Identity Theft, or How To Influence Public Opinion

I've been wanting to write this for a while, but I can never remember to do it when I have the time. Everybody has heard of Identity Theft by now, but just in case you've been in a nuclear shelter the past 10 years waiting for the big one, I'll provide a one paragraph primer:

Identity Theft is a centuries old crime which has the public's attention these days because it has become so much easier to perpetrate due to the massive reliance on electronic data storage, manipulation and migration, all part of the information revolution and in conjunction with the rapid evolution of the Internet. Conceptually, it's really quite simple; the perpetrator assumes the identity of another and performs (usually) financial transactions in their name. Such transactions can include minor stuff like opening a credit card account and using it to steal a few thousand dollars, to somewhat more serious acts such as selling somebody else's house pocketing hundreds of thousands of dollars in the process. It just happens to be a lot easier to do "anonymously", behind a computer screen, hence it's surging popularity.

What I am here to tell you today is that you've been hoodwinked, cheated, lied-to and generally misled about this whole "identity theft thing", by a collaboration of private companies in the "ID theft solutions" industry, politicians wishing to cash in on some political clout, some "experts" who have shrewdly made themselves rather prominent and are now able to cash in on books and speaking engagements, and a financial services industry that loves nothing more than to show how much they care for their customers while screwing them on the backside.

First of all, let's talk a little bit about statistics: everybody loves to flaunt all those numbers that tell you that only last year, 10 or 20 or 30 million people got ripped off through ID theft. Reality check. First of all, these are extrapolations, unfortunately based on somewhat shady original baseline numbers. Second, those numbers represent INCIDENTS, not PEOPLE. That is, if someone stole a credit card checkbook from your mailbox and attempted to cash 10 different checks, it would be counted as 10 incidents. Another way to look at it is that they don't count overlaps; if the same person had their identity "stolen" 100 times, that's 100 people. Of course, pretty much by definition any ID theft crime results in multiple hits on the same person, to "milk" that stolen ID as much as possible. Third, the vast majority of these never end up costing anyone anything; when someone did exactly that to me last year and tried to cash over $15,000 that way, all it took was about an hour on the phone with my card companies to get it resolved, and I never lost a penny. I'm a highly paid consultant, so I could conceivably "count" my hour as worth $275 (my standard hourly rate); of course, that's baloney, since I did it at evening, after working hours, and it really was nothing but a minor inconvenience. And I'm rather "expensive"; it sometimes appears that at least in these statistics, everyone in this great country makes over $100 an hour.

Just think about it logically; if you are to believe the cumulative stats spewed about these past few years, at the end of 2006, over half of the people in this country would have had their identity stolen, each of them suffering between $750 to $3500 worth of damages, depending on who you ask. Such costs are so high that the economy would have literally ground to a halt (150M x $3500 each = that's just over HALF A TRILLION dollars, folks, or over FOUR PERCENT of the US GDP). To hear some of these people speak, you'd think there was a competition afoot to try and find a way, any way, to increase the overall damage done in each consecutive speech. And if you haven't heard your local expert tell you in a little trade show about over, oh, 200 BILLION DOLLARS IN DAMAGES THIS YEAR ALONE, with eyes open big and a booming tone, as they say, you ain't seen nuttin' yet.

But my problem is not even with the snake-oil, because many of these people have good intentions and quite a large number of them have good advice. Oh no. My biggest problem, and where you have been brazenly lied to for years now, is related to the issue of WHAT IDENTITY THEFT ACTUALLY IS.

Let me tell you right now - ID theft has ABSOLUTELY NOTHING TO DO WITH PRIVACY. Nothing. None whatsoever, except that privacy supports ID theft. The next time somebody starts talking to you about ID theft, and leverages privacy in the first five minutes of their spiel, just do yourself a favor and walk away. They are just not worth hearing.

So let's the record straight, shall we? Why isn't ID theft an issue of privacy? I find that the best way to explain these kinds of issues is by way of example. Let's assume that we live in a different world. In this world, everyone has full access to look at everybody's else information - and I do mean full access, including the ability to bring up their health records, criminal history, and yes, financial accounts such as bank and credit card accounts. Oh yes. In this world, you can log in to my bank account any time and look at exactly how much money I have, what I've bought recently, what my birthdate, mother's maiden name and social security number are, the works. Everything.

I'll give you a couple seconds to digest the above, I know, it sounds kinda scary.

