News Analysis: Is Big Data an Economic Big Dud?

The astounding rate of growth would make any parent proud. There were 30 billion gigabytes of video, e-mails, Web transactions and business-to-business analytics in 2005. The total is expected to reach more than 20 times that figure in 2013, with off-the-charts increases to follow in the years ahead, according to Cisco, the networking giant.

How much data is that? Cisco estimates that in 2012, some two trillion minutes of video alone traversed the Internet every month. That translates to over a million years per week of everything from video selfies and nannycams to Netflix downloads and “Battlestar Galactica” episodes.

What is sometimes referred to as the Internet’s first wave — say, from the 1990s until around 2005 — brought completely new services like e-mail, the Web, online search and eventually broadband. For its next act, the industry has pinned its hopes, and its colossal public relations machine, on the power of Big Data itself to supercharge the economy.

There is just one tiny problem: the economy is, at best, in the doldrums and has stayed there during the latest surge in Web traffic. The rate of productivity growth, whose steady rise from the 1970s well into the 2000s has been credited to earlier phases in the computer and Internet revolutions, has actually fallen. The overall economic trends are complex, but an argument could be made that the slowdown began around 2005 — just when Big Data began to make its appearance.

Those factors have some economists questioning whether Big Data will ever have the impact of the first Internet wave, let alone the industrial revolutions of past centuries. One theory holds that the Big Data industry is thriving more by cannibalizing existing businesses in the competition for customers than by creating fundamentally new opportunities.

In some cases, online companies like Amazon and eBay are fighting among themselves for customers. But in others — here is where the cannibals enter — the companies are eating up traditional advertising, media, music and retailing businesses, said Joel Waldfogel, an economist at the University of Minnesota who has studied the phenomenon.

“One falls, one rises — it’s pretty clear the digital kind is a substitute to the physical kind,” he said. “So it would be crazy to count the whole rise in digital as a net addition to the economy.”

Robert J. Gordon, a professor of economics at Northwestern University, said comparing Big Data to oil was promotional nonsense. “Gasoline made from oil made possible a transportation revolution as cars replaced horses and as commercial air transportation replaced railroads,” he said. “If anybody thinks that personal data are comparable to real oil and real vehicles, they don’t appreciate the realities of the last century.”

Other economists believe that Big Data’s economic punch is just a few years away, as engineers trained in data manipulation make their way through college and as data-driven start-ups begin hiring. And of course the recession could be masking the impact of the data revolution in ways economists don’t yet grasp. Still, some suspect that in the end our current framework for understanding Big Data and “the cloud” could be a mirage.

“I think it’s conceivable that the data era will be a bust for the things people expect it to be useful for,” said Scott Wallsten, a senior fellow at the Technology Policy Institute and the Georgetown Center for Business and Public Policy. Some entirely new use will have to turn up for data to fulfill its economic potential, he added.

There is no disputing that a wide spectrum of businesses, from e-marketers to pharmaceutical companies, are now using huge amounts of data as part of their everyday business.

James Glanz is an investigative reporter for The New York Times.

News Analysis: The Challenge of Creating a Unified Organizational Strategy

To be clear, it is hard to do. The default behavior for human beings is to think in terms of tribes. If you work in a small department in a big company, you’re naturally going to identify most closely with your immediate colleagues. You’ll have lunch or coffee together, and maybe even socialize with them outside the office.

Other colleagues you see in the hallway and on the elevator can seem like total strangers, even though you work for the same company. Divisions fighting for resources and attention can exacerbate the problem.

It’s a theme that has come up often in my interviews with more than 200 leaders for my column, Corner Office, and smart leaders recognize that us-versus-them behavior can ultimately destroy companies.

So what should leaders do? A few tips have emerged from my interviews.

Create a ‘One Company’ Culture

Symbolism is important, in both the language that leaders use and the organizational chart they create.

Here’s how Kathleen L. Flanagan, the chief executive of Abt Associates, tackled the issue.

“We’ve grown from $180 million in annual revenue a few years ago to $425 million today. As the company grew, more business units were created, and so we had more silos in the organization. My objective two years ago in coming into this job was to take down the silos. So I reorganized the company. It used to be organized around lines of business — international, U.S.-based, data collection — and there used to be senior vice presidents who led each of those big businesses. I took those senior V.P. positions away and hired one executive vice president for global business who shared my vision for what I call One Global Abt.

At the heart of that is taking down the walls so people can collaborate more freely, so that we can leverage all of Abt. We now ask people to pick their heads up out of their project work or their division focus and look across the whole company. So I now ask my managers to wear two hats. Everybody’s got their job in the big picture of the company, but they all have to wear an Abt hat. It’s really easy, given the time pressures and the pace of our work, to put blinders on and be very project-focused. It’s harder to take a step back and ask, “How does this apply to the whole company?”

Simplify the Scoreboard

A big part of a leader’s job is to establish a simple set of performance metrics so that everyone in the company can feel as if they’re part of a broader team, and can understand how the work they do contributes to the broader goals. Chief executives have to choose those metrics carefully because, as the saying goes, what gets measured gets managed.

A powerful example of this came from Shivan S. Subramaniam, the chief executive of FM Global, a commercial and industrial property insurer, who shared with me how his team worked hard to develop very simple goals.

“We call them key result areas, or K.R.A.’s. We’re multinational — we’ve got 5,100 people, 1,800 of whom are engineers. We’re very analytical. But we have three K.R.A.’s, nothing terribly fancy. And everybody focuses on them. One is on profitability. One is on retention of existing clients. And one is on attracting new clients. That’s it.

You can talk to people in San Francisco, Sydney or Singapore, and they’ll know what the three K.R.A.’s are. All of our incentive plans are designed around our K.R.A.’s, and every one of those K.R.A.’s is very transparent. Our employees know how we’re doing. And, most importantly, they understand them, whether they’re the most senior manager or a file clerk, so they know that ‘If I do this, it helps this K.R.A. in this manner.’”

Communicate Relentlessly to the Entire Staff

There’s a reason that so many companies hold regular all-hands meetings (and with technology, it’s possible to do them in large and sprawling companies now). Again, it’s about tribal behavior. You have to bring everybody together and speak to everyone as a group for people to identify themselves with the broadest group. Leaders then have to take their simple plan and hammer it home, again and again, even if they feel like everybody has heard it before a hundred times.

It’s a lesson that Christopher J. Nassetta, the Hilton Worldwide chief, told me that he learned over time.

“You have to be careful as a leader, particularly of a big organization. You can find yourself communicating the same thing so many times that you get tired of hearing it. And so you might alter how you say it, or shorthand it, because you have literally said it so many times that you think nobody else on earth could want to hear this. But you can’t stop. In my case, there are 300,000 people who need to hear it, and I can’t say it enough. So what might sound mundane and like old news to me isn’t for a lot of other people. That is an important lesson I learned as I worked in bigger organizations.”

Steve Ballmer’s challenge as the chief executive of Microsoft is not unlike the challenge that it faces with technology: how to take something very complicated — be it a software program or a sprawling organizational chart — and make it simple to operate. This may be the toughest task of his career.

Adam Bryant writes the Corner Office column, which appears on Fridays and Sundays.

News Analysis: Facebook Made Me Do It

That feedback loop of positive reinforcement is the most addictive element of social media. All those retweets, likes and favorites give us a little jolt, a little boost that pushes us to keep coming back for more. It works whether or not we post the typical social media fodder of lush vacation pictures and engagement announcements or venture into realms that showcase our most daredevilish antics and risqué behavior.

It is one way to understand why people upload things that make us gasp, from my friend’s playful bare-all portrait to more sinister, illegal activities, like the defacing of parks and monuments with graffiti and other acts of outright vandalism.

Our growing collective compulsion to document our lives and share them online, combined with the instant gratification that comes from seeing something you are doing or experiencing get near-immediate approval from your online peers, could be giving us more reason to act out online, for better or for worse.

We are, in other words, one another’s virtual enablers.

People, of course, have always found ways to manipulate media — whether print, television or digital — to get attention. But Zeynep Tufekci, a professor of sociology at the University of North Carolina, Chapel Hill, says the vast amplification of the potential audience a single person can reach has raised the stakes for all online activity.

“The fact that the world is going to see you increases the risks you are willing to take,” she said. “We see this all the time on social media in protests, and the same is true for graffiti. It’s performative.”

Part of our increasing looseness with what we post on the Web has to do with the realization that one raunchy photo is just a single data point among hundreds. But Coye Cheshire, a professor of information sciences at the University of California, Berkeley, who studies how we interact online, thinks there might be something more complex at play. In his research, he has highlighted the power of social approval. In a study of social exchange systems like Facebook, when people were told that their networks liked the content they were sharing, they shared more. But when they were told that people in their network did not like their shared content, they actually shared even more to figure out what their network might like, and “come up with more content that was edgier,” he said.

