Today, that something is military IT.

The newest edition of Foreign Affairs features a lengthy piece by William J Lynn III, the current U.S. deputy secretary of defense, about the growing threat of digital terrorism and other security risks posed by an increasingly digital society. It outlined Operation Buckshot Yankee, a previously classified incident that involved massive security breaches into government systems.

It laid a powerful reality — that information technology enables almost everything the military does — against the tactical approach to devious online behavior, including cyberwarfare, to make an important point: securing the country’s vulnerable IT systems is a military imperative, and the Department of Defense along with many other agencies are putting a massive amount of work into doing just that, concluding that something called Project Command “is slated to become fully operational by October.”

Project Command is a reorganization of existing strategies; a consolidation of several existing task forces spread throughout various agencies into one four-star command. Three missions guide it:

First, it leads the day-to-day protection of all defense networks and supports military and counter-terrorism missions with operations in cyberspace. Second, it provides a clear and accountable way to marshal cyber-warfare resources from across the military. … Cyber Command’s third mission is to work with a variety of partners inside and outside the U.S. government.

Of course, development is key here, and a significant part of turning the Department of Defense into the best cyber-security provider in the world may involve an open-source approach to collaboration shared across everyone on the life-cycle of that third mission of Cyber Command.

Which is where the recent news cycle comes into play: forge.gov, a code-sharing site for broad collaboration among developers and engineers working for and on behalf of the government, is getting some attention.

Red Hat public sector strategist Gunnar Hellekson gave some background on the specifics, and from my reading of his post he’s cautiously optimistic that forge.gov could become a real asset:

Before, say, the mid-1990s, much of the DOD’s software was owned by the government. GOTS, or “Government Off-the-Shelf” as it’s now called, was built and maintained by the DOD and its contractors. This was appropriate for some military-specific systems, but the strategy outlived its usefulness when the government could no longer keep up with commercial enterprises. For many pieces of common software, like operating systems, spreadsheets and web browsers, the open market produced more innovative and higher-quality products. So down came the order: use commercial software. COTS (“Commercial Off-the-Shelf”) was ascendant. …

COTS software is still king, but where the government needs to control its own integration, set its own standards, and exercise stewardship over its own infrastructure, it can still develop its own GOTS solutions — this time, in an open, collaborative manner. Where GOTS was once insular, slow-moving, and highly proprietary, it can now be produced at lower cost and with lower barriers to entry for new innovations. Because this “Open GOTS” is built using familiar open source methods, the projects have a fighting chance of working together.

The endgame here, as Ars Technica put it, is “for Forge.gov to be operated as a more inclusive environment” than preceding efforts to apply open-source collaboration to cyber-security.

There certainly are some problems with the initiative, as the Ars piece points out. However, after the entire approach to this work is rearranged in an administrative, command-chain sense with the roll-out of Cyber Command, perhaps officials will be equipped with the intelligence to succeed in the difficult mission of stopping cyber-security attacks before they even start.

A complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interactions came together to allow the initiation and escalation of the Deepwater Horizon accident. Multiple companies, work teams and circumstances were involved over time.

From BP’s much-awaited report on its April 20 oil spill in the Gulf. I hope to get through most of the report today and have some insight, but in the meantime, the full text of the report is after the jump.

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The research office is only now beginning to attract attention for the unusually strong powers Congress granted it to force financial companies to turn over confidential information and help spot potential market blowups. In a nod to its abilities to peer into the uncharted depths of the financial system, lobbyists are calling it the CIA of financial regulators.

The analogy may not be far off. Housed within the Treasury, the office will have both data collection and analysis arms. The law says it can demand “all data necessary” from financial companies, including banks, hedge funds, private equity firms, and brokerages. That would include previously secret details such as who the counterparties are for credit default swaps and information on individual loans such as interest rate and maturity. If companies aren’t forthcoming, the director of the office can issue subpoenas.

It’s about time someone profiled the Office of Financial Research, a new agency created when President Obama signed the Dodd-Frank Act into law in July, and Bloomberg’s Robert Schmidt does a great job with his piece.

Some important takeaways:

But what do these takeaways actually mean?

The standardization of data is fairly self-explanatory. A number of data standards, such as XBRL and some elements of Basel II, exist and many investors find them pretty useful.

At the same time, markets have long needed better data standards across all participants, and one good way to make that happen is to make one regulator responsible for setting its own standards across all the institutions it regulates.

The OFR subpoena power, and the overall way it treats its data, is one aspect of it that will irk a lot of institutional investors because, it’s safe enough to assume, it will ultimately result in data being disclosed that banks would much rather have kept in secret.

