Dr. David McBrien

I have just finished watching "The Battle of Britain", an old (1969) film I first saw when I was young, and it reminded me of David McBrien, a colleague and a good friend of my father's. By strange coincidence, he died exactly 12 years ago to the day. He flew Spitfires for the RAF during the war, though in all the years I knew him he never once talked about his experiences. He was a wonderful physician, and a stand up no-nonsense man who took no guff from anyone, particularly my father who tended to browbeat people to get his way. David would have none of it. He and Hilary were very kind to my father after my mother passed away in 1989, and I am enormously grateful to them both. His words "... don't you know", which he often used at the end of a sentence to emphasize a point he was making, sound as clear in my head as they did when I was a teenager. He was, without doubt, one of "The Greatest Generation".

The 215

The NSA has been in the spotlight for a while. Most of us who had been blissfully ignorant, became aware of the surprising scale and scope of the NSA's data collection effort when The Guardian, courtesy of Edward Snowden, blew the whistle on a large domestic surveillance program.

There has been a great deal of confusion about what the programs actually did and why they might be if concern. It seems that one of the most controversial is that covered by Section 215 of the 2001 Patriot Act which allows for the bulk (and seemingly indiscriminate) collection of telephone meta-data. The administration maintained that 'no one was listening to your phone calls' which is true, but that rather misses the point. Social network analysis tools reveal a great deal from just this kind of connection data.

In addition to seeing if an individual has ties to a known terrorist, structural equivalence can likely help identify people in terrorist cells. What's more concerning though is the potential to use role equivalence to identify similar looking network structures; having a network that is structurally similar to a terrorist cell doesn't make it one. Data-mining this kind of information helps by adding richness to the analysis. While it is probably true that no singe act of terror has been thwarted as a direct result of the use of this data, it seems within the realms of possibility that the 215 program added something to the bigger picture.

So, the question should probably not be "do we discontinue the program?" but rather "how do we safeguard the information and the potential insights it generates from mis-use, either by government and politicians, or other parties (for example hackers, leakers, or even foreign governments)?"

One idea floated recently is that the data be kept by a private consortium of the telcos. This makes me more uncomfortable than having the government hold it. First, the private sector will be even less motivated than the government to invest adequately in safeguards to prevent misuse of the information. Indeed they may even be tempted to exploit it for commercial ends; after all, having not just their own telephone subscribers' data but the entire country's in a single database has enormous commercial potential.

My vote would be to create a special branch of the judiciary whose role would be the safeguarding and oversight of this data. Expanding the role of the judiciary has some appeal given widespread suspicion of the executive branch and the state of disarray in the legislative branch.         

    

Perverse Incentives

"£6 billion in total was paid out to staff in incentive pay at a time when total shareholder return was down 34% and dividend payments totaled only £2.7 billion." (The Salz Review). Incentive bonuses paid to Barclays' 60 top earners in 2011 allegedly exceeded total dividends paid to shareholders.

First this makes a mockery of the notion of 'residual claimants', the firm's owners, being appropriately rewarded for the risk they take that the firm might go broke, risks that the more richly rewarded employees don't share.

And it also suggests a problem with the more practical side of principal agent theory which has focused on creating incentive structures that align the interests of employees with those of owners. Here they clearly aren't; employees are benefiting substantially at the expense of owners, and doing so by taking enormous risks (e.g., the London Whale) that increase shareholders' risk and reduce shareholders' rewards.

Something, as Hamlet noted, is rotten in the State of Denmark.

An anachronistic obsession

Every day on every new station, from local to national, we hear what the Dow Jones Industrial Average is doing; and it's an increasingly pointless anachronism. 

Once, the Dow was a barometer of the economy - by which is generally meant the US domestic economy. A rising Dow meant firms were doing better, they were investing, and creating jobs.  And when people were flush they were spending and US firms benefited.

But that time has gone; there is no longer a strong correlation between the profits of the 30 Dow companies and the US domestic economy. Over half the Dow 30 earn derive most of their revenues overseas. And those that manufacture do so mostly outside the US. So sales and  profits (and share prices) can rise when domestic spending falls as long as they are rising globally, or while costs are being trimmed by off-shoring.

While not as telegenic (nor as frequently updated, a key factor for the 24x7 media), employment statistics and median wage rates are a better indicator of domestic economic prosperity.               

Changes

The President, in his pre-Christmas press conference, talked vaguely of 'changes' in 2014. I predict one of those will be Kathleen Sebelius stepping down; perhaps to spend more time with her family.