More scandals predicted: Tougher accounting laws foster elaborate schemes, expert warns

New accounting regulations in the United States are merely a series of Band-Aids that creates a "false comfort" until the next wave of scandals, predicts a senior Canadian academic.

"My opinion is that Sarbanes-Oxley is inadequate and we should not be surprised when the next wave of auditor scandals surfaces," Karim Jamal, a business professor at the University of Alberta, said of the U.S. law enacted in 2002 in the wake of accounting scandals at Enron Corp. and other companies.

U.S. energy trader Enron filed for bankruptcy in December, 2001, amid revelations of off-the-books partnerships that hid debt and enriched certain executives.

Mr. Jamal told a U.S. audience at a business ethics conference in Minnesota the sophisticated type of fraud perpetrated by Enron is "a consequence of regulation" and that the "highly regulated U.S. market is more (not less) vulnerable to sophisticated and large frauds."

In his speech, Mr. Jamal criticized the bevy of new corporate governance rules introduced in the United States and Canada in recent years as "misguided and counterproductive."

He said that although they are well intentioned, they often exacerbate the conditions that lead to accounting fraud.

The role of regulation in markets is to promote efficiencies that prevent cheating, he told his audience of U.S. business people, accountants, regulators and legislators. Still, he said the preponderance of rules and laws, especially in the U.S. market, has not protected it from widespread earnings restatements and fraud, such as those that engulfed WorldCom Inc., Tyco International Ltd. and Nortel Networks Corp.

"Managers do not passively modify their behaviour to carry out the intent of regulators," he told the conference in mid-May. "Instead, they actively look for ways around the new rules."

As a result, he said, "We appear to be getting into a game of escalating rule-writing by regulators, followed by creative games by management to get around the rules. This is a destructive game and we are veering towards more and more improper behaviour."

Making matters worse, Mr. Jamal said there is no accountability demanded from such regulators as the U.S. Securities and Exchange Commission and the Ontario Securities Commission, and virtually no examination of the role they may have played in restraining or encouraging fraud in the aftermath of these scandals.

"While it is easy to demand even more regulation, one at least has to ask whether we might be better off by reducing regulation in accounting," he said.

Mr. Jamal, whose work has been published by the prestigious Cato Institute in Washington, urged regulators to refrain from writing any new specific rules with severe penalties. Instead, he advocated the creation of principles-based laws that set higher standards to help restore the reputation the accounting industry enjoyed during its 30-year golden age, which ended in the 1960s.

In order to do that, Mr. Jamal suggested there are fundamental problems with the existing laws that need to be addressed.

For one, he says, managerial misbehaviour and questionable ethics of corporate senior executives are as much to blame for illegal activities as poor auditing by accounting firms.

There is tremendous pressure on corporate management to meet its financial targets and numerous incentives, such as stock options, that tempt executives to cheat.

As a result, Mr. Jamal says auditors are also under incredible pressure to agree with management's aggressive accounting judgments.

In the 1960s, scandals, lawsuits and widespread criticism of the industry tarnished the accounting industry's reputational lustre. He says business executives were influenced by the winner-takes-all mantra. Although the markets created incentives for them to work hard and take risks, it also created incentives for them to cheat, he said.

As a result, Mr. Jamal argued that "auditors came under increasing pressure to agree with aggressive and questionable accounting judgments of business executives."

In the 1970s, accounting firms were transformed into advocates for their clients, helping them to find ways around rules and regulations. During the 1980s and 1990s, he said accounting firms became more commercially oriented and ruthlessly competitive, rewarding partners based on how much revenue they brought into the firm.

Not only that, the pressure to increase revenues made the large audit firms even more dependent on large publicly traded companies that paid very high audit fees, such as Enron, which paid US$25-million to Arthur Andersen in 2001.

The result, warned Mr. Jamal, is auditors are more tempted to side with corporate management instead of public shareholders.

"The amounts of money at stake for senior executives are so large, that they will devise many sophisticated schemes to meet their reporting targets," he said. "Telling executives to 'be good' and asking them to sign certifications pales in comparison to the hundreds of millions of dollars at stake each year."

Rather than introduce more rules to rein in executive pay, Mr. Jamal urged regulators continue to force companies to develop more effective internal governance beginning at the board level. As well, he suggested that publicly traded companies should not be allowed to hire their own auditors.

"Unless this conflict of interest is resolved, we will not have an independent auditor," he said.

His solution to secure an objective and independent auditor is to have companies retain a third-party intermediary, such as the New York Stock Exchange or the Toronto Stock Exchange, to hire the external auditor.

At the same time, audit firms should be forced to assume more responsibility for fraud detection and should be obliged to report suspected frauds to any outside government agency.

