When The Future Has No Shadow
I remember when I was in college, discussing what we’d do if we discovered we had a terminal disease. Being college students, there were lots of ways to maximize short-term fun before the disease ate you.
The game theory folks talk about “the long shadow of the future,” the idea that cooperation can be rewarded in the future, as a strong driver towards cooperative behavior. So what happens if you expect that your company will, over the next few years, be sued out of existence?
One valid answer is to maximize the cash extracted from your customers now, and damn the effects on the rest of the world. You might break laws in other countries. You might claim, under tenuous logic, that local regulations don’t apply to you. You should maximize short term profits over everything, because you may be shut down soon.
Now, I’m not privy to any secrets at Choicepoint. (Unlike Choicepoint, who is privy to secrets about me.) I have no idea if this is their strategy. But are their actions distinguishable from this?
Let’s close with a quote from Schneier:
ChoicePoint protects its data, but only to the extent that it values it. The hundreds of millions of people in ChoicePoint’s databases are not ChoicePoint’s customers. They have no power to switch credit agencies. They have no economic pressure that they can bring to bear on the problem. Maybe they should rename the company “NoChoicePoint.”
[Other Choicepoint posts today include a roundup, some analysis. Or you may just want to look at the archives from Feb 17th onwards.]
This a standard problem in economics. If an agent knows the normal risky downside in any action has been removed, but the upside remains, and if the agent himself is not responsible, then they are incented to gamble on short term high risk activities.
This happens to companies that enter a high bankrupcy probability. The employees know it is coming, so they know that any normal strategy will be denied any success. So they gamble on high risk, but high loss strategies. You only need a few of these to guaruntee failure.
(See also moral dilemma, cash cows, agency theory…)
ChoicePoint
Adam Shostak suggests we might expect shady behaviour from firms that don’t expect to be around for very long. There is therefore a possible link between ethics and viability – poor viability leads to poor ethics. But what about the causal link the oth…
More ChoicePoint
Following up from my previous post, I thought I
Where economic incentives fail because of externalities, etc. criminal penalties should be considered especially where the harm to individuals is significant and other remedies are inadequate. Had Choicepoint’s upper management been subject to substantial criminal sanctions for the company’s irresponsibility they would not have valued the security of others solely on its market value to them.