Category Archives: History

Energy, History, Security

China backs down on aid-for-oil in Sudan?

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The Economist reports that as the crisis in western Sudan continues to worsen, the UN finally might actually be asked to engage.

SINCE the tragedy in Darfur, Sudan’s western region, began three years ago, at least 200,000 people — some say more than 300,000 — have died; another 2m, in a population of 6m, have been displaced, many of them fleeing across the border into Chad; […] Now, belatedly, the UN is likely, as a last resort, to send blue helmets to Darfur. The United States, which two years ago accused the Sudanese government of genocide, is driving the plan, and opposition to it is fading. The Sudanese government in Khartoum, which has armed and encouraged the mounted Arab militias, or janjaweed, responsible for most of the killing, has stopped denouncing the UN intervention idea out of hand. The AU, whose peacekeepers have proved sadly unable to stop the janjaweed’s campaign of rape, murder and pillage, has acknowledged that it needs the UN’s help. And even China, which had opposed any UN intervention for fear of annoying Sudan’s murderous government, from which it buys vast dollops of oil, is now unlikely to object.

Most of the oil companies have withdrawn from the Sudan already, while China has taken the opportunity to expand control of the oil companies and establish itself as the Sudan’s largest trading partner. And yet, as the article points out, the UN presence might actually be a NATO mission in conjunction with the African Union.

It’s not clear if this supports the Whitehouse strategy or is happening in spite of it, since Bush quietly lobbied to neuter the Darfur Peace and Accountability Act in Congress (apparently as the Sudanese government was seen as an ally in the war on terror).

China had claimed to be innocently perfoming aid-for-oil through “non-interference in domestic affairs”, but in reality they armed the Islamic government in Khartoum, undoubtedly leading directly to the genocide in Darfur through air/ground superiority. On the other hand they also provided a fair number of soldiers to the UN for other conflict areas in Africa. In any case, it is clear that the US again may be perceived to be weakening in influence as China’s participation was needed in order for the UN to be an effective force in the region.

One could almost argue that China took a page out of the Cold War playbook and knowingly destabilized the region in order to facilitate investment and then only just approved the use of NATO forces to secure access to resources in northern Africa, under the guise of humanitarian assistance…

Food, History, Security

Death by Insurance

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Bruce Schneier has posted a restaurant guide to San Jose, which reveals his particular taste in food as well as humor. I found it enjoyable and informative and noted that he, and his wife Karen, hate the idea of corporate food because corporations are not legally bound to serve the interests of the consumer:

Look up the 1919 court decision Dodge v. Ford Motor Co.; it’s easy to find with
Google. That case still stands, and it upholds the fundamental legal principle that a corporation must put the interests of its shareholders above all other interests; and that it has no legal authority to serve any other interests, customers included. A corporation can only serve its customers’ interests inasmuch as it also serves its shareholders’ interests. Otherwise, as in Dodge v. Ford, the shareholders can sue.

The Super Size Me documentary showed the dangers of being an uninformed consumer, and how the giant food corporations can get an upper hand on average people by abusing their trust. Some suggest that putting regulations on these corporations will have a chilling effect on the market, but the opposite is generally true. The problem is that the market of “nutrition” slides into a market for “marketing”, which means those who actually try to deliver nutritous meals are sidelined by the deceptive and more profitable substitutes. “Honey, are we having snake-oil for dinner again tonight? It’s my favorite!”

In related news, I just read about the tragic story of a man who paid money into a health-insurance company only to find out that they had no intention of helping him afford health-care treatment. If you think markets do not need regulation, try to figure this one out.

When [KMBC’s] Flink talked to Tracy Pierce, his cancer was attacking his body. Despite being fully insured, every treatment his doctors sought for him was denied by his insurance provider. First-Health Coventry deemed the treatments were either not a medical necessity or experimental.

“I don’t know what else to do but just wait,” Tracy Pierce said last May.

As he waited, his doctors appealed again and again, including a 27-page appeal spelling out that Tracy Pierce would die without care. Coventry dismissed each request.

“It’s purely economical. You never see an insurance company try to block an inexpensive test,” said William Soper.

Soper leads a group of doctors who filed a lawsuit last year against insurance providers. This week, Soper went to Jefferson City to lobby legislators for change.

“And you know, it’s not going to get better anytime soon. It’s going to get worse,” said Myra Christopher, who is the president and chief executive officer of the Center for Practical Bioethics.

It is hard to read this type of news and then review the Coventry Health Care, Inc. website, which boasts how shareholders are richly rewarded by sound financial management.

Coventry Health Care, Inc. (NYSE:CVH) today reported operating results for the quarter ended December 31, 2005. Operating revenues totaled $1.72 billion for the quarter, a 24.2% increase over the fourth quarter of 2004.