© National Post 2004

[CLB] Aha... I agree with Professor Jamal. This is a standard problem with all game-theoretic systems. A 'game' has three essential parts as well as players: starting condition; rules of play; winning conditions. I'm thinking of Monopoly while typing this, but substitute any game, like poker, managing your stock portfolio, playing peak-a-boo with your nephew, or running a business in any legislated environment. As soon as you have these elements, you also have optimal ways to win. And in every sufficiently interesting game (read here that the rules themselves are open in some manner to interpretation or even to change), these using optimal ways themselves become games. Lawyers and legislators are game players by nature.

What's the issue?

For every rigidly structured game, there are emergent paradoxes within. Perhaps the most commonly known and recognized paradox of this sort is within democratic voting structures. How can one person win the common / popular vote, and the other the election victory - the paradox arising from representative democratic systems.

There's a fascinating game floating around called Nomic serving as a study of at least one such paradox in games: The Paradox of Self-Amendment, that a legal "rule of change" such as a constitutional amendment clause may apply to itself and authorize its own amendment.

In the story above, Professor Jamal has highlighted a different paradox, that which I'd like to call the paradox of legislating bsuiness in a free market economy.

(0) comments

MediaGuardian.co.uk
"Many businesses on the internet have a clue, even if they don't know it."

You may want to reference the Cluetrain Manifesto before reading the above linked piece. The ability of the internet to connect customers to each other, and to the inside of companies, as is done at Channel 9 from Microsoft, is fundamental to 'cluefulness'.

If markets are conversations, one tends to only have extended conversations with people that you can trust, people/companies with integrity.

(0) comments

According to EWeek

We are recaptitulating elements of the PC revolution of the early 80's. This time collaboration and networking tools are the guerilla productivity tools, but the productivity block is once again the corporate IT manager.

The analogy isn't perfect, but then they never are. The author goes on to say that, "...many IT groups will resist—wrapping themselves in up in Sarbanes-Oxley compliance, application and network security and preserving the integrity of critical systems."

How do you leverage new technology and still meet corporate governance and other integrity requirements? By empowering and trusting your staff for one. If they know what has to be protected and why, including the costs of lost protection, then their skunk works projects are more likely to turn into productivity AND data pluses for you.

(0) comments

Reason

Living in a database nation raises innumerable privacy concerns. But it also makes life easier and more prosperous. We may have kissed privacy goodbye -- and good riddance, too

The latest issue of Reason Magazine, which touts itself as monthly the print magazine of “free minds and free markets" has personalized each individual's subscriber's front cover. If you are a subscriber you received your magazine with an aerial photo of your subscription address on the front cover.

Just because we have a technology doesn't mean we have to use the technology. Somebody should explain the concept. In an article entitled Database Nation: The upside of "zero privacy" we are presented with the commercial upside of freely flowing personal information. If I were assured that this is the uses to which the data would be put, I could live with it. My personal privacy barriers aren't that high, and the purported benefits can be pretty cool. The issue arises when data is misused. Given that some current estimates say that over 60% of e-mail on the Internet is spam, the optimism of the article is naive at best.

You be the judge.

(1) comments

The Star

'Canadian privacy leaders seem to understand and respect the need for compliance with federal and provincial laws,' states the study, which was commissioned by the Ontario Information and Privacy Commissioner.

'However, they rarely see compliance as the single goal or mission of privacy management (and) are more likely to hold the view or belief that their role is inextricably tied to information ethics rather than obedience to the law.'

(0) comments

Life With Alacrity:
by Christopher Allen

When people speak about privacy, they may actually be talking about very different forms of privacy: defensive privacy, human-rights privacy, personal privacy, and contextual privacy.

Defensive privacy is the first form: it's about protecting information about myself that makes me vulnerable or makes me feel at risk. This type of information can include things like my social security number, my credit report, or non-financial things such as my medical records or my home address. For some of my female friends this includes things like their photographs and email addresses. All of this information can be misused by other individuals or organizations in one way or another to mess up my life -- and in fact defensive privacy is usually centered around protecting this critical information from those singular individuals or organizations, be they con men, stalkers, or the Mafia. Most of the current privacy issues on the Internet seem to fall into this category. This form of privacy has also not fared well in the US courts -- for instance, in 1974 the Supreme Court decided that your bank records belong to the bank, to do with as they see fit.

Closely intersecting defensive privacy is the category of human-rights privacy. When you are speaking with a European about privacy, this often is the type of privacy they are speaking of. This comes from their history: the Netherlands in the 1930s had a very comprehensive administrative census and registration of their own population, and this information was captured by the Nazis within the first three days of occupation. Thus Dutch Jews had the highest death rate (73 percent) of Jews residing in any occupied western European country -- far higher than the death rate among the Jewish population of Belgium (40 percent) and France (25 percent). Even the death rate in Germany was less then the Netherlands because the Jews there had avoided registration. (source: The Dark Side of Numbers). Human-rights privacy differs from defensive privacy in that it is about how governments can abuse information, rather then individuals abusing information. I used to feel safe about human-rights privacy in the US, that there was no way that what happened in Europe could happen here, but now I have lost such confidence because of Bush and Ashcroft.

