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The Economics of Trust: Dr. Elliot Jaffe | Get.Rounds Blog
 

The Economics of Trust: Dr. Elliot Jaffe

A friend of mine does not want to use Facebook or Google Mail. He is concerned that the companies will be able to read all of his email and look at his network of friends. According to him, someone at the company could use this information to identity theft or personal surveillance. In this note, I want to show you why you should not be overly concerned.

My keyboard once got stuck and all I could type was the letter K. I had two choices; take it to the publically traded corporate store where I bought it, or to a neighborhood repair shop. The local disk has all my passwords, cookie, browser history and even credit card reports. Assuming that they can both fix the problem, why should I trust them with my data?

Let’s see what economic incentive each store has to protect my data. If someone broke into the neighborhood store and took my disk, what would it cost the store? Probably nothing. I would get a personal apology, and my data would be gone. Let’s assume I told the local newspaper about it. Still nothing. It would probably not even make the paper, robberies happen every day.

What would happen if someone at the company store took my disk? The company would try to make it right. They have a potential PR problem. Let’s say I reported to the newspaper that company X had abused my trust and did not protect my data. Now this is news. We trust large companies to act responsibly and to make sure that their employees remain honest. If the corporate repair shop was found to have improper security controls, or to hire known criminals, they would be open to lawsuits and a public relations mess that could drive down their stock prices.

Google and Facebook are like that corporate repair shop. Your local ISP is like the neighborhood repair show. If your local ISP messes up and exposes your data, you might be able to sue, but customers are pretty unlikely to leave that ISP en-mass. It’s local, and you don’t expect high levels of professionalism from a local shop.

If Google exposed your data or allowed it to be exposed, then the conspiracy theorists would have a field day. Proof that big companies are evil. Even if it was not true, users would migrate from Google products to its competitors. Google’s sky high stock price would tumble, at least temporarily.

Google has every incentive to protect your data, not only from its internal uses, not only from its employees, but also from hackers. It does not matter how your data was abused or lost, only that it happened and Google looses face and money. What about your local ISP? Do they care?

Large companies are the safest place to store your data. They have an economic incentive to maintain your privacy.


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5 Comments

  1. dxdasd

    Large companies are the safest place to store your data. They have an economic incentive to maintain your privacy.

    Like aol?
    http://en.wikipedia.org/wiki/A.....ta_scandal

  2. Thanks, Dr. Jaffe! You’ve given the best explanation I have ever seen for why no major corporation has ever (nor will ever!) release the information they’ve collected, like credit card numbers and so forth.

  3. The argumentation is flawed and tricks readers into thinking that data (the disk) is something you can “take” away.

    No, the fundamental problem is that data may be copied and multiplied at will, and once that happens you’ll not know that it happened or who did it. Moreover, no one will help you to find out because – for the individual case – this is nearly impossible.

    The psychological impact is comparable to smoking and cancer or sex and HIV: As long you don’t do everything to protect your body, you will have regrets later on.

    Do everything to protect your data and devices, don’t choose convenience over privacy. There are a number of solutions for that. Don’t trust services that are free, because nothing is, they always get something in return.

  4. The large companies are also the obvious target of large scale spying operations since it is obvious that data collects at those points.. Large companies are just as likely to be broken into (as we witnessed in the google aurora attacks).

    The simple truth is that if you want your mail protected from prying eyes, you should be making use of encryption..

  5. [...] Dr. Elliot Jaffe says I shouldn’t worry about Google. This entry was posted in General. Bookmark the [...]

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