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Commentary on The Capital Markets- Category [Technology]
2017-12-18 10:30 by Karl Denninger
in Technology , 219 references
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This company and it's CEO both deserve to be hit by an asteroid and destroyed:

 by tickerguy

Never mind the company funding those who are alleged to be sexual abusers.

During the "original" debate on this issue there's a pretty clean argument to be made that Netflix intentionally shifted transfers of its content onto a transport provider who it also barred from negotiating bilateral traffic payments.  It then blamed ISPs for "slowdowns" that it caused, intentionally.  There was never one single subpoena served on the firm to back this up, but the objective outside measurements available at the time made an extremely persuasive case for that being exactly what happened.

As I have pointed out in other articles the consequence of so-called "Net Neutrality" has been to essentially reinforce a monopoly by Netflix!  What monopolists do in the general sense is force other people to pay their costs, which they pocket.  It is usually done through nefarious and back door ways, since simply stealing billions tends to be noticed and might run into some pushback.

Amazon does this, for example, by subsidizing product sales with AWS.  They'd never be in business for 10+ years as a product sales company that is incapable of delivering a profit as fulfillment costs continue to ramp faster than top-line sales growth, especially when that happens over the space of many years (and it has.)  But if you can grab some cash from some other customer and make up the difference, especially if you can get the government to be part of the funding source, well.....

Hastings has effectively done the same thing.  

At the same time real issues of neutrality have gotten exactly zero attention.  ISPs during the entire "neutrality" period still blocked SMTP servers, for example, making it impossible for you to run your own mail.  Why?  They claim abuse potential but let's be serious -- forcing all your email through them allows them to mine that email for marketing purposes.  Google clearly does this through Gmail and it must be assumed every other large ISP is doing it now too.  That's your allegedly-private email but as soon as you start tossing it through someone else's server, unencrypted, there is no longer anything preventing said company from using what's in there and selling it.  The number of enforcement actions to force ISPs to stop this crap during so-called "neutrality"?  Zero.

We have a serious problem with last-mile monopolies in the ISP market today.  But you cannot solve that through regulation -- you can only solve it through competition.  There are natural monopolies that exist in certain areas (e.g. last mile easements) and the answer is for municipal, county and state governments to use their eminent domain power they have already exercised for power and water services to provide a "dark fiber" tap to each home or business, all terminated in a convenient and neutral point.  You then pay (if you wish to use it) for the use of that piece of glass and you then select an ISP who has located at the interconnect and that's where the plug goes.  The "central points" are open to all ISPs who wish to enter a market at the same price for the space, power and cooling with a small enough minimum purchase that modest-sized local and regional ISPs can participate.  This is simple, elegant, and can trivially provide gigabit-level transport to each house.  MCSNet would have been a participant in this instantly were it to be made available, and had any of the municipalities in our service area had  the tiniest shred of interest in doing it back in the 1990s I probably would not have sold the company to Winstar.

Let's note that such a model of breaking the back of the monopolists has also been mightily opposed by every single cable and DSL provider in the space today, including by getting laws passed prohibiting localities from doing this sort of thing.  Yeah.

But that someone is a jackass (e.g. Comcast, Cox, etc) and has done things that if anyone bothered to enforce 100+ year old law would send them all to prison doesn't make someone else doing the same thing and enforcing it through law right, just or appropriate.  All that does is make them willing co-conspirators which adds a Racketeering charge to what they should all be staring down.

Hastings and Netflix are slimeballs, and their renewed "public campaign" of misinformation and outright lies must be both exposed and destroyed.

That is, unless you like getting your pocket picked.

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2017-11-29 07:00 by Karl Denninger
in Technology , 454 references
[Comments enabled]  

There is circulating a "note" making the claim that we are basically at the end of the car era, much like we wound up at the end of the horse era.

That of course doesn't mean there are no horses.  There are; the moderately (and more-so) wealthy still own them for sport and pleasure, but other than the Amish nobody owns them for basic personal transportation whereas they were essentially the only means of same decades ago.

The argument is that driverless "cars" (really a box that moves people and can be called on demand) will appear and basically take over.  First slowly, like cars did, and then more-or-less all at once.