In addition, he suggested that the same feeling of anonymity one experiences in a crowd might translate to the Web, leading people to act more impulsively than they might in person. “Sharing content and interacting with others online feels collective, even if we are at home alone, uploading photos or watching videos,” he said. “If we are doing something openly, the negative effect could lose its power.”

Mr. Cheshire was quick to point out that he did not blame social media for inspiring bad behavior, only exacerbating it among those who are already inclined that way. “For people who get a lot of motivation out of knowing that other people will respond to what they are doing, knowing that thousands or millions could see it can be very powerful,” he added. “When there’s enough notoriety that can come out of it, it changes the risk calculation and raises the incentive.”

Geoff Manaugh, who blogs about urban architecture and the environment and who was recently named editor in chief of Gizmodo, a technology blog, agreed that social media alone could not be held accountable. “Social media makes it easier to share acts of stupidity,” he said. “But people have always been, and will continue to be, stupid, with or without the tools to share.”

“Being stupid specifically in fragile, natural landscapes is a symptom of something else entirely,” he continued, referring to the uploads of graffiti tags in public parks, “including a lack of respect for shared resources and a lack of interest in the natural world.”

And graffiti, street art and the Internet have long been intertwined, and that relationship has only grown stronger in recent years.

For example, although I’ve lived in New York for close to five years, my only encounters with the work of Hanksy, a graffiti artist who largely makes his art in New York and whose signature pieces involve the clever mash-up of the actor Tom Hanks and the works of the British artist Banksy, have been through Tumblr and Instagram.

“MY popularity exists right now because of social media and the Internet,” he said in a phone interview.

Hanksy said that after he put up his first piece in New York, he snapped a photo and uploaded it to the Web. Not long after, he said, “Tom Hanks tweeted it and it snowballed and here I am, two and a half years later with three successful solo shows and a rabid following of fans online.”

“It gives you an opportunity to see stuff you haven’t before,” he said. Graffiti art in particular is “tailor made for the Web and Instagram, Tumblr, Reddit or Facebook because it is so image-driven,” he said.

In addition, he said street art is “so transitory” and ephemeral that without social media, “a lot of it would fall by the wayside and get covered by paint” before anyone had the chance to see it.

Mr. Manaugh said that although there was a big difference between street art and outright vandalism, it is all social media. The inscriptions left on rocks in the desert and petroglyphs “are, to some extent, the Facebook wall of an earlier era in human communication,” he said, “a kind of geoliterature left in place for others to discover.”  

Jenna Wortham is a technology reporter for The New York Times.

News Analysis: Unraveling Brothers’ Online Lives, Link by Link

The Boston Marathon bombings quickly turned into an Internet mystery that sent a horde of amateur sleuths surging onto the Web in a search for clues to the suspects’ identity. And once the search focused on Tamerlan and Dzhokhar Tsarnaev, the brothers’ social media postings provided a rich vein of material to mine and sift.

There are more than a thousand messages on Dzhokhar’s Twitter account in addition to a profile page on VKontakte, a popular Russian social networking site, and in Tamerlan’s case, a list of favorite videos on YouTube and what appears to be an Amazon wish list belonging to him (Amazon would not confirm whose list it was, citing its privacy policy.)

These posts instantly became dots that people began trying to connect. Some details ratified the views of those former friends and neighbors who said they were utterly shocked at the brothers’ possible involvement in such a horrifying crime. Other posts pointed to Tamerlan Tsarnaev’s growing interest in Islamic radicalism and possibly a dark subtext to the friendly, boy-next-door affect of Dzhokhar.

At the same time, they were reminders of the complexities of online identity — of the ways in which people strike poses and don masks on the Web (which can sometimes turn into self-fulfilling prophecies), and the ways in which the Web can magnify or accelerate users’ interests and preoccupations.

The younger brother, Dzhokhar, in particular, seemed utterly immersed in American pop culture, and concerned with the sorts of things that preoccupy many young men — girls (“miss u.s.a. is so sexy”) and good times (“I am the best beer pong player in Cambridge. I am the #truth”). In fact, much of his Twitter feed is distinctive only in its ordinariness — ordinariness that stands in such startling contrast to the horror of what happened last week in Boston.

There are lots of references to musicians like Chris Brown, Jay-Z and Michael Jackson; television shows like “Breaking Bad” and “Game of Thrones,” and movies like “Spider-Man” and “Finding Nemo.” He prattles away about Nutella and Frosted Flakes, complains about typos and losing his remote. “Pop-up adds are the worst, on par with mosquitoes,” he tweets on June 17, 2012.

Given the layers of irony, sarcasm and joking often employed on Twitter, it can be difficult to parse the messages of a stranger. Yet some of them can seem menacing or portentous, given what we now suspect: “a decade in america already, I want out,” “Never underestimate the rebel with a cause” or, drawing from lyrics from a Kendrick Lamar song, “No one is really violent until they’re with the homies.” But others suggest a more Holden Caulfield-like adolescent alienation: “some people are just misunderstood by the world thus the increase of suicide rates.” Sometimes, Dzhokhar sounds downright sentimental (unless, of course, he is being ironic): “There are enough worms for all the birds stop killing each other for ‘em.”

Parts of Dzhokhar’s VKontakte page are harsher and more serious. Under personal priority, it says “Career and money.” Under worldview, it says “Islam.” There is a link to a video indicating outrage at the violence in Syria, and a link to an Islamic Web site that says “And do good, for Allah loves those who do good.” Another video features a blind boy talking to an older man, saying he believes his blindness will be absolved on Judgment Day; the man starts to cry, and wonders how many people who have their sight are as committed to the study of the Koran as the boy.

Other posts on Dzhokhar’s page have a more sardonic edge. There is a link to a self-described “journal of sarcasm” called “Evil Corporation” (featuring a logo reminiscent of Angry Birds) and also a joke that goes like this: “A car goes by with a Chechen, a Dagestani and an Ingush inside. Question: Who is driving?” Answer: The police.

Finn Cohen contributed reporting from New York, and Andrew E. Kramer from Moscow.

News Analysis: After Apple’s Rise, a Bruising Fall

Wall Street has turned viciously on its one-time iDarling. The rout in Apple’s share price — it fell nearly 2.7 percent on Thursday, bringing the damage since late September to 44 percent — has many wondering when, and where, all of this will end.

The answer, of course, is that no one really knows. Yes, Apple is slowing, as companies inevitably do. But Apple remains enormously profitable and the envy of corporations worldwide.

And yet Apple’s decline in the stock market has been so swift and so brutal that the development has begun to change the way investors view the company. Apple no longer looks like a sure thing.

It is a remarkable turn in one of the standout stock market stories of recent years. Only seven months ago, Apple’s share price raced above $700 to a record high, making Apple the most valuable company on the planet. By Thursday, the stock had sunk to $392.05, closing below $400 for the first time since late 2011.

The proximate cause of Thursday’s decline was news this week of a glut of audio chips at one of Apple’s suppliers. That, in turn, prompted concern that sales of iPhones might fall short of expectations.

But that was just one more bit of downbeat news in what has been a downbeat few months. All told, $290 billion has been wiped off Apple’s value since September. It might seem difficult to believe, but Apple now ranks among the biggest losers in the stock market over the last seven months, right next to the J. C. Penney Company, that sick man of American department stores. The last time Apple was trading this low was in November 2011. Steve Jobs had just died and everyone wondered how Apple would carry on without its visionary leader.

Stock price aside, Apple is bigger and, by some measures, stronger today that it was then. It sells more iPhones and iPads than ever. It is expanding its global reach. And it is making so much money — analysts expect the company to report another solid quarter next week — that it has been having trouble figuring out what to do with all of its cash. Speculation is rife that Apple might pass some cash to shareholders in the form of an increased stock dividend.

On one level, the Apple story is a common one on Wall Street: what goes up also goes down. As Apple’s stock price soared in recent years, some pointed out that the company’s sales couldn’t keep growing — and its share price couldn’t keep rising — at that rapid pace forever. In hindsight, Apple’s surge above $700 strikes some as irrational, as does its precipitous plunge back below $400.

“Overexuberance on the upside leads to herd behavior and panic during the correction,” said Avanidhar Subrahmanyam, an professor of behavioral finance at U.C.L.A. “People just panic and the stress hormone kicks in.”

One issue is that Apple is a favorite stock among individual investors. The investment firm SigFig estimated last fall that 17 percent of all retail investors owned Apple stock, four times the number that owns the average stock in the Dow Jones industrial average.

Trading by retail investors can be amplified by hedge funds, who see everyday investors piling in and push in the opposite direction by shorting the stock, betting it will decline. The so-called short interest in Apple reached a peak last November, but hasn’t gone down much since then, according to data from Nasdaq.

Aswath Damodaran, professor of finance at New York University, said the enthusiasm surrounding Apple last year prompted him to sell his own holdings in the company when the stock was around $610.

