Monday, June 10, 2013 - New Journalism and Cyber Wars

New Journalism and Cyber Wars

by Sinclair Noe

DOW – 9 = 15,238
SPX – 0.57 = 1642
NAS + 4 = 3473
10 YR YLD + .05 = 2.21
OIL - .26 = 95.77
GOLD + 2.40 = 1388.00
SILV + .26 = 22.05

Last week, the Guardian, a British newspaper, published classified information on phone and internet monitoring by the US government, as well as classified information about how the US has been conducting cyber attacks around the globe. Today we learned that the guy who leaked the classified information to the Guardian is a guy named Edward Snowden; he's 29 years old; he got the classified data while he worked for Booz Allen Hamilton, a private contractor. Snowden recently moved to Hong Kong. Still waiting to hear if he'll be extradited.

For several years now, my friends Pat and Linda Gorman have invited me to speak at the economic conferences each year. Each day, here on the radio I talk about the economic news of the day, so when I speak at their annual conference I try to make those presentations about big trends. In 2011, one of the trends I brought up was something I labeled New Journalism, based in part on the Wikileaks model. In 2012, another trend was CyberWars. I've expanded on those ideas in this presentation I made this past April. So, I went back and looked at that speech over the weekend. I'll share some of it with you today.

The idea of New Journalism was that we have seen a failure of main stream media to pull back the veil of secrecy in government and in corporate America; not surprising since corporate America controls the media and has an almost incestuous relationship with government. Here, I hoped we might see a Wikileaks bank dump. We still haven't seen that. I did not expect changes in main stream media. I wasn't that naïve. The bank dump supposedly exists, but make no mistake, the bankers are in control. They have choked off funding sources for Wikileaks, and the US government has threatened legal action against Julian Assange.

I also told attendees at the conferences about CyberWars. And I was spot on with that trend. We've been attacked. The Cyber World has been exposed for huge vulnerabilities. We all use those interconnected tubes that form the internet, and everything you do on the internet is extremely unsecured. One of the major threats is to the electric grid; beyond the physical threat from cyberattack, there is the concern about secrets. Major corporations, and major departments of government have been hacked. What gets scary is that the Department of Defense and Department of Justice and major financial institutions are vulnerable to attacks. Even Michelle Obama's finances were hacked. The best thing I can tell you is that you need some physical assets in your hot little hands. Otherwise, there will come a time when you get caught.

It's important to recognize that although no cyberwar has ever been declared, cyberwarfare is now a part of life. The war is pervasive and we are all vulnerable to attack. It's impossible to say who fired the first "shot" in this war, but the US government has certainly stepped up the fight. President Obama accelerated cyberattacks (begun during the Bush administration) on the computer systems that run Iran's nuclear enrichment facilities. The worm that the US (in conjunction with Israel) created to carry out the attacks accidentally became public in the summer of 2010; a programming error allowed it to escape its target in Iran, and it was discovered by computer security experts. They named it Stuxnet. Stuxnet was the US's first sustained use of cyberweapons; the attacks marked the first time that a computer worm was used to cause physical damage.

Well that's both kind of scary and cool, but so what? What's the point? How does it affect me? The point is that the genie is out of the bottle, and there's no going back. Unlike in a traditional war, in a cyberwar it's the more developed nations that are the most vulnerable to attack. The fact that the US has recently been so brazen in its cyberwar efforts, virtually ensures an increase in cyberattacks against the US government and US businesses.

Security has now become the third pillar of computing, joining energy-efficient performance and Internet connectivity in importance. The takeaway for US businesses should be that they need to pay more attention to securing their networks. The takeaway for investors should be that with the proliferation and increasing sophistication of cyberthreats, there will be growing demand to protect against it. As the weapons in this cyberwar evolve, so too must the defenses against them. And that's big business; the market is in the neighborhood of $25 billion worldwide, and double-digit growth is projected for years to come.

This past week's leaks to the Guardian newspaper weren't really new. We knew the government has been working with telecom companies to monitor telephone and internet communication. It's been going on for years now. When intelligence agencies talk about terrorist “chatter”, they're not talking about conversations using walkie talkies. And the CyberWar – well, we started it, and it isn't some virtual video game, it is very real; and it affects our most basic infrastructure, from defense to transportation to electricity to water to food, and the entire supply chain.

Booz Allen Hamilton, the company that employed Edward Snowden – the man who has admitted he leaked top secret info to the Guardian, Booz Allen Hamilton has approximately 25,000 employees, 76 percent of whom have a US government security clearance and 49 percent of whom have security clearances at the level of "top secret or higher." That's 12,250 people employed at Booz Allen alone who have "top secret" clearance. How much of the company's work is for the US government? Almost all of it. In each of the past three years, 98 percent or more of its income came from government contracts.

How on earth can you keep secrets if just one American company has enough people with top secret access to fill a mid-sized American town?There's no small irony that much of Booz Allen's work for the government is about securing government data from hackers and spies. The first subsection of the annual report is titled "Keeping Information Secure: An integrated approach enables effective cybersecurity." How much of their work is with the NSA and other intelligence agencies is hard to say. Understandably, that's not played up in the annual report, and the company has contracts focusing on everything from veterans affairs to air traffic control.

But plenty of intelligence work is disclosed, most of it with military, like the work it does with the Army's Intelligence and Information Warfare Directorate to build a database that "delivers massive and elastic data storage and processing capacity, with the power to query, sort, and analyze hundreds of millions of textual intelligence products in less than one second." Booz Allen Hamilton's sales have doubled in the last four years and profit has nearly tripled. Oh, and guess who the majority owner of Booz is? Carlyle Group, the long-time DC heavyweight private equity firm with deep connections to the Bush family. We can see how clever it is proving to be to have outsourced big chunks of the defense, security, and intelligence apparatus.

In other words, there are a lot of companies making big bucks in the Cybersecurity business, and there are way too many people with access to top secret info, and that access is not just to government secrets but also corporate secrets. It's just a matter of time until we see a Wikileaks style bank dump, or other major corporations wake up one morning to realize their dirty laundry is on the line. And when that happens, every time that happens, we pull back the curtain a little more.

Sun's CEO Scott McNealy may have stated it best, or at least the most bluntly. "You have zero privacy. Get over it." In this view, the Internet opened the door, the NSA just tiptoed through it.

Every day, we voluntarily upload mountains of data -- our thoughts, our jokes, our activities, our photos -- for at least part of the world to see. If we assume any degree of privacy for that material, we probably shouldn't be allowed to operate a television, much less a computer.

But we send emails to named recipients, we visit websites for our own information or entertainment. Despite the warnings from experts to encrypt everything but our underwear, we do those things with an expectation of privacy. The problem is that we do almost all those things for free.

Yes, we hear the triumphant cry of the early Internet enthusiasts ringing in our minds' ears: Information wants to be free. However, people's time and effort is never free. The people whose ingenuity and expertise have made all our online activities possible certainly weren't doing it for free. If you doubt that, check what the founders of Google are driving these days. And at least since the advent of the web portal, online companies have engaged us in a bargain no less unproclaimed and undebated (if as of now less sinister) than the security-for-privacy deal the federal government has made on our behalf: our "free" activity in return for our transactional data, which is then used to lure advertisers. It's a cliche by now, but no less true for that: If you don't pay for the product, you are the product.