money

Railroads & tolls

From Andrew Odlyzko’s “Pricing and Architecture of the Internet: Historical Perspectives from Telecommunications and Transportation“:

Railroads were the dominant industry of the 19th century. … Early railroad charters, in both England and the U.S., were modeled after canal and turnpike charters, and almost uniformly envisaged that railroad companies would not be carriers themselves. Instead, they were expected to offer their facilities for use by carriers that would carry goods and passengers in their own wagons over the rails. Still, these charters specified tolls that varied greatly depending on the nature of the cargo. … For example, the very first parliamentary act for a railway was enacted in 1801. (Previous railways had been on private property, but in this case, as in subsequent ones, promoters were asking for the right of eminent domain to acquire the necessary land.) Between the endpoints of the railway, “chalk, lime and other manures were charged at the rate of three-pence per ton per mile; coals, corn, potatoes, iron and other metals, fourpence; and all goods not specified, sixpence” (p. 45 of [13]). …

Although some railroads did operate with other companies’ equipment on their rails for decades (and modern ones do so extensively), there was a relatively quick shift in the 1830s and 1840s towards railroads being exclusive carriers. There were technical reasons promot- ing such a shift (safety was jeopardized with multiple operators and primitive technology), but there is evidence that desire for greater control over pricing by railroads was also a major consideration [64]. Once railroads became carriers, they could engage in much more extensive price discrimination than allowed by the toll structure in their charters. And, propelled by the economics of their industry, with high fixed costs, railroads did engage in massive price discrimination, including personal discrimination. The result was massive political movements leading to government regulation [62,65].

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Turnpikes, roads, & tolls

From Andrew Odlyzko’s “Pricing and Architecture of the Internet: Historical Perspectives from Telecommunications and Transportation“:

British turnpikes were a controversial response to a serious problem. Traditionally, the King’s Highway was open to all. The problem was how to keep it in good condition. As commerce grew, the need to maintain roads became acute. At first, in Elizabethan times, laws were enacted compelling all able-bodied commoner males to devote several days a year to labor on the highways. (See [1,66,80] for references for the background information as well as other items below that are not attributed otherwise.) The inequitable distribution of the burden this imposed and the lack of effective control mechanisms by the central government led to many complaints. As a result, in 1663, the first turnpike was authorized. A local group was authorized to create a turnpike trust that would borrow money to improve a section of a road, and then collect tolls from travelers for passage over that section of the road. This venture was set up (as were all subsequent turnpikes) as an ostensibly non-profit trust. (There were opportunities for profits there, for example in payment of above-market fees and other abuses, but those were illicit, and in any case were not the high profits that other, more private, enterprises, such as lighthouses and canals, offered.) The reason for the non-profit nature of turnpikes was presumably to allay concerns about a violation of the ancient principle that the King’s Highway was open to all. Still, this turnpike was very controversial (as were many later ones). Apparently largely for that reason, it took until 1695 before the next turnpike was set up [2].

In the early 18th century, the turnpike movement took off in earnest. Although there were frequent protests (sometimes violent, as in the burning of the toll gates around Bristol in 1727 and 1735), by mid-1830s there were over 20,000 miles of turnpikes in England. …

Tolls were usually doubled on Sundays for ordinary commercial traffic, but were eliminated for travel to or from church. They also “were never levied on foot passengers, and were thus unfelt by the labouring poor” (p. 124 of [80]). There were also options in many cases for a flat fee for annual access. Still, there were countless controversies about the toll, “the collection of which led to endless evasions, inequalities and favouritisms of all kinds, arbitrary exactions, and systematic petty embezzlements” (p. 136 of [80]). …

… road tolls are coming back as a result of growing congestion and improved technology. Unlike telecommunications, where technology is increasing capacity of fiber, coax, and radio transmissions, building new roads is increasingly difficult, and making existing ones carry more traffic can only be done to a limited extent. At the same time, electronic means for monitoring traffic and collecting tolls are improving, and we see central business districts in Norway, Singapore, and London imposing tolls. Most of these systems do raise privacy issues, too, since they are centralized ones with information about users, or at least cars. Still, there is a strong tendency to introduce ever more detailed monitoring of traffic, often with the explicit goal of charging users according to their level of activity (whether by governments or by insurance companies).

