China: A Digital Currency Forecast

September 27, 2020

DarkCyber noted “‘One Day Everyone Will Use China’s Digital Currency.” If you have read Beyond Search/Dark Cyber before, you may know that words like “all,” “every,” and similar categorical affirmatives are irritants. We live in an era of “black swans” and words like “never” are tough to accept as characterizing the present datasphere. Nevertheless, we have an “everyone” from the Beeb.

The main idea is that Chinese digital currency will become the big dog. Hasta la vista dollares en efectivo. The Delphic statement comes from Chandler Guo, a “pioneer in cryuptocurrency.” The Chinese DCEP is coming. DCEP is the digital currency electronic payment, and it seems destined to become the way to pay.

The write up notes:

But many question whether it will succeed and there are concerns that it will be used by Beijing to spy on citizens.

And there is the Chinese spy thing.

The article includes an anonymous source, a now standard journalistic convention:

“The Chinese government believes that if some other countries can also use the Chinese currency it can break the United States’ monetary sovereignty. The United States has built the current global financial system and the instruments,” says an anonymous Chinese crypto currency observer known as Bitfool.

Are Guo and Bitfool correct? Sure, why not. It is 2020, the Year of the Black Swan.

Stephen E Arnold, September 27, 2020

DarkTrace: Details about the Company Floated

September 24, 2020

DarkCyber noted “Goldman Snubs £2bn Darktrace Float Amid Lynch Extradition Battle.” The Sky News article presented some information which struck the DarkCyber research team as interesting. The story reported:

Legal issues surrounding the British technology star have led to Goldman Sachs deciding not to seek an IPO role…

The question is, “Why?” Goldman Sachs, like other high profile financial institutions, has been embroiled in interesting deals in the past. Wikipedia offers a list which warrants consideration if only to weed out the realities from the allegations.

SkyNews includes these data in its story:

  • The sale of Autonomy to Hewlett Packard allegedly influenced the decision
  • Invoke Capital (founded by Michael Lynch) was the first investor in the cyber-centric firm Darktrace
  • Darktrace employs more than 1200 people and has more than 40 offices
  • The company has “more than $200 million in revenue”
  • “Mr Lynch stepped down from the Darktrace board in 2018, Invoke remains the company’s largest shareholder.”
  • “KKR had increased its stake in Darktrace as part of a reorganization of the company’s shareholder structure.”
  • “Darktrace might quickly be valued at well over £2bn.”
  • Poppy Gustafsson, a former Autonomy professional, is the CEO
  • Darktrace has $1bn in “cumulative bookings.”
  • Customers include AIG, BT Group, Jimmy Choo, the Science Museum Group and William Hill.

According to The Register, Autonomy’s auditor Deloitte was fined about $20 million US for “misconduct.”

Stephen E Arnold, September 24, 2020

Palantir Technologies: A Problem for Intelware Competitors?

September 24, 2020

The Palantir Technologies initial public offering is looming. Pundits are excited; for example, “Palantir Has A Long Uphill Battle Towards Customer Acquisition, But Benefits From Stickiness And Contract Expansion” makes clear that the journey to profitability may be like the Beatles observed: A long and winding road. Others are focused on churn; for example, “5 things to Know about Palantir’s Upcoming IPO.” DarkCyber’s response: “Just five?”

The issue is intelware. Many companies have tried to convert selling to law enforcement, intelligence agencies, and regulators into a billion dollar software and services business. There are some success stories; for example, Booz Allen fits the bill. The company sells time. The company has its own software, not much, but it exists. The company cheerleads, which is a nice way to say that for money “experts” will talk about promising products from the competitive marketplace.

Palantir is more like Autonomy than a blue-chip consulting firm. Autonomy played the “secret black box” chip with its neuro-linguistic programming. It worked until it did not. The firm licensed its black box to BAE Systems in the 1990s. The Autonomy marketing machine then generated revenue slowly and steadily. Then Autonomy acquired companies and cranked up its sales machine. At “peak Autonomy,” the well managed outfit Hewlett Packard, grabbed a brass ring with Autonomy engraved on it.  The cost was north of $10 billion and years of legal bills. Autonomy was a publicly traded company, and it had a revenue track record dating from 1996. The HP deal was completed in October 2011. That means that the FY2010 data give us an idea about how much secret black box software can generate with “advanced” software, great marketing, and demanding management. The revenue for Autonomy after 15 years was in the neighborhood of $870 million.

7 graph A

One of Palantir Gotham’s innovations: A right mouse click displays a wheel of choices. The interface is definitely jazzier than that of Analyst’s Notebook, now owned by IBM.

