This time, the Oscar goes to.... ME

Take-Knowledge to Protect-Knowledge, the ever-evolving Technology

--mattewho

While the entire world is blaming Greenspan for bringing down the financial world single-handedly, I find myself having a soft spot for him. The poor guy was not only over-criticized; he was over-credited for his ability. It was the technology, the robust computers and sophisticated applications, which developed innovative derivative and structured products, that played a significant role in the 2008 financial tsunami. With 13 investment banks vanishing in six months, the long- standing US financial system, built by our founding fathers, and designed to be idiot-proof, was brought to the brink of collapse. Apparently, our genius didn’t foresee technology being the potential beast. In the middle of the crisis, I had lunch with a retired former colleague, who called computer “the sewing machine”; she was once ranked among the top 100 financial analysts on Wall Street. We were reverse engineering one derivative fund using rainbow option. She grasped the concept quickly and then bursted out: “This is too complex to calculate, how can one price it daily?” “Certainly not by your slide rule.” I replied. Of course, my rude comment almost cost us our friendship.
Not to challenge Einstein’s Twin Paradox, but time in Technology dimension does travel at a different speed. When I first joined the firm, the number of employees was about 35% of current size, but the number of servers was less than 1% of what we have now. Surprisingly, despite the fact we are an old fashion behind-the-curve investment firm, we had a State-Of-Art server at that time, a Net-FRAME server. (See news attached at bottom). The server was wrapped in large black steel; you would have to be a professional heavy weight wrestler to lift it. It had 128MB memory, and, not to scare you, 1GB hard drive! With the price tag at $30K of current money, it was the Holy Grail at the time. Fast forward 16 years, servers with 1000% more capacities are either invisible (virtualized) or built like a pizza box, and at fractional cost. Wall Street has classified the computer hardware sector as commodity. In a mere 16 years, the exquisite piece of Art in Sotheby has turned into the framed Art in Costco. It is quite an insult to the Industry; luckily, in a nice way.
The rapid growth of Internet since 1995 has become the vital force for the world economy; it has enabled business accessing, storing, and processing information, worldwide, all in split second; Aided by fast growing robust infrastructure, business was turning the vast amount of information collected from Internet into massive innovative products. By the same channel, it was marketing, selling, and distributing the products within real time of producing. In a nutshell, Internet and information technology have made information extremely fluid. As professionals in the financial industry, we all know how powerful the word “liquidity” is. In retrospect, financial service industry has benefited from Technology more than any other sectors of the world economy. Powerful combination of rapid growth infrastructure and sophisticated financial applications enabled firms to develop innovative, structured and highly complex products to meet customers’ needs. High-speed Internet pushed Finance into twenty-four-hour, seven-day-a-week global activity with vast sums flashing between markets. The ability to instantaneously interpret the financial markets and anticipate their movement has brought huge profits to Financial Service Industry.

Entering new millennium, as more information is disseminated electronically, the ability to manipulate is also growing, the vital force (Simultaneous Information sharing and transmission) that drove the world economy in the last decade, has recently started to show its dark side. After growing incidences of malicious virus attacks and identity theft, people’s sense of privacy and security is diminishing. A recent Wall Street Journal survey indicated that privacy is the issue that concerns Americans most in the twenty-first century, ahead of overpopulation, racial tensions, and global warming. Businesses can’t talk enough about privacy, and are rushing to pass laws to protect it; during an IT leader conference held in past May, the majority of the topics were about privacy regulations and security enforcement; technology for business productivity and innovation received little interest and mention. Obviously, technology is shifting towards a more defensive strategy: to secure data, to protect knowledge, and to reduce complexity.
One way to protect privacy is to set regulations. While I have no doubt about the necessity of regulations, I am less confident about the efficacy. Let’s take the corruption Index; it is higher in highly regulated countries. Let alone the lengthy process of regulation creation: Who picks and chooses the data to protect and not protect? What about information shared globally? Who would the new regulations apply to? What data are protected? What’s considered commerce? Lots of questions; few answers. This is surely just the beginning.
The other way to solve the problem of data security is to spend money on technology, for instance, applying secure web gateways to prevent employee exchange of web based email and postage on social network sites. The tools are useful, but only up to a certain degree, and to a certain point. You don’t have to be technologically savvy to register a free logmein account, which would enable you to connect to home PC from work and perform all the activities blocked by employer. So ultimately, the problem cannot be solved by technology alone because it is not purely technical in nature. Although technical defense is vital, systems are inherently vulnerable to both negligent and malicious acts by people. The real challenge for IT today is learning how to influence people’s behavior; security needs to shift towards being an influential mechanism. To achieve the approach, we need first to understand the business, and then enable the business to achieve its objectives in a way that is secure.
Every revolution has its challenges; that is part of the evolution. The original date of early human use of fire for cooking was about 1.6 million year ago, yet the evidence of their ability to control fire was dated only around 400,000 years ago. For over a million years, they faced the threat of fire but never gave up cooking. If history repeats itself, as it always does, we will find the solution for privacy and security successfully.