In other words not long from now (months, really, if you're in parts of Arizona!) you will start to be able to hail what amounts to a robotic taxi -- with no driver in it at all.  As the technology improves and expands people will start to voluntarily eschew owning a car in favor of hailing rides in driverless vehicles; arguably mostly for economic reasons.

Oh by the way, if you're one of the half-million or so who currently drive for Uber, Lyft, or a conventional "taxi" or "black car" service -- you're all out of a job the that transition really starts to accelerate.  Keep that in mind as you continue to read onward....

At some point the accident rate disparity between the choice of car ownership and driverless "hail and get in" vehicles will cause the government to either ban driving or it will get so prohibitively expensive, either by insurance regulations or outright government taxation in some form, that only the very wealthy will retain the option (as is the case now for horses.)

You may see benefits here.

I see grave danger.

The freedom to travel has always been one that has centered around some form of personal transportation.  For roughly 100 years after this nation was formed it was mostly from horses.  Now it's mostly from personal motor vehicles.  There is in fact an actual court case that says that driver licensing is illegal for personal transportation as personal transport of one's body and personal effects using the common means of the day is a fundamental liberty secured by the US Constitution.

That all disappears like a fart in a Church if transportation as a service becomes not only a dominant theme but actually required to be used either by sky-high costs or government dictate.  With transportation becoming centered around a handful of large and in many cases government sponsored and regulated companies the ability to effectively bar someone from traveling where they wish, when they wish will become trivial and, you can be assured, wildly abused.

You will be able to be trivially prevented from going where you want, when you want or even going anywhere at all.  You will have no recourse if it happens to you or if your travels are "redirected" or prohibited outright on the whim of said firms or, for that matter, at the whim of the government.

Don't get me wrong -- as I get older and more-frail there will come a point where the ability to hail such a device will look pretty darned attractive to me.  Perhaps I personally, at that point, won't care because the alternative is that I will be unable to operate a personal motor vehicle using my eyes, hands and feet.

But to those who believe this will be some great societal advance, let me issue a warning that I hope doesn't become prescient: You're going to all rue the day this happens and the majority of the persons in this nation at the time will be rendered effective slaves as a consequence and you will be imprisoned or killed if you resist.

There are ways around this outcome, of course.  If self-driving technology is used to make possible the purchase and ownership of truly autonomous vehicles that are owned by individuals and which do not require external control be enabled and available to other than the owner the problem can be largely mitigated.  But make no mistake -- there are plenty of individuals in government and corporations who will work mightily behind the scenes in an attempt to make damn sure that the ordinary, non-wealthy individual will never be able to buy such a device, and that there will be no such thing as an autonomous vehicle that will be solely under the individual owner's control -- ever.  Even the current Tesla models are not under your control as an alleged "owner"; the company can in fact brick them remotely, temporarily or permanently and there is nothing you can do to prevent it.

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2017-11-27 07:00 by Karl Denninger
in Technology , 8367 references
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Math-challenged people******me off, and Net Neutrality is one of the bigger ones -- so here we go.

Let's assume I'm an ISP.

We'll use nice round numbers to make this easy.

Let us assume I have 1Gbps of transport available to me on my network.  I sell service with "speeds" of 10 Mbps and put connections through a "traffic shaper" that delivers "up to" 10Mbps for each customer.

I sell 500 of these connections in your neighborhood.  I do this because I know, with a good degree of certainty (because I modeled it over the period of several months or years) that your average use as a home user will be under 2Mbps all the time, with occasional higher bursts.

Since 2Mbps x 500 = 1Gbps, I can support this userbase.  If you run a "Speed Test" you will usually get the full 10Mbps that you bought.  In rare circumstances you may not.  If I have my traffic shaper implement a "fairness algorithm" I can prevent anyone from being "starved" entirely -- but it is simply impossible for me to deliver 5Gbps (that is, 10Mbps to every one of my 500 customers at once) as that's 500% of what my network is capable of doing!

All is well for quite a while.

Then along comes some new and innovative service.  The "new and innovative service" charges $10/month (my Internet service to you costs $50/month, so I am collecting a total of $25,000 a month in revenue.)