But that alone doesn’t represent a threat to trading profits. An FOA request is a profoundly slow way to get information, and given the speed at which the markets move, trading on that information alone is about as good a trading strategy as throwing darts at a board wallpapered with stock tickers and buying whatever it hits. In fact, the OFR doesn’t even seem to intend to keep up with the speed of active trading.

Furthermore, I assume the OFR will tell a firm if an FOA request is made for the data it has disclosed to the regulator. This alone should be adequate information for the firm to decide what it should do with its trading positions in light of the request. Asserting that Wall Street tends to value those secrets just for the sake of secrecy isn’t a new observation, but asking it to loosen its proverbial tie a bit isn’t unreasonable.

Elsewhere, there are a few important questions that I haven’t found good answers to. What are the penalties for non-compliance? How important is it that it (seemingly) does not apply to insurance companies? What is the deadline for the Office establishing a data standard? Who is it hiring, not only as the head, but as support and enforcement staff?

Though there are surely a lot of moving parts to this portion of the reform law, I hope these questions get more context soon. A timeline posted at the Financial Regulation Forum pegs the start of OFR’s data analysis from “within a year” of the Dodd-Frank Act’s July 21, 2010 signing date. And at the Financial Accounting Standards Research Initiative blog, Jeff Wilks provided the service of actually reading the Act and parsed out some useful technical insights on the OFR.

Both entries are worthwhile reading for anyone interested on the topic.

As an aside, it wasn’t unheard-of to see this kind of regulation coming down the pike. Last year, I posed a question to my LinkedIn network about the feasibility of what I at the time called a “pricing regulator” for derivatives. While the Office of Financial Research doesn’t regulate pricing (and doesn’t focus solely on derivatives), it does aim to collect the necessary data to establish, in a roundabout way, the systematic risks posed by the market’s pricing at any given point in time. Which is similar to the scenario I inquired about.

And you won’t find serious remarks about the matter coming from the mouths of lawmakers on either side of the proverbial aisle, either. That’s because the issue is one of the most boring discussions imaginable: the differences between fiscal and monetary policy.

A reminder, for anyone who’s interested: Fiscal policy refers to the ways in which the government collects and spends money. Tax rates, stimulus spending, servicing debt, providing social services, and an assortment of other actions. And monetary policy refers to how the government manages the supply of money it already has. What the Federal Reserve does, and who’s in charge of it.

Though Obama’s remarks today will probably focus entirely on fiscal policy, proper discussions of fiscal policy don’t take place in a vacuum – they involve monetary policy as well because the two areas of domestic policy interact in some awkward, unpredictable ways. But talk of the Fed’s overall power in light of the financial reform law, for instance, doesn’t fit into news segments and sound bites about tax rates. So for the sake of simplicity, plenty of observers will just drop the interrelation between the two altogether.

Nevertheless, I’ve posted some good reading about the (theoretical) relationships between monetary and fiscal policy after the jump. It’s from 2001 but still seems relevant to the broader discussion that ought to be happening.

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David Larcker and Anastasia Zakolyukina of Stanford’s Graduate School of Business analysed the transcripts of nearly 30,000 conference calls by American chief executives and chief financial officers between 2003 and 2007. They noted each boss’s choice of words, and how he delivered them. They drew on psychological studies that show how people speak differently when they are fibbing, testing whether these “tells” were more common during calls to discuss profits that were later “materially restated”, as the euphemism goes.

Since not all executives write their own remarks for those calls, it would be fair to question the study’s viability. Except that the researchers know that, and so they only examined the Q&A portion of the calls, which takes so much time to script that it’s not worth bothering to try.

The article does correctly observe that PR practitioners are bound to get their game-theory on and avoid precisely the things the research says indicate deception. In that vein, here’s a cheeky handy list of things to do when drafting earnings scripts for the 3Q10 period:

To be serious for a moment, the payoff for everyone else is that, as claimed by the authors, “linguistic features statistically improve the out-of-sample performance for a traditional accounting-based model that uses discretionary accruals. These performance results suggest that it is worthwhile for researchers to consider linguistic cues when attempting to measure the quality of reported financial statements.”

So they’re saying the models are reliable data-points for traders and other investors on the Street?

A working version of the full paper appears after the jump; it’s great background for IR types.

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This post on NBC.com reports that Terry Jones, the Florida pastor behind his church’s revolting International Burn a Quran Day, was arrested for sharing child pornography on August 4. Why aren’t other media outlets running the news as well?

Because it’s made-up. It’s a hoax. Complete fiction, and I’ve screen-captured it because, if NBC wants to be taken seriously as a news outlet, they’ll retract it and issue a statement that explains how it got there in the first place.

