In response to my post from earlier today, I repost Bruce Schneier's article from 2007:

January 25, 2007

In Praise of Security Theater

While visiting some friends and their new baby in the hospital last week, I noticed an interesting bit of security. To prevent infant abduction, all babies had RFID tags attached to their ankles by a bracelet. There are sensors on the doors to the maternity ward, and if a baby passes through, an alarm goes off.

Infant abduction is rare, but still a risk. In the last 22 years, about 233 such abductions have occurred in the United States. About 4 million babies are born each year, which means that a baby has a 1-in-375,000 chance of being abducted. Compare this with the infant mortality rate in the U.S. -- one in 145 -- and it becomes clear where the real risks are.

And the 1-in-375,000 chance is not today's risk. Infant abduction rates have plummeted in recent years, mostly due to education programs at hospitals.

So why are hospitals bothering with RFID bracelets? I think they're primarily to reassure the mothers. Many times during my friends' stay at the hospital the doctors had to take the baby away for this or that test. Millions of years of evolution have forged a strong bond between new parents and new baby; the RFID bracelets are a low-cost way to ensure that the parents are more relaxed when their baby was out of their sight.

Security is both a reality and a feeling. The reality of security is mathematical, based on the probability of different risks and the effectiveness of different countermeasures. We know the infant abduction rates and how well the bracelets reduce those rates. We also know the cost of the bracelets, and can thus calculate whether they're a cost-effective security measure or not. But security is also a feeling, based on individual psychological reactions to both the risks and the countermeasures. And the two things are different: You can be secure even though you don't feel secure, and you can feel secure even though you're not really secure.

The RFID bracelets are what I've come to call security theater: security primarily designed to make you feel more secure. I've regularly maligned security theater as a waste, but it's not always, and not entirely, so.

It's only a waste if you consider the reality of security exclusively. There are times when people feel less secure than they actually are. In those cases -- like with mothers and the threat of baby abduction -- a palliative countermeasure that primarily increases the feeling of security is just what the doctor ordered.

Tamper-resistant packaging for over-the-counter drugs started to appear in the 1980s, in response to some highly publicized poisonings. As a countermeasure, it's largely security theater. It's easy to poison many foods and over-the-counter medicines right through the seal -- with a syringe, for example -- or to open and replace the seal well enough that an unwary consumer won't detect it. But in the 1980s, there was a widespread fear of random poisonings in over-the-counter medicines, and tamper-resistant packaging brought people's perceptions of the risk more in line with the actual risk: minimal.

Much of the post-9/11 security can be explained by this as well. I've often talked about the National Guard troops in airports right after the terrorist attacks, and the fact that they had no bullets in their guns. As a security countermeasure, it made little sense for them to be there. They didn't have the training necessary to improve security at the checkpoints, or even to be another useful pair of eyes. But to reassure a jittery public that it's OK to fly, it was probably the right thing to do.

Security theater also addresses the ancillary risk of lawsuits. Lawsuits are ultimately decided by juries, or settled because of the threat of jury trial, and juries are going to decide cases based on their feelings as well as the facts. It's not enough for a hospital to point to infant abduction rates and rightly claim that RFID bracelets aren't worth it; the other side is going to put a weeping mother on the stand and make an emotional argument. In these cases, security theater provides real security against the legal threat.

Like real security, security theater has a cost. It can cost money, time, concentration, freedoms and so on. It can come at the cost of reducing the things we can do. Most of the time security theater is a bad trade-off, because the costs far outweigh the benefits. But there are instances when a little bit of security theater makes sense.

We make smart security trade-offs -- and by this I mean trade-offs for genuine security -- when our feeling of security closely matches the reality. When the two are out of alignment, we get security wrong. Security theater is no substitute for security reality, but, used correctly, security theater can be a way of raising our feeling of security so that it more closely matches the reality of security. It makes us feel more secure handing our babies off to doctors and nurses, buying over-the-counter medicines, and flying on airplanes -- closer to how secure we should feel if we had all the facts and did the math correctly.

Of course, too much security theater and our feeling of security becomes greater than the reality, which is also bad. And others -- politicians, corporations and so on -- can use security theater to make us feel more secure without doing the hard work of actually making us secure. That's the usual way security theater is used, and why I so often malign it.

But to write off security theater completely is to ignore the feeling of security. And as long as people are involved with security trade-offs, that's never going to work.

This essay appeared on Wired.com, and is dedicated to my new godson, Nicholas Quillen Perry.

Duck & Cover.

Here at i2pi, we feel a strong brotherhood with all things pie, as demonstrated in the image below*:

And as statistics & visualization junkies, we think we have found the only good use for a pie chart:

I don't get it.

I don't understand why we are getting into such a fuss attempting to stop the decline in stock prices. If a company defaults on its debt then the equity holders get nothing. That's just how it works. The likelihood of default is reflected in corporate bond rates and CDS spreads. As those spreads widen, we see that the market believes in a greater chance for default, therefore the value of the equity declines. Whether they are right or wrong is another thing, but markets are supposed to reflect beliefs. Facts are for the future to reveal.

As far as I can tell there are no great operational reasons why a company would care about the current value of its equity. Yes, if they are trying to make purchases with equity, it could be a problem, but that's not at play right now. Yes, companies have a duty to their shareholders, both internal and external. But if the external market believes something that isn't shared by insiders you shouldn't be taking aim at changing the mechanism for reflecting beliefs. That's nothing more than shooting the messenger.