But, that "new and innovative service" requires that you pull down 5Mbps for the entire time you are using it, and it requires that there be no jitter at all to work (in other words the 5Mbps has to be delivered from the time you start using it until you finish without exceptions, or your user experience will be unacceptable.)  In addition the rest of your household use will still be there, so that 5Mbps requirement is additive to the 2Mbps I already modeled on an average basis.

Now let us assume this "new and innovative service" becomes wildly popular and half the people on my network subscribe to it.

Suddenly my 2Mbps model is no longer any good.  It is now, for 50% of my customers during the 6:00 PM to 11:00 PM hours, 7Mbps.

My former network build-out required that I be able to deliver 1Gbps reliably.

Suddenly I need to deliver (250 * 7) + (250 * 2) or 2Gbps -- twice as much -- or everyone screams and calls me a schmuck, swear that I run a terrible ISP and more.

The facts are -- and I am speaking as a former ISP CEO and guy who has built networks for a living for roughly 30 years -- that attempting to "over commit" a network by 100%, that is, demand twice what it is capable of delivering, doesn't cause everyone to get half of what they want.  Due to how TCP works and the retries that are generated when buffers overflow everyone (not just the people who want to watch streaming) will get very close to nothing at all.  Some modern operating systems will attempt to "throttle back" their demanded bandwidth in an attempt to maintain operation but not all, and consumer devices such as cellphones, tablets, desktop and laptop computers, especially older ones, are some of the worst in this regard.

Let's assume (for simplicity) the following breakdown of my expenses monthly (simplified but good enough to make the point):

  • $10,000 is spent on bandwidth provision (directly proportional to that 1Gbps)
  • $10,000 is not proportional to the bandwidth provision (building, staff, power, routers for the most part, etc.)
  • $2,500 goes to promotion and marketing (attracting new customers, advertising, etc)
  • $2,500 is my profit (10% of sales -- not really all that good, but about right for a mature business.)

Your "demand" for that "new an innovative service" just doubled that first $10,000 line; it goes to $20,000.  In order to prevent you from destroying my network's performance for everyone I must spend the additional $10,000 yet "net neutrality" says I cannot charge those who caused this expense more money nor can I "rate-shape" or block the source -- even though they are in fact economic and network terrorists in that they know that they're stealing their infrastructure costs from others and in fact designed their business model to do so on purpose.

I am now losing $7,500 a month.  I have been forced to spend the $10 large by an outside firm I have no contract with or control over because if I don't my network has unacceptable performance for everyoneAgain, that outside firm solicited people to buy their service knowing that this would happen because they believe they can force me to EAT that additional $10,000 in cost.

Worse, the faster I grow my customer base or the more people adopt this "new service" the more money I lose because my loss is a percentage, not a dollar amount!

I thus have only the following options available to me if I wish to remain in business: 

1. Charge the "new and innovative service" for the performance it demands from my network that is beyond what was reasonably engineered for.  In other words they get charged a "tariff" to the extent they force network operation beyond engineered limits, and if they refuse then I shape their traffic so it conforms to both what my network was designed for and what nearly all other services on the Internet fit within.  This is something said "new and innovative" service might be able to mitigate.  For example Netflix could be "unlimited" to the customer only if you queued what you wanted to watch the night before, allow it to transfer the data to your computer or phone when everyone is sleeping on a rate-limited basis and thus there's no excess load impact on me as an ISP.  If you instead demand to watch now, and "now" is in the evening hours, you pay a buck an hour to Netflix (and Netflix pays the ISP that, less the handling costs) for your decision to impose the load at that particular time.  Note that if I charge back the $10,000 then Netflix is forced to raise its prices to $50 from $10 since the additional $40 in hard cost they tried to shove off on me per-customer gets thrown back at them.  How many customers does Netflix have at $50/month?  NONE!

2. Charge the user directly for the "burst" traffic on a metered basis.  In other words you have a 10Mbps link but if you consume a lot of data during "busy" periods you will get hit with a "demand" charge.  This is how the electric utilities work for commercial customers; you have a base charge and then a "demand" charge that applies to your heaviest power demand during periods of heavy use.  That charge is large because it is intended to recover the expense of being able to meet your extraordinary demand for electricity.  The market has deemed #2 unacceptable, period; note that the government is able to force this billing paradigm in the commercial power delivery market (and in a few areas in the residential market too) because electrical service is a government-granted monopoly.