The third kind of privacy, personal privacy, is more unique to the United States. It is what Supreme Court Justice Brandeis in 1890 called "the right to be left alone". This form of privacy is often what the more Libertarian-oriented founders of the Internet mean when they talk about privacy. Personal privacy covers things like the "do not call registry", the various rights to do as we please in our own houses -- such as view pornography or play S&M games with our partners -- and the general right to not be interrupted or interfered with unnecessarily at home. This form of privacy has more basis in US law; the concept is based on an interpretation of the First, Fourth, and Fifth amendments of the US Constitution, but is not explicitly defined there. However, this form of privacy is guaranteed by the State of California Constitution which assures residents that they may pursue and obtain safety, happiness, and privacy.

Finally, contextual privacy is what Danah Boyd calls the ickiness factor in her blog, and also in her post at Many-To-Many: Ickiness is the guttural reaction that makes you cringe, scrunch your nose or gasp "ick" simply because there’s something slightly off, something disconcerting, something not socially right about an interaction. This category is very difficult to define, and is easily confused with other forms of privacy, but I believe it has more to do with an inappropriate level of intimacy. An example of this is when I discovered that my professional colleagues on Orkut could see that I was in a committed relationship, and in turn I could see that some of them were in open marriages. I don't think there is very much harm that can come from this information being revealed, however, it was "icky" because it was an inappropriate level of intimacy for a professional context.

All four of these forms of privacy can intersect -- for instance, Orkut allows you to reveal your sexual orientation, which could be used secretly by an employer to discriminate against you (defensive privacy), or by a future Ashcroftian government to violate your civil rights (human-rights privacy), might lead you to being bothered at home because of people who either agree with or disagree with your orientation (personal privacy), and often is inappropriate for casual professional acquaintances to be told about (contextual privacy).

I don't think any of this answers the question of how to solve problems of privacy, but I do believe that it can help when you are discussing privacy to be sure that you try to convey and understand each others' ideas of what privacy means.

(0) comments

The New York Times > Arts > Think Tank
'People who live in the intersection of social worlds,' Mr. Burt writes, 'are at higher risk of having good ideas.'

People with cohesive social networks, whether offices, cliques or industries, tend to think and act the same, he explains. In the long run, this homogeneity deadens creativity. As Mr. Burt's research has repeatedly shown, people who reach outside their social network not only are often the first to learn about new and useful information, but they are also able to see how different kinds of groups solve similar problems.

Mr. Burt began developing his idea about 'structural holes' - the notion that people can find opportunities for creative thinking where there is no social structure - as a graduate student at the University of Chicago in the 1970's. A student of the eminent sociologist James Coleman, he was assigned to study patterns of exchange between companies using a technique called block modeling, which classifies individuals and organizations according to a large amount of data on what they buy, who they know and more. Structural holes between companies was a theme in his 1977 dissertation and became a focus in his 1992 book, "Structural Holes," which applied it to individual behavior.

(0) comments

Nobel Site
In the course of the 20th century, mankind experienced some of the most devastating wars of all times. Where did these wars take place? Have some regions experienced more wars than others? Who were the main protagonists in these conflicts? This map gives you the opportunity to answer these questions. It displays wars with at least 1,000 military battle deaths.

The Nobel Peace Prize celebrated its centennial in 2001. Where did the Laureates and nominees come from? How many Africans have received the prize? Alongside the map on wars you will find statistics showing the geographical distribution of Peace Prize nominees and Laureates since 1901.
Go to the Conflict Map

(0) comments

MSNBC - Study: ID theft usually an inside job: "a large number of the identities were stolen not by an employee -- but by the business owner."
By any reasonable standard, this is a bad thing.

(0) comments

Security Pipeline | Trends | Phishing Phrenzy
"In addition to losses suffered by individual and institutional phishing victims, some larger consequences are predicted. The credibility of e-commerce, as a whole, is being threatened, according to a recent Gartner survey. Add the explosive growth of phishing to other consumer uncertainties about e-commerce, and you have a recipe for possible e-commerce disaster."

We can take for granted that the best defense against 'phishing' practices is to have informed and knowledgable staff and customers. In such a world one of the key elements in maintaining credibility, and therefore customers, will be the firms perceived integrity. Please note that the increasing demands for personal information privacy are being matched by increased expectations of corporate openness. The only way that integrity will be perceived is if integrity is executed.