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Canals & tolls

From Andrew Odlyzko’s “Pricing and Architecture of the Internet: Historical Perspectives from Telecommunications and Transportation“:

The modern canal era can be said to start with the Duke of Bridgewater’s Canal in England. Originally it was just a means of connecting the Duke’s colliery to Manchester. The parliamentary charter (which enabled him to take over private property, with appropriate compensation) obliged the Duke to carry cargo to Manchester at a maximum charge of 30 pence a ton, and to sell his own coal in Manchester for no more than 80 pence a ton, about half the price that had prevailed before [38,68]. Parliament was determined to obtain substantial benefits for the public from the grant of government powers to the Duke. …

The great financial success of the Duke of Bridgewater’s Canal led to widespread attempts to emulate it. In the early 1790s, there was a canal mania, with a burst of construction that was never to be replicated in Britain. (The U.S. had its canal mania some decades later, following on the great success of the Erie Canal.) The charters of those canals show a general trend towards greater price discrimination. …

Similar toll schedules depending on cargo were also common in the United States. As an example, when parts of the still incomplete Erie Canal were opened in 1820, there was a long list of tolls, concluding with “All articles not enumerated, one cent, per ton, per mile” (Chapter 2 of [81]). The enumerated articles (among those that were measured by the ton) were charged tolls ranging from salt and gypsum at 0.5 cents per ton per mile, to 1 cent for flour, to 2 cents for merchandise, and nothing for fuel to be used in the manufacture of salt (so that it was necessary not only to know the nature of the cargo, but its ultimate use). …

While canal operators were trying to squeeze carriers (who were trying to squeeze merchants, in ways similar to those described below for turnpikes), carriers often attempted to evade tolls. They bribed toll-collectors, misrepresented what the cargo was, or how much there was of it, and in some cases even hid cargo with high toll charges under commodities such as sand for which the fees were low. The countermeasures, just as they are today, and would likely be in the future with electronic communications, were based on both technology and law. Measurements were taken (in many cases there were books available to canal operators, listing canal boats, and the weight of cargo aboard as a function of how deeply in the water they lay), and there were punitive penalties for evasion.

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Paul Graham on software patents

From Paul Graham’s “Are Software Patents Evil?“:

The situation with patents is similar. Business is a kind of ritualized warfare. Indeed, it evolved from actual warfare: most early traders switched on the fly from merchants to pirates depending on how strong you seemed. In business there are certain rules describing how companies may and may not compete with one another, and someone deciding that they’re going to play by their own rules is missing the point. Saying “I’m not going to apply for patents just because everyone else does” is not like saying “I’m not going to lie just because everyone else does.” It’s more like saying “I’m not going to use TCP/IP just because everyone else does.” Oh yes you are.

A closer comparison might be someone seeing a hockey game for the first time, realizing with shock that the players were deliberately bumping into one another, and deciding that one would on no account be so rude when playing hockey oneself.

Hockey allows checking. It’s part of the game. If your team refuses to do it, you simply lose. So it is in business. Under the present rules, patents are part of the game. …

When you read of big companies filing patent suits against smaller ones, it’s usually a big company on the way down, grasping at straws. For example, Unisys’s attempts to enforce their patent on LZW compression. When you see a big company threatening patent suits, sell. When a company starts fighting over IP, it’s a sign they’ve lost the real battle, for users.

A company that sues competitors for patent infringement is like a defender who has been beaten so thoroughly that he turns to plead with the referee. You don’t do that if you can still reach the ball, even if you genuinely believe you’ve been fouled. So a company threatening patent suits is a company in trouble. …

In other words, no one will sue you for patent infringement till you have money, and once you have money, people will sue you whether they have grounds to or not. So I advise fatalism. Don’t waste your time worrying about patent infringement. You’re probably violating a patent every time you tie your shoelaces. At the start, at least, just worry about making something great and getting lots of users. If you grow to the point where anyone considers you worth attacking, you’re doing well.

We do advise the companies we fund to apply for patents, but not so they can sue competitors. Successful startups either get bought or grow into big companies. If a startup wants to grow into a big company, they should apply for patents to build up the patent portfolio they’ll need to maintain an armed truce with other big companies. If they want to get bought, they should apply for patents because patents are part of the mating dance with acquirers. …

Patent trolls are companies consisting mainly of lawyers whose whole business is to accumulate patents and threaten to sue companies who actually make things. Patent trolls, it seems safe to say, are evil. I feel a bit stupid saying that, because when you’re saying something that Richard Stallman and Bill Gates would both agree with, you must be perilously close to tautologies.