“I was terrified by the kinds of investors coming into Apple’s stock,” said Mr. Damodaran. “Not only were they coming in with unrealistic expectations, they were at war with each other.”

Recently, Mr. Damodaran began buying shares again, convinced that the fears had gone too far.

“Right now, Apple is being priced as though it has no future growth,” he said.

News Analysis: Google Focuses on Privacy After Street View Settlement

This week, though, Google was told what to do. In the culmination of a two-year investigation into whether its Street View violated privacy protections, law-enforcement officials told the company to shape up. Again.

Google has repeatedly redefined how people communicate and acquire knowledge in the 21st century, and it has repeatedly been accused of breaking the rules in the process. The company says it has taken its mistakes in the case to heart and has already changed. Never again, it says, will a midlevel engineer be able to do anything like what one did in Street View: start a program to scoop up data secretly from potentially millions of unencrypted Wi-Fi networks around the world, without his bosses bothering to know.

To make sure of this, a coalition of 38 states has drawn up numerous specific steps for Google to take, ranging from educating its engineers to educating its lawyers. Whatever Google was doing before to improve its privacy controls was not enough, the states say.

“There is no reason to believe they are not going to comply with each and every term in this agreement,” said Matthew F. Fitzsimmons, the Connecticut assistant attorney general who worked on the settlement.

Jill Hazelbaker, a Google spokeswoman, said, “We’ve worked hard to improve our practices.”

Google’s internal compliance will not be directly monitored. But if states feel Google is not upholding its side of the deal, they can bring the matter up to the executive committee that brokered the deal, including the attorneys general of Illinois, Massachusetts and Texas.

Some privacy experts think the program has a fair chance of success.

“This gives me some glimmer of hope that going forward, the culture of Google will include more privacy by design,” said Joseph L. Hall, senior staff technologist at the Center for Democracy and Technology. “Then they could do things in an innovative way on the front end that won’t result in needing to beg for forgiveness later.”

Still, it is difficult to make changes in an extremely successful technology firm. Silicon Valley executives remember all too well the case of Microsoft, which owned the future in the mid-1990s in the way that Google, Facebook and Amazon seem to now. Then the government sued the company and came close to breaking it up. Microsoft’s image, and its momentum, never recovered.

“Google is just as concerned, if not more concerned, about public perception than it is about paying a few fines,” said Ryan Calo, a law professor at the University of Washington who studies privacy issues. “Lay people will take a settlement as being evidence of a mea culpa.”

Larry Page, Google’s co-founder and chief executive, has made it clear that he wants the 31,000-employee company to try to act like a start-up, which means taking risks and doing things quickly. That was the sort of attitude that led to the Street View violation.

“The states are trying to inculcate a culture of privacy, to make it part of the DNA of Google,” said Timothy J. Toohey, a privacy expert at the law firm Snell & Wilmer. “But regulators and attorneys general are not technologists, and it becomes very difficult to follow through.”

Inside Google, the Street View breach was viewed more as a management problem than as a privacy one, according to people briefed on the investigation who were not authorized to speak publicly. The company realized, these people said, that it needed clearer control over what its engineers were doing and tighter restrictions on which engineers could gain access to certain data.

There has also been a realization among Google executives that these privacy penalties do matter, if only because of the reputational risks. They know the company can only sustain so many strikes against it in the public’s point of view, and the problem becomes more acute with each one, said former Google executives who spoke anonymously to preserve business relationships.

Edward Wyatt contributed reporting from Washington.

News Analysis: U.S. Confronts Cyber-Cold War With China

WASHINGTON — When the Obama administration circulated to the nation’s Internet providers last week a lengthy confidential list of computer addresses linked to a hacking group that has stolen terabytes of data from American corporations, it left out one crucial fact: that nearly every one of the digital addresses could be traced to the neighborhood in Shanghai that is headquarters to the Chinese military’s cybercommand.

A building that houses a Chinese military unit on the outskirts of Shanghai, believed to be the source of hacking attacks.

That deliberate omission underscored the heightened sensitivities inside the Obama administration over just how directly to confront China’s untested new leadership over the hacking issue, as the administration escalates demands that China halt the state-sponsored attacks that Beijing insists it is not mounting.

The issue illustrates how different the worsening cyber-cold war between the world’s two largest economies is from the more familiar superpower conflicts of past decades — in some ways less dangerous, in others more complex and pernicious.

Administration officials say they are now more willing than before to call out the Chinese directly — as Attorney General Eric H. Holder Jr. did last week in announcing a new strategy to combat theft of intellectual property. But President Obama avoided mentioning China by name — or Russia or Iran, the other two countries the president worries most about — when he declared in his State of the Union address that “we know foreign countries and companies swipe our corporate secrets.” He added: “Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions and our air traffic control systems.”

Defining “enemies” in this case is not always an easy task. China is not an outright foe of the United States, the way the Soviet Union once was; rather, China is both an economic competitor and a crucial supplier and customer. The two countries traded $425 billion in goods last year, and China remains, despite many diplomatic tensions, a critical financier of American debt. As Hillary Rodham Clinton put it to Australia’s prime minister in 2009 on her way to visit China for the first time as secretary of state, “How do you deal toughly with your banker?”

In the case of the evidence that the People’s Liberation Army is probably the force behind “Comment Crew,” the biggest of roughly 20 hacking groups that American intelligence agencies follow, the answer is that the United States is being highly circumspect. Administration officials were perfectly happy to have Mandiant, a private security firm, issue the report tracing the cyberattacks to the door of China’s cybercommand; American officials said privately that they had no problems with Mandiant’s conclusions, but they did not want to say so on the record.

That explains why China went unmentioned as the location of the suspect servers in the warning to Internet providers. “We were told that directly embarrassing the Chinese would backfire,” one intelligence official said. “It would only make them more defensive, and more nationalistic.”

That view is beginning to change, though. On the ABC News program “This Week” on Sunday, Representative Mike Rogers, Republican of Michigan and chairman of the House Intelligence Committee, was asked whether he believed that the Chinese military and civilian government were behind the economic espionage. “Beyond a shadow of a doubt,” he replied.

In the next few months, American officials say, there will be many private warnings delivered by Washington to Chinese leaders, including Xi Jinping, who will soon assume China’s presidency. Both Tom Donilon, the national security adviser, and Mrs. Clinton’s successor, John Kerry, have trips to China in the offing. Those private conversations are expected to make a case that the sheer size and sophistication of the attacks over the past few years threaten to erode support for China among the country’s biggest allies in Washington, the American business community.

“America’s biggest global firms have been ballast in the relationship” with China, said Kurt M. Campbell, who recently resigned as assistant secretary of state for East Asia to start a consulting firm, the Asia Group, to manage the prickly commercial relationships. “And now they are the ones telling the Chinese that these pernicious attacks are undermining what has been built up over decades.”

This article has been revised to reflect the following correction:

Correction: February 24, 2013

An earlier version of this article gave an incorrect month for a visit to the Pentagon by a senior Chinese military leader. The visit took place in May 2011, not April 2011.

News Analysis: Message, if Murky, From U.S. to the World

At the global treaty conference on telecommunications here, the United States got most of what it wanted. But then it refused to sign the document and left in a huff.

What was that all about? And what does it say about the future of the Internet — which was virtually invented by the United States but now has many more users in the rest of the world?

It may mean little about how the Internet will operate in the coming years. But it might mean everything about the United States’ refusal to acknowledge even symbolic global oversight of the network.

The American delegation, joined by a handful of Western allies, derided the treaty as a threat to Internet freedom. But most other nations signed it. And other participants in the two weeks of talks here were left wondering on Friday whether the Americans had been negotiating in good faith or had planned all along to engage in a public debate only to make a dramatic exit, as they did near midnight on Thursday as the signing deadline approached.

The head of the American delegation, Terry Kramer, announced that it was “with a heavy heart” that he could not “sign the agreement in its current form.” United States delegates said the pact could encourage censorship and undermine the existing, hands-off approach to Internet oversight and replace it with government control.

Anyone reading the treaty, though, might be puzzled by these assertions. “Internet” does not appear anywhere in the 10-page text, which deals mostly with matters like the fees that telecommunications networks should charge one another for connecting calls across borders. After being excised from the pact at United States insistence, the I-word was consigned to a soft-pedaled resolution that is attached to the treaty.

The first paragraph of the treaty states: “These regulations do not address the content-related aspects of telecommunications.” That convoluted phrasing was understood by all parties to refer to the Internet, delegates said, but without referring to it by name so no one could call it an Internet treaty.

A preamble to the treaty commits the signers to adopt the regulations “in a manner that respects and upholds their human rights obligations.”

Both of these provisions were added during the final days of haggling in Dubai, with the support of the United States. If anything, the new treaty appears to make it more intellectually challenging for governments like China and Iran to justify their current censorship of the Internet.

