Right at this moment, would-be adulterers across the globe are caught in a horrible dilemma.
It goes something like this: “Should I sue Ashley Madison – the extramarital-affair-facilitating website from which hackers have stolen all of the embarrassing personal details that I had thought were completely secure? Or should I forego a potentially big payday and gamble that my spouse won’t find out?”
Your level of sympathy for these people will probably range from “they’re only human” to “serves them right” to “string ‘em up”, depending on your own experiences and moral code.
But forget the salacious side – this story matters. Because in our rapidly approaching future, hackers will be able to do a lot worse than merely humiliate you online…
A matter of life and death
Hacking isn’t just potentially embarrassing – it could be deadly.
You might have seen a video doing the rounds on the internet which illustrates this quite terrifyingly.
Two hobbyists, Charlie Miller and Chris Valise, made headlines in the US when they hacked into a Jeep Cherokee that was driving along a highway. They started with the radio and the temperature.
Then they hit the brakes, bringing the car to a standstill.
Of course, this was a controlled experiment, so no one was hurt. They did it to highlight potential security issues. But it’s easy to imagine a terrorist, a generic misanthrope, or just a bored prankster causing chaos by doing the same during the rush hour.
This problem will only get worse the more we rely on technology. Two years ago, when Miller and Valise did a similar experiment, they had to physically connect their laptop to their victim’s car. Now they can take advantage of the wireless technology that comes as standard. (Ironically this wireless connection is designed to make it easier to diagnose faults.)
When cars become driverless – which is more than possible in the foreseeable future – we’ll be completely at the mercy of the machines.
And you don’t have to be paranoid to see this happening to other essential infrastructure, especially as we move from hard drives to cloud storage. The number of devices connected to the internet is expected to grow tenfold, from two billion to 25 billion, between 2010 and 2020.
Both cases tie in with another major trend – online crime is rising fast. Banking fraud in the UK rose by nearly 50% last year. Fraud related to credit cards now totals nearly £500m.
A similar thing is happening in the US. A study by LexisNexis suggests the total value of fraudulent payments to businesses rose by 38% to $32bn in 2014.
Payment fraud isn’t the only type of online crime. Theft of intellectual property and records and the draining of bank accounts are also big problems.
The total cost of cybercrime is hard to estimate. It depends on how you measure it, and whether you take direct and indirect impacts into account. And it’s always worth remembering that most of the people who measure this stuff have a vested interest in making the figures look as shocking as possible.
That said, it’s pretty obvious that as more and more of our information goes online and more of our transactions take place there, then more crime is going to migrate online too. So whether the total cost to the global economy is $375bn or $575bn (both estimates I’ve seen online), one thing is clear – defending against cybercrime is going to be an ever more important issue.
The market is cybersecurity is huge – and getting bigger fast
As a result, governments are increasing their spending on online security, even as they cut back other aspects of public spending. For example, the US government will spend a record $14bn this year to meet security threats across the country.
At the same time, firms are also increasing spending. They need to protect themselves from reputation-destroying security breaches. But it’s also a response to new regulations.
The Jeep stunt has prompted American politicians to propose legislation to force car firms to upgrade security on their cars’ networks. Last year, in an effort to get firms to spend more, the White House issued guidelines urging them to do more to protect their data.
And this goes far beyond car manufacturers. A recent Accenture survey suggested that 90% of financial institutions plan to significantly increase spending on cybersecurity, with two-third rankings cybersecurity as the most pressing operational issue, even above credit risk.
In any case the global market is now large and growing rapidly. Estimates put the size of the market at between $75bn and $85bn, with infrastructure firms accounting for $45bn alone, and on course to reach $120bn within a few years.
I’ll be looking at some of the best ways to profit in MoneyWeek magazine in the next couple of weeks. If you’re not already a subscriber, get your first four issues free here.