(0) comments

Investor's Business Daily

[...] 'The scandals show the need to reform the fund industry,' said Roye, head of the SEC's Division of Investment Management. The $7.6 trillion industry must refocus on establishing its integrity, he said.

Quoting the SEC's chairman William Donaldson, Roye said, 'Each fund company must examine its moral DNA.'

Fund companies must reform themselves, then reassure shareholders and restore their confidence, he added.

Roye said the SEC has begun 16 separate reforms for the fund industry since September 2003, when New York Attorney General Eliot Spitzer exposed abusive fund trading practices.

[...] The SEC proposal to require chairman of fund boards of directors to be independent is among its most controversial, Roye said.

But Roye reiterated the SEC's interest in requiring chairmen to be independent of management companies. For one thing, independent chairmen can more effectively block improper conduct by a fund manager, he said. That's because they would not share any potential conflicts of interest a manager might have in taking risks in pursuit of short-term returns.

Independent chairman also would not be caught up in such conflicts as those that can arise in fee negotiations between a fund and its management company.

[...]

[CLB: This is the standard practice of "Separation of Duties," something any decision making body ought to engage in.]

(0) comments

The Ivory Tunnel

Focus:

How is it that our culture has moved from a living cosmos to a dead one, in which we have come to understand saving and preserving as pickling rather than letting be?

Why have we come to fear change, and see death only as extinction?

We still amass flowers at funerals, yet embalm our dead and bury them in hermetically sealed caskets and concrete vaults designed to separate vulnerable human flesh from the encroaching soil.

__posted by Carolyn L Burke @ 7:43 a.m.
subscribe to Integrity

(0) comments

The Ivory Tunnel
Heidegger's path into phenomenological enquiry is "to let that which shows itself be seen from itself in the very way in which it shows itself" (quoted in Stefanovic, 2000: 9-10; from Heidegger, 1962: 58). Stefanovic continues,

One of [phenomenology's] primary tasks is to articulate essential meanings as they appear to human understanding[,] ... to discern underlying patterns of meaning that may not be self-evident but that permeate our efforts to interpret the world in which we find ourselves [, and] ... to crystallize some essential truths in their historical and cultural rootedness."

(1) comments

S W E B O K


The Project Management Institute in its Guide to the Project Management Body of Knowledge defines 'generally accepted' knowledge for project management in the following manner:

' 'Generally accepted' means that the knowledge and practices described are applicable to most projects most of the time, and that there is widespread consensus about their value and usefulness. 'Generally accepted' does not mean that the knowledge and practices described are or should be applied uniformly on all projects; the project management team is always responsible for determining what is appropriate for any given project. '

(0) comments

HISSA @ NIST
High integrity software is software that can and must be trusted to work dependable in these and other critical functions (e.g. communications (computers, telephony), software in safety systems of nuclear power plants, medical devices, electronic banking, air traffic control, automated manufacturing, and some business systems).

(0) comments

ONLamp.com

After managing the performance of over 20,000 infrastructure and application penetration tests and vulnerability assessment exercises, I have come to realize the importance of technical testing and provision of information security assurance. The purpose for conducting the tens of thousands of penetration tests during my 20-plus years working in information systems security was 'to identify technical vulnerabilities in the tested system in order to correct the vulnerability or mitigate any risk posed by it.' In my opinion, this is a clear, concise, and perfectly wrong reason to conduct penetration testing.

Vulnerabilities and exposures in most environments come about by poor system management -- patches not installed in a timely fashion, weak password policy, poor access control, et al. Therefore, the principal reason and objective behind penetration testing should be to identify and correct the underlying systems management process failures that produced the vulnerability detected by the test. The most common of these systems management process failures exist in the following areas:

System software configuration

Applications software configuration

Software maintenance

User management and administration

Unfortunately, many IT security consultants provide detailed lists of specific test findings, and never attempt the higher order analysis needed to answer the question of "why." This failure to identify and correct the underlying management cause of the test findings assures that, when the consultant returns to test the client again in 6 months, a whole new set of findings will appear.

...

__posted by Carolyn L Burke @ 2:35 p.m.
subscribe to Integrity

(0) comments

TheStar.com

"... a huge number of Torontonians have no cultural memory of debates and battles and delightful pleasures that have vanished from the city's landscape. Neither do they recall dragons slain, like the Spadina Expressway. Unless we keep the memory alive, person to person, neighbour to neighbour.

'Cultures live through word of mouth and example,' the 88-year-old Jacobs writes in Dark Age Ahead, her seventh book. 'Writing, printing, and the Internet give a false sense of security about the permanence of culture. Most of the million details of a complex, living culture are transmitted neither in writing nor pictorially.'