What’s more, two other proposals that raised objections from the United States were removed. One of those stated that treaty signers should share control over the Internet address-assignment system — a function now handled by an international group based in the United States. The other, also removed at the Americans’ behest, called for Internet companies like Google and Facebook to pay telecommunications networks for delivering material to users.

Given that the United States achieved many of its stated goals in the negotiations, why did it reject the treaty in an 11th-hour intervention that had clearly been coordinated with allies like Britain and Canada?

In a Dubai conference call with reporters early on Friday, Mr. Kramer cited a few remaining objections, like references to countering spam and to ensuring “the security and robustness of international telecommunications networks.” This wording, he argued, could be used by nefarious governments to justify crackdowns on free speech.

But even Mr. Kramer acknowledged that his real concerns were less tangible, saying it was the “normative” tone of the debate that had mattered most. The United States and its allies, in other words, saw a chance to use the treaty conference to make a strong statement about the importance of Internet freedom. But by refusing to sign the treaty and boycotting the closing ceremony, they made clear that even to talk about the appearance of global rules for cyberspace was a nonstarter.

It may have been grandstanding, but some United States allies in Europe were happy to go along, saying the strong American stand would underline the importance of keeping the Internet open.

News Analysis: The Dangers of Allowing an Adversary Access to a Network

G. Dagli Orti/De Agostini, via Getty Images The Trojan Horse, as depicted on Greek pottery. The Trojan Horse in modern cyberspace is still something to be feared.

Schoolchildren learn the tale of the Trojan Horse, the giant gift in which Odysseus and a platoon of 30 Greek soldiers hid to gain access to the heavily defended city.

Thousands of years later, it remains a thoroughly modern concept that is increasingly found at the heart of cyberwarfare strategies. Modern Trojan horses are computer code or vulnerabilities hidden in software or hardware that would allow a spy or an attacker to gain access to an adversary’s computers and networks. Find a way to be invited into the computers of your enemy’s weapons and military systems and you can render them useless in the face of an attack.

For more than a decade, Pentagon officials have been anxious about the growing reliance by the United States electronics industry on Chinese manufacturers. As the Internet has become the nation’s critical infrastructure weaving together commerce and power systems and even military command and control, it has become increasingly unthinkable to have a foreign presence in the network. Their fear is that those building and maintaining the network could build in a Trojan horse.

Thus it was striking that the word “Trojan” was not mentioned in a 52-page report issued Monday by the House Permanent Select Committee on Intelligence focusing on the activities of two giant Chinese telecommunications firms, Huawei and ZTE, which have long been suspected of having links to the Chinese government. Beijing has been suspected of trying to steal American corporate and government secrets through computer espionage.

Stuxnet, a surreptitious program that was reportedly designed by United States and Israeli intelligence agencies to afflict the Iranian nuclear enrichment program, had many of the properties of a highly sophisticated Trojan horse. The program was at the heart of a concerted effort to delay or destroy the Iranian Natanz nuclear fuel facility. The attack damaged centrifuges and might have provided a surveillance window into Iranian activities by giving Western intelligence agencies unfettered access to the desktop computers of Iranian project managers.

The program acted as a Trojan horse, perhaps delivered first on a USB memory stick, that then spread through computer networks inside the secret facility before reaching the outside world. A striking map of the paths followed by Stuxnet infection created by researchers at Symantec, the Silicon Valley computer security firm, indicates that Stuxnet actually broke out of Natanz, rather than breaking in, just as the Greek soldiers climbed out of the horse at night.

Possibly because the United States is making Trojan horses, that term — if it exists in the House report on Huawei and ZTE — is said to be found only in a classified annex to the report that has not been made available.

The published report consists of a series of allegations about the activities of the companies, including bribery and surveillance, but little hard evidence. Reports of “suspicious” incidents, including an ostensible case of “beaconing” from Cricket, a Texas wireless operator that uses Huawei equipment, have been heatedly denied by Huawei.

If this issue is important enough, said Richard A. Clarke, who served as the nation’s counterterrorism overseer in both the Clinton and George W. Bush administrations, there should be ways of declassifying the information. “They’re making important accusations,” he said. “Important accusations require important proof.”

According to several former government officials, the real issue is not what has happened in the past but rather what might happen if Huawei gear were widely used in American telecommunications networks. Such use would mean that the company would have to serve and fix the network, requiring extensive access for its technical personnel to telecommunications networks in the United States.

The danger in letting your potential adversary maintain your network has already been demonstrated, according to Mr. Clarke, who wrote in “Cyber War: The Next Threat to National Security and What to Do About It.” In 2007, a remarkably sophisticated computer attack by Israel rendered Syrian antiaircraft radar useless. Israeli aircraft were able to destroy a Syrian nuclear reactor without any response from the country’s military. He says it was vulnerable because the Syrians had relied on outsiders to maintain the network.

Mr. Clarke disputes a recent New Yorker article that asserted that the bombing attack was supported by conventional electronic warfare, which involves jamming or deceiving an enemies’ radar with high-powered radio waves. “Regular electronic warfare fills the frequencies with static and overpowers the frequencies,” he said. “That wakes people up. That didn’t happen. The Syrians didn’t notice the jamming of their radars.”

In 2009, The New York Times reported that an American semiconductor industry executive who claimed to have direct knowledge of the operation said that technology for disabling the radars had been supplied by Americans to the Israeli electronic intelligence agency, Unit 8200.

If his account is true, it may be the real reason that the government has worked so hard to make sure that American computer networks are not made in China.

News Analysis: Free Speech in the Age of YouTube

San Francisco

COMPANIES are usually accountable to no one but their shareholders.

Internet companies are a different breed. Because they traffic in speech — rather than, say, corn syrup or warplanes — they make decisions every day about what kind of expression is allowed where. And occasionally they come under pressure to explain how they decide, on whose laws and values they rely, and how they distinguish between toxic speech that must be taken down and that which can remain.

The storm over an incendiary anti-Islamic video posted on YouTube has stirred fresh debate on these issues. Google, which owns YouTube, restricted access to the video in Egypt and Libya, after the killing of a United States ambassador and three other Americans. Then, it pulled the plug on the video in five other countries, where the content violated local laws.

Some countries blocked YouTube altogether, though that didn’t stop the bloodshed: in Pakistan, where elections are to be scheduled soon, riots on Friday left a death toll of 19.

The company pointed to its internal edicts to explain why it rebuffed calls to take down the video altogether. It did not meet its definition of hate speech, YouTube said, and so it allowed the video to stay up on the Web. It didn’t say very much more.

That explanation revealed not only the challenges that confront companies like Google but also how opaque they can be in explaining their verdicts on what can be said on their platforms. Google, Facebook and Twitter receive hundreds of thousands of complaints about content every week.

“We are just awakening to the need for some scrutiny or oversight or public attention to the decisions of the most powerful private speech controllers,” said Tim Wu, a Columbia University law professor who briefly advised the Obama administration on consumer protection regulations online.

Google was right, Mr. Wu believes, to selectively restrict access to the crude anti-Islam video in light of the extraordinary violence that broke out. But he said the public deserved to know more about how private firms made those decisions in the first place, every day, all over the world. After all, he added, they are setting case law, just as courts do in sovereign countries.

Mr. Wu offered some unsolicited advice: Why not set up an oversight board of regional experts or serious YouTube users from around the world to make the especially tough decisions?

Google has not responded to his proposal, which he outlined in a blog post for The New Republic.

Certainly, the scale and nature of YouTube makes this a daunting task. Any analysis requires combing through over a billion videos and overlaying that against the laws and mores of different countries. It’s unclear whether expert panels would allow for unpopular minority opinion anyway. The company said in a statement on Friday that, like newspapers, it, too, made “nuanced” judgments about content: “It’s why user-generated content sites typically have clear community guidelines and remove videos or posts that break them.”

Privately, companies have been wrestling with these issues for some time.

The Global Network Initiative, a conclave of executives, academics and advocates, has issued voluntary guidelines on how to respond to government requests to filter content.

And the Anti-Defamation League has convened executives, government officials and advocates to discuss how to define hate speech and what to do about it.

Hate speech is a pliable notion, and there will be arguments about whether it covers speech that is likely to lead to violence (think Rwanda) or demeans a group (think Holocaust denial), just as there will be calls for absolute free expression.

Behind closed doors, Internet companies routinely make tough decisions on content.

Apple and Google earlier this year yanked a mobile application produced by Hezbollah. In 2010, YouTube removed links to speeches by an American-born cleric, Anwar al-Awlaki, in which he advocated terrorist violence; at the time, the company said it proscribed posts that could incite “violent acts.”

ON rare occasions, Google has taken steps to educate users about offensive content. For instance, the top results that come up when you search for the word “Jew” include a link to a virulently anti-Jewish site, followed by a promoted link from Google, boxed in pink. It links to a page that lays out Google’s rationale: the company says it does not censor search results, despite complaints.