Palantir Technologies opened for business in 2003. The company has been in business for 17 years. Yep, that’s two years longer than Autonomy. And what is Palantir’s alleged revenue for the last fiscal year? $742 million. The company’s advantages were the support of Peter Thiel (a Silicon Valley Thor), secrecy, a method for importing ANB files (if you don’t know what this is, well, what can I tell you in a free blog post?), and okay sales and so-so marketing. (One of Palantir’s innovations was a wheel of choices, not Bayesian methods wrapped in mystery.)

If my math is correct, Autonomy generated $128 million more revenue that Autonomy. If one uses 2011 dollars, not the Rona roiled 2020 dollars, the difference is more like $400 million, give or take $20 million or so. Yep, Autonomy appears to have outperformed Palantir: Less time, more revenue.

What?

Why?

Who?

How?

Let’s take each question.

First, what? The lackluster performance of Palantir Technologies illustrates the difficulty intelware companies, even ones with great advantages like the aforementioned ANB filter, have making really big money quickly. Remember. To generate less revenue than Autonomy, Palantir required $2.6 billion in funding. DarkCyber thinks that patient investors may be nervous about their investment which could melt away like a real snowflake. You can work out the math. Take 17 years of losses, subtract the revenue generated over 17 years, add in some interest just for spice, and mix into a pressurized container containing the fumes of burning a big cash pile. Read more

Cybersecurity: A Booming Business

September 23, 2020

The United Kingdom has seen record growth for cyber security startups. The record growth in the cybersecurity field is due to the COVID-19 pandemic and the heavy demand on Internet and digital services. Internet and digital services must be protected from potential bad actors stealing individuals’ information or be mischievous during Zoom meetings. Tech Round explains more about cybersecurity’s growth in: “Cybersecurity: The Fastest Growing UK Startup Sector During COVID-19.”

Before the pandemic struck, cybersecurity focused on financial and regulatory risks. Cyber risk management is now a hot ticket for investors. COVID-19 also points to a future where more people will be working remotely, organizations will host their data offsite, and more services will be online:

“Ajay Hayre, Senior Consultant Technology at Robert Walters comments: “Historically IT security has represented only 5% of a company’s IT budget but due to remote working and transition to online or cloud-based solutions, cybersecurity has been thrust to the centre of business continuity plans, having proved its worth in enabling business objectives during lockdown. Not only will every company see the benefit of having this expertise in-house, but they will be looking externally for tools, services and advisors to help guarantee the future-proofing of their business by way of solid and robust cybersecurity provisions.”

What is even more interesting are the venture capitalists behind the investing. The PHA Group breaks down who the “5 Key VCs Backing Cybersecurity Startups” are. According to the LORCA Report 2020, a half billion pounds were fundraised in the first half of 2020 for cybersecurity startups. This is a 940% increase compared to 2019. Venture capitalists also want to invest their money in newer technologies, such as AI, encryption, secure containers, and cloud security. The five companies that invested the most in UK cybersecurity are Ten Eleven Ventures, Energy Impact Partners, Index Ventures, and Crosslink Capital.

Whitney Grace, September 23, 2020

Financial Crime: Business As Usual?

September 22, 2020

DarkCyber noted “HSBC Moved Vast Sums of Dirty Money after Paying Record Laundering Fine.” The article makes clear that banks do what banks do: Move money. Why? To make money, earn bonuses, and become a master of the banking universe.

Is anyone surprised? The authors of the write up seem to be. We noted this passage:

The FinCEN Files investigation found that HSBC’s highly profitable branch in Hong Kong played a key role in keeping the dirty money flowing. Although providing only a partial view of HSBC’s suspicious activity reports, the records show that between 2013 and 2017, HSBC’s U.S. compliance staff, who are charged with monitoring customer activity, filed reports lacking crucial customer information on 16 shell companies that had processed nearly $1.5 billion in more than 6,800 transactions through the bank’s Hong Kong operations alone. More than $900 million of that total involved shell companies linked to alleged criminal networks…

Institutions have processes. Once processes kick in, the paper pushing and the employees keep the wheels turning. The “work” is following the “rules” in order to complete tasks. Changing work processes in a large organization is difficult, often impossible. Quibi makes videos few watch. Facebook sells targeted ads across borders based on free flowing data. Successful organizations are successful because individuals find ways to generate profit from tasks others find giant money losers.

The write up hits the problem right between the eyes, stating:

Compliance officers said that the bank did not give them enough time to meaningfully investigate suspicious transactions and that branches outside the U.S. often ignored requests for crucial customer information. They said they were treated as a second-class workforce within the bank, with little power to shut down problematic accounts.

The exposition about the HSBC big bank is a reminder that institutions are, supercharged with online systems, smart software, and people who follow prescribed work procedures. In these efficient organizations, making money is the driver.

