3 ms·

Security in a Reputation Economy

28 points by phsr 17y ago

nazgulnarsil 17y ago
reputation effects are a foundational aspect of a healthy free-market. this isn't some sort of new economy, it's just that the tech market exemplifies the free-market better than others because it moves too quickly for regulators (so far).
- timwiseman 17y ago
  No, its not new, in fact Schneir lists examples that have been around for a very long time (restaurants in particular). But it is taking on new aspects and new prominence in the IT field. I do not think regulation will actually change much. Reputation will still be immensely important. Obviously it will remain significant in quality of service, and regulators can only establish a base minimum if they can do anything at all in terms of quality of service. Regulators can (and should) play a greater role on the security side, but even there they can only establish base minimums and many will fall below that anyway. Companies will always be able to exceed that minimum, and that will often be important, especially to those that really care about security.
  - nazgulnarsil 17y ago
    regulations can erect barriers to entry (the cost of complying with regulation in many industries are massive, cars for example), meaning that existing players can lower their service standards by a set amount (down to the point where a competitor could expect that better service would gain enough of the market to recoup the entry costs). a barrier to entry effectively changes the risk/reward expectation of investors.
mhb 17y ago
I don't see the insight here. There is no new "reputation economy". If his customers aren't as concerned about the security of their data as he is, that can be explained by the different way they value the damage to their reputations from a security breach. Presumably most of his customers sell something other than security so the damage to their reputation will be less than if their whole business was selling security. If your business is painting cars, you'd expect that you'd be a lot more focused on paint quality than a dealership that sends you a few cars to paint.

28 points by phsr 17y ago

reputation effects are a foundational aspect of a healthy free-market. this isn't some sort of new economy, it's just that the tech market exemplifies the free-market better than others because it moves too quickly for regulators (so far).

timwiseman 17y ago
No, its not new, in fact Schneir lists examples that have been around for a very long time (restaurants in particular). But it is taking on new aspects and new prominence in the IT field. I do not think regulation will actually change much. Reputation will still be immensely important. Obviously it will remain significant in quality of service, and regulators can only establish a base minimum if they can do anything at all in terms of quality of service. Regulators can (and should) play a greater role on the security side, but even there they can only establish base minimums and many will fall below that anyway. Companies will always be able to exceed that minimum, and that will often be important, especially to those that really care about security.
- nazgulnarsil 17y ago
  regulations can erect barriers to entry (the cost of complying with regulation in many industries are massive, cars for example), meaning that existing players can lower their service standards by a set amount (down to the point where a competitor could expect that better service would gain enough of the market to recoup the entry costs). a barrier to entry effectively changes the risk/reward expectation of investors.

mhb 17y ago

I don't see the insight here. There is no new "reputation economy". If his customers aren't as concerned about the security of their data as he is, that can be explained by the different way they value the damage to their reputations from a security breach. Presumably most of his customers sell something other than security so the damage to their reputation will be less than if their whole business was selling security. If your business is painting cars, you'd expect that you'd be a lot more focused on paint quality than a dealership that sends you a few cars to paint.