Susan Benesch, who studies hate speech that incites violence, said it would be wise to have many more explanations like this, not least to promote debate. “They certainly don’t have to,” said Ms. Benesch, director of the Dangerous Speech Project at the World Policy Institute. “But we can encourage them to because of the enormous power they have.”

The companies point out that they obey the laws of every country in which they do business. And their employees and algorithms vet content that may violate their user guidelines, which are public.

YouTube prohibits hate speech, which it defines as that which “attacks or demeans a group” based on its race, religion and so on; Facebook’s hate speech ban likewise covers “content that attacks people” on the basis of identity. Google and Facebook prohibit hate speech; Twitter does not explicitly ban it. And anyway, legal scholars say, it is exceedingly difficult to devise a universal definition of hate speech.

Shibley Telhami, a political scientist at the University of Maryland, said he hoped the violence over the video would encourage a nuanced conversation about how to safeguard free expression with other values, like public safety. “It’s really about at what point does speech becomes action; that’s a boundary that becomes difficult to draw, and it’s a slippery slope,” Mr. Telhami said.

He cautioned that some countries, like Russia, which threatened to block YouTube altogether, would be thrilled to have any excuse to squelch speech. “Does Russia really care about this film?” Mr. Telhami asked.

International law does not protect speech that is designed to cause violence. Several people have been convicted in international courts for incitement to genocide in Rwanda.

One of the challenges of the digital age, as the YouTube case shows, is that speech articulated in one part of the world can spark mayhem in another. Can the companies that run those speech platforms predict what words and images might set off carnage elsewhere? Whoever builds that algorithm may end up saving lives.

Somini Sengupta is a technology correspondent for The New York Times.

News Analysis: Free Speech in the Age of YouTube

San Francisco

COMPANIES are usually accountable to no one but their shareholders.

Internet companies are a different breed. Because they traffic in speech — rather than, say, corn syrup or warplanes — they make decisions every day about what kind of expression is allowed where. And occasionally they come under pressure to explain how they decide, on whose laws and values they rely, and how they distinguish between toxic speech that must be taken down and that which can remain.

The storm over an incendiary anti-Islamic video posted on YouTube has stirred fresh debate on these issues. Google, which owns YouTube, restricted access to the video in Egypt and Libya, after the killing of a United States ambassador and three other Americans. Then, it pulled the plug on the video in five other countries, where the content violated local laws.

Some countries blocked YouTube altogether, though that didn’t stop the bloodshed: in Pakistan, where elections are to be scheduled soon, riots on Friday left a death toll of 19.

The company pointed to its internal edicts to explain why it rebuffed calls to take down the video altogether. It did not meet its definition of hate speech, YouTube said, and so it allowed the video to stay up on the Web. It didn’t say very much more.

That explanation revealed not only the challenges that confront companies like Google but also how opaque they can be in explaining their verdicts on what can be said on their platforms. Google, Facebook and Twitter receive hundreds of thousands of complaints about content every week.

“We are just awakening to the need for some scrutiny or oversight or public attention to the decisions of the most powerful private speech controllers,” said Tim Wu, a Columbia University law professor who briefly advised the Obama administration on consumer protection regulations online.

Google was right, Mr. Wu believes, to selectively restrict access to the crude anti-Islam video in light of the extraordinary violence that broke out. But he said the public deserved to know more about how private firms made those decisions in the first place, every day, all over the world. After all, he added, they are setting case law, just as courts do in sovereign countries.

Mr. Wu offered some unsolicited advice: Why not set up an oversight board of regional experts or serious YouTube users from around the world to make the especially tough decisions?

Google has not responded to his proposal, which he outlined in a blog post for The New Republic.

Certainly, the scale and nature of YouTube makes this a daunting task. Any analysis requires combing through over a billion videos and overlaying that against the laws and mores of different countries. It’s unclear whether expert panels would allow for unpopular minority opinion anyway. The company said in a statement on Friday that, like newspapers, it, too, made “nuanced” judgments about content: “It’s why user-generated content sites typically have clear community guidelines and remove videos or posts that break them.”

Privately, companies have been wrestling with these issues for some time.

The Global Network Initiative, a conclave of executives, academics and advocates, has issued voluntary guidelines on how to respond to government requests to filter content.

And the Anti-Defamation League has convened executives, government officials and advocates to discuss how to define hate speech and what to do about it.

Hate speech is a pliable notion, and there will be arguments about whether it covers speech that is likely to lead to violence (think Rwanda) or demeans a group (think Holocaust denial), just as there will be calls for absolute free expression.

Behind closed doors, Internet companies routinely make tough decisions on content.

Apple and Google earlier this year yanked a mobile application produced by Hezbollah. In 2010, YouTube removed links to speeches by an American-born cleric, Anwar al-Awlaki, in which he advocated terrorist violence; at the time, the company said it proscribed posts that could incite “violent acts.”

ON rare occasions, Google has taken steps to educate users about offensive content. For instance, the top results that come up when you search for the word “Jew” include a link to a virulently anti-Jewish site, followed by a promoted link from Google, boxed in pink. It links to a page that lays out Google’s rationale: the company says it does not censor search results, despite complaints.

Susan Benesch, who studies hate speech that incites violence, said it would be wise to have many more explanations like this, not least to promote debate. “They certainly don’t have to,” said Ms. Benesch, director of the Dangerous Speech Project at the World Policy Institute. “But we can encourage them to because of the enormous power they have.”

The companies point out that they obey the laws of every country in which they do business. And their employees and algorithms vet content that may violate their user guidelines, which are public.

YouTube prohibits hate speech, which it defines as that which “attacks or demeans a group” based on its race, religion and so on; Facebook’s hate speech ban likewise covers “content that attacks people” on the basis of identity. Google and Facebook prohibit hate speech; Twitter does not explicitly ban it. And anyway, legal scholars say, it is exceedingly difficult to devise a universal definition of hate speech.

Shibley Telhami, a political scientist at the University of Maryland, said he hoped the violence over the video would encourage a nuanced conversation about how to safeguard free expression with other values, like public safety. “It’s really about at what point does speech becomes action; that’s a boundary that becomes difficult to draw, and it’s a slippery slope,” Mr. Telhami said.

He cautioned that some countries, like Russia, which threatened to block YouTube altogether, would be thrilled to have any excuse to squelch speech. “Does Russia really care about this film?” Mr. Telhami asked.

International law does not protect speech that is designed to cause violence. Several people have been convicted in international courts for incitement to genocide in Rwanda.

One of the challenges of the digital age, as the YouTube case shows, is that speech articulated in one part of the world can spark mayhem in another. Can the companies that run those speech platforms predict what words and images might set off carnage elsewhere? Whoever builds that algorithm may end up saving lives.

Somini Sengupta is a technology correspondent for The New York Times.

News Analysis: Facebook’s Big Problem: Investors Losing Faith

Mario Tama/Getty ImagesFacebook‘s stock price fell on Thursday after some 271 million shares owned by early investors were free to be sold as a lockup period ended.

Want to better understand the crazy world of technology stocks? That requires having a grasp of something that can best be described as the curse of the ordinary.

That curse could mean that Facebook, which is already down by nearly 50 percent from its offering price to $19.05 on Friday, could drop even further.

It’s all about valuations.

Most efforts to judge the right stock market value for a company rely on profit forecasts. But earnings at young technology companies are harder to predict than at businesses using traditional approaches to generate earnings in other industries.

In times of optimism, that knowledge dearth can actually work to the advantage of technology companies. Executives fill that emptiness with promises of paradigm-breaking ways of doing business, prompting Wall Street analysts to project amazing profits. Investors get excited and flock to their stock debuts. In short, it’s all about being seen as extraordinary.

That magic allowed Facebook to go public at a stock price that was an astronomical 100 times its earnings per share. Back in May, investors seemingly had little trouble believing that Facebook could entwine advertising into all interactions on its site and generate extraordinary revenue.

Indeed, each of the companies that have gone public in recent months has needed one main magical story. For Groupon, it was that the company had found a revolutionary marketing tool that was perfect for small businesses. The untapped market was theoretically huge.

But the nightmare begins when investors stop believing in that central story. Earnings don’t have to be terrible, and they haven’t been at the hardest hit firms — Facebook, Groupon and Zynga, the online game company. The earnings just have to contain a few clues that the dream won’t be achieved.

Then, the transition from extraordinary to ordinary is brutal.

Groupon is down 75 percent from its initial public offering. The market now values it as if it were any old marketing company; its shares are trading at 12 times the earnings that analysts are projecting for 2013, according to data from Thomson Reuters.

This is a critical time for Facebook.

The faith level in the company is declining. Right now, Facebook is trading at 31 times the earnings that analysts are expecting for 2013. That’s not too expensive, but it’s far above Google’s 2013 price-to-earnings ratio of 14 times.

One reason investors have fled the stock is that Facebook’s second-quarter earnings showed few signs that it was close to achieving meteoric growth. “There have been almost no positive signals at Facebook in the past six months,” said Anup Srivastava, an assistant professor at the Kellogg School of Management at Northwestern University. He thinks Facebook shares should be worth about $12, based on his estimates of the company’s future cash flows.