Families are the instruments, the conduit. So, too, are our schools and institutions, bolstered by elected representatives. Our great minds and scientists are supposed to help perpetuate the culture through rigorous inquiry and experimentation and innovation.

But these 'pillars' of Western culture are under deep stress -- so much so that Jacobs feels she must blow the whistle on the gloomy future awaiting us if we don't wake up.

'This is both a gloomy and a hopeful book,' says the first line of Dark Age. Jacobs explains during an interview: 'I don't think we've reached one of those terrible points of no return. We've been doing a lot of things wrong, and this is a kind of wake-up call.'"

...

(0) comments

Top News Article | Reuters.com: "The Canadian officials pointed to continued proliferation of spam in the United States despite spam legislation as showing the need for more enforcement and self-regulation"

While the notion of an international anti-spam treaty is laudable, it will likely be unworkable. There's too much money in the practice to think that at least one or more countries won't become "ISP's of convenience". Self-regulation, or integrity, may well provide a better way forward, enabling us to enable technology and tools to identify trusted and reliable sources of information.

(0) comments

ITBusiness.ca: "Basel II, along with recent legislation like PIPEDA, will force banks to focus on data integrity management rather than the technology that contains it"

The point of both this, and the preceding post, is to highlight the tight links between practicing as a business with integrity, INCLUDING especially the way that you handle data.

(0) comments

ITBusiness.ca

"I don’t think they’re equipped at the moment to go after the spam problem. But once people realize that spam is a breach of (PIPEDA), then people will go to them."

An e-mail address is personal information, added Morin, so there needs to be a test case where a privacy commissioner or an individual seeks recourse under the law. "This needs to happen before we identify any gaps (in the law)."

(0) comments

MIT Technology Review

One prolific inventor offers tips on how to ensure that your inventions have their day in the sun.