Their mission statement seems plausable for a health-care provider:

To be the recognized leader in providing quality, accessible, and affordable health care benefits and services that maintain and improve the quality of life of all our members and the communities we serve.

But the only news that this corporation reports seems to be related to pleasing their shareholders:

Barron’s has repeatedly made note of Coventry’s focus on keeping costs down, indicating that Coventry shared in common with 2005’s other top 5 finishers “a tightfisted approach to overhead� and an “innovative use of information technology.�
[…]
Among all companies named to Forbes’ list in the category of Health Care Equipment & Services, Coventry was recognized in the 2005 edition as having had the highest 5-yr annualized total return, a distinction the company repeated in the 2006 edition.
[…]
Among all Fortune 500 companies, Coventry was also cited in the 2005 edition as having had the third highest total return to shareholders over the prior five-year period.
[…]
The Wall Street Journal again named Coventry to its list, and cited it as having the seventh highest five-year returns among all companies. As in the 2004 edition, Coventry again ranked #1 among all health plans nationally based on five-year performance.

Take a look yourself, ALL the news items they cite are related to shareholder returns. Not a single news item related to their mission statement!! Any chance they would post a news page where they actually say something like “we helped someone stay healthy today” or give some testimonials? I couldn’t find one. In light of the news they favor, maybe they should change their mission statement to “we keep overhead down and give great returns to shareholders”.

This of course begs the obvious question what is the antidote to the powerful incentives that make companies deny treatment in order to achieve financial accolades? Who can answer? Could it be the new Coventry CEO (ex-CFO), Dale B. Wolf who reported a cool $4,364,807 income for 2005, and $1,153,490 in exercised stock options (and $16,733,300 in vested, $2,632,500 in non-vested options)? Not bad for a company that was reported in 2005 to have a $5.3 billion revenue with $337.12 million net and $3.72 earnings per share.

Ouch. Tracy Pierce died while Coventry reported a $337 million net. Something tells me if you take this case to the feds right now, they might have a hard time understanding the problem. Even though the public pays for an ambulance that the AP says Vice President Cheney always has on call, I suspect that Bush and Cheney never actually bother with health-care insurance or consumer-grade care because they simply do not trust the system to take proper care of them.

We are told a corporation in America is legally a person (as in corporeal) and yet how many of us really know the person that we entrust with our lives or health? What do you do when you get cancer and the person you paid in advance to take care of you says “sorry, I don’t think you’re worth the time/expense”? And that is not even to touch upon the insurance premiums that are forcing the cost of care to skyrocket. The health-care crisis is solidly upon America, and detailed insider information (about corporations) is power.

One final thought: I always see innocent kids drinking “Rockstar” and I wonder if they know or care who is behind the label. Does it matter? Based on the above, I would hope most people might say yes. We need information to make the market work, and yet most people find information gathering expensive and clumsy. Journalists used to make a living out of delivering quality information, but even that market has eroded in terms of quality to the point where individual contributors and boutique outfits (those less beholden to the shareholder) are a more reliable source of data.

Anyway, back to Rockstar, Russell Goldencloud Weiner is the founder and CEO of the company, which is based in Las Vegas, Nevada. It turns out he is the son of Michael Weiner, ala the extremist right-wing talk-show host Michael Savage. You might have heard of Savage as the guy who said on air that the US should murder millions of Arabs, or the guy who claims that “radical homosexuals” and “radical Islamists” are “one and the same, they’re all terrorists”. Maybe you heard about the time when he said Clinton would recover from heart surgery only because “hell was full”. And then there’s the time he explained to his listeners “When you hear ‘human rights,’ think gays. […]think only one thing: someone who wants to rape your son”.

So, speaking of sons, is there a political connection between the younger Weiner and the Savage? Sure enough, Salon reports that they are both in the business together:

Savage’s son, Russ Weiner, kicked off the show. With his spiky, dyed-orange hair and calculated scruffiness, he was reminiscent of Dr. Evil’s son Scott from the Austin Powers movies. The resemblance was confirmed when Weiner proclaimed, “I’m proud to be the son of Savage!” The 30-something Weiner is the founder of RockStar, an energy drink that he developed with his dad, drawing on Savage’s previous career as a Marin County herbalist and ethnobotanist named Michael Weiner. RockStar’s herbal liver-cleansing formula is supposed to enable drinkers to “party like a rock star,” which presumably means drinking and doping. Generous free samples had been passed out to the crowd on the way in. It lived up to its hype: The antifreeze-colored, cough-syrup-flavored beverage can only be enjoyed if you’re taking drugs.

But while Weiner has cashed in on other people’s bad behavior, he made it clear that he’s a family-values kind of guy.

Right. Drink up everybody. Here’s to healthy information.

History, Security

Burglar Steals Squad Car

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Funny. Reuters reports today that a burglar in Germany, who had just been booked at the Eschwege station, grabbed the keys to a squad car during his interrogation and drove away.

