Privacy Digest

How Security Companies Sucker Us With Lemons -: "More than a year ago, I wrote about the increasing risks of data loss because more and more data fits in smaller and smaller packages. Today I use a 4-GB USB memory stick for backup while I am traveling. I like the convenience, but if I lose the tiny thing I risk all my data.

Encryption is the obvious solution for this problem -- I use PGPdisk -- but Secustick sounds even better: It automatically erases itself after a set number of bad password attempts. The company makes a bunch of other impressive claims: The product was commissioned, and eventually approved, by the French intelligence service; it is used by many militaries and banks; its technology is revolutionary.

Unfortunately, the only impressive aspect of Secustick is its hubris, which was revealed when Tweakers.net completely broke its security. There's no data self-destruct feature. The password protection can easily be bypassed. The data isn't even encrypted. As a secure storage device, Secustick is pretty useless.

On the surface, this is just another snake-oil security story. But there's a deeper question: Why are there so many bad security products out there? It's not just that designing good security is hard -- although it is -- and it's not just that anyone can design a security product that he himself cannot break. Why do mediocre security products beat the good ones in the marketplace?

In 1970, American economist George Akerlof wrote a paper called 'The Market for 'Lemons'' (abstract and article for pay here), which established asymmetrical information theory. He eventually won a Nobel Prize for his work, which looks at markets where the seller knows a lot more about the product than the buyer.

Akerlof illustrated his ideas with a used car market. A used car market includes both good cars and lousy ones (lemons). The seller knows which is which, but the buyer can't tell the difference -- at least until he's made his purchase. I'll spare you the math, but what ends up happening is that the buyer bases his purchase price on the value of a used car of average quality. "

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