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The diamond scam

From The Atlantic‘s “Have You Ever Tried to Sell a Diamond?” (February 1982):

The diamond invention – the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem – is a relatively recent development in the history of the diamond trade. Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of gem diamonds amounted to a few pounds a year. In 1870, however, huge diamond mines were discovered near the Orange River, in South Africa, where diamonds were soon being scooped out by the ton. Suddenly, the market was deluged with diamonds. …

The major investors in the diamond mines realized that they had no alternative but to merge their interests into a single entity that would be powerful enough to control production and perpetuate the illusion of scarcity of diamonds. The instrument they created, in 1888, was called De Beers Consolidated Mines, Ltd., incorporated in South Africa. As De Beers took control of all aspects of the world diamond trade, it assumed many forms. In London, it operated under the innocuous name of the Diamond Trading Company. In Israel, it was known as “The Syndicate.” In Europe, it was called the “C.S.O.” — initials referring to the Central Selling Organization, which was an arm of the Diamond Trading Company. And in black Africa, it disguised its South African origins under subsidiaries with names like Diamond Development Corporation and Mining Services, Inc. At its height — for most of this century — it not only either directly owned or controlled all the diamond mines in southern Africa but also owned diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland.

De Beers proved to be the most successful cartel arrangement in the annals of modern commerce. While other commodities, such as gold, silver, copper, rubber, and grains, fluctuated wildly in response to economic conditions, diamonds have continued, with few exceptions, to advance upward in price every year since the Depression. …

The diamond invention is far more than a monopoly for fixing diamond prices; it is a mechanism for converting tiny crystals of carbon into universally recognized tokens of wealth, power, and romance. To achieve this goal, De Beers had to control demand as well as supply. Both women and men had to be made to perceive diamonds not as marketable precious stones but as an inseparable part of courtship and married life. To stabilize the market, De Beers had to endow these stones with a sentiment that would inhibit the public from ever reselling them. The illusion had to be created that diamonds were forever — “forever” in the sense that they should never be resold.

In September of 1938, Harry Oppenheimer, son of the founder of De Beers and then twenty-nine, traveled from Johannesburg to New York City, to meet with Gerold M. Lauck, the president of N. W. Ayer, a leading advertising agency in the United States. …

In Europe, where diamond prices had collapsed during the Depression, there seemed little possibility of restoring public confidence in diamonds. … This left the United States as the only real market for De Beers’s diamonds. In fact, in 1938 some three quarters of all the cartel’s diamonds were sold for engagement rings in the United States. Most of these stones, however, were smaller and of poorer quality than those bought in Europe, and had an average price of $80 apiece. Oppenheimer and the bankers believed that an advertising campaign could persuade Americans to buy more expensive diamonds. …

Specifically, the Ayer study stressed the need to strengthen the association in the public’s mind of diamonds with romance. Since “young men buy over 90% of all engagement rings” it would be crucial to inculcate in them the idea that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship.

Since the Ayer plan to romanticize diamonds required subtly altering the public’s picture of the way a man courts — and wins — a woman, the advertising agency strongly suggested exploiting the relatively new medium of motion pictures. Movie idols, the paragons of romance for the mass audience, would be given diamonds to use as their symbols of indestructible love. In addition, the agency suggested offering stories and society photographs to selected magazines and newspapers which would reinforce the link between diamonds and romance. Stories would stress the size of diamonds that celebrities presented to their loved ones, and photographs would conspicuously show the glittering stone on the hand of a well-known woman. Fashion designers would talk on radio programs about the “trend towards diamonds” that Ayer planned to start. …

In addition to putting these plans into action, N. W. Ayer placed a series of lush four-color advertisements in magazines that were presumed to mold elite opinion, featuring reproductions of famous paintings by such artists as Picasso, Derain, Dali, and Dufy. The advertisements were intended to convey the idea that diamonds, like paintings, were unique works of art.

By 1941, The advertising agency reported to its client that it had already achieved impressive results in its campaign. The sale of diamonds had increased by 55 percent in the United States since 1938, reversing the previous downward trend in retail sales. N. W. Ayer noted also that its campaign had required “the conception of a new form of advertising which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea — the eternal emotional value surrounding the diamond.” …

N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country. “All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions,” the agency explained in a memorandum to De Beers. …

De Beers needed a slogan for diamonds that expressed both the theme of romance and legitimacy. An N. W. Ayer copywriter came up with the caption “A Diamond Is Forever,” which was scrawled on the bottom of a picture of two young lovers on a honeymoon. Even though diamonds can in fact be shattered, chipped, discolored, or incinerated to ash, the concept of eternity perfectly captured the magical qualities that the advertising agency wanted to attribute to diamonds. Within a year, “A Diamond Is Forever” became the official motto of De Beers. …

