Monday, October 31, 2016

The Cyber Insurance Emperor Has No Clothes

(Of course, the title is hyperbole and attention-seeking. Now that you are here, I hope you'll keep reading.)

(click to enlarge)
In the Hans Christian Anderson story, The Emperor's New Clothes, the collective delusion of the Emperor's grand clothes was burst by a young child who cried out: "But he has got nothing on!"

I don't mean that cyber insurance has no value or that it is a charade.

My main point: cyber insurance has the wrong clothes for the purposes and social value to which it aspires.

This blog post sketches the argument and evidence. I will be following up separately with more detailed and rigorous analysis (via computational modeling) that, I hope, will be publishable.

tl;dr: (switching metaphors)
As a driving force for better cyber risk management, today's cyber insurance is about as effective as eating soup with a fork.
(This is a long post. For readers who want to "cut to the chase",  you can skip to the "Cyber Insurance is a Functional Misfit" section.)

Wednesday, October 19, 2016

Orange TRUMPeter Swans: When What You Know Ain't So

Was Donald J. Trump's political rise in 2015-2016 a "black swan" event?  "Yes" is the answer asserted by Jack Shafer this Politico article. "No" is the answer from other writers, including David Atkins in this article on the Washington Monthly Political Animal Blog.

Orange Swan
My answer is "Yes", but not in the same way that other events are Black Swans.   Orange Swans like the Trump phenomenon is fits this aphorism:
"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." -- attributed to Mark Twain
In other words, the signature characteristic of Orange Swans is delusion.

Rethinking "Black Swans"

As I have mentioned at the start of this series, the "Black Swan event" metaphor is a conceptual mess. (This post is sixth in the series "Think You Understand Black Swans? Think Again".)

It doesn't make sense to label any set of events as "Black Swans".  It's not the events themselves, but instead they are processes that involve generating mechanisms, our evidence about them, and our method of reasoning that make them unexpected and surprising.