Such a fate may seem unthinkable, given how far the stock has already fallen. But Facebook may struggle to keep pace with Google, which, though it is a more mature Internet company, is still finding ways to grow fast. In its second quarter, the volume of “paid clicks” (the number of times users click on a link that generates revenue for Google) rose 42 percent from the year-earlier period. That’s the fastest growth since 2007, according to analysts at Nomura. And despite its extraordinary growth, investors still give Google’s shares only an ordinary valuation.

But there’s still hope for Facebook.

Negativity can feed on itself in the stock market, and the over-optimism of the I.P.O. may simply have been replaced with rabid pessimism today. “As with most other young growth stocks, no one really knows Facebook’s value,” said Aswath Damodaran, a professor of finance at the New York University Stern School of Business. “That means people can overreact in both directions.”

There are ways to get back into investors’ good graces. One is for Facebook to be more convincing when explaining why it’s special.

Since its own I.P.O., LinkedIn has kept investors enthralled. The company trades at 79 times projected 2013 earnings, a clear sign that the market believes the company has created a revolutionary space for companies to recruit.

Then there’s Amazon.com, which is extraordinarily talented at projecting itself as extraordinary. Its shares trade at 100 times its projected 2013 earnings, even though it has reported what might look like disappointing earnings for several years. The dream is that Amazon is well on its way to dominating Internet commerce, and can look forward to prodigious profits.

Amazon.com also shows there’s a way to get investors believing again. Its shares plunged amid fears that it could go bankrupt soon after the dot-com boom of the late 1990s, but in the last 10 years it has regained extraordinary status.

Facebook could use some of that Amazon magic.

News Analysis: Computers Trade Quickly, but Leave No Time to Think

Most of the time.

Unfortunately, the improved markets also are more prone to disaster. The same computerization and increased competition that provided the benefits also weeded out people who had the obligation to step up in times of stress, and virtually eliminated the ability of people and institutions to slow or halt markets when something goes badly wrong.

And with technological innovation continuing apace, the risks may have increased. Regulators can require changes that will prevent an exact repeat of any given disaster, as they did after the flash crash of May 6, 2010, but there appears to be no way to guess what will be the immediate cause of the next problem. And that problem may be huge. On Wednesday, computers at Knight Capital Group, a firm that executes millions of stock trades every day, went haywire.

Unintended orders spewed forth and some stocks gyrated wildly. It took the firm the better part of an hour to turn off its computers, and on Thursday it estimated its losses at $440 million.

Knight, one of the biggest players in the stock market, said it was exploring strategic alternatives. That is a polite way of saying it is desperately searching for a buyer.

It may be worthwhile to consider what would have happened a few decades ago had a computer somehow done the same thing.

The orders would have flooded into specialists at the New York Stock Exchange — people who had a duty to make markets — or to the market makers in Nasdaq stocks who had a similar responsibility. Some of the stupid orders might have been executed, but trading in the affected stocks would have come to a halt within minutes while people tried to figure out what was going on. There would have been red faces at the firm responsible, but much less red ink.

Those market makers are largely gone now. Their sources of profit — the spreads between what they sold stocks for and what they would pay for them — have vanished with competition and rule changes that allow share prices to move by one cent or less, rather than the one-eighth of a dollar, or 12.5 cents, that used to be the minimum change.

Market makers have been largely replaced by high-frequency traders who use computers that can react to orders in nanoseconds. They send in orders — and cancel them — far faster than any human could hope to do.

Exchanges, knowing that they need market makers who will take the other side of customer orders, offer rebates to high-frequency traders who manage to fill a lot of orders. In normal times, the result is markets that are highly liquid and very fast.

Decades ago, the size of an order that could be executed was limited by the capital available to the stock exchange specialist, and it was necessary for Wall Street firms like Goldman Sachs and Salomon Brothers to fill the role for large institutional orders. There are enough high-frequency firms that big orders can now be filled quickly and at lower costs.

However, those high-frequency traders have no obligation to hang around and continue to make markets when things get dicey. There was plenty of criticism of the specialists and market makers in the old days. We are approaching the 25th anniversary of the 1987 crash, when many Nasdaq market makers panicked and decided that the safer course was to not answer their phones.

But the market makers generally met their responsibilities. If they were unwilling to do so, perhaps because of a flood of orders to sell a particular stock, the market in that stock would simply shut down for a time. That pause would give others time to see what was happening, and anyone who thought the market move was unreasonable could step in and offer to buy the stock.

Now, many of the high-frequency traders — who have no power to halt trading, even if their computers somehow concluded that was wise — have simply programmed their computers to get out of a market if it is going crazy. The result is that markets may have far less liquidity when that liquidity is needed most.

To get the advantages that come with being listed as market makers, high-frequency firms were required to usually have offers posted to buy and sell the stocks in which they made markets. That rule led to the stub bid. If things were going crazy, the firm would put in a bid of $1 a share for a $40 stock. It met the requirement, but obviously no one would be stupid enough to sell at that price.

Unless that someone were a computer.

News Analysis: Internet Pirates Will Always Win

Hit one, countless others appear. Quickly. And the mallet is heavy and slow.

Take as an example YouTube, where the Recording Industry Association of America almost rules with an iron fist, but doesn’t, because of deceptions like the one involving a cat.

YouTube, which is owned by Google, offers a free tool to the movie studios and television networks called Content ID. When a studio legitimately uploads a clip from a copyrighted film to YouTube, the Google tool automatically finds and blocks copies of the product.

To get around this roadblock, some YouTube users started placing copyrighted videos inside a still photo of a cat that appears to be watching an old JVC television set. The Content ID algorithm has a difficult time seeing that the video is violating any copyright rules; it just sees a cat watching TV.

Sure, it’s annoying for those who want to watch the video, but it works. (Obviously, it’s more than annoying for the company whose product is being pirated.)

Then there are those — possibly tens of millions of users, actually — who engage in peer-to-peer file-sharing on the sites using the BitTorrent protocol.

Earlier this year, after months of legal wrangling, authorities in a number of countries won an injunction against the Pirate Bay, probably the largest and most famous BitTorrent piracy site on the Web. The order blocked people from entering the site.

In retaliation, the Pirate Bay wrapped up the code that runs its entire Web site, and offered it as a free downloadable file for anyone to copy and install on their own servers. People began setting up hundreds of new versions of the site, and the piracy continues unabated.

Thus, whacking one big mole created hundreds of smaller ones.

Although the recording industries might believe they’re winning the fight, the Pirate Bay and others are continually one step ahead. In March, a Pirate Bay collaborator, who goes by the online name Mr. Spock, announced in a blog post that the team hoped to build drones that would float in the air and allow people to download movies and music through wireless radio transmitters.

“This way our machines will have to be shut down with aeroplanes in order to shut down the system,” Mr. Spock posted on the site. “A real act of war.” Some BitTorrent sites have also discussed storing servers in secure bank vaults. Message boards on the Web devoted to piracy have in the past raised the idea that the Pirate Bay has Web servers stored underwater.

“Piracy won’t go away,” said Ernesto Van Der Sar, editor of Torrent Freak, a site that reports on copyright and piracy news. “They’ve tried for years and they’ll keep on trying, but it won’t go away.” Mr. Van Der Sar said companies should stop trying to fight piracy and start experimenting with new ways to distribute content that is inevitably going to be pirated anyway.

According to Torrent Freak, the top pirated TV shows are downloaded several million times a week. Unauthorized movies, music, e-books, software, pornography, comics, photos and video games are watched, read and listened to via these piracy sites millions of times a day.

The copyright holders believe new laws will stop this type of piracy. But many others believe any laws will just push people to find creative new ways of getting the content they want.

“There’s a clearly established relationship between the legal availability of material online and copyright infringement; it’s an inverse relationship,” said Holmes Wilson, co-director of Fight for the Future, a nonprofit technology organization that is trying to stop new piracy laws from disrupting the Internet. “The most downloaded television shows on the Pirate Bay are the ones that are not legally available online.”

The hit HBO show “Game of Thrones” is a quintessential example of this. The show is sometimes downloaded illegally more times each week than it is watched on cable television. But even if HBO put the shows online, the price it could charge would still pale in comparison to the money it makes through cable operators. Mr. Wilson believes that the big media companies don’t really want to solve the piracy problem.

“If every TV show was offered at a fair price to everyone in the world, there would definitely be much less copyright infringement,” he said. “But because of the monopoly power of the cable companies and content creators, they might actually make less money.”

The way people download unauthorized content is changing. In the early days of music piracy, people transferred songs to their home or work computers. Now, with cloud-based sites, like Wuala, uTorrent and Tribler, people stream movies and music from third-party storage facilities, often to mobile devices and TV’s. Some of these cloud-based Web sites allow people to set up automatic downloads of new shows the moment they are uploaded to piracy sites. It’s like piracy-on-demand. And it will be much harder to trace and to stop.