Alright. Now, in this world, because information is available to everybody, it is very easy to create a powerful AUTHENTICATION AND AUTHORIZATION system to ensure that only the person performing a transaction is indeed allowed to do so. Why? Because all information is always available, including, say, DNA signatures. So you can very easily get them to use some form of biometric authentication - fingerprint and retina scan, say - whenever they want to transact with someone. In this particular world, (financial) ID theft does not exist, because there is no point in trying to assume somebody else's identity; once you try to perform a transaction in their name you will immediately and automatically be exposed, due to the availability of perfect information.

Note something interesting here: PRIVACY IS THE CHIEF REASON that ALLOWS ID THEFT TO SUCCEED. In other words, privacy and ID theft go hand-in-hand. Anyone attempting to deal with ID theft should be firmly opposed to measures of privacy, because privacy is what allows the assumption of somebody else's identity.

Got that?

ID theft is an AUTHENTICATION AND AUTHORIZATION issue, NOT privacy. It has nothing to do with privacy, except that privacy enables it.

So how do we solve ID theft? only one way; by allowing someone to build a bulletproof authentication system. This means that this central authority will have to have information about each of us - or at least those of us wishing to participate - that would unequivocally identify us, for example, through DNA and biometric signatures, probably obtained partially through things like blood samples. Oh yes. The second part would require that the financial services industry utilizes this central authority to authorize transactions (including account openings, for example). And lastly, merchants will have to incorporate additional measures to facilitate this authorization scheme, for example, getting your fingerprint when you go through the register at Safeway.

Guess what? Do that, and ID theft disappears. Poof. Just like that. Of course, all the privacy zealots will scream that this is a huge violation of people's rights, and their privacy, and blahblahblah (you may note that I don't have much appreciation for privacy advocates), and there you have it, ID theft is alive and well. And why? Because of privacy guys.

Oh well.

Just remember. ID theft is NOT an issue of privacy. There are many, many people out there that have a very powerful interest in making you think that it is, but it is not. In fact, it's quite the opposite. Privacy enables ID theft. ID theft is an issue of authentication.

It's done

As of yesterday at 3:10PM or thereabouts, I am a united states citizen. God, that sounds a little surreal.

We got to the courthouse at 1:45 or so to find a long line of people waiting to get in, and big signs saying it was for the 2:45 ceremony. Since my letter said 2:15, I was a bit anxious - there was no way we would get in before the appointed time! Crashing the line, we made it in at 2:05 or so, only to realize that I was part of the 2:45 group, and that the letter was intentionally made out to state a time half an hour earlier, to deal with stragglers.

I had to stand in another line to get registered. They took my green card (a moment of involuntary hesitation there), exchanging it for a piece of paper that had a hand-written number (017) and another number (1) circled in red ink. I later learned 017 was my serial number for that ceremony, and that 1 was the line number for where I would have to stand after the ceremony to receive my certificate of naturalization.

Paper in hand I went in and sat down, and waited with 141 others for the ceremony to begin. There were 4 no-shows, which held things up a bit. Social security guys came in and gave us a form to fill so we can hand it in after the ceremony to get our status changed with them. I guess as part of becoming new citizens we were being indoctrinated into the "paradigm of lines", which is almost as american as apple pie.

Not much to tell about the ceremony itself, but I felt a surge of pride and had to hold back the tears as I was repeating the words of the oath after the judge. It was a bit odd to note that most people around me did not seem excited or nervous in any way; I saw no one else in the group of about 20-30 in my close vicinity who was holding back tears, that's for sure. Even more interesting was the fact that at least two or three of them did not repeat the words of the oath, and stayed silent throughout. I found that jarring.

I was also the only one in the whole group of 142 people who bothered to go back in once all was said and done and get pictures next to the flag. Then we walked out and that was that. I'm now one of a group of 300-million people that, when it comes down to it, has created the most successful society thus far in human history. I am proud to be a part of it. Thank you, america, for accepting me.

(back to narrative) The most surreal was yet to come. We went to apply for my passport at the post office three block down the street. I filled in the application, and got to the counter to hand it in. The guy asked for my certificate of naturalization, which I assumed was for the purpose of authenticating my identity. He had to say it six times (and my wife had to shake me) before I realized he wasn't joking - he was taking it away from me to send in with the application.