By Ray Kurzweil

May 2004

I am often asked my advice on how to succeed as an inventor. More than 30 years of experience have given me a few insights. To wit: invention is a lot like surfing; you have to catch the wave at the right time. This is why I have become an ardent student of technology trends. I now have a research staff that gathers data on a broad variety of technologies, and I develop mathematical models of how technology in different areas evolves. These models show that the pace of innovation itself is doubling every decade.
As we approach the steep part of technology’s exponential growth, timing becomes ever more crucial in successfully developing and introducing an invention. You need to aim your invention at the world of the future, not the world that exists when your research project is launched. Inevitably, the world will be a different place when you seek to introduce your innovation. Everything changes—market needs, competition, channels of distribution, development tools, and enabling technologies.
To time an invention properly, you need to consider its entire life cycle. We can identify seven stages in the evolution of a technology: precursor, invention, development, maturity, false pretenders, obsolescence, and antiquity. An invention will thrive, becoming a successful product, only if the crucial phases—precursor, invention, development, and maturity—are attended to.
The Life Cycle of an Invention
In the precursor stage, the enabling factors for the new technology are in place; visionaries may even describe its operation or its goals. But the invention has yet to become a reality. Leonardo da Vinci, for example, described flying machines, but we don’t consider him to be the inventor of the airplane.
Our society especially celebrates invention, but this stage exists only in the context of those before and after. Inventors need to bridge science and practical problem-solving skills. They clearly need determination; Edison, for instance, went through thousands of materials before settling on a satisfactory light bulb filament. As I mentioned, they need a sense of timing. They also need a measure of salesmanship to attract the necessary resources, including investment and coworkers—not to mention customers.
The third stage is development. Often an invention enters the world as an ungainly and impractical device. It would be hard to develop an effective business model around the Wright brothers’ airplane. Further refinements had to take place before we really entered the age of aviation.
Development is followed by maturity, which constitutes the bulk of a technology’s life span. The technology has now become an integral part of everyday life, and it appears that it will never be replaced. Invariably, there are assaults on the now established technology, which form the fifth stage, that of false pretenders. Here a new, potentially disruptive technology claims to be in a position to replace the mature technology. Although better in certain ways, the new technology is invariably found to be missing salient and critical features of the established invention. The failure of the upstart only strengthens the conviction of technology conservatives that the old order will indeed hold indefinitely.
Over time, however, new inventors master the absent qualities of the upstart, pushing the older technology into obsolescence, which constitutes about 5 to 10 percent of its life cycle. The final resting ground for a technology is antiquity. Consider today the horse and buggy, the manual typewriter, and soon, the music CD.
I have personally been involved in inventing an upstart technology to replace a venerable mature one: the piano. The precursor of the piano was the harpsichord. Musicians were dissatisfied, however, that the harpsichord couldn’t vary the intensity of its sound; so Bartolomeo Cristofori invented one that could. He called it “gravicembalo col piano e forte” (harpsichord with soft and loud), or “piano” for short. It was not initially popular, but refinements ultimately made the piano the keyboard instrument of choice throughout the 19th and 20th centuries.
The false pretender was the electric piano of the early 1980s. It had many advantages: no need for tuning, a panoply of sounds, and automated accompaniment, among others. But it was missing one crucial feature: a convincing piano sound.
With advanced signal processing and insights from pattern recognition, this deficit was overcome. Today, the sound quality of electronic pianos surpasses that of the upright piano, which used to constitute the bulk of the market for acoustic pianos. Electronic instruments now come close to dominating the market for pianos, and the sale of acoustic pianos continues to decline.
Three Steps to Successful Invention
Trying to predict the life cycle of your invention, as well as those of the technologies you may be displacing, is the first step to success. But fostering the key stages in the development of a new technology requires attention to detail. My experiences have led me to a number of observations on ways to facilitate the process.
One insight I’ve gained is that most modern technologies are interdisciplinary. For example, speech recognition, another area I’ve worked in, involves speech science, acoustics, psychoacoustics, signal processing, linguistics, and pattern recognition. A major challenge to interdisciplinary technology development is that different disciplines use different terms for the same concept. Norbert Wiener commented on this in his seminal book Cybernetics, written in 1948: “There are fields of scientific work…which have been explored from the different sides of pure mathematics, statistics, electrical engineering, and neurophysiology…in which every single notion receives a separate and different name from each group, and in which important work has been triplicated or quadruplicated, while still other important work is delayed by the unavailability in one field of results that may have already become classical in the next field.”
At my companies we’ve solved this problem by creating our own terminology and thus, in essence, new interdisciplinary fields. The goal is to try to eliminate the tendency for everyone to describe the same thing differently and find one term to agree on. (This also has advantages in keeping our work secret: anyone overhearing our discussions has no idea what we are talking about!) We teach all the requisite disciplines to every member of the team. And to foster cross-fertilization and new ways of approaching problems, we’ll assign, for example, an acoustics problem to the pattern recognition experts, and vice versa.
This brings up another critical consideration: the importance of creating devoted and passionate teams. One way to accomplish this is to adopt a goal that has the potential to inspire. I’ve tried to do this in my own career by selecting projects that contribute to my own social and cultural goals. And in assembling a team, I consider each member’s personality and team-building skills as important as his or her technical skills. Most importantly, I try to include the intended users of a technology as key members of the team. For example, when I was developing a reading machine for the blind in the 1970s, I recruited blind scientists and engineers from the National Federation of the Blind, and when working on music synthesis in the 1980s, I required that all of the engineers be musicians. Invariably, the users of a technology are sensitive to subtle issues that nonusers fail to appreciate.
Based on these insights, I offer a three-step program for beginning the invention process, good for innovators from the lone inventor to the large corporate team. Step one is to write the advertising brochure. This can be a real challenge. It compels you to list the features, the benefits, and the beneficiaries. You will find this impossible to accomplish if your ideas are not well formed.
Step two: use this brochure to recruit the intended users. If these beneficiaries don’t immediately get excited about your concept, then you are probably headed down the primrose path. Invite them to participate in creating the invention. After all, if they want it so badly, let them help you invent it.
Finally, engage in some fantasy. Sit down, close your eyes, and imagine that you’re giving a speech some years from now explaining how you solved the challenging problems underlying your new invention. What would you be saying? What would you have to be saying? Then work backwards from there.
Ray Kurzweil

(2) comments

General Electric : Our Commitment : GE Integrity

The 'Spirit & The Letter' is the GE integrity policy, and each GE employee signs a pledge to adhere to it when they join the company.

(0) comments

Silicon Valley - Dan Gillmor's eJournal - Oracle, Hypocrisy and Opinion Laundering#010350: "Oracle's turnabout on ACT highlights the technology industry's frequent indifference to principle on public policy issues, at least when principle conflicts with the bottom line."

Or at least so says Dan Gillmore in a recent post. This one happens to point out Oracle, but it would be unfair to single out Oracle. Almost every major software and I.T. company has had its failings. One is tempted to talk about glass houses, especially since glass is made of silica [silica - Silicon Valley...oh never mind], but the fact remains that in a connected world we may strive to put personal privacy in place, but corporate privacy is a thing of the past. Survivors will walk their own talk with consistency and integrity, or at least so I hope.

(0) comments

newsobserver.com

Isaac Asimov had a pretty good handle on how to deal with smart machines: create them with built-in ethics. Thus Asimov's three laws of robotics, which make it possible to live with creatures smarter than ourselves.

The first law: 'A robot may not injure a human being or, through inaction, allow a human being to come to harm.' The second: 'A robot must obey orders given it by human beings except where such orders would conflict with the First Law.' And the third: 'A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.'