3. Charge everyone irrespective of their use of said new service -- or not.  In other words I now have to be able to deliver the 2Gbps as an ISP but I can't charge on a differential basis for it based on who's making me purchase the additional capacity so I am now forced to charge everyone 25% more whether they use the new and innovative service or not.  In this case you pay for your neighbor's decision to subscribe to Netflix.  As a cable company I might get that from you in higher internet prices or higher cable TV prices but I have to get another $20/month from you somehow.  If you're wondering why $200 cable+internet monthly bills are now rather common and it's damn hard to get both under $100 a month even with basic cable, maybe you will finally realize that you screwed yourself with all your insane screaming because this is why it happened.

Net Neutrality effectively forced the ISP to do #3 -- Hastings got his $200 stock price because you have been robbed whether you are a Netflix subscriber or not.

Oh by the way, it's not just Netflix.  It's also Amazon (with their Prime Video), Hulu (their subscription service), Youtube "Red", Disney's newly-announced service coming online soon, MLB's "streaming" service and hundreds of new services yet to be developed and marketed.

Since nobody subscribes to all of these services yet all of them (plus the ones to come that are bandwidth hogs outside of the expected norm) will wind up in this position the odds are that even if you are a Netflix subscriber you're going to get robbed in order to subsidize someone else's subscription to something.

There are serious monopoly problems with "last mile" data provision, especially in America.  They were present in the 1990s (in places where we had multiple DS-1 providers in the 1990s, for example, the price was usually 1/2 to 1/5th of that where there was only one "choice"!) and are worse today for broadband where for most consumers there is exactly one option of like kind and quality.  But Net Neutrality does not address that problem because it can't; it instead imposes a forced-subsidy model on those who don't want a given service and makes the monopoly problem worse.

If you want an example in another "market" have a look at Health Care, where EMTALA (mandating "neutrality" of treatment of all emergency patients) is arguably one of the biggest causes of the last three decade's worth of 500+% increases in the "cost" of health care and "insurance", never mind the complete inability in many cases to get a price at all prior to services being rendered.  Tell me again about how "affordable" said "insurance" actually is if you don't qualify for some sort of subsidy....

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2017-11-22 07:00 by Karl Denninger
in Technology , 222 references
[Comments enabled]  

The stupid, it burns!

A UC Berkeley computer science professor helped to create a video that imagined a world where nuclear weapons were replaced by swarms of autonomous tiny drones that could kill half a city and are virtually unstoppable.

Stuart Russell, the professor, said these drones are already a reality.


This so-called "professor" needs to be taken out into San Francisco Bay where there are sharks and tossed overboard for this horse**** stunt.

Let me explain.

Yes, it is trivial, even today, to create a small drone that can "pierce" someone's skull.  You can quite-trivially recognize a "head" and aim at it, along with striking it.  You don't even need a lot of forward speed since the attack can come from above, using gravity, and with a small enough "snout" the amount of kinetic energy required is pretty small too.

That's not the problem.

The problem is energy management and density.

Today's "hobby" (and small commercial) drones are energy density limited.  The unit has to lift its power source, which is a battery.  Batteries are terrible in this regard because they carry their reactants, including the oxidizer, in the case.

This means the common drone is limited to a few minutes of fly time before its battery is exhausted.

So to use such a "swarm" you'd have to release the drones close to where they will hit, and they will get one target per, provided they can find and execute on one before their power runs out.  The smaller the drone the less power it carries because it's ability to lift said cell is smaller.  If it's designed like a plane rather than a hovercraft it can go further but it's still severely limited on runtime.

If you start putting explosives inside it then you have the same problem in that you have to lift that too.  This, by the way, is why small hobby-style drones don't bother the various authorities all that much when it comes to terrorists using them for bombs -- they simply can't carry enough explosive to be all that interesting.

That doesn't mean it won't suck to be you if you're targeted by something like this.  It will.  But the idea of a "killer, cheap swarm" that spreads out over a city and murders people by the score is science fiction horse**** because only in that universe does the power supply exist to allow the dwell time and travel range to actually make it practical.

