Monthly Archives: September 2015

Chinese Cyber Espionage

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The Wall Street Journal published a transcript of written responses put to the Chinese President Xi Jinping.  On the issue of Chinese hacking the Chinese President had this response:

China takes cybersecurity very seriously. China is also a victim of hacking. The Chinese government does not engage in theft of commercial secrets in any form, nor does it encourage or support Chinese companies to engage in such practices in any way. Cybertheft of commercial secrets and hacking attacks against government networks are both illegal; such acts are criminal offenses and should be punished according to law and relevant international conventions. China and the United States share common concerns on cybersecurity. We are ready to strengthen cooperation with the U.S. side on this issue.

The key part of the response here is “relevant international conventions.”  There aren’t any!  There is a model set of non-binding international norms released by the UN back in July, 2015.  Those norms include:

(a) Consistent with the purposes of the United Nations, including to maintain international peace and security, States should cooperate in developing and applying measures to increase stability and security in the use of ICTs and to prevent ICT practices that are acknowledged to be harmful or that may pose threats to international peace and security;

(b) In case of ICT incidents, States should consider all relevant information, including the larger context of the event, the challenges of attribution in the ICT environment and the nature and extent of the consequences;

(c) States should not knowingly allow their territory to be used for internationally wrongful acts using ICTs;

(d) States should consider how best to cooperate to exchange information, assist each other, prosecute terrorist and criminal use of ICTs and implement other cooperative measures to address such threats. States may need to consider whether new measures need to be developed in this respect;

(e) States, in ensuring the secure use of ICTs, should respect Human Rights Council resolutions 20/8 and 26/13 on the promotion, protection and enjoyment of human rights on the Internet, as well as General Assembly resolutions 68/167 and 69/166 on the right to privacy in the digital age, to guarantee full respect for human rights, including the right to freedom of expression;

(f) A State should not conduct or knowingly support ICT activity contrary to its obligations under international law that intentionally damages critical infrastructure or otherwise impairs the use and operation of critical infrastructure to provide services to the public;

(g) States should take appropriate measures to protect their critical infrastructure from ICT threats, taking into account General Assembly resolution 58/199 on the creation of a global culture of cybersecurity and the protection of critical information infrastructures, and other relevant resolutions;

(h) States should respond to appropriate requests for assistance by another State whose critical infrastructure is subject to malicious ICT acts. States should also respond to appropriate requests to mitigate malicious ICT activity aimed at the critical infrastructure of another State emanating from their territory, taking into account due regard for sovereignty;

(i) States should take reasonable steps to ensure the integrity of the supply chain so that end users can have confidence in the security of ICT products. States should seek to prevent the proliferation of malicious ICT tools and techniques and the use of harmful hidden functions;

(j) States should encourage responsible reporting of ICT vulnerabilities and share associated information on available remedies to such vulnerabilities to limit and possibly eliminate potential threats to ICTs and ICT-dependent infrastructure;

(k) States should not conduct or knowingly support activity to harm the information systems of the authorized emergency response teams (sometimes known as computer emergency response teams or cybersecurity incident response teams) of another State. A State should not use authorized emergency response teams to engage in malicious international activity.

These norms involve the use of Information and Communications Technologies (ICT) to attack critical infrastructure, not espionage. These norms are a perfectly reasonable set of standards of international conduct on the Internet.  States should be diligent in protecting critical infrastructure, not allow their territories to be used for attacks on another, share vulnerability information, secure the supply chain from conterfeit products (from China), and states shouldn’t deploy their security researchers to do harm.

The states obligations under international law in (f) are about the laws of armed conflict and the protection of civilians and infrastructure, article 56, in the additional Protocol I of the Geneva Conventions, which incidentally the US had never ratified due to its objections to paragraph 3 of article 44 of the Protocol which absolve guerrilla fighters from the requires that other uniformed militaries must comply with and makes it more likely that civilians will be attacked and the military charged with war crimes.

Ignoring Volatile Markets

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Dan Solin over at the Huffington Post has a blog post entitled “The Secret to Investing in Volatile Times.”  The secret:

Instead of watching the breathless reporting from the floor of the New York Stock Exchange, do the opposite. Ignore the financial media. Pay no attention to what is happening in the market. Be blissfully ignorant. Spend the time you might normally devote to these anxiety-producing activities on pursuing your hobbies, spending time with your family and taking a vacation.

Once you understand that monitoring the markets is harmful to your long-term returns, a whole new world of opportunities will await you.

Because long term returns are higher under a buy and hold strategy, you will have greater peace of mind and higher returns, if you just ignore the market’s gyrations and try to time it.  Obviously your broker, who is in part motivated by commissions, isn’t too keen on this strategy, nor are newsletter writers and analysts with a good track record of market timing.  Bob Brinker and Marty Zweig come to mind.

Generally market timing is a fool’s game.  Burton Malkiel studied stock market efficiency, which says that the prices in the stock market reflect all known information at the time.  Generally the stock market returns can be modeled as random walk and guessing at the points when prices reverse is nearly impossible to do, i.e., technical indicators aren’t reliable, nor does doing fundamental analysis, because the information will be reflected in the prices by those with an opportunity to arbitrage.  So if you should just buy and hold, how should you invest?

Harry Markowitz, developed a method for constructing optimal portfolios, the method for which was enhanced to account for risk tolerance (the Sharpe ratio).  This is the basis for most of the new robo-advisers, where you answer a series of questions to gauge your risk tolerance and then the robot constructs an optimal portfolio that is supposed to return the greatest risk-adjusted rate according to your risk tolerance.