It is only going to get worse. Piracy has started to move beyond the Internet and media and into the physical world. People on the fringes of tech, often early adopters of new devices and gadgets, are now working with 3-D printers that can churn out actual physical objects. Say you need a wall hook or want to replace a bit of hardware that fell off your luggage. You can download a file and “print” these objects with printers that spray layers of plastic, metal or ceramics into shapes.

And people are beginning to share files that contain the schematics for physical objects on these BitTorrent sites. Although 3-D printing is still in its infancy, it is soon expected to become as pervasive as illegal music downloading was in the late 1990s.

Content owners will find themselves stuck behind ancient legal walls when trying to stop people from downloading objects online as copyright laws do not apply to standard physical objects deemed “noncreative.”

In the arcade version of Whac-A-Mole, the game eventually ends — often when the player loses. In the piracy arms-race version, there doesn’t seem to be a conclusion. Sooner or later, the people who still believe they can hit the moles with their slow mallets might realize that their time would be better spent playing an entirely different game.

Nick Bilton is a technology columnist for The New York Times.

News Analysis: Computers Trade Quickly, but Leave No Time to Think

Most of the time.

Unfortunately, the improved markets also are more prone to disaster. The same computerization and increased competition that provided the benefits also weeded out people who had the obligation to step up in times of stress, and virtually eliminated the ability of people and institutions to slow or halt markets when something goes badly wrong.

And with technological innovation continuing apace, the risks may have increased. Regulators can require changes that will prevent an exact repeat of any given disaster, as they did after the flash crash of May 6, 2010, but there appears to be no way to guess what will be the immediate cause of the next problem. And that problem may be huge. On Wednesday, computers at Knight Capital Group, a firm that executes millions of stock trades every day, went haywire.

Unintended orders spewed forth and some stocks gyrated wildly. It took the firm the better part of an hour to turn off its computers, and on Thursday it estimated its losses at $440 million.

Knight, one of the biggest players in the stock market, said it was exploring strategic alternatives. That is a polite way of saying it is desperately searching for a buyer.

It may be worthwhile to consider what would have happened a few decades ago had a computer somehow done the same thing.

The orders would have flooded into specialists at the New York Stock Exchange — people who had a duty to make markets — or to the market makers in Nasdaq stocks who had a similar responsibility. Some of the stupid orders might have been executed, but trading in the affected stocks would have come to a halt within minutes while people tried to figure out what was going on. There would have been red faces at the firm responsible, but much less red ink.

Those market makers are largely gone now. Their sources of profit — the spreads between what they sold stocks for and what they would pay for them — have vanished with competition and rule changes that allow share prices to move by one cent or less, rather than the one-eighth of a dollar, or 12.5 cents, that used to be the minimum change.

Market makers have been largely replaced by high-frequency traders who use computers that can react to orders in nanoseconds. They send in orders — and cancel them — far faster than any human could hope to do.

Exchanges, knowing that they need market makers who will take the other side of customer orders, offer rebates to high-frequency traders who manage to fill a lot of orders. In normal times, the result is markets that are highly liquid and very fast.

Decades ago, the size of an order that could be executed was limited by the capital available to the stock exchange specialist, and it was necessary for Wall Street firms like Goldman Sachs and Salomon Brothers to fill the role for large institutional orders. There are enough high-frequency firms that big orders can now be filled quickly and at lower costs.

However, those high-frequency traders have no obligation to hang around and continue to make markets when things get dicey. There was plenty of criticism of the specialists and market makers in the old days. We are approaching the 25th anniversary of the 1987 crash, when many Nasdaq market makers panicked and decided that the safer course was to not answer their phones.

But the market makers generally met their responsibilities. If they were unwilling to do so, perhaps because of a flood of orders to sell a particular stock, the market in that stock would simply shut down for a time. That pause would give others time to see what was happening, and anyone who thought the market move was unreasonable could step in and offer to buy the stock.

Now, many of the high-frequency traders — who have no power to halt trading, even if their computers somehow concluded that was wise — have simply programmed their computers to get out of a market if it is going crazy. The result is that markets may have far less liquidity when that liquidity is needed most.

To get the advantages that come with being listed as market makers, high-frequency firms were required to usually have offers posted to buy and sell the stocks in which they made markets. That rule led to the stub bid. If things were going crazy, the firm would put in a bid of $1 a share for a $40 stock. It met the requirement, but obviously no one would be stupid enough to sell at that price.

Unless that someone were a computer.

News Analysis: Top Universities Test the Online Appeal of Free

In a major development on Tuesday, a dozen highly ranked universities said they had signed on with Coursera, a new venture offering free classes online. They still must overcome some skepticism about the quality of online education and the prospects for having the courses cover the costs of producing them, but their enthusiasm is undimmed.

But at universities that have not yet seized a piece of this action, the response ranges from curiosity to fear of losing a crucial competition. When University of Virginia trustees ousted their president last month — a decision they later reversed — one reason cited was concern about being left behind online. (Virginia was included in Tuesday’s announcement.)

“There’s panic,” said Kevin Carey, director of education policy at the New America Foundation, a nonpartisan research group. “Whether it’s senseless panic is unclear.”

Massive open online courses, or MOOCs, let colleges reach vast audiences at relatively low cost, but they have not yet made money from them. And if it becomes possible in years to come to get a complete college education from an elite institution online, free or at relatively low cost, experts wonder whether some colleges will find it harder to attract students willing to pay $20,000, $40,000 or even $60,000 a year for the traditional on-campus experience.

Online classes have been around for years, with technology evolving to include multimedia features and interaction among students and faculty. What is new is the way top colleges are jumping in with free courses — in effect, throwing open the doors digitally.

So far, most people signing up live in foreign countries. But MOOCs will become more appealing to domestic students when they give course credits toward a degree, something the elite universities have not yet done. The University of Washington says it plans to do so, and it may be just a matter of time before earning credits becomes standard.

“The people who should be worried about this are the large tier of American universities — especially the expensive private schools — that are not elite and don’t have the same reputation” as the big-name universities now creating MOOCs, said Anya Kamenetz, an author who writes on the future of higher education.

Residential colleges already attract far less than half of the higher education market. Most enrollment and nearly all growth in higher education is in less costly options that let students balance classes with work and family: commuter colleges, night schools, online universities.

Most experts say there will always be students who want to live on campus, interacting with professors and fellow students, particularly at prestigious universities. But as a share of the college market, that is likely to be a shrinking niche.

The elite universities will be best able to compete with low-cost alternatives because their large endowments make them less dependent on tuition income, and they can lower their effective prices through generous financial aid, said John Nelson, a managing director at Moody’s Investors Service who analyzes higher education finances.

Analysts say that universities will inevitably try to make money from MOOCs, whether by charging tuition or not. Software companies working with colleges have looked into advertising, or selling information on students to prospective employers.

William E. Kirwan, chancellor of the University System of Maryland, noted that a few public colleges, including his system’s University College, already offer mostly online courses. In the future, he said, the standard class will be a hybrid of in-person and online elements, which Maryland is experimenting with.

“We think this approach can cut costs by about 25 percent,” he said, “enabling each professor to work with more students, while producing a clear improvement in learning outcomes.”

For a decade, Carnegie Mellon University’s Open Learning Initiative has created free online courses. But for many educators, Stanford fired the starting gun last fall, with a free online course in artificial intelligence that drew 160,000 students.

The Massachusetts Institute of Technology started a free class project, MITx, in December. The next month, a Stanford professor who helped teach the artificial intelligence class founded Udacity, a company offering free courses in partnership with colleges and professors.

In April, Stanford, Princeton, the University of Pennsylvania and the University of Michigan joined forces with Coursera to offer free classes. In May, Harvard teamed with M.I.T. to create a similar venture, edX.

In the last week, more universities signed on with Coursera.

“Our participation was finalized literally over the weekend,” said J. Milton Adams, vice provost at the University of Virginia, which listed five free courses. “I’m going to have some unhappy faculty members saying, ‘Why can’t my course be on there?’ ”

News Analysis: That’s Not My Phone, It’s My Tracker

Most doubts about the principal function of these devices were erased when it was recently disclosed that cellphone carriers responded 1.3 million times last year to law enforcement requests for call data. That’s not even a complete count, because T-Mobile, one of the largest carriers, refused to reveal its numbers. It appears that millions of cellphone users have been swept up in government surveillance of their calls and where they made them from. Many police agencies don’t obtain search warrants when requesting location data from carriers.

Thanks to the explosion of GPS technology and smartphone apps, these devices are also taking note of what we buy, where and when we buy it, how much money we have in the bank, whom we text and e-mail, what Web sites we visit, how and where we travel, what time we go to sleep and wake up — and more. Much of that data is shared with companies that use it to offer us services they think we want.