N. W. Ayer … set about exploiting the relatively new medium of television by arranging for actresses and other celebrities to wear diamonds when they appeared before the camera. …

N. W. Ayer proposed to apply to the diamond market Thorstein Veblen’s idea, stated in The Theory of the Leisure Class, that Americans were motivated in their purchases not by utility but by “conspicuous consumption.” “The substantial diamond gift can be made a more widely sought symbol of personal and family success — an expression of socio-economic achievement,” N. W. Ayer said in a report. To exploit this desire for conspicuous display, the agency specifically recommended, “Promote the diamond as one material object which can reflect, in a very personal way, a man’s … success in life.” …

Toward the end of the 1950s, N. W. Ayer reported to De Beers that twenty years of advertisements and publicity had had a pronounced effect on the American psyche. “Since 1939 an entirely new generation of young people has grown to marriageable age,” it said. “To this new generation a diamond ring is considered a necessity to engagements by virtually everyone.” …

The campaign to internationalize the diamond invention began in earnest in the mid-1960s. The prime targets were Japan, Germany, and Brazil. … Within ten years, De Beers succeeded beyond even its most optimistic expectations, creating a billion-dollar-a-year diamond market in Japan, where matrimonial custom had survived feudal revolutions, world wars, industrialization, and even the American occupation. …

When the campaign began, in 1967, not quite 5 percent of engaged Japanese women received a diamond engagement ring. By 1972, the proportion had risen to 27 percent. By 1978, half of all Japanese women who were married wore a diamond; by 1981, some 60 percent of Japanese brides wore diamonds. In a mere fourteen years, the 1,500-year Japanese tradition had been radically revised. …

The diamond market had to be further restructured in the mid-1960s to accomodate a surfeit of minute diamonds, which De Beers undertook to market for the Soviets. They had discovered diamond mines in Siberia, after intensive exploration, in the late 1950s: De Beers and its allies no longer controlled the diamond supply, and realized that open competition with the Soviets would inevitably lead, as Harry Oppenheimer gingerly put it, to “price fluctuations,”which would weaken the carefully cultivated confidence of the public in the value of diamonds. Oppenheimer, assuming that neither party could afford risking the destruction of the diamond invention, offered the Soviets a straightforward deal – “a single channel” for controlling the world supply of diamonds. In accepting this arrangement, the Soviets became partners in the cartel, and co-protectors of the diamond invention.

Almost all of the Soviet diamonds were under half a carat in their uncut form, and there was no ready retail outlet for millions of such tiny diamonds. When it made its secret deal with the Soviet Union, De Beers had expected production from the Siberian mines to decrease gradually. Instead, production accelerated at an incredible pace, and De Beers was forced to reconsider its sales strategy. De Beers ordered N. W. Ayer to reverse one of its themes: women were no longer to be led to equate the status and emotional commitment to an engagement with the sheer size of the diamond. …

DeBeers devised the “eternity ring,” made up of as many as twenty-five tiny Soviet diamonds, which could be sold to an entirely new market of older married women. The advertising campaign was based on the theme of recaptured love. Again, sentiments were born out of necessity: older American women received a ring of miniature diamonds because of the needs of a South African corporation to accommodate the Soviet Union. …

N. W. Ayer learned from an opinion poll it commissioned from the firm of Daniel Yankelovich, Inc. that the gift of a diamond contained an important element of surprise. “Approximately half of all diamond jewelry that the men have given and the women have received were given with zero participation or knowledge on the part of the woman recipient,” the study pointed out. …

Women spoke in interviews about large diamonds as “flashy, gaudy, overdone” and otherwise inappropriate. Yet the study found that “Buried in the negative attitudes … lies what is probably the primary driving force for acquiring them. Diamonds are a traditional and conspicuous signal of achievement, status and success.” It noted, for example, “A woman can easily feel that diamonds are ‘vulgar’ and still be highly enthusiastic about receiving diamond jewelry.” The element of surprise, even if it is feigned, plays the same role of accommodating dissonance in accepting a diamond gift as it does in prime sexual seductions: it permits the woman to pretend that she has not actively participated in the decision. She thus retains both her innocence – and the diamond. …

