Wednesday, 9 November 2011

Note from Japan - cyber attacks

I'm on a week-long trip to Japan to visit with some clients. Although not a reason for my trip, a subject that's come up several times is the alarming recent spike in cyber attacks on Japanese companies. One senior executive at a global electronics corporation told me that they were responding to at least one serious attempted breach every day; another - more worryingly a significant player in the defensive industry - reported similar issues.

This goes to show that the recent London conference on cyber security was very topical as this is a global issue, at least for those companies that embrace and participate in market capitalism. There is clear danger of reaching for apocalyptic scenarios when discussing this topic, but I for one am concerned about the threat of cyber warfare perpetrated by China, Russia and others to the world's economic and political security.

The regimes mentioned are not in any way wedded to the market economy - they and their puppet companies participate as far as needed to secure sufficient economic and material power to sustain their internal political objectives. If that means that the innovation engine that powers creative destruction is rendered impotent by endless plagarism then all the better. As the technological advantage of the developed world is eroded, so the real power of emerging regimes becomes all the more manifest. Stagnation of global development is excellent for them, even if it is not the primary objective of their strategy.

And the threat is not just economic - it's bad for profit margins if China copies your jet engine design. It's a whole lot worse if that engine ends up in the back of a Chinese fighter plane over the Spratley Islands.

Governmental intervention would be one way of protecting our system, but history suggests that public sector intervention tends to be too late to have a positive effect. For me, the answer lies in industrial co-operation to protect vital communications networks and secure corporate firewalls. RAND would love the game theory inherent in this problem - it doesn't matter where Liyang gets its engine design from, it's the ability to leap technology generations that kills you. Therefore one breach breaks the entire system. We live or die together!

I think this subject is going to be a major focus for us in the coming years - hopefully we can contribute to a meaningful solution.

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