If you make the argument that insiders care about stock prices because of options and the effect on morale, then you have a bigger problem. If insiders honestly worry about what management considers a temporary misplaced belief, then clearly the insiders don't hold those same beliefs. And maybe then facts are actually closer to what the external market is reflecting. This would mean that the mecahism is working, and shooting the messanger would be trying to shoot the future.

:wq

Now I don't know how many of you have watched Bloomberg TV in the evening, but without the distraction of an active trading session the channel feels much more like a low-rent community college broadcast. All that was missing was a potted plant and an American flag.

Instead they had Arthur Laffer.

He was making the argument that the Fed should have cut yesterday and the basis of his argument was something along the lines of, well if we bail out 100% of GDP we will be no better off than if we bail out 0% of GDP. I didn't quite follow his line of reasoning, but it was an all too familiar approach to me.

At least in the words of my favourite motivational speaker de jour, Tim Gunn, if you only have one trick up your sleeve you had better 'Make It Work.'

:wq

This morning I came across an interesting paper that demonstrated a leading relationship between a basket of currencies and the IMF commodity price index:

Using data obtained over the past one to three decades for Australia, Canada, Chile, New Zealand, and South Africa - all small commodity exporters with market-based floating exchange rates - we find that their currencies embody remarkable forecasting power for future global commodity price movements. Individually, these exchange rates can forecast the prices of their country's major commodity exports, and together, they do an excellent good job at predicting aggregate commodity market movements.

[snip]

This forecasting success of commodity currencies is no deus ex machina but has a sound and intuitive economic basis. It follows naturally from the fact that exchange rates are asset prices that embody expectations of future movements in macroeconomic fundamentals, specifically ones that will directly affect the exchange rates. For commodity currencies, global commodity prices matter to their exchange rate values.

Inspired, I bounded out of bed and decided to pretend to be an economist this morning. Without reading the paper, I grabbed what data I could and put together a simple vector autoregressive model. I couldn't find data for the Chilean Peso, or at least my data set suggests that it was, up until recently, pegged to the USD, so I worked with only the AUD, CAD, NZD and ZAR. Even so, as my pretty picture above shows - the model is pretty spiffy.The chart shows the out-of-sample 1 month ahead prediction. Overall the model gets me an R-squared of 0.85.

Neat.

Now onto real work for the rest of the day.

:wq

Hey, you, meet you

Nearly seven years after Osama Bin Laden disappeared, US intelligence agencies are still chasing his shadow. And shadows are precisely what they should be looking for, says NASA's Jet Propulsion Laboratory in Pasadena, California.

By analysing the movements of human shadows in aerial and satellite footage, JPL engineer Adrian Stoica says it should be possible to identify people from the way they walk - a technique called gait analysis, whose power lies in the fact that a person's walking style is very hard to disguise.

The results showed that the appropriately trained sexologists were able to correctly infer vaginal orgasm through watching the way the women walked over 80 percent of the time. Further analysis revealed that the sum of stride length and vertebral rotation was greater for the vaginally orgasmic women. "This could reflect the free, unblocked energetic flow from the legs through the pelvis to the spine," the authors note.

There are several plausible explanations for the results shown by this study. One possibility is that a woman's anatomical features may predispose her to greater or lesser tendency to experience vaginal orgasm. According to Brody, "Blocked pelvic muscles, which might be associated with psychosexual impairments, could both impair vaginal orgasmic response and gait." In addition, vaginally orgasmic women may feel more confident about their sexuality, which might be reflected in their gait. "Such confidence might also be related to the relationship(s) that a woman has had, given the finding that specifically penile-vaginal orgasm is associated with indices of better relationship quality," the authors state. Research has linked vaginal orgasm to better mental health.

Extending the idea to satellites could prove trickier, though. Space imaging expert Bhupendra Jasani at King's College London says geostationary satellites simply don't have the resolution to provide useful detail. "I find it hard to believe they could apply this technique from space," he says.

:wq

See here.

Parachute use to prevent death and major trauma related to gravitational challenge: systematic review of randomised controlled trials

Gordon C S Smith, professor1, Jill P Pell, consultant2
1 Department of Obstetrics and Gynaecology, Cambridge University, Cambridge CB2 2QQ, 2 Department of Public Health, Greater Glasgow NHS Board, Glasgow G3 8YU

Abstract

Objectives To determine whether parachutes are effective in preventing major trauma related to gravitational challenge.

Design Systematic review of randomised controlled trials.

Data sources: Medline, Web of Science, Embase, and the Cochrane Library databases; appropriate internet sites and citation lists.

Study selection: Studies showing the effects of using a parachute during free fall.

Main outcome measure Death or major trauma, defined as an injury severity score > 15.

Results We were unable to identify any randomised controlled trials of parachute intervention.

Conclusions As with many interventions intended to prevent ill health, the effectiveness of parachutes has not been subjected to rigorous evaluation by using randomised controlled trials. Advocates of evidence based medicine have criticised the adoption of interventions evaluated by using only observational data. We think that everyone might benefit if the most radical protagonists of evidence based medicine organised and participated in a double blind, randomised, placebo controlled, crossover trial of the parachute.

Just got them back from the 1-hour photo place this afternoon. Took the rest of the afternoon off work, scanned them, and then uploaded them to the Internet website Flickr.