Except for those few stones that have been destroyed, every diamond that has been found and cut into a jewel still exists today and is literally in the public’s hands. Some hundred million women wear diamonds, while millions of others keep them in safe-deposit boxes or strongboxes as family heirlooms. It is conservatively estimated that the public holds more than 500 million carats of gem diamonds, which is more than fifty times the number of gem diamonds produced by the diamond cartel in any given year. Since the quantity of diamonds needed for engagement rings and other jewelry each year is satisfied by the production from the world’s mines, this half-billion-carat supply of diamonds must be prevented from ever being put on the market. The moment a significant portion of the public begins selling diamonds from this inventory, the price of diamonds cannot be sustained. For the diamond invention to survive, the public must be inhibited from ever parting with its diamonds. …

During the periods when production from the mines temporarily exceeds the consumption of diamonds – the balance is determined mainly by the number of impending marriages in the United States and Japan – the cartel can preserve the illusion of price stability by either cutting back the distribution of diamonds at its London “sights,” where, ten times a year, it allots the world’s supply of diamonds to about 300 hand-chosen dealers, called “sight-holders,” or by itself buying back diamonds at the wholesale level. …

Dave Watts summed up the magazine’s experiment by saying, “As an 8-year investment the diamonds that we bought have proved to be very poor.” The problem was that the buyer, not the seller, determined the price. …

In 1976, the Dutch Consumer Association also tried to test the price appreciation of diamonds by buying a perfect diamond of over one carat in Amsterdam, holding it for eight months, and then offering it for sale to the twenty leading dealers in Amsterdam. Nineteen refused to buy it, and the twentieth dealer offered only a fraction of the purchase price. …

Retail jewelers, especially the prestigious Fifth Avenue stores, prefer not to buy back diamonds from customers, because the offer they would make would most likely be considered ridiculously low. The “keystone,” or markup, on a diamond and its setting may range from 100 to 200 percent, depending on the policy of the store; if it bought diamonds back from customers, it would have to buy them back at wholesale prices. Most jewelers would prefer not to make a customer an offer that might be deemed insulting and also might undercut the widely held notion that diamonds go up in value. …

The firm perhaps most frequently recommended by New York jewelry shops is Empire Diamonds Corporation, which is situated on the sixty-sixth floor of the Empire State Building, in midtown Manhattan. Empire’s reception room, which resembles a doctor’s office, is usually crowded with elderly women who sit nervously in plastic chairs waiting for their names to be called. One by one, they are ushered into a small examining room, where an appraiser scrutinizes their diamonds and makes them a cash offer. “We usually can’t pay more than a maximum of 90 percent of the current wholesale price,” says Jack Brod, president of Empire Diamonds. … For example, Brod estimates that a half-carat diamond ring, which might cost $2,000 at a retail jewelry store, could be sold for only $600 at Empire. …

He points out that the setting frequently conceals flaws, and adds, “The sort of flawless, investment-grade diamond one reads about is almost never found in jewelry.” …

When thieves bring diamonds to underworld “fences,” they usually get only a pittance for them. In 1979, for example, New York City police recover stolen diamonds with an insured value of $50,000 which had been sold to a ‘fence’ for only $200. …

While those who attempt to sell diamonds often experience disappointment at the low price they are offered, stories in gossip columns suggest that diamonds are resold at enormous profits. This is because the column items are not about the typical diamond ring that a woman desperately attempts to peddle to small stores and diamond buying services like Empire but about truly extraordinary diamonds that movie stars sell, or claim to sell, in a publicity-charged atmosphere. …

… the “pipeline” through which De Beers’s diamonds flow from the cutting centers in Europe to the main retail markets in America and Japan. This pipeline, a crucial component of the diamond invention, is made up of a network of brokers, diamond cutters, bankers, distributors, jewelry manufacturers, wholesalers, and diamond buyers for retail establishments. Most of the people in this pipeline are Jewish, and virtually all are closely interconnected, through family ties or long-standing business relationships. …

The most serious threat to De Beers is yet another source of diamonds that it does not control – a source so far untapped. Since Cecil Rhodes and the group of European bankers assembled the components of the diamond invention at the end of the nineteenth century, managers of the diamond cartel have shared a common nightmare – that a giant new source of diamonds would be discovered outside their purview. … In the late 1970s, vast deposits of diamonds were discovered in the Argyle region of Western Australia, near the town of Kimberley (coincidentally named after Kimberley, South Africa). Test drillings last year indicated that these pipe mines could produce up to 50 million carats of diamonds a year – more than the entire production of the De Beers cartel in 1981. …

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Why businesses want RFID for inventory

From Technology Review‘s “Tracking Privacy“:

Technology Review: How would RFID work to track products?