The question is, can we build such laws into machinery? The answer may be important, for if Vernor Vinge is right, we're rapidly moving to a time when computer intelligence will be so far beyond our own that predicting the future will become impossible. Vinge calls this the Singularity.

Vinge, a retired computer scientist, writes superb science fiction of his own, his best being the 1992 novel 'A Fire Upon the Deep.' Since he first laid out the Singularity at a 1993 NASA gathering, his work has been the source of endless speculation about the nature of intelligence, and the ramifications of current technology trends as they follow what seem to be unstoppable, exponential laws.

'An ultraintelligent machine could design even better machines,' Vinge writes. 'There would then unquestionably be an 'intelligence explosion,' and the intelligence of man would be left far behind. Thus the first ultraintelligent machine is the last invention that man ever need make ...'

The arrival of such an intelligence -- which Vinge thinks could occur before 2030 when large computer networks "wake up" as an entity with super-human intelligence, or as researchers develop it in labs -- would be a "singularity" because we would not be able to use human reason to see beyond it. As for using it to our advantage, Vinge says that it would not be our tool, "any more than humans are the tools of rabbits or robins or chimpanzees."

[...]

However...

Instead of our artifacts "awakening," we may find ourselves awakening to the fact that technology remains a matter of tough choices based on human ethics. That's not a "singularity," but merely a call to stay in the game, considering the consequences of all the technology we build with care. It's also a call for human dignity to reassert itself and stop waiting for an all-too-hypothetical day when machines will take moral choice out of our hands.

Paul A. Gilster, a local author and technologist, can be reached at gilster@mindspring.com.

(0) comments

IPC - Build it in: Privacy pivotal to effective Customer Relationship Management
A new report from the Privacy Commissioner of Ontario and the Canadian Marketing Association has just been released.

(0) comments

Forbes.com

A U.S. nuclear engineer and a Russian scientist say their firm will be the first to create the technology that finally succeeds at mimicking human sight.

That seems like a long shot for their Los Altos, Calif.-based startup Pixlogic, as well as for the myriad industry, government and academic researchers who have been pounding away at this technical challenge for decades. 'People have not been able to crack this problem,' admits Pixlogic founder and Chief Executive Joseph Santucci.

Indeed, computer vision was one of the original promises of artificial intelligence when it first was talked about decades ago. Nevertheless, efforts to achieve that far-fetched feat have resulted in some exciting new technology in the realm often referred to as visual search, or image understanding.

Pixlogic is backed by the Central Intelligence Agency's nonprofit venture capital arm In-Q-Tel, whose mission is to nurture technology that serves U.S. security interests--and to make money for taxpayers while they're at it. Santucci and his Russian-born chief scientist, Dr. Shelia Guberman--who invented the handwriting recognition technology used in Microsoft's Windows CE program--say that the CIA is now testing their software. In their words, the technology can be 'visually programmed' to monitor video feeds in real time to search for certain events or elements.

The software sees objects in a picture or video frame and makes a mathematical formulation to describe them. The formulations are stored in a searchable database and compared to the formulations for objects that are already filed. This is nowhere near mimicking human sight, but it's a start.

[...]

[CLB: And it's the first step in ongoing video surveillance tied in to identity recognition and activity recognition. What's this? Imagine you are at an ATM. The video monitor recognizes your face, perhaps as part of a larger identification and authorization process. As you go through your transaction, the same system watches your actions. Do you reach into your purse? Do you drop your card after removing if from the system? is another person with you? Are your lips moving - perhaps as you sing in the privacy of the ATM booth? Etc. What sort of information can be gleaned from your physical motion? And then associated with you for future purposes? In fact, could the way you walk in to the booth be used to uniquely determine who you in the first place? Visual recognition combined with searchable keyword correlations expands the privacy and security maze of ethics.]

(0) comments

O'Reilly Network by David Sklar

Gmail detractors who are upset that non-Gmail subscribers who send a message to gmail.com will have their messages involuntarily scanned by the Gmail ad-bot are operating under a seductively misleading understanding of the "privacy" of email.

The key element here to understand, and I can't reinforce this enough, is that once you have sent an e-mail you have lost control of it. NEVER send an unencrypted e-mail that you wouldn't be prepared to see in a newspaper or have to defend in court.

While you certainly have an expectation of privacy, you need to balance your expectations against the way that the real world works. For anyone with the technical wherewithall, your e-mail is essentially a post card that they can read as it passes by. This is another link between integrity and privacy. If your business communications have integrity, then a loss of privacy, while it may be damaging if it contains proprietary or valuble information, will not be fatal. The same can't be said of people currently convicted as a result of e-mails they wish that they hadn't sent.