Apparently the police noticed him leaving in the car but the burglar still tried to escape chase. Insult to injury or just a chance to get away?

To put this in perspective, Reuters also reported today that Vice President Cheney directly authorized his aide to “use classified material to discredit a critic of the Bush administration’s Iraq war effort”. Cheney was engaged “in an effort to counteract diplomat Joe Wilson’s charge that the Bush administration twisted intelligence on Iraq’s nuclear weapons to justify the 2003 invasion.”

Wilson charged the Bush administration with manipulation of the truth. Rather than prove themselves innocent of manipulation, the Bush administration dug in further and did it again. The question now is who is authorized to chase them down and take the keys away before more innocent people get hurt?

History, Security

The Economics of Security

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That’s the title of Schneier’s upcoming RSA presentation, and yet his analysis of the Post Office shooting in California (titled “Security Problems with Controlled Access Systems“) lacks even a basic foundation in economics:

This is a failure of both technology and procedure. The gate was configured to allow multiple vehicles to enter on only one person’s authorization — that’s a technology failure. And people are programmed to be polite — to hold the door for others.

Many of the commentators picked this up right away and pointed out that it would be far too costly to upgrade the physical access controls at all post offices, since they are easy to defeat. Fine, but defeat by what/whom? The risk calculation is unbearably lopsided if all we do is debate how vulnerable we could be, as opposed to including what we need to protect ourselves from.

risk = asset x vulnerability x threat
threat = frequency x severity

Bruce does suggest that frequency should be taken into consideration when he notes “There is a common myth that workplace homicides are prevalent in the United States Postal Service”. But he still concludes rather misleadingly that basic gate and access card controls “failed” to prevent a motivated and armed assailant with insider knowledge from bypassing them. Moreover, he doesn’t address anything related to how the frequency might be determined going forward (or what countermeasures might have mitigated the threat, looking back).

Thus, I posted two comments to try and help balance out the discussion by touching on more of the economic considerations:

In a typical risk calculation, you have to factor in the threat as well as the vulnerabilities. If you don’t want to decrease the vulnerabilities (e.g. due to capital expense and inconvenience) then you should consider countermeasures for the threats. The article mentions the woman had been put on medical leave a couple years prior to the shooting and had tangled with law-enforcement already. Seems like there are some opportunities for improvement, regarding how her condition/situation was handled or at least monitored, that would give a far better return on investment than making a post office into a fortress.

It appears to me not just a failure of physical security (making the workers vulnerable), but of a health-care system (increasing the likelihood and severity of threats).

Posted by: Davi Ottenheimer at February 4, 2006 01:22 AM

It will be interesting to see if anyone makes the connection of the threat to Ronald Reagan’s program to reduce state (and eventually federal) spending on mental health treatment. Here’s how he described it in his Dec 7, 1973 article in the National Review:

“California has pioneered the concept of treating the mentally ill with an expanded system of community mental health programs. When we started, the budget for community treatment was $18 million. This year it is more than $140 million and California’s shift from the ‘warehousing of the mentally ill’ in large state mental institutions has become a model for the nation.”

Unfortunately, it turns out that while this appears to have reduced spending is has also led to a significant decrease in security and safety:

http://www.metroactive.com/papers/metro/07.30.98/cover/mentalprison-9830.html

“When then-governor Ronald Reagan closed state mental institutions in the 1960s, policy-makers anticipated that a network of community-based programs would develop to care for the mentally ill. But only a smattering of those facilities have materialized during the last three decades. In this county only 30 of these privately-run facilities provide 24-hour care to the mently disabled, leaving thousands with mental-health needs to fend for themselves. At the same time, new laws made it tougher to commit someone to the existing and meager state hospital system. California currently runs only five state mental hospitals, one of which is in Vacaville state prison. Of the 3,664 patients in state mental hospitals, the vast majority, 2,723, were placed there for criminal activity. Fewer than 1,000 Californians are held in state mental hospitals for solely medical reasons. For those who need 24-hour care but are not outwardly violent and have no police record, there are few institutions with openings, leaving patients in the care of families and communities often under-equipped to deal with them.”

Had the communities generated the programs, things might have been different. But it was a gamble and the risk of this policy appears to not only have been seriously understated but the savings up front seem to have transferred to far higher costs later on…

Posted by: Davi Ottenheimer at February 4, 2006 01:42 AM

I really enjoy Bruce’s blog, and the comments, but sometimes it feels like the market isn’t working since encryption is being ignored by the real cryptographers at the exact time when most of us need the most help with it. Instead, the market seems to be inciting him (as well as other specialists) to branch out into polisci, philosophy and economics…even a friend of mine who pioneered the use of ATM encryption is spending his time consulting on organizational risk. Strange, especially since I get more and more requests to help design and deploy identity and key management systems.