We have all heard about the wonders of frictionless sharing, whereby social networks automatically let our friends know what we are reading or listening to, but what we hear less about is frictionless surveillance. Though we invite some tracking — think of our mapping requests as we try to find a restaurant in a strange part of town — much of it is done without our awareness.

“Every year, private companies spend millions of dollars developing new services that track, store and share the words, movements and even the thoughts of their customers,” writes Paul Ohm, a law professor at the University of Colorado. “These invasive services have proved irresistible to consumers, and millions now own sophisticated tracking devices (smartphones) studded with sensors and always connected to the Internet.”

Mr. Ohm labels them tracking devices. So does Jacob Appelbaum, a developer and spokesman for the Tor project, which allows users to browse the Web anonymously. Scholars have called them minicomputers and robots. Everyone is struggling to find the right tag, because “cellphone” and “smartphone” are inadequate. This is not a semantic game. Names matter, quite a bit. In politics and advertising, framing is regarded as essential because what you call something influences what you think about it. That’s why there are battles over the tags “Obamacare” and “death panels.”

In just the past few years, cellphone companies have honed their geographic technology, which has become almost pinpoint. The surveillance and privacy implications are quite simple. If someone knows exactly where you are, they probably know what you are doing. Cellular systems constantly check and record the location of all phones on their networks — and this data is particularly treasured by police departments and online advertisers. Cell companies typically retain your geographic information for a year or longer, according to data gathered by the Justice Department.

What’s the harm? The United States Court of Appeals for the District of Columbia Circuit, ruling about the use of tracking devices by the police, noted that GPS data can reveal whether a person “is a weekly church goer, a heavy drinker, a regular at the gym, an unfaithful husband, an outpatient receiving medical treatment, an associate of particular individuals or political groups — and not just one such fact about a person, but all such facts.” Even the most gregarious of sharers might not reveal all that on Facebook.

There is an even more fascinating and diabolical element to what can be done with location information. New research suggests that by cross-referencing your geographical data with that of your friends, it’s possible to predict your future whereabouts with a much higher degree of accuracy.

This is what’s known as predictive modeling, and it requires nothing more than your cellphone data.

If we are naïve to think of them as phones, what should we call them? Eben Moglen, a law professor at Columbia University, argues that they are robots for which we — the proud owners — are merely the hands and feet. “They see everything, they’re aware of our position, our relationship to other human beings and other robots, they mediate an information stream around us,” he has said. Over time, we’ve used these devices less for their original purpose. A recent survey by O2, a British cell carrier, showed that making calls is the fifth-most-popular activity for smartphones; more popular uses are Web browsing, checking social networks, playing games and listening to music. Smartphones are taking over the functions that laptops, cameras, credit cards and watches once performed for us.

If you want to avoid some surveillance, the best option is to use cash for prepaid cellphones that do not require identification. The phones transmit location information to the cell carrier and keep track of the numbers you call, but they are not connected to you by name. Destroy the phone or just drop it into a trash bin, and its data cannot be tied to you. These cellphones, known as burners, are the threads that connect privacy activists, Burmese dissidents and coke dealers.

Prepaids are a hassle, though. What can the rest of us do? Leaving your smartphone at home will help, but then what’s the point of having it? Turning it off when you’re not using it will also help, because it will cease pinging your location to the cell company, but are you really going to do that? Shutting it down does not even guarantee it’s off — malware can keep it on without your realizing it. The only way to be sure is to take out the battery. Guess what? If you have an iPhone, you will need a tiny screwdriver to remove the back cover. Doing that will void your warranty.

Matt Blaze, a professor of computer and information science at the University of Pennsylvania, has written extensively about these issues and believes we are confronted with two choices: “Don’t have a cellphone or just accept that you’re living in the Panopticon.”

There is another option. People could call them trackers. It’s a neutral term, because it covers positive activities — monitoring appointments, bank balances, friends — and problematic ones, like the government and advertisers watching us.

We can love or hate these devices — or love and hate them — but it would make sense to call them what they are so we can fully understand what they do.

Peter Maass and Megha Rajagopalan are reporters on digital privacy for ProPublica, the nonprofit investigative newsroom.

News Analysis: That’s Not My Phone, It’s My Tracker

Most doubts about the principal function of these devices were erased when it was recently disclosed that cellphone carriers responded 1.3 million times last year to law enforcement requests for call data. That’s not even a complete count, because T-Mobile, one of the largest carriers, refused to reveal its numbers. It appears that millions of cellphone users have been swept up in government surveillance of their calls and where they made them from. Many police agencies don’t obtain search warrants when requesting location data from carriers.

Thanks to the explosion of GPS technology and smartphone apps, these devices are also taking note of what we buy, where and when we buy it, how much money we have in the bank, whom we text and e-mail, what Web sites we visit, how and where we travel, what time we go to sleep and wake up — and more. Much of that data is shared with companies that use it to offer us services they think we want.

We have all heard about the wonders of frictionless sharing, whereby social networks automatically let our friends know what we are reading or listening to, but what we hear less about is frictionless surveillance. Though we invite some tracking — think of our mapping requests as we try to find a restaurant in a strange part of town — much of it is done without our awareness.

“Every year, private companies spend millions of dollars developing new services that track, store and share the words, movements and even the thoughts of their customers,” writes Paul Ohm, a law professor at the University of Colorado. “These invasive services have proved irresistible to consumers, and millions now own sophisticated tracking devices (smartphones) studded with sensors and always connected to the Internet.”

Mr. Ohm labels them tracking devices. So does Jacob Appelbaum, a developer and spokesman for the Tor project, which allows users to browse the Web anonymously. Scholars have called them minicomputers and robots. Everyone is struggling to find the right tag, because “cellphone” and “smartphone” are inadequate. This is not a semantic game. Names matter, quite a bit. In politics and advertising, framing is regarded as essential because what you call something influences what you think about it. That’s why there are battles over the tags “Obamacare” and “death panels.”

In just the past few years, cellphone companies have honed their geographic technology, which has become almost pinpoint. The surveillance and privacy implications are quite simple. If someone knows exactly where you are, they probably know what you are doing. Cellular systems constantly check and record the location of all phones on their networks — and this data is particularly treasured by police departments and online advertisers. Cell companies typically retain your geographic information for a year or longer, according to data gathered by the Justice Department.

What’s the harm? The United States Court of Appeals for the District of Columbia Circuit, ruling about the use of tracking devices by the police, noted that GPS data can reveal whether a person “is a weekly church goer, a heavy drinker, a regular at the gym, an unfaithful husband, an outpatient receiving medical treatment, an associate of particular individuals or political groups — and not just one such fact about a person, but all such facts.” Even the most gregarious of sharers might not reveal all that on Facebook.

There is an even more fascinating and diabolical element to what can be done with location information. New research suggests that by cross-referencing your geographical data with that of your friends, it’s possible to predict your future whereabouts with a much higher degree of accuracy.

This is what’s known as predictive modeling, and it requires nothing more than your cellphone data.

If we are naïve to think of them as phones, what should we call them? Eben Moglen, a law professor at Columbia University, argues that they are robots for which we — the proud owners — are merely the hands and feet. “They see everything, they’re aware of our position, our relationship to other human beings and other robots, they mediate an information stream around us,” he has said. Over time, we’ve used these devices less for their original purpose. A recent survey by O2, a British cell carrier, showed that making calls is the fifth-most-popular activity for smartphones; more popular uses are Web browsing, checking social networks, playing games and listening to music. Smartphones are taking over the functions that laptops, cameras, credit cards and watches once performed for us.

If you want to avoid some surveillance, the best option is to use cash for prepaid cellphones that do not require identification. The phones transmit location information to the cell carrier and keep track of the numbers you call, but they are not connected to you by name. Destroy the phone or just drop it into a trash bin, and its data cannot be tied to you. These cellphones, known as burners, are the threads that connect privacy activists, Burmese dissidents and coke dealers.

Prepaids are a hassle, though. What can the rest of us do? Leaving your smartphone at home will help, but then what’s the point of having it? Turning it off when you’re not using it will also help, because it will cease pinging your location to the cell company, but are you really going to do that? Shutting it down does not even guarantee it’s off — malware can keep it on without your realizing it. The only way to be sure is to take out the battery. Guess what? If you have an iPhone, you will need a tiny screwdriver to remove the back cover. Doing that will void your warranty.

Matt Blaze, a professor of computer and information science at the University of Pennsylvania, has written extensively about these issues and believes we are confronted with two choices: “Don’t have a cellphone or just accept that you’re living in the Panopticon.”

There is another option. People could call them trackers. It’s a neutral term, because it covers positive activities — monitoring appointments, bank balances, friends — and problematic ones, like the government and advertisers watching us.

We can love or hate these devices — or love and hate them — but it would make sense to call them what they are so we can fully understand what they do.

Reporters on digital privacy for ProPublica, the nonprofit investigative newsroom.