The post, curiously listed under the Entertainment banner of the web site and posted without a byline, stems from this thread on Topix, a hyperlocal news network with a heavy focus on message boards and reader-submitted material, from a post submitted by an anonymous user. It’s posted on NBC.com under the category “News From You,” which makes me wonder why the NBC web site gives user-submitted posts unfiltered access to a portion of its web site that looks like filtered editorial. Ordinary readers aren’t able to read the post and tell who put it there.

Searchable Florida court records can’t confirm that Terry Jones was arrested for sharing child pornography. Perhaps more telling, no other news outlet reported the story either. Aside from the NBC post and the Topix message board, the coverage includes a few blog posts and that’s it. I’m certain it’s made-up — I only noticed the post when it was reblogged on a popular Tumblr page earlier today.

I wouldn’t necessary expect the post to come off of Topix too quickly, if at all — I don’t know much about the platform, including whether or not it maintains news desks or editors that filter irrelevant or, in this case, fictitious, content out. But I would expect, after being live for more than two weeks, that someone on the editorial side at NBC would notice and get it down. It’s rather embarrassing for the network’s brand.

What Jones is doing down in Florida is disgusting and it’s probably safe enough to assume there isn’t much to like about Terry Jones, as a pastor or as a human. And, sure, his religious ideology is so hateful and infuriating that, one way or another, people are going to make stuff up about him on the internet. That’s unavoidable.

But it’s not too much to ask that the leading broadcast news networks do better than to appear like they’re running news from unsubstantiated, anonymous message board post.

So here they are. Using documents anonymously provided by one of the students, The Chronicle of Higher Education explains the incident:

The second research assistant was bothered by the discrepancy. How could two researchers watching the same videotapes arrive at such different conclusions? He suggested to Mr. Hauser that a third researcher should code the results. [...]

A graduate student agreed with the research assistant and joined him in pressing Mr. Hauser to allow the results to be checked, the document given to The Chronicle indicates. But Mr. Hauser resisted, repeatedly arguing against having a third researcher code the videotapes and writing that they should simply go with the data as he had already coded it. After several back-and-forths, it became plain that the professor was annoyed.

“i am getting a bit pissed here,” Mr. Hauser wrote in an e-mail to one research assistant. “there were no inconsistencies! let me repeat what happened. i coded everything. then [a research assistant] coded all the trials highlighted in yellow. we only had one trial that didn’t agree. i then mistakenly told [another research assistant] to look at column B when he should have looked at column D. … we need to resolve this because i am not sure why we are going in circles.”

The research assistant who analyzed the data and the graduate student decided to review the tapes themselves, without Mr. Hauser’s permission, the document says. They each coded the results independently. Their findings concurred with the conclusion that the experiment had failed…

Yesterday, department dean Michael D. Smith sent a letter to faculty that confirmed Hauser was found to be in violation of eight separate incidences of scientific misconduct under FSA standards. The full letter is reprinted here.

“I read lots of food blogs, for instance, but is there a food buyer or a general manager writing a blog somewhere? Publishing-industry blogs that are about the business rather than the books? Other great industry blogs?”

– Ezra Klein, Washington Post

Anyone who works in the field of public relations or communications, as I do, should be thrilled to read this.

It isn’t new to observe that if a company or an executive publishes a quality blog, then some people will find it. What is new, though, is that if a company or an executive publishes a quality blog, then journalists like Ezra Klein really want to be told about it.

I enjoy reading his work, but I didn’t go to the event since I don’t live in D.C. Here are some key points, though, from a summary he published online today; his full preview post is here:

When one party pushes a line, reporters spend a lot of time asking the other party if it’s true. But if the media’s used to hearing [manufactured controversy about Republicans] from Democrats, it’s not actually used to libertarian ideas coming from Republican candidates. Republicans are supposed to like tax cuts and defense spending and, usually, enormous walls along the border. They’re not supposed to make existential challenges to every aspect of the modern welfare state. And it’s not just journalists who think this. We’re finding that voters aren’t sure how to deal with it, either. [...]

I don’t think libertarian candidates are going to go down in flames. But I don’t think you can say that Americans are embracing their ideas as much as they’re turning away from policies and incumbents that they consider failures. When libertarian candidates are completely up-front, they get tripped up; they run into voters who are afraid that they’re going to lose benefits they’ve paid for. This is a better problem than libertarians used to have, when they were scrambling for 5 percent in New Hampshire primaries. What we need to see, though, is whether libertarians can get past the apprehensions, win, and govern.