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Fears of AI-induced Armageddon are overdone

September 1, 2026 Leave a comment

Applying basic security principles would go a long way to fixing problems identified by Anthropic and OpenAI, writes Ciaran Martin

Economist

Aug 23rd 2026

On May 19th 1998, seven hackers from a group called L0pht walked into a Senate office building in Washington, DC. Granted pseudonymity, “Mudge”, “Space Rogue”, “Kingpin” and four others came in ill-fitting suits to warn a congressional committee that any one of them could make the internet unusable in 30 minutes. Fourteen years later Leon Panetta, then America’s defence secretary, warned of a “cyber Pearl Harbour”.

Cyber-security has a long history of apocalyptic prophecies which, despite lots of individual hacks and harms, never quite come to pass. Now, another 14 years on, there is a new wave of catastrophising. In April Anthropic, a frontier AI lab, said its latest model, Claude Mythos, was so good at hacking it would not be released publicly. In July its main rival, OpenAI, disclosed that several of its AI agents broke out of a testing environment and into Hugging Face, a library of AI models. There followed similar disclosures from Anthropic, Meta and Britain’s AI Security Institute.

One news outlet, capturing the growing sense of foreboding, called it “the start of a dangerous AI cyber era”. So is it different this time? Or does the uneasy equilibrium between attack and defence still hold? Mostly, and thankfully, it does, for two reasons.

First, the pattern in which scary announcements give way to more measured assessments within weeks keeps repeating. Anthropic’s standout claim for Mythos was that it had found a flaw in widely used software dating as far back as the 1990s. Subsequent analysis, however, showed that the threat was much less potent than headlines suggested. Within weeks, predictions of a tsunami of AI attacks had given way to forecasts of merely a stormy period, and then to talk of AI as an opportunity for security improvement. If AI is good at finding weaknesses, it can also help fix them.

There is likewise less to the supposedly “rogue” agents than meets the eye. They were not going rogue. They were doing what humans had told them to do, with the precocity and indiscipline of talented but unsupervised children. They did no real harm.

The incidents differ in detail, but the common factor is a failure to control the testing environment. This must be improved. Some in the cyber-world expressed astonishment at the weakness of testing controls, noting that security-company tests ending in the same outcomes might lead to lawsuits and even prosecutions. That accountability principle is crucial and goes beyond testing. Agents can act autonomously but are not autonomous: whoever sets one to work owns what it does. If the world lets AI agents run riot without supervision or accountability, cyber-attacks will be among the lesser of the ensuing problems.

The second reason for calm lies in understanding hackers. The reports about Mythos and the agents relate to artificial testing conditions. Using agents for hacking in the real world means bypassing guardrails and incurring extremely heavy computing costs. These constraints matter: several years into the age of AI, evidence that malicious hackers are using advanced AI-hacking techniques remains remarkably scant.

Last year a working paper from MIT Sloan, written with an AI-security vendor, claimed that 80% of ransomware incidents (the most harmful form of cyber-crime) were AI-driven. Marketing departments seized on the finding. Respected publications amplified it. But the paper was withdrawn after critics noticed it had counted, among other things, WannaCry—the attack in 2017 in which misfiring North Korean hackers wreaked havoc in more than 150 countries—as AI-powered.

One of the people who spotted this nonsensical claim was Marcus Hutchins, a British cyber expert credited with stopping WannaCry. Mr Hutchins now despairs of the “freakout over Mythos”, given that the “local water treatment plant runs [on] Windows XP”, a Microsoft product already obsolete when WannaCry struck, and “the protocol that routes internet traffic is secured by everyone just agreeing that hijacking it would be uncool.”

Both points are crucial. Mudge and others warned in 1998 that fundamental parts of the internet’s architecture were wildly insecure. Some still are. The reason nobody has brought down the internet is that there is no reason for any capable hacker other than a total nihilist to do it, and whoever did could expect severe consequences. That remains the uneasy basis of modern digital life.

Mr Hutchins’s point about critical infrastructure is more timely still. As the media gawped at AI-testing failures, in the real world hackers were hitting water facilities in a dozen American states. Whoever they were—some say Iran, but President Donald Trump demurs—they were using crude techniques exploiting basic security failures, not advanced AI. Serious supply disruption was only avoided thanks to stored water, manual valves and observant staff.