Sandra Hughes [Global privacy executive, Procter and Gamble]: It’s a technology that involves a silicon chip and an antenna, which together we call a tag. The tags emit radio signals to devices that we call readers. One of the things that is important to know about is EPC. Some people use RFID and EPC interchangeably, but they are different. EPC stands for electronic product code; it’s really like an electronic bar code.

TR: So manufacturers and distributors would use EPCs encoded in RFID tags to mark and track products? Why’s that any better than using regular bar codes?

Hughes: Bar codes require a line of sight, so somebody with a bar code reader has to get right up on the bar code and scan it. When you’re thinking about the supply chain, somebody in the warehouse is having to look at every single case. With RFID, a reader should be able to pick up just by one swipe all of the cases on the pallet, even the ones stacked up in the middle that can’t be seen. So it’s much, much faster and more efficient and accurate.

TR: Why is that speed important?

Hughes: We want our product to be on the shelf for consumers when they want it. A recent study of retailers showed that the top 2,000 items in stores had a 12 percent out-of-stock rate on Saturday afternoons, the busiest shopping day. I think the industry average for inventory levels is 65 days, which means products sitting around, taking up space for that time, and that costs about $3 billion annually. Often a retail clerk can’t quickly find products in the crowded back room of a store to make sure that the shelves are filled for the consumer, or doesn’t know that a shelf is sitting empty because she hasn’t walked by lately. With RFID, the shelf can signal to the back room that it is empty, and the clerk can quickly find the product.

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Phishing by altering the bank’s server

From Computerworld‘s “Florida banks hacked in new spoofing attack“:

Three Florida banks have had their Web sites compromised by hackers in an attack that security experts are calling the first of its type.

Earlier this month, attackers were able to hack servers run by the Internet service provider that hosted the three banks’ Web sites. They then redirected traffic from the legitimate Web sites to a bogus server, designed to resemble the banking sites, according to Bob Breeden, special agent supervisor with the Florida Department of Law Enforcement’s Computer Crime Center.

Users were then asked to enter credit card numbers, PINs and other types of sensitive information, he said.

According to Breeden, the affected banks are Premier Bank, Wakulla Bank and Capital City Bank, all small, regional banks based in Florida.

This attack was similar to phishing attacks that are commonly used against online commerce sites, but in this case hackers had actually made changes to legitimate Web sites, making the scam much harder for regular users to detect.

… Though Breeden said the scam was operational for only “a matter of hours” and probably affected fewer than 20 banking customers, the technique appeared to be very effective at extracting sensitive information.

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Free markets need visibility to work

From Slashdot’s “Pay-per-email and the ‘Market Myth’“:

But I think there’s a bigger problem underlying all of this. It’s not about specific problems with GoodMail’s or AOL’s or Hotmail’s system. The problem is that many advocates of these systems say that any flaws will get sorted out automatically by “the market” — and in this case I think that is simply wrong. And in fact the people on Thursday’s panel can’t really believe it either, because one thing we all agreed on was that Bonded Sender sucks. But has the marketplace punished Hotmail for using it? Have people left in droves because non-Bonded-Sender e-mail gets blocked? No, because if they never see it getting blocked they don’t know what happens. Free markets only solve problems that are actually visible to the user.

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How much does stolen identity info cost?

From The New York Times‘ “Countless Dens of Uncatchable Thieves“:

In the online world, he operates under the pseudonym Zo0mer, according to American investigators, and he smugly hawks all manner of stolen consumer information alongside dozens of other peddlers at a Web site he helps manage.

“My prices are lowers then most of other vendors have and I will deliver them in real time,” reads a typically fractured Zo0mer post.

At the same forum, another user, “tabbot,” offers “any U.S. bank accounts” for sale.

“Balance from 3K and above: $40,” he writes. “Regular brokerage accounts from 3K and above: $70.”

Tabbot also offers full access to hacked accounts from credit unions. One, with a $31,000 balance, is being sold for $400. “I can try search specific info such as signature, ssn, dob, email access,” tabbot writes. “Account with an extra info will be more expensive.”

