America’s security scandal

The biggest intelligence leaks since Watergate have sent shockwaves through the US. But is there anything to worry about? Simon Wilson reports.

What happened?

In one of the biggest security breaches in decades, The Guardian and The Washington Post broke the news that the National Security Agency (NSA, the US equivalent of Britain's GCHQ) has been operating a secret programme called Prism. Approved by a secret security court, it draws data on individuals "directly from the servers" of internet and tech giants including Google, Facebook, Apple, Microsoft and others.

Their source was Edward Snowden, a former CIA employee working for NSA contractor Booz Allen Hamilton (and now a fugitive) who claims that material harvested by Prism was the main source for President Obama's daily security briefings. The Prism scandal comes hard on the heels of the news that US intelligence is harvesting information from big phone firms, and that the Inland Revenue Service tax authorities deliberately targeted right-wing pressure groups.

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What's the reaction to these revelations been?

It has ranged from the notably relaxed to the outraged. In the former camp is The Wall Street Journal, which headlined its editorial, "Thank you for data mining". It maintains that "we bow to no one in our desire to limit government power, but data mining is less intrusive on individuals than routine airport security".

All NSA does, it reckons, is "run algorithms over the call log database, looking for suspicious patterns over time" just like a credit-card system that flags up suspicious payments. And since the "effectiveness of data mining is proportional to the size of the sample, so the NSA must sweep broadly". In other words, government surveillance of communications data is here to stay, so get used to it.

What do others say?

For The Guardian's Jonathan Freedland, the scandal confirms the slide in the President's reputation from a liberal icon into "George W Obama". And it's not just the liberal-left that's angry: the right-wing libertarian MEP Daniel Hannan blogged that the Prism revelations are profoundly shocking and challenge the way we think about freedom, privacy and America.

For the FT's Edward Luce, Prism is confirmation that Eisenhower's "military-industrial complex" has been replaced, post 9/11, by the "data-intelligence" complex, in which the US employs 854,000 civil servants and contractors (such as Snowden).

How does the scandal affect business?

Given there is always a trade-off between security and liberty, until it is positively demonstrated that Western security agencies are not only gathering data but are also abusing it, up until now most people have tacitly accepted the current trade-off (just as they accept the trade-off between personal privacy and convenience involved in using Facebook or Gmail, or even a Nectar or Oyster card). That said, there is no good result here. If the companies involved knew what was happening then they clearly lie to customers about their relationships with governments. And if they were ignorant, it implies that their own security has been radically compromised.

How have markets reacted?

For now, stock markets have taken the revelations in their stride. After all, points out Lex in the FT, "being an obedient corporate citizen may have its benefits the next time a deal is put in front of regulators". What is certain is that the Prism saga has shone a spotlight on the whole question of 'big data' and how it is used and increased concerns over the creep towards the 'data nudism' of social networks, Google Glass and the like.

Indeed, at the Hay Festival last month, the Google executive chairman Eric Schmidt asked his audience what they would think about a pill that could beam information about our bodies to computers via wi-fi. As his listeners began to mutter nervously, Schmidt sprang his surprise: "Too late it's already being licensed."

Is big data' an opportunity or a threat?

Clearly both. In business terms, according to a paper (available online) from the McKinsey Global Institute, big data is the next key driver for innovation, competition and growth in productivity. Meanwhile, Kenneth Cukier, the co-author of a book on the subject (and The Economist's newly created "data editor") uses a medical analogy to capture how big data will change societies.

Cukier argues that the idea that doctors rely on their own judgment to diagnose disease, rather than leverage the vast aggregated trove of data on previous cases over decades, will one day come to seem as "barbaric as bloodletting". In the next 12 months, says Cukier, "we are going to see a breakout moment when everyone has to have a big data strategy, doing an inventory of what data we have, what data we should be collecting and we are not, and how we could use it".

The rise of the algorithmist

Kenneth Cukier of The Economist argues strongly that, as the influence of big data grows, we need to devise new legal frameworks that focus not on "notice-and-consent" (ie, ticking a box online agreeing to pages of legal jargon you haven't read), but on actual harm done by owners of data. He highlights the issue of "propensity" as a core area of concern alongside privacy: the risk that individuals are penalised or treated prejudicially as the result of algorithms that predict the future from past behaviour. And he argues that we will develop a highly remunerated new class of trusted professional, the "algorithmist", to stand alongside accountants and lawyers.