And there is the sting: underlying cyber-security is often so weak hackers have no need of expensive new techniques. AI doesn’t yet give most hackers magical new powers. But it can help them prepare, speed and scale up. That could make it likelier that security neglect will come back to haunt organisations.

This is the boring but vital lesson. At Black Hat, a security conference held this month, two OpenAI employees presented on the Hugging Face incident. Their concluding recommendation was that applying basic, long-established security principles would have gone a long way towards containing OpenAI’s over-enthusiastic agents. Depressing, perhaps, but if it takes inflated hype about omnipotent AI bots going on hacking sprees to get the West finally to focus on fixing the cyber-security flaws that have long put water and other vital services at risk, then so be it.

Ciaran Martin is a professor at the Blavatnik School of Government at Oxford University. He ran Britain’s National Cyber Security Centre from 2016 to 2020.

Which kind of society do you want?

Today 24/07/26 President Trump imposed a new set of tarrifs after the Supreme Court decision on his last imposition suite:

  1. The legal status changed
  2. The politics may well change
  3. The economics have not changed

My occupation happens to be in the domain of number three. Where are you? Where do you want to be? Worth a thought.

Rent Control – Careful What You Wish For

This apparently obvious and attractive but fatally flawed notion has become attractive again….

Alex Tabarrok on July 2, 2026 at Marginal Revolution
Rent Control: The Ceiling Trap.

Norway abolished its rent control in 1982, and the economist Are Oust realized the newspapers had been quietly recording the whole experiment. He collected housing classifieds from Oslo’s Aftenposten from 1970 to 2008 and watched the market turn inside out. Under rent control, Oslo’s listings pages looked nothing like a housing market.

It was tenants who advertised, pleading their qualities to landlords — “housing wanted” ads outnumbered “housing for rent.” Ten to fifteen percent of those ads were placed by the tenant’s employer, vouching for them the way a bank vouches for a borrower. Tenants offered babysitting, gardening, snow-shoveling, and janitorial work on the side to sweeten the deal. Landlords, for their part, could demand a tenant of a particular gender, age, occupation, region of origin — some ads specified “strong Christian beliefs.” Deposits commonly ran to 50 or 60 months’ rent, occasionally 100 or more: tenants effectively lent the landlord the equity of the flat, interest free. And only about 20 percent of “for rent” ads dared print the rent, much of which would have been illegal.

Then the ceiling lifted. Within a few years the page flipped: landlords advertised to tenants, roughly 80 percent of listings printed an asking rent, the mega-deposits vanished, and the demands for snow-shoveling Christians of specified gender dwindled to nothing. The price went back to doing the rationing — so nothing else had to. Check out the whole thing–it’s fabulous.  

Where AI is Taking Us

Very difficult to disagree with Thiel’s view:

Peter Thiel, the PayPal mafia boss from Silicon Valley, believes that AI is ending the elite system of the past 200 years, one centered on mathematical prowess. The logical edge of “math-oriented talents” in fields like engineering and quant work is being rapidly supplanted by AI, and their professional moats are vanishing. The true competitiveness of the future lies with narrative builders, those who grasp social contexts, and language-savvy talents who can embed AI into societal systems—these are humanity’s unique strengths.

The Industrial Revolution devalued muscle; the AI revolution is devaluing “pure-compute brains.” The winners of tomorrow will be the social system operators who can steer algorithms with language and anchor value with storytelling.

As a programmer: Don’t just bury your head in code—practice describing problems in natural language more; learn product thinking and user research to understand non-technical needs; prioritize ethics and social impact in development; pick a domain and dig deep; turn code into “storytelling” systems. Your future edge will be “code + narrative.” So, young folks, don’t rush to ditch STEM, and don’t think humanities is an easy win. What you really need to hone is thinking deeper questions with AI, telling more compelling stories, and building more complex social systems. Thiel has pointed the way, but the real game is just getting started.

In plain terms, you need a blend of arts and sciences to go further.

What is a Govt Job?

In hawking around their various positions the government and the media and unions and employers have invented vast and complex debates about how many jobs have been created and/or lost. All fun and games and the source of endless debate and calculation.

It is difficult to get away from the proposition, it seems to me, that from a taxpayers point of view the critical point is simply whether the government payroll, adjusted for inflation, has gone up or down. Whether that payroll should have gone up or down is another matter involving quite separate considerations largely concerned with what value the taxpayer gets from the expenditure and whether or not that “value” is wanted.

