People are often surprised to hear that the first cyber attack happened in the 1800s and I love recounting the story of how it happened. This week we also cover income share agreements and how they (usually) better align incentives between schools and students as well as where else they are being used. Finally, we cover The Waffle house Index which is an informal metric first popularized by former FEMA director Craig Fugate.
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French Semaphore Cyber Attack (1 min)
Income Share Agreements (2 min)
The Waffle House Index & FEMA (1 min)
Starting in 1789 Napoleon constructed a nationwide semaphore telegraph system that cut the time taken for messages to be transmitted between Paris and the outer fringes of the country from 3-4 days to 3-4 hours. This system (which pre-dated the electric telegraph) functioned by having a string of stations within line of sight of each other stretching across the entire country. Each station housed an operator whose job it was to watch the station ahead of them with a telescope and re-transmit messages they saw using a system of pulleys and wooden beams. In this way, information was efficiently transmitted over vast distances.
However, in 1834 two enterprising bond traders in Paris realized that this network could be subverted for other purposes as well. The Blanc brothers realized that if they could transmit information about the days price movements from Paris to other parts of the country faster than the information arbitrageurs of their time (who were focused on trying to find better carrier pigeons and horses) that they'd be able to make a lot of money. So they bribed two telegraph operators to insert errors into the sequences they transmitted which would allow their accomplices in other parts of the country to know whether the market had gone up or down for the day. For two years their scheme proved profitable until they were discovered by the government and tried for their crimes.
Luckily for the Blanc brothers, the telegraph was so new that there was no law against what they had done and they were allowed to keep both their freedom and their gains.
Napoleon constructed a nationwide human-operated semaphore telegraph which allowed information to be transmitted across the entire country in hours but limited its usage to governmental and military purposes. Two bond trading brothers realized they could make money by being the first to know about price movements in Paris and bribed two telegraph operators to encode information on bond prices in their messages. After two years they were caught but escaped conviction because there was no law against their actions since the telegraph system was so new.
Income share agreements (ISAs) are a method of financing that allow someone to forgo future income in return for benefits now. Many coding bootcamps such as Flatiron School and Lambda School offer them to their students. Schools like this allow a student to get a free (or close to free) education with the promise to pay back a certain percentage (10-20%) of their income when they land a job for a specified period of time (1-4 years).
ISAs for students seem to be a great alternative to traditional student debt. There is a strong incentive for the school to train each student to be able to get a high paying job so that the school can make more money from the student. This aligns the student and the school's incentives quite nicely.
However, recently there has been some turmoil with one of the main providers of ISAs (Lambda School). It emerged that they were actually securitizing the cash flows from the ISAs they had gathered and sold them to hedge funds and PE investors. Essentially this means they were getting paid upfront (instead of collecting revenue over time from the student's paycheck) and allowing these hedge funds to collect the "future income" from the students instead.