Wet Economics and Digital Security

A student once unwittingly asked a physicist, “Why did the chicken cross the road?” Immediately, the physicist retreated to his office to work on the problem.

Some days later, the physicist emerged and told the student, “I have a model that explains the chicken’s actions, but it assumes the road is frictionless and that the chicken is both homogeneous and spherical…”

In the last 50 years, economics has increasingly tied its models to frictionless decisions and homogeneous, spherical employees. These employees are as interchangeable with each other as are the widgets a company mass-produces. They show up to work at a certain wage and, since perfect competition in the labor market makes these models work, there is an assumption that the cost of labor is at a point where the market clears – no need to offer any more or less than that going wage rate.

As the world economy moved from regionalization to globalization and digital technologies made employees’ locations no longer tied to where a firm was legally chartered, the idea that costly labor in one market could be replaced with cheaper labor in another market fit well with the notion that employees were homogeneous, spherical physical bodies making frictionless decisions.

The biggest problem with the economic models that have dominated economic thought over the last 50 years is that, while they are great for predicting normal ups and downs in periods of relative calm, they are useless in times of massive upheaval. Put another way, they are like weather forecasting models that see category 5 hurricanes as “an increased chance of rain” or massive blizzards as “snowfall predicted for the weekend”. These models go blind in such unanticipated crises and are particularly useless for crises precipitated out of massive fraud and abuse. We saw the flaws of the models first in 1998, then in 2001, and again in 2008. We may soon see another round of flaw-spotting very soon, what with unease afflicting a number of major banks in germany and Italy…

But the second-biggest problem with the economic models is less obvious, and that’s because it involves the one thing everyone seems to leave out of their thought processes: security. Because the employees are not interchangable spheres and their decisions frequently involve friction, we can see security issues arising out of our reliance on those economic models.

The first is that employees are not widgets to be had at the lowest price: changing out a skilled veteran with many years at a firm even for someone with the same amount of experience from another firm involves a loss of institutional knowledge that the veteran had. The new person will simply not know many of those lessons until they are learned the hard way. In security, that can be costly, if not fatal.

It’s even worse if the new employee has significantly less experience than the veteran. I shudder whenever I hear about “voluntary early retirement” because it means all those people with many, many years at the firm are about to be replaced by people of vastly less experience. Because that experience is not quantified in the models used, it has no value in the accounting calculations that determined cutting the payroll to be the best path to profitability.

Then there’s the matter of the new employees – especially if they’re outsourced – not having initiative to fix things proactively. That lack of initiative, in fact, may be specified in the support contract. Both parties may have their reasons for not wanting to see initiative in third-party contractors, but the end result is less flexibility in dealing with a fluid security issue.

Remember the story of the Little Dutch Boy that spotted a leak in the dike and decided to stop it with his finger, then and there? What sort of catastrophe would have resulted if the Little Dutch Boy was contracted by the dike owners to monitor the dike, to fill out a trouble ticket if he spotted a breach, for the ticket to go to an incident manager for review, then on to a support queue with a 4-hour SLA to contact the stakeholders, so that they could perform an incident review and assess the potential impact before assigning it the correct priority? There would be a good chance that the incident would resolve itself negatively by the time it was graded as a severity one incident and assigned a major incident management team to set up a call bridge.

Security needs flexibility in order to succeed, and that kind of flexibility has to go along with the ability to exercise initiative. Full-time employees, costly though they may be, are more likely to be authorized to exercise initiative – and, if they’re experienced, more likely to use it.

On the matter of those decisions with friction… at any time, an employee can make an assessment of his or her working conditions and decide that they are no longer optimal. Most employees will then initiate either a job search process or a program of heavy substance abuse to dull the pain brought on by poor life and career choices, but others will choose different paths. It is those others that will create the security issues.

These others may decide that the best thing to do in their particular position is to get even with their employer for having created an undesirable situation. In the film “Office Space”, three of the main characters chose that path and created a significant illegal diversion of funds via their access to financial system code. They also stole and vandalized a laser printer, but that had less impact on their employer than the diversion of funds. In the same film, a fourth employee chose to simply burn down the place of business. Part of the popularity of the film stemmed from the way those acts of vengeance, in particular the vandalism of the printer and the sabotage of the financial system, rang true with the people in the audience.

We all knew an employer that, in our minds, deserved something like what happened in the movie. When I read recently of a network administrator deleting configurations from his firm’s core routers and then texting all his former co-workers that he had struck a blow on their behalf, I saw that such sentiments were alive and seething in more than one mind. As options for future employment in a region diminish as the jobs that once sustained that region go elsewhere, that seething resentment will only increase, resulting in ever-bolder acts of defiance, even if they result in the self-destruction of the actors initiating them.

But then there are the others that take even more thought about their actions and see a ray of hope saving them from self-destruction in the form of criminal activity. Whether they sell their exfiltrated data for money or post it anonymously on WikiLeaks. The first seeks to act as a leech off of his employer, the second has a motive to make the truth be known. Both actually prefer that the employer’s computer systems be working optimally, so as to facilitate their data exfiltration.

In economic models, this should not be happening. People should be acting rationally and either accept lower wages or retrain for other jobs. In real life, people don’t act rationally, especially in times of high stress. So, what can firms do about this in order to improve security?

The answer lies in the pages of Machiavelli’s “The Prince”. Give them a stake in the enterprise that requires their loyalty in order to succeed, and then honor that loyalty, even if it means payroll costs don’t go down. It won’t eliminate criminals 100%, but it will go a long way towards not only limiting the number of criminals in one’s firm, but also will maximize the incentive for loyal employees to notice, report, and react to suspect behaviors. If a firm was once again a place where people could be comfortable with their job prospects for the years ahead, it would be less of a target in the minds of the unhomogeneous, unspherical employees whose decisions always come with friction. It would be a firm that would have better retention of institutional knowledge and expertise in dealing with incidents.

Now, will boards and c-level executives see things this way? Not likely, given that the economic models of the past 50 years dominate their thinking. Somehow, the word has to get out that econometric models are not the path to security. Security is not a thing, but a system of behaviors. If we want more security, we then have to address the behaviors of security and give employees a reason to embrace them.

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