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Paypal’s numbers

From “PayPal Prepares For a Challenge From Google“:

Long the Internet’s leading online-payments service, PayPal has a 24% market share of U.S. online payments, according to financial-institution consulting firm Celent LLC. PayPal, founded in 1998, boasts 96 million accounts with consumers who want to send payments online without revealing their credit-card or banking information to vendors. To use the service, customers simply set up an account with their credit-card or bank-account details, fill out a payment amount and the email address of the recipient, and send the payment via the Internet to PayPal. If the recipient doesn’t have an account, he simply opens one in order to collect the payment. The service gained traction on eBay and proved to be more popular than an in-house payment system it had been using.

For eBay, which acquired the online-payment business in October 2002, PayPal has been a big asset. The unit has helped accelerate trading on eBay’s auction sites in the U.S., Germany and the United Kingdom. Most recently, PayPal generated 23% of eBay’s total $1.3 billion quarterly revenue. And PayPal’s revenue is growing steadily: It was up 48% to $304.4 million in the fourth quarter compared with a year earlier.

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1,000,000 miles in 30 days

From MSNBC’s “Very, very frequent flyer hits 1 million goal“:

On his blog “The Great Canadian Mileage Run 2005,” [Marc] Tacchi reported on Wednesday that he had racked up 1,003,625 mileage points and spent 56 of the last 61 days in an airplane. …

The 30-year-old embarked on his venture using Air Canada’s North America Unlimited Pass — a C$7,000 ticket that allowed passengers limitless travel within the continent between October 1 and November 30. …

A typical day would start with a 10 a.m. flight to Victoria, British Columbia, about 70 km (45 miles) from Vancouver. He would fly back and fourth between the two cities about six times and then catch an overnight flight 4,300 km (2,700 miles) to Toronto.

In Toronto, he would immediately board a return flight. …

By reaching the 1 million mile goal, Tacchi gets the equivalent of about 10 round-trip business class flights from Canada to Australia, which he has estimated would normally cost about C$70,000.

He plans to redeem his travel points to take his family to Miami at Christmas, then maybe go to Hong Kong or Thailand.

When he wasn’t flying to collect travel points, Tacchi works as a contract pilot. Once a week, he flies a Boeing 747 cargo plane to Europe or Asia.

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MTBU: Maximum Time to Belly Up

From The Register’s “How ATM fraud nearly brought down British banking“:

And there wasn’t time for the banks to fix the problem if anyone went public with it. Their MTBU was too short. MTBU? That’s “Maximum Time to Belly Up”, as coined by the majestic Donn Parker of Stanford Research Institute. He found that businesses that relied on computers for the control of their cash flow fell into catastrophic collapse if those computers were unavailable or unusable for a period of time. How long? By the late 1980s it had fallen from a month to a few days. That’s not a good thing; it meant that a collapse of the computers that any UK clearing bank relied on would destroy it in less than a week.

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Cybercrime more profitable than drug trafficing

From Reuters’ “Cybercrime yields more cash than drugs: expert“:

Global cybercrime generated a higher turnover than drug trafficking in 2004 and is set to grow even further with the wider use of technology in developing countries, a top expert said on Monday.

No country is immune from cybercrime, which includes corporate espionage, child pornography, stock manipulation, extortion and piracy, said Valerie McNiven, who advises the U.S. Treasury on cybercrime.

“Last year was the first year that proceeds from cybercrime were greater than proceeds from the sale of illegal drugs, and that was, I believe, over $105 billion,” McNiven told Reuters.

“Cybercrime is moving at such a high speed that law enforcement cannot catch up with it.”

For example, Web sites used by fraudsters for “phishing” — the practice of tricking computer users into revealing their bank details and other personal data — only stayed on the Internet for a maximum of 48 hours, she said. …

Developing countries which lack the virtual financial systems available elsewhere are easier prey for cybercrime perpetrators, who are often idle youths looking for quick gain.

“When you have identity thefts or corruption and manipulation of information there (developing countries), it becomes almost more important because … their systems start getting compromised from the get-go,” she said.

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Nothing fails like excess

From The New York Times:

Perhaps it was the bottle of 1947 Château Pétrus for £12,300 ($17,500). Or maybe it was the 1945 vintage from the same vineyard for £11,600 ($16,500). During dinner at a fashionable restaurant here, six investment bankers lapped up £44,000 ($62,700) in fine wines, and now they are suffering from a huge hangover.

Their employer, Barclays Capital, has fired all but one of the bankers since the dinner last July at Pétrus, a restaurant in London … when some of the bankers secretly tried to pass off their part of the bill as client expenses, Barclays began firing them one by one.

Gourmets willing to spend £50 for three courses can tuck into the cooking of Marcus Wareing, including sautéed medallion of stuffed confit pig trotter or roast breast of Anjou pigeon on a parsnip galette.