Regulators, compliance officers, and employees are unable to take meaningful action. Is it a surprise that “The Risk Makers: Viral Hate, Election Interference, and Hacked Accounts: Inside the Tech Industry’s Decades-Long Failure to Reckon with Risk” reaches an obvious conclusion: Money is the driver.

Consider the question, “What’s gone wrong?”

The answer is, “Nothing.” The system is what regulators, employees, and people want it seems.

Observations:

  1. A new definition of “crime” may be needed to embrace the reality of institutional behavior
  2. Regulatory authorities struggle to deal with corporate entities which are more impactful than governments
  3. Individuals appear willing to skirt social norms in order to feather their nest and craft a life outside of certain institutions.

Intriguing challenges for the institutions, their employees, and the governments charged with enforcing rules, laws, and mandated behaviors.

Stephen E Arnold, September 23, 2020

Efficiency: Modern Analytic Techniques Are Logical

September 21, 2020

I don’t pay much attention to writing about motion pictures. The title “Why Christopher Nolan Actually Blew Up A Real Plane For Tenet” was a bit of a baffler. I did not recognize the name “Christopher Nolan.” I knew the meaning of the word “tenet” but I had zero clue it was entertainment. When I looked him up, I did not recognize his cinematic masterpieces. Nevertheless, the premise of the essay was interesting:

Skip using a computer to fake blowing up a large airplane. But a 747 and just blow it up.

Interesting. Were there environmental costs? Were their additional safety related costs? Were there clean up costs? Were there additional legal costs associated with making sure that someone would have to pay if the whole deal went south? Maybe a post explosion maintenance worker catching on fire or just getting sick from breathing fumes?

Hey, breathing. What’s the big deal?

The write up does not address these questions, and my hunch is that expert cinema professionals think much about these problems even if some bright young sprout asked, “What happens if we screw up, kill a bunch of people, and maybe pollute the creek running next to the shoot?”

Hey, ducks and fish. Who cares? These folks are creating art for real people. Ducks? Or, “Hey, don’t rain on my parade” could well have been the response.

Thinking and acting efficiently is the way of the world among a certain cohort of professionals. If movie makers cannot ask, “How much will it cost if we screw this up?”, what other intellectual shortcuts have been taking place.

My hunch is a lot. Efficiency? Love it. Do large technology companies think in the manner of an esteemed, powerful creator of motion pictures? Yeah, good question.

Stephen E Arnold, September 21, 2020

Google Bert: Why Not Apply Method to Advertising?

September 17, 2020

DarkCyber noted  this story: “Google Accused of Allowing Scammers to Display Fake Adverts for Debt Help Online.” The main point is that questionable advertisements continue to appear for some Google users. Google needs advertising revenue to pay to keep the plumbing shipshape. Extra money is needed to fund noble projects like the Loon balloon and solving death.

Does Google have a potential solution?

Google Using Language AI Model to Match Stories with Fact Checks” raises the possibility that the company can. The write up reports:

Google is now leveraging BERT, one of its language AI models, in full coverage news stories to better match stories with fact checks and better understand what results are most relevant to the queries posted on Search. The more advanced AI-based systems like BERT-based language capabilities can understand more complex, natural-language queries.

But maybe not?

The article points out:

Google has more than 10,000 search quality raters, people who collectively perform millions of sample searches and rate the quality of the results.

DarkCyber thinks there may be another reason for faulty advertising screening.

That reason is money. Google needs cash and laying off people, automating, and fending off Amazon, Facebook, and Microsoft is expensive. Maybe any advertising is judged differently from other types of content.

Stephen E Arnold, September 17, 2020

Palantir: Will Investors Embrace Intelware Outfit Generating Consistent, Substantial Losses for More Than a Decade?

September 11, 2020

The stock market is chugging along, fueled by greed, the Rona, and a need to fuel the 21st-century F. Scott Fitzgerald gestalt. “Palantir Is Being Valued around $10.5 billion ahead of Direct Listing as Investors Question Growth Story” includes some interesting information about Palantir, an intelware startup which is only 17 years old, losing money, and shrouded in mysterious behavior.

The write up states:

Palantir said in its updated prospectus on Wednesday that it has 1.64 billion shares outstanding, as of Sept. 1 [2020]. Based on the average private market transaction price in the latest quarter of $6.45 a share, the company is being valued by investors at just over $10.5 billion. That’s far below Palantir’s valuation of $20.4 billion in a 2015 funding round.

Is “far below” a signal?

The write up notes:

In July, Palantir raised $410.5 million by selling shares at $4.75 a piece, according to the filing, which comes out to a valuation of about $7.8 billion. Transactions during the quarter took place at anywhere from $4.17 a share to $11.50 a share, suggesting a range of $6.83 billion to $18.8 billion. The math gets even fuzzier when considering that Palantir had a reported valuation of $20.4 billion in 2015, when the share price was $11.38. That price, based on the supplied share count as of Sept. 1, would indicate a current valuation of $18.6 billion.

