (2018-12-06) p. B1 New York Times</ref> When Facebook reported that 3 million users in Europe had abandoned them it lost $120 Billion in market value and the stock has continued to lose value throughout 2018.<ref>Over $119bn wiped off Facebook's market cap after growth shock. The Guardian https://www.theguardian.com/technology/2018/jul/26/facebook-market-cap-falls-109bn-dollars-after-growth-shock</ref> The loss to Equifax market cap after their privacy breach is more that 30% with some experts doubting that the company can continue in existence after all the legal cases are settled.<ref>''Equifax’s stock has fallen 31% since breach disclosure, erasing $5 billion in market cap.'' (2017-09-14) Market Watch https://www.marketwatch.com/story/equifaxs-stock-has-fallen-31-since-breach-disclosure-erasing-5-billion-in-market-cap-2017-09-14</ref>
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===Financial Innovation===
 
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The major culprit of the recent '''Great Recession''' has been blamed on new financial instruments. Even before that occurrence both Arthur Anderson and Enron were eliminated from their place as admired companies and ceased operation after discoveries of how the manipulated energy futures. This was an existential legal risk in their case, but there was substantial cost to their reputation even before they ceased operations.
 
  
 
==Solutions==
 
==Solutions==

Latest revision as of 17:22, 15 July 2023

Full Title or Meme

The page is about the risk that Technology creates to the entire human ecosystem as it advances.

Context

  • Capitalism as been through a wide range of interpretations and manifestations since David Hume and Adam Smith. [1] defined an alternative to the zero sum politics of the Feudal age. They were right and an age of capital growth began that has itself gone through many iterations, but remains the dominant way for humans to organize themselves. Technology became easier to fund with the joint stock companies that flourished since the 1700's.
  • New risks created by new technologies are not new. As steam power rose in importance, the need for human power dwindled. The disruptions to the working population rose and fell as each wave of technology was absorbed by the human Ecosystem. Unfortunately it seems that the rate of technology change continues to accelerate, making it increasingly difficult for humans to adapt.

Problems

This enumeration of the problems originated with Peter Neumann[2]

  1. Using technology to solve problems that are not inherently technological, like Bitcoin and other crypto assets to avoid the use of existing financial organizations that increasingly seem disconnected from the needs of their customers. The problem is that the desire to avoid regulation is resulting in the following problem.
  2. Using technology to facilitate crimes that already existed before the technology was introduced. The crypto capabilities and lack of regulation result in unexplained losses to the unsophisticated players who repeat the mistakes of the past, and also the increasing use of the unregulated value flow by drug dealers, pedophiles and other unsavory members of society.
  3. Using technology in well know areas, like elections or the rollout of a Medical Insurance web site by the US Gov't can be disastrous. While the Office of the Inspector General listed 10 reasons for the disaster, the real problem is that it tried to do something new in all its complexity rather than to start small and successful, and then build on that success. This is the primary reason major projects fail, they try to do it all at once even when they have not created a working system to start from.[3]
  4. Using technologies that are not yet trustworthy or occur because management is not equipped to deal with the rapid changes in technology and the impact that can have on business operations and customer expectations. For example both Google and Microsoft issued warnings in their recent filings on the risk that bad outcomes are highly likely as Artificial Intelligence becomes an increasingly large component of their operations.[4]
  5. Using technology to create businesses that exploit the customer's (or citizen's) lack of familiarity with the way that the new technology enables bad behavior. Specifically the Contract of Adhesion requires the customer to accept terms as dictated by the business, or the new feature is not available. Basically black mail the user.
  6. Using technology with business models that focus on short-short term optimization and not on building a business that values its employees and customer enough to ensure their own long-term stability. The focus on next quarter's corporate earnings, or the next election cycle is due, in part, to the excision of ethics and morality from business championed in 1970 by Milton Freidman[5] at Chicago a hard-core capitalist who felt the only function of a corporation was to maximize profits. It turns out that the change in business practices started at about that time.

Privacy

For example, since the 2016 US presidential election Facebook has been called on the carpet in several countries for numerous privacy lapses that continue to grow.[6][7] When Facebook reported that 3 million users in Europe had abandoned them it lost $120 Billion in market value and the stock has continued to lose value throughout 2018.[8] The loss to Equifax market cap after their privacy breach is more that 30% with some experts doubting that the company can continue in existence after all the legal cases are settled.[9]

Solutions

  • Changing corporate habits can be difficult unless the CEO of the Enterprise makes and enforces a commitment to treating the employee and the customer with respect. [10]
  • Large accounting firms have all started “Conduct Risk” practices due to the growing demand, but also to the expectation of continued pressure from regulatory bodies to assure that Enterprises are positioned to absorb the costs of unsafe behavior.
  • The best solution would be for financial disclosure documentation to require the inclusion of a conduct risk assessment in every mandated disclosure, with privacy risk as a component of that section. This procedure will never anticipate changes brought about by radically new technologies, but it will require inclusion of risks as they are recognized. Large numbers of shareholder suits are based on misleading the investors on the risk of behavior.[11]
  • In Germany the boards are required to have representatives of the community and labor unions. This assures that there is some input as to the Common Good of the community and the workers at the company.

References

  1. ↑ Adam Smith, An Inquiry into the Nature and Causes of the the Wealth of Nations (1776-03-09) William Strahan publisher Went through 5 revisions, some major. A Translation into Modern English, Industrial Systems Research, 2015. ISBN 978-0906321706
  2. ↑ Peter Neumann, Computer-Related Risks and Remediation Challenges CACM 66 No. 6 (2023-06)
  3. ↑ Jennifer Pahlka, Recording America: Why Government Is Failing in the Digital Age and How We Can Do Better Metropolitan Books (2023) abstract at https://bigthink.com/smart-skills/complex-project-galls-law/
  4. ↑ Tom Simonite, Google and Microsoft Warn That AI May Do Dumb Things. (2019-02-19) Wired Magazine https://www.wired.com/story/google-microsoft-warn-ai-may-do-dumb-things
  5. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named Friedman
  6. ↑ Kevin Roose, No gentile Giant, But a Juggernaut Playing Hardball. (2018-12-06) p. B1 New York Times
  7. ↑ Adam Satariano +1, Leveraging User Data To Show Favoritism Among Its partners. (2018-12-06) p. B1 New York Times
  8. ↑ Over $119bn wiped off Facebook's market cap after growth shock. The Guardian https://www.theguardian.com/technology/2018/jul/26/facebook-market-cap-falls-109bn-dollars-after-growth-shock
  9. ↑ Equifax’s stock has fallen 31% since breach disclosure, erasing $5 billion in market cap. (2017-09-14) Market Watch https://www.marketwatch.com/story/equifaxs-stock-has-fallen-31-since-breach-disclosure-erasing-5-billion-in-market-cap-2017-09-14
  10. ↑ Time magazine special report on Habits
  11. ↑ Brendan Pierson, Former Exxon CEO Rex Tillerson testifies in climate change fraud trial Reuters (2019-10-30) https://www.reuters.com/article/us-exxon-mobil-lawsuit/former-exxon-chief-rex-tillerson-to-testify-in-climate-change-fraud-trial-idUSKBN1X912M

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