16 03 De2

Introduction to Information Systems
ISOM 2010
Lecture 3: Digital Economy (II)
Prof. Michael Zhang
Download: Part II
ISOM2010 - Copyright (c) Michael Zhang
Moores Law
If cars had developed as fast as PCs for the

last 30 years, we could buy a Rolls-Royce at
20,000,000
2.86
$_______
or it could run ________miles
with 1 gallon of gas.
Metcalfes Law
The value of a
communications network is
proportional to the square of
the number of users of the
system (n2).
Network Effects
Now, for k nodes, how many
k*(k-1)/2
lines are there?
2600 years ago, Hebrew

used reverse substitution in writing
some parts of the Hebrew Bible.
Reverse substitution
abcdefghijklmnopqrstuvwx
yz
ZYXWVUTSRQPONMLKJIHGFEDC
BA
2400 years ago, Spartan generals
wrapped a long narrow strip

of paper around a stick of a
specific diameter, and then
wrote along the length of
the stick.
I have a secret
2300 years ago, the Greeks

Numerical substitution
1
I/J
23 15 31 31 34
HELLO
2000 years ago, Caesar

used the shift by X method
to encrypt his commands.
Shift by 3
A B C D E F G ..
A B C D E F G ..
YLFWRYB
VICTORY
10
The American Civil War (18611865)

Union General, Joseph Hooker, used code book for
encryption in the American Civil War.
11
WWI
During WWI, US army translated secret documents into the
Navajo nations language (a Native Indian nation).
12
Enigma Machine
13
Sending Passwords
Encrypt
The Internet
User
Server
14
Without encryption
Oh, Alice, I want to

tell u sthits
between us
OKBobu
can post it on
the big-word-wall
@ UST
15
Asymmetric encryption
Key 1 and
encryption algorithm
Key 2 and
encryption algorithm
Ciphertext
Plaintext
Encryption
Decryption
If Key 1 = private, Key2 must be corresponding public
If Key 1 = public, Key2 must be corresponding private
16
Public/private key encryption

Big random number
K4D94KJ
JD325K4
Hello
Alice!
Key-making
algorithm
Encrypt
6D3N0DS23N
Hello
Alice!
Decrypt
Alices
private key
Alices
public key
Bob has the

public key
(via the Internet
or through
third party)
Post office creates

a mailbox and its key
Mailbox has a public address
Alices
private key
The key is private
17
Math behind the keys

A large prime number:
243,112,609-1
It has > 12,978,000 digits
P1*P2=C
C is public key
P1 and P2 make the private key
It is very easy to calculate C from P1 and P2

But very difficult to decompose C into P1 and P2
18
Encrypt/decrypt: Critical factors

One-to-one match
A public key is uniquely matched to a private key.
Anyone can encrypt using the public key, but only the
holder of the private key can decrypt.
Secrecy depends on the secrecy of the private key.
19
Public-Key Applications: Privacy

Bob
Alice
Plaintext
Encrypt
Ciphertext
Bobs Public Key
Decrypt
Plaintext
Bobs Private Key
Alice encrypts message to Bob using

Bobs Private Key typo: shouMld be Bob's Public Key
Only Bob knows Bobs Private Key only
Bob can decrypt message
20
Signatures
Alice
Plaintext
Encrypt
Signed
Message
Alices Private Key
Decrypt
Bob
Plaintext
Alices Public Key
Bob knows it was from Alice, since only Alice

knows Alices Private Key
Non-repudiation: Alice cant deny signing
message (except by claiming her key was stolen!)
Integrity: Bob cant change message (doesnt
know Alices Private Key)
21
Amazon and eBays success induced a gold rush in Bay area.

Whats the impact on Business School graduates? How
about ordinary people who knows neither business nor
technology?
Business graduates go to silicon valley. Other people
become day traders.
With a simple presentation, Philip Kaplan walk out with
$40,000. A company spends $10 million on launch party
out of $12 million raised. For 30 seconds of TV ad, some
spend $2.2 million. Why VC would like to fund such
craziness?
Even knowing some sites are garbage, they want to be in the game.
22
Financial frenzy is only one source of the problem. What is

the other one?
Over spending in fiber optic information highways
Amazons #55 employee said he would not say Gee, Im the
10 million dollar book reviewer. Bezos also said Do not
look at the stock price of Amazon. Why?
Because the job you are doing and the reward you get are
not comparable.
23
What Greenspan did in February and March

of 2000 to cool down the bubble?
Increase the interest rates
April 13, 2000. Black Friday. NASDAQ

evaporated 25% market value. Amazon fired
1400 employees. What are Elisabeth KublerRoss 5 stages of grief in the face of death?
Denial, anger, bargaining, depression,
acceptance.
24
5 years after the bubble, people reached the stage

of acceptance, all in all, it was bad. But there is
another school of thought. What was that?
Its the price we pay for progress
Out of the historical bubbles of telegraph, railway,

canals, automobile came: mass communications,
water transportation, the road, and railway
networks. How about the Internet bubble?
Information highway. Cheap infrastructure.
25
Andy Grove, the legendary chairman of Intel, was

the biggest naysayer during the boom, why did he
argue that the bubble had been a good thing?
The frenzy drew untold billions of dollars into
building out the Internet infrastructure. It
forced the brick and mortar companies to
become internet companies.
Creative destruction or Destructive creation?
It is a good thing, for those survived, and for the
new comers.
26
Individuals and
Internet is about connecting ______
Individuals to _______.
Information
connecting _____
27
Review
The Bubble Video is on YouTube for review:
https://www.youtube.com/watch?v=aQjnkyoNIfg
28
The End

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Introduction to Information Systems

ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

If cars had developed as fast as PCs for the

2600 years ago, Hebrew

ISOM2010 - Copyright (c) Michael Zhang

2400 years ago, Spartan generals

wrapped a long narrow strip

ISOM2010 - Copyright (c) Michael Zhang

2300 years ago, the Greeks

2000 years ago, Caesar

The American Civil War (18611865)

ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

Oh, Alice, I want to

ISOM2010 - Copyright (c) Michael Zhang

Public/private key encryption

Bob has the

Post office creates

Mailbox has a public address

ISOM2010 - Copyright (c) Michael Zhang

Math behind the keys

It is very easy to calculate C from P1 and P2

Encrypt/decrypt: Critical factors

ISOM2010 - Copyright (c) Michael Zhang

Public-Key Applications: Privacy

Bobs Public Key

Bobs Private Key

Alice encrypts message to Bob using

Alices Private Key

Alices Public Key

Bob knows it was from Alice, since only Alice

Amazon and eBays success induced a gold rush in Bay area.

Financial frenzy is only one source of the problem. What is

ISOM2010 - Copyright (c) Michael Zhang

What Greenspan did in February and March

April 13, 2000. Black Friday. NASDAQ

5 years after the bubble, people reached the stage

Out of the historical bubbles of telegraph, railway,

Andy Grove, the legendary chairman of Intel, was

ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

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