But the food was very much a sideshow to this particular dinner, which also included a third Château Pétrus, this one a 1946 vintage for £9,400. Then there was a 1984 Montrachet for £1,400, two bottles of Kronenbourg beer at £3.50 each, six glasses of Champagne for £9.50 each, one juice at £3, 10 bottles of water totaling £35, a pack of cigarettes for £5 and, to wash it all down, a bottle of 100-year-old Château d’Yquem dessert wine for £9,200.

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Obsessed by gnomes

From Ananova:

A man who lives with 900 gnomes says there is no room in his life for a wife.

Ron Broomfield is so obsessed with gnomes he even dresses up as one twice a week.

His fascination has so far cost him £20,000.

The 67-year-old shares his home in the Lincolnshire market town of Alford with the gnomes.

‘I’m not married any more but, to be frank, there’s no room for a woman. Gnomes have become my life,’ he said.

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The Forbes Fictional Fifteen

If fiction can be regarded as a culture’s subconscious, then it’s clear that we are a nation obsessed with the very rich. From avaricious caricatures like The Simpsons’ Montgomery Burns to literary character studies like F. Scott Fitzgerald’s Jay Gatsby, our culture — both high and low — is littered with images of billionaires and tycoons.

Rank Name $Net Worth
1. Santa Claus $∞
2. Richie Rich $24.7 billion
3. Oliver “Daddy” Warbucks $10 billion
4. Scrooge McDuck $8.2 billion
5. Thurston Howell III $8 billion
6. Willie Wonka $8 billion
7. Bruce Wayne $6.3 billion
8. Lex Luthor $4.7 billion
9. J.R. Ewing $2.8 billion
10. Auric Goldfinger $1.2 billion
11. C. Montgomery Burns $1 billion
12. Charles Foster Kane $1 billion
13. Cruella De Vil $875 millon
14. Gordon Gekko $650 millon
15. Jay Gatsby $600 millon” [Forbes]

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Great story about Shaw

George Bernard Shaw supposedly asked a woman if she would sleep with him for a million pounds. Her demure response was “Certainly.” But when he asked her if she would sleep with him for 10 pounds, her response was “Sir, what do you think I am?”, to which Shaw retorted “Madam, we’ve already determined what you are. Now we’re just haggling over the price.”

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Black Friday, now Cyber Monday

From "Ready, Aim, Shop" in The New York Times:

Though it sounds like slick marketing, Cyber Monday, it turns out, is a legitimate trend. According to Shop.org, a trade group, 77 percent of online retailers reported a substantial sales increase on the Monday after Thanksgiving last year. “Not good for employers,” observed Ed Bussey, senior vice president of marketing at the online lingerie retailer Figleaves.com.

Figleaves.com said sales on Cyber Monday last year were twice those of Black Friday. And that number is likely to jump this year when it offers the online equivalent of a doorbuster – 20 percent off all items.

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The largest library fine … ever.

I was an undergraduate at Washington University in St. Louis from 1985-1989, and a graduate student in English Lit. from 1989-1996. During that time, I racked up my share of library fines (not hard to do when the fines were $0.10 a day, per book), a couple of times into three digits. In fact, I always said that Olin Library was one day going to name an extension room after me: the Granneman Procrastination room.

Recently I started teaching at Wash. U. Desiring a library book, I walked into Olin Library for the first time in seven years and tried to get the volume. The student behind the desk told me that there was a problem with my account, but he was puzzled as to what it actually was. He told me that he would talk to his supervisor, who would send me an email once everything was straightened out.

A couple of days later, I received this email:

From: Lisa W—
To: scott@granneman.com
Subject: Olin library Privileges
Date: Tue, 24 Dec 2002 09:40:40

Sir,

Your record has been updated to show current status as a faculty member of UCollege. As to the fines, I looked them up in our archive and there seems to be some disagreement between our archives and your library record. We are showing fines of $714. I’ve showed this to my supervisor, letting her know that you have material you want to put on reserve for a class, and she decided to simply ignore the $714 fine and reduce the $81.60 fine to $20. If this is a bit confusing, we do have the archive printout available for you to look at. The fines seem to date from around 1989 to 1995. The $20 can be paid at the circulation desk. From that point your record will be completely current. If you do have any questions, please let me know.

Thank you.

Wow. This has to be a record!

Needless to say, I paid the $20. Gratefully.

The largest library fine … ever. Read More »