What? What do you MEAN take it away? I just got it! You can't take it away! It's mine! I... I spent so many years wanting it, and... and now you're taking it away? Will I get it back? (yes) When? (a couple months) You're sure you have to take it? (Yes) But, but... (you're an american now, don't worry about it)

So anyway, we walked out of the post office, and I was rather shell-shocked, and as my wife and I were speaking we realized this was another of those huge cultural gaps that are simply not understood very well; that most americans never, throughout their whole lives, have any document proving their american citizenship (over 85% of americans never get a passport), and they don't even think about it. It seems completely obvious to them. I felt - heck, still do - completely naked. I mean, what if I needed to prove my citizenship? How can ANYONE walk around without some document to prove their citizenship? Doesn't it bother them, you, err, us? Wow. What a change in mindset. It gave me an insight into the whole national ID debate that I simply could never have had before then. It's not about privacy. It's... it's about the concept of proof, which I am so used to where I come from, and which for people who grew up here sounds completely foreign. I mean, it now all makes sense. It's that thing that upsets so many people in other countries, you know, when an american says in this tone that always sounds superior "but I'm an AMERICAN!". It all makes sense now, and I would never, ever have understood it until I left the post office without my certificate, with my green card having been taken away when I got naturalized, having absolutely no proof that I am indeed a citizen, just walking there on the street and having to simply accept, believe, feel confident that I was.

A look at healthcare

I have recently been forwarded this article, and thought I'd toss in my two cents. Not that it would matter to anyone except maybe, possibly, the five (am I exaggerating?) of you reading this blog. But hey, they are my two cents, so I'll toss them as I please. So there.

Mr. Boudreaux makes a very good point - free universal healthcare is, indeed, a completely moronic notion driven by and large by people with some hidden romantic notions about Karl Marx (sorry, I had to). His analogy is entirely appropriate, but his conclusions - privatize healthcare even more - are terribly wrong.

I'll tell you why they are so wrong before I propose an alternative system that could be adopted relatively easily within the current US framework while solving the biggest issues with healthcare in this country.

Mr. Boudreaux is wrong for three simple reasons:

1) While healthcare is not a right, access to a basic level of healthcare - leaving the issue of costs aside for a moment - is, indeed, a social right. Why? because human society - at least western society - is built on the notion that communities are desirable and that compassion is a basic principle of humanity. I'll leave you with the exercise of drawing the inevitable conclusion from the last statement.

It is also important to define "basic" here - basic healthcare in the US means something completely different than in, say, Africa. Keep this in mind as you keep reading.

2) Societal health is driven in part by the overall physical health of its members and the ability to take care of them. Of course, I am referring to the "compassionate society" which I believe we prefer to live in. It is therefore a basic ingredient in the overall health of not just each individual, but society as a whole.

3) Survival cannot be driven by shareholder profit considerations, especially not in an imperfect market, where long-term societal impacts are never considered as strongly as short-term personal interest. In other words, if you let stock prices drive healthcare, you will inevitably face the "profit maximization" or "margin improvement" paradigm, which in simple terms means that the for-profit provider will always be interested in doing as little as possible while charging as much as possible. It's not evil, it's simply the way for-profit organizations work in capitalism.

OK, that was a bit long-winded, but in a nutshell I am suggesting that to leave healthcare (and education, by the way) entirely in the hands of for-profit organizations without, at the very least, societal oversight (which means government, until someone comes up with a better way to organize human society) would eventually result in great healthcare for those who don't need it, and no healthcare for those who do (sounds familiar?), due to the profit motive.

Instead, I would like to propose a different system. It is a combination of ideas from around the world, and I think it could work fairly well in the US.

Here we go:

1) Basic healthcare would be defined by a not-for-profit professional panel that is nominated by a congressional committee. It would include all elements of a basic healthcare plan, including types of services, formulary etc., just like a health insurance policy. This panel will have no political affiliation, and to insure that, members will be selected for terms longer than at least two administrations (I suggest 10 years). Panel members will have to pass stringent criteria to qualify, and will be paid (and paid well, similar to supreme court judges) through the same system that will fund basic healthcare (see below). The panel will have full authority to determine changes to the elements of this basic plan, and will be required to do so at least twice annually. Lastly, the panel will be constrained by the amount of available funds in the national health fund (see below).
2) We will set up a national health fund. This fund will be completely independent (meaning it could not be used by the budget office to cover shortages elsewhere, like social security). It will be funded by a flat tax that will amount to, say, a tax-deductible 4% of a person's annual gross income. In addition, employers will contribute a tax-deductible 2% of their payroll. I am not proposing any caps to this tax, but in order to maintain feasibility, such a cap will have to be introduced (otherwise wealthy members will justly complain of having to pay, say, over a million a year in healthcare).
3) The basic healthcare plan will still require some contributions from members; however, those will be small. For example, $10 office visits, $10 RX, 10% contribution, no deductible, annual out-of-pocket maximum of say $1000 per person, similar to the best group PPO plans out there. All such expenses will be tax deductible. Furthermore, I also propose that very low income families will receive some sort of tax credit (like a child credit) to help offset these costs.
4) The national basic healthcare plan will be available to everyone. It doesn't matter if you have cancer, you're diabetic, pregnant or what have you; you make money in this country, you are covered by virtue of paying the tax.
5) Better coverage - for example, for things that might not be covered under the basic national plan - will be available through private healthcare companies, such as today's health insurance companies. They can offer more comprehensive policies, additional coverage for non-included drugs, or whatever they want. Furthermore, they would be able to charge whatever they think the market will bear, with much less strict price controls (I am proposing a spread of 5x between top and bottom). Yes, this means they could also charge different members different prices. However, one important caveat exists - any plan they offer will have to be offered to everyone.
6) Healthcare providers - doctors, hospitals etc - will be required to accept all patients or only private patients. This means that if they accept anyone under the national plan, they must accept everyone; otherwise they can choose to only accept those patients who are covered by one or more specific private plans. However, a provider who chooses to only accept private patients will not be able to treat them for ailments that are covered through the national health plan. In effect, if you want to be a specialist in an area that isn't handled in the national plan and only work with very wealthy clients, you are free to do so, but that's all you will be doing.
7) All drug and treatment prices will be negotiated and determined by a sister panel of negotiators, who will work to establish a national pricing index for the national plan with cost-of-living adjustments (similar to, say, the CIA).