I have a right not to be mugged. That doesn't mean I walk the mean streets with hundred dollar bills hanging from my pockets. I have right to privacy, but I bear some responsibility for ensuring that it is possible to be private.

(0) comments

HBS Working Knowledge

Deal making is glamorous; due diligence is not. That simple statement goes a long way toward explaining why so many companies have made so many acquisitions that have produced so little value. Although big companies often make a show of carefully analyzing the size and scope of a deal in question - assembling large teams and spending pots of money - the fact is, the momentum of the transaction is hard to resist once senior management has the target in its sights. Due diligence all too often becomes an exercise in verifying the target's financial statements rather than conducting a fair analysis of the deal's strategic logic and the acquirer's ability to realize value from it. Seldom does the process lead managers to kill potential acquisitions, even when the deals are deeply flawed.

What can companies do to improve their due diligence? To answer that question, we've taken a close look at twenty companies - both public and private - whose transactions have demonstrated high-quality due diligence. We calibrated our findings against our experiences in 2,000-odd deals we've screened over the past ten years. We've found that successful acquirers view due diligence as much more than an exercise in verifying data. While they go through the numbers deeply and thoroughly, they also put the broader, strategic rationale for their acquisitions under the microscope. They look at the business case in its entirety, probing for strengths and weaknesses and searching for unreliable assumptions and other flaws in the logic. They take a highly disciplined and objective approach to the process, and their senior executives pay close heed to the results of the investigations and analyses - to the extent that they are prepared to walk away from a deal, even in the very late stages of negotiations. For these companies, due diligence acts as a counterweight to the excitement that builds when managers begin to pursue a target.

The successful acquirers we studied were all consistent in their approach to due diligence. Although there were idiosyncrasies and differences in emphasis placed on their inquiries, all of them built their due diligence process as an investigation into four basic questions:

What are we really buying?

What is the target’s stand-alone value?

Where are the synergies—and the skeletons?

What’s our walk-away price?

[Here] we’ll examine each of these questions in depth, demonstrating how they can provide any company with a solid framework for effective due diligence.

[...]

__posted by Carolyn L Burke @ 7:01 a.m.
subscribe to Integrity

(0) comments

Final Report to Parliament on Actions Arising from the Auditor General's Report on the Office of the Privacy Commissioner of Canada

I don't think that I could have come up with a more dry and dull title had I actively worked at it for a week. Yet this report, released this week from the Office of the Privacy Commissioner of Canada, speaks directly to issues of integrity and privacy.

Anyone likely to be reading this blog will probably be familiar with the unfortunate early termination of George Radwanski's term as Privacy Commissioner after revelations of internal turmoil in the office, and allegations of inappropriate use of funds. The Auditor General report on these issues made a number of recomendations and this report is the new Privacy Commissioner's final response.

Two things are of note here:

The first is that the new Commissioner appears, from the look of the recently revamped OPC web site, to have instituted a much more open process for the office. Approximately $200,000 of an estimated $350,000 outstanding for issues such as inappropriate payouts has been recovered.

The second and more relevant point is that this report speaks directly to both integrity and privacy. There is little doubt that Mr. Radwanski was a strong voice for privacy. We will leave aside disagreements about Mr. Radwanski as a voice for privacy within the privacy community for now. David Zussman of the Public Policy Forum has a nice overview of the some of the lessons learned from this debacle. Most of the reports and statements can be found here.

Integrity and privacy are values that have to be executed from the inside out. Ask George Radwanski, last seen taking an economy fare train out of Ottawa.

(0) comments

CATA press release

The key overall decision criteria in making strategic and architectural decisions were identified as, in order of priority: 1. Reliability, 2. Performance, 3. Price, 4. Security, 5. Interoperability. Open and other (COTS) source, were both ranked against those criteria in terms of overall strength:
Decision Criteria: High Medium Low

Decision Criteria	High	Medium	Low
1. Reliability	open	other
2. Performance	open	other
3. Price	open		other
4. Security	open	other
5. Interoperability	open	other

The biggest concerns and irritants with open and other (COTS) source were:

• Open #1 - Intellectual property concerns
  #2 - Time-consuming to research and assess
  
• Other #1 - Pricing and licensing costs and policies
  #2 - Security

Recommendations by respondents for other IT decision-makers included advice to:

• Assess total cost of ownership over a 3-5 year period (support, training, etc) and availability of skilled resources and support.
  
• Evaluate product maturity (some are not ready for prime time) and establish project specific criteria as well.
  
• Establish formal policies for use and development (understanding of licensing, organizational fit in terms of openness and sharing, clear policies and procedures).
  
• Don't under-estimate the change process, and make sure you have people with strong skills in open source.
  
• Don't under-estimate the opportunities of open source. Start to get in the game now.

[...]

(0) comments