Interesting.

But the losses need to be viewed differently; for example:

Palantir wants investors to concentrate on what the company calls its contribution margin, or the revenue left after subtracting the costs it bears to generate sales. That number climbed to 55% in the second quarter from 18% a year earlier.

I don’t recall “contribution margin” from my economics class in 1962.

The write up points out:

Palantir has only 125 customers that spent on average $5.6 million each in 2019. Glazer says the company’s products and sales strategies are “in their infancies.”

DarkCyber believes that Palantir’s trajectory over the last decade makes clear that there is a glass ceiling for software and services centric solutions. If our data are semi-accurate, Palantir is unlikely to grow in a way to repay its investors or achieve profitability in a highly competitive market sector.

Interesting play in the time of Rona, constrained budgets in government agencies, and a hint of financial desperation in some allied sectors.

Stephen E Arnold, September 11, 2020

Surveillance Footage Has Value

September 10, 2020

It is not a secret that Google, Facebook, Apple, Instagram, and other large technology companies gather user data and sell it to the highest bidder. It is a easy way to pad their bottom line, especially when users freely give away this information. The Russian city of Moscow wants to ad more revenue to the city’s coffers, so they came up with an ingenious way to get more cash says Yahoo Finance, “Moscow May Sell Footage From Public Secret Camera: Report.”

According to the report, Moscow’s tech branch plans to broadcast videos captured on cameras in public areas. Technically, at least within the United States, if you are in a public place you are free to be filmed and whoever does the filming can do whatever they want with the footage. Russia must be acting on the same principle, so Moscow’s Department of Information Technologies purchased cameras to install outside of 539 hospitals. It might also be a way to increase security.

All of the footage will be stored on a central database and people will be able to purchase footage. The footage will also be shown on the Internet.

What is alarming is that MBK Media wrote in December 2019 that footage from Moscow’s street cameras was available for purchase on black markets with options to access individual or an entire system of cameras. This fact is scarier, however:

“The same department organized the blockchain-based electronic voting in Moscow and one more Russian region this summer when Russians voted to amend the country’s constitution. The voting process was criticized for the weak data protection.”

Moscow wants more ways to keep track of citizens in public areas and it wants to make some quick rubles off the process. Companies in the US do the same thing and the government as well.

Whitney Grace, September 10, 2020

—-

Palantir Has Only Unicorn Scorn for Fellow Travelers

September 7, 2020

It is a time of change for Palantir, a software company that proudly serves the US intelligence community. The firm is both going public and planning to move away from Silicon Valley to Denver, Colorado. CEO Alex Karp took the opportunity to engage in some situational signaling. CNBC describes how “Palantir CEO Rips Silicon Valley in Letter to Investors.” Writer Ari Levy shares some excerpts:

“‘Software projects with our nation’s defense and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace. For many consumer internet companies, our thoughts and inclinations, behaviors and browsing habits, are the product for sale. The slogans and marketing of many of the Valley’s largest technology firms attempt to obscure this simple fact.’ Although he did not name any such companies specifically, Facebook fits the description—an ironic touch given that [Palantir cofounder Peter] Thiel was an early investor in that company and remains on its board of directors. Karp said in the letter that government agencies have been hamstrung, in part by failed tech infrastructure and that Palantir’s mission is to help. ‘Our software is used to target terrorists and to keep soldiers safe,’ he wrote. ‘If we are going to ask someone to put themselves in harm’s way, we believe that we have a duty to give them what they need to do their job.’”

That is some wordsmithing. Levy notes one risk factor acknowledged in Palantir’s paperwork—its strident refusal to work with China, despite that country’s rank as the world’s second-largest economy. The potential hit to the company’s growth is no match for its distain of the Chinese communist party, apparently. Count another virtue signaled. Surprisingly, Google’s alleged work with China did not make it directly into the letter, but the write-up reminds us:

“Thiel has accused the company of ‘seemingly treasonous’ behavior for allegedly helping the Chinese government while backing down from a contract with the U.S. government after facing employee criticism. Here’s how Karp addressed the matter: ‘We have chosen sides, and we know that our partners value our commitment. We stand by them when it is convenient, and when it is not.’”

The article reproduces the letter in full at the bottom, so navigate there to read the entire composition. Yes, perhaps it is high time this righteous company said goodbye to famously progressive Silicon Valley. Will Karp miss Philz Coffee as much as his former compatriots? Will interested individuals believe this restatement of reality from a fan of the ANB file format?

Cynthia Murrell, September 7, 2020

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