This is it, in a nutshell. I believe that the above plan will solve most of the issues we are currently facing, namely:

1) Access to healthcare will be available to everyone, sick or not.
2) Healthcare will be far more affordable than it is today (before you jump on the 4% tax thing, do yourself a favor and calculate how much money a good PPO plan will cost you today, and remember it's tax deductible).
3) Better insurance will still be available to those who wish to pay for it.
4) There will be no large-scale abuse of the system as suggested in Mr. Boudreaux's article, since there will still be a contribution element.
5) Much of the waste, carried through administrative costs and currently inherent in the healthcare system will be eliminated, allowing for better use of funds and therefore a better national plan over time.

Anyway, as I said, just my two cents.

Look, ma, no passport!

I just received my invitation in the mail to attend the US citizenship oath ceremony on October 27th...

YEAH!!!

I am SO excited about this... contrary to some others I've spoken to, I really want to be a citizen of this country, not just for the various benefits (usually financial) that seem to drive most applicants. I just really like it here. The good and the bad make for an equation here that just isn't paralleled anywhere else. Quite a number of people I've known from very early on in my life have said at some time or another that I was an american that happened to be born in another country; it's about time to correct that error.

When I got the letter in the mail I rushed into the house to open it and started jumping up and down when I realized it was, indeed, the last step in realizing a dream that I had since I was in my early teens, reaching the destination on a path that I had trod upon for over 20 years.

Me, a US citizen.

Wow.

A new bubble

I don't know what to tell you, except that this definitely smells like bubble 2.0 by now.

$4.1B for Skype?
$770M for MySpace?
And now, $1.6B for YouTube?

I bet you News Corp are smiling now as this sort of makes the money they paid for MySpace look like a great deal. Skype, at least, was generating some cashflow. Scant comfort, of course, since the amounts were negligible. But MySpace and YouTube? I mean, are you serious? What the hell is wrong with the tech world, that people are willing to even try and justify these valuations? This is, of course, all shareholders money they are playing with, but the thing that really raised the flag for me was that the YouTube one was a stock exchange. Oh yes. Now we're getting back to good ol' 1999, where you COULD just as easily spend $5B to buy someone because your company was valued at over $100B even though you were losing money hands over fist on revenues that were an order of magnitude or two less than a mid-sized retailer. Who cares? you paid in stock, and since everything was inflated the way it was, it was nothing more than a funny little game - played on the backs of the poor sods who eventually got fried. It was a microeconomic disaster in the end, but since the tech sector was so well... contained... it really didn't hurt anything else that much (and the Dow's relatively strong performance during the time the Nasdaq got buried is the best indicator of that).

Well, I'm happy for the 67 new millionaires at YouTube (can you believe it? that's how many people worked there when the acquisition was announced). Personally, I'm shaking my head wondering how this is even possible. What set of circumstances allows someone like Google to truly analyze the YouTube acquisition and come to the conclusion that it will generate enough free cash over whatever period of time to justify spending $1.6 BILLION DOLLARS on it. Or eBay to justify spending $4.1 billion on Skype. Or News Corp - NEWS CORP, for heaven's sake - to justify spending almost a BILLION DOLLARS on MySpace. I just don't get it. I wanna smoke what they're smoking. It would sure make my mortgage payment look a lot more bearable.