That is great, but what if I am saving for more than just retirement, such as a boat, the kids’ college tuition, etc.?

Well, the academics have a solution for that too.  We haven’t seen it make its way into the robo-adviser products yet, but certainly a human adviser can use the tools of both classic portfolio selection and lessons from behavioral finance and, rather than treating the person as a single pot of money to be invested in one portfolio, the concept of mental accounts can be used to construct optimal portfolios for aspirational investing (that boat or Porsche), college funds and retirement funds.

So back to Solin.  Solin is only partly correct.  You are best ignoring the market hype, but only if you have a well diversified portfolio that is optimized for your level of risk tolerance.  If you can’t sleep at night, you’re taking too much risk.

Bumper Stickers and The Gun Toting Hippie

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Jay Nordlinger posted an Impromptus today on the subject of bumper stickers and singled out a pickup truck that he came across with a seemingly odd collection of bumperstickers, being all over the map on the left-right spectrum.  He was having trouble with taxonomy.
This vehicle’s owner fits into a category I’ve called Gun Toting Hippie.  It is a particular species you find in pockets in Texas and the mountain states mainly, but can be found in isolated villages around the U.S. such as Bolinas, California, which received a substantial influx of Scots-Irish and was a smuggling town during Prohibition.
This species values radical individualism, rejecting the typical hippie communitarianism.  The radical individualism primarily manifests itself in an aversion to taxation, a valorization of gun rights, and corporate culture and bureaucracy are anathematized.  The military-industrial complex is sinister and a threat to individual liberty, as are treaties and multinational institutions, therefore isolation is the preferred foreign policy.  Conservation is an important goal, which aligns the Gun Toting Hippie with the radical left and environmental movements; except when those movements put agrarian pursuits in the crosshairs, because the Gun Toting Hippie is a Jeffersonian agrarian.  (The BLM is a sinister agency.)  In general the military should be small and based on a the principles of a democratic militia like Athens had as opposed to the professionalized military of Sparta (let’s leave aside that Athens was also imperial).
The ideology of the Gun Toting Hippie is very American, but a unique admixture not found in other cultures.  It is a strong brew of Jeffersonianism and Jacksonianism animated by the passions of Scots-Irish recalcitrance.  This ideological diversity is what makes America great.

Geertz and Daesh

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The American Interest had a blog post today, responding to a Christianity Today article discussing an evangelical Christian congregation in Germany that has welcomed and converted hundreds of Muslim migrants.  Writing about how the conversions indicate not a vote for Christianity, but a vote against the crises in the Middle East today:

That points to a danger for Islam: The pressures of intellectual and social modernization colliding with sectarian radicalism—and all in a region characterized by repeated economic and political failures—can create a civilizational crisis of confidence. Some respond by radical fundamentalism, trying to drown out the disturbing and critical voices in their own heads. Others say nothing but quietly distance themselves from the ideologies and practices of a world they see as failing. Some struggle to develop a concept of their faith that is resilient and open enough to coexist with modernity. And still others look for alternatives in other belief systems, religious and non-religious.

The American Interest is describing a particular phenomenon that has been in evidence in the Islamic world since the modern era. Clifford Geertz, described the phenomenon in Islam Observed.  He describes a social psychological condition where modernity brought a lack of certainty in religious truth. You have the average believer sandwiched between secularism and scripturalists who are taking a leap back to construct a more pure form of religion.

Geertz discussed a particular difference between the “scripturalist interlude” in the West and the one in Islam. In the West, it was the Protestant Reformation, which reached back to the scriptures and laid the foundation for the radical transformation of society, priming society for modernity. In the Islamic world, the great leap back in order to make the great leap forward got stuck in the leap back.

What happened is an ideologization of religion as the response to modernity, rather than the leap forward to modernity. Combine a fundamentalist theology with a totalitarian political institutions to enforce an idealized seventh century life style and you get Daesh.  It is natural for Muslims, caught between the scripturalists and secularists to seek out alternative forms of belief, when they reach a more permissive culture.

A Journey of a Thousand Miles Begins with a Single Step

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Welcome to The Noble Polymath!  This is a site of occasional pieces of opinion and analysis.  First let’s answer the question the wife-unit first posed: what is a polymath?  A polymath is a person who knows a lot about a lot of subjects.  Leonardo Da Vinci was a polymath.  Benjamin Franklin was a polymath.

The next question: why “Noble?”  The answer is that in modern usage the term polymath has become synonymous with dilettante, a dabbler.  The polymath is in fact not a dabbler.  A polymath often suffers from a particular disorder common to bibliophiles: successive monomanias.  Were you to see my crammed bookshelves you would see evidence of successive monomanias–hundreds of volumes on the Deuteronomistic History, hundreds of volumes on the secular study of religion, hundreds on Jewish Studies, about a hundred on psychoanalysis, hundreds on international relations and grand strategy, and about a hundred on applied mathematics.

My most recent monomania is international relations and grand strategy.  It was sparked when I read a piece in the Wall Street Journal by Charles Hill extolling the virtues of the liberal arts in state craft.  I learned that Charles Hill taught in the Brady-Johnson Program in Grand Strategy at Yale University.  I looked up the program, which is a non-degree program for training diplomats and heads of state.  I found a syllabus via a Google search and over the next several years devoured the reading list, but required and recommended.  I entered a degree program in the subject this year at Troy University to put all that to use in acquiring a credential in the subject, perhaps leading to a PhD in the subject.

You will see many posts on the subject as I encounter and react to the news of the day.