Now in a "battlefield" type environment, if you can get close enough, it's another matter.  There a bunch of tiny drones that can only lift a fraction of a pound each might be very effective across small areas.  Release a bunch (e.g. from high altitude overhead from a "drop plane"), they target anything bipedal, ram what appears to be the "head" and explode.  Even very small charges would have devastating impact, could be contact-fused (easy and as cheap to make as a rifle primer) and would be extremely hard to defend against (over than by being behind hard cover on all sides!)

But in a city or other urban type environment against civilians, and the outrageously idiotic claim that $25 million can buy an "army" of these things today that can kill half a city?


I can come up with a half-dozen cheap countermeasures against such a swarm.  Perfect, no, they wouldn't be but you don't have to be -- you just have to make using them uneconomic.

I ain't skeered; bring it on.

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Folks, let's make this easy.

Everyone wants to talk about how Podesta's email was penetrated, or the rest of the DNC, or that the RNC, allegedly, was not.

All the screamers are (still) out about  "Russia" and similar.

Let me restate -- while Podesta's email was apparently broken into via a "spearfishing" email (one with a reset password link embedded in it that didn't go to the real site, but rather to the person who was trying to steal) and which he was dumb enough to click and then provide his current password the real issue here isn't about this sort of attack at all.

The real issue is about the idiocy of such "email" systems or the use of any other sort of cloud provider for anything secure in the first place.

Let me explain.

I run my own email here.  It would be trivial for me to lock it down so that even if you stole my password it would be worthless.


Simple, really.  You see on the same network I have a VPN gateway that does not accept passwords at all.  It only accepts a certificate.  Such a SSL certificate is (nominally) intended to sign and encrypt private emails, and can also be used as a secure identifier for a VPN.  It is, effectively, the same thing a server uses to secure web communications but with a different set of "intended use" flags set (client authentication and digital signature rather than SSL server authentication.)

All I'd have to do is change the configuration on the email system slightly so that only accesses that came from connected VPN clients could connect at all.

Now you'd have to steal a device and if you did, it would only work until I knew it was stolen (and revoked the key.)  No other means of getting in would work even with the password.

It is literally a 15 second configuration change on my Dovecot and Exchange servers to do this, and it would not impact my ability to exchange email with others one bit.

Modern smartphones (including Android, IOS and BlackBerry 10 handsets) can all use these certificates for an IPSEC/IKEv2 connection.  Such a connection can be "nailed" open as well, active even on cellular, or activated "on demand" by the user.  Modern commercial and freely available operating systems (Windows 7/8/10, MacOS, Linux and FreeBSD) can also use same.  Doing so positively encrypts all traffic coming into or leaving said device.

Such a system is extremely secure because only authorized devices, secured with a cryptographic key loaded on them, can see the service in question.  An unknown key is refused by the VPN gateway as is one that has been revoked. Only trusted certificates (which are loaded on the host in a certificate store) can connect.  I use this facility with other services here at Ticker Central so I can have my laptop with me and use it "as if I was at home" even from half the world away on an insecure, or even known to be monitored data link.

The only way to get packets onto the "private" network from the outside and thus be able to "see" the email store is to connect to the VPN and establish a tunnel and the only way to do that is to have a trusted certificate on the device in question.  No certificate, no connection, no access, password or no password -- period.

This sort of facility is essential if you intend to allow remote access to services that are themselves of questionable security (or worse) such as, for example, Windows file shares.

So why didn't the DNC do this?

Because it takes more than 30 seconds of thought to do it and in addition it means not using email providers like Google -- you have to do it yourself, in-house, or all these security steps are worthless since your certificates and such have to be where someone else, who is unvetted, can get at them.

In other words they were stupid, and so have been the others.  They chose the equivalent of an unlocked front door for their house, and then are surprised when someone walks in and takes all the beer out of the fridge.

Oh, and all the guns and money in the house too, along with the nice widescreen TV!

Just remember folks that these are the very same people who claim to be smart enough to run the country.

PS: All the cloud providers are unlocked houses.  Always. They have to be in order for a cloud service to work; it's not a choice, it's an inherent part of any public "cloud" architecture. Claims otherwise are like putting a 25 cent TSA lock on your suitcase and calling it "secure."  The reason you have not and will not see this discussed in the media, especially the "business media", is that the minute this fact reaches the level of general knowledge all of said "cloud providers" have their stock prices collapse.

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