There is no doubt great debate to be had over those matters but it seems ill advised to continue to waft endlessly over what should and should not be counted as a job, a vacancy, a newly created job (or vacancy) and the like. Let us at least start with some statistic which reflects what we are seeking – which, depending on what agenda you are pushing, is an increase or a decrease.

Categories: General, Public Policy Tags:

A Different Kind of Diversification

The Economist of May 2026 reports that there are now, in American listed markets, more ETFs than there are listed companies. Stock picking is not the game it once was – nor, one assumes, is commission harvesting from broking your picks.

Especially Relevant to NZ

Read on blog or Reader Marginal REVOLUTION Read on blog or Reader Do Market Reforms Cause Growth?
By Tyler Cowen on May 1, 2026

Do market-oriented reforms cause economic growth?

This paper revisits this question using a cross-country panel of reform episodes identified from various changes in well-known economic freedom and structural reform indices. We exploit the timing of reforms using distributed-lag and event-study frameworks that trace the dynamic response of per-capita GDP. We find little evidence of immediate growth gains and some short-run adjustment costs following reform. However, growth rises gradually and persistently over time, with economically meaningful effects emerging after several years. These patterns are robust across alternative measures of reform and specifications. The results reconcile conflicting findings in the literature by showing that market reforms generate long-run growth gains despite short-run disruptions.

Overall, the evidence supports the view that institutional liberalization operates through slow-moving channels that accumulate into sustained improvements in economic performance.

That is from a recent paper by Jon Hartley and Brian Wheaton.   Comment

Categories: General

King Charles – Address to US Congress

Categories: General

Inversion and Objectives

January 17, 2026 Leave a comment

A recent memo from investment guru Howard Marks provides – almost as an aside – a helpful example of how Charlie Munger’s persistent invocation to “always invert” (when problem solving) as applied to investment.

Marks explains the six principles which have been applied by Oaktree Investments since its inception. Four of the six may be seen as clear instructions on what NOT to do rather than piecemeal fragments of supposed elixir.

The principles are:

  1. Risk control is the primary objective. It is number one for a reason which ought to be obvious and must be prioritised;
  2. Consistency for clients. The rapid flights from highs to lows and all their associated emotions are to be strenuously avoided since clients are happiest with a smooth ride;
  3. Explore and focus on the less efficient markets which have not been picked over by the masses, and which may, therefore, offer mispricing which can be exploited;
  4. Specialisation – which allows concentration on depth of knowledge and understanding rather than a thin spread of superficial knowledge of many markets and opportunities;
  5. No reliance on macro forecasting. The entire fools package of this activity can be usefully avoided so that relevant value drivers can be pursued; and,
  6. No reliance on market timing. If profitable returns rely on ability to time the markets the chances of disaster are high and the opportunity has little going for it.

This list of what not to do implicitly highlights that you do have to be some sort of expert or at least have a palpable edge in what you invest in. Lead by sufficient understanding and discipline to control risk. Marks – who is hard to touch for sustainable high performance – adheres studiously to these canons. While this gives little clue as to his knowledge of and tools used in risk control, it does ensure that the focus is not on the irrelevant if ever present temptation to become enmeshed in troublesome noise.

Still Confusing Family Rust with Silver

November 12, 2025 Leave a comment

As the issue of best use of taxpayers capital again raises its head, a curt reminder of just how good Govts (of any stripe) are at managing projects “owned” by the state is this:

“Radio NZ reports:

When the New Zealand Transport Agency signed off on an integrated national ticketing system in 2009, John Key was prime minister, Avatar ruled at the box office and a pound of butter cost about $3.60.

After more than 16 years, the first stage of the $1.4 billion National Ticketing Solution’s (NTS) latest iteration, known as Motu Move, was launched on Monday in Christchurch, rolling out contactless payment options on bus and ferry services across Greater Christchurch.

The option to pay with contactless debit or credit cards and digital payments like Apple Pay and Google Pay on phones or smart watches on buses and ferries will work on three hundred buses across Christchurch, Waimakariri and Selwyn, but only for those paying full fare.

A system to enable concession holders to pay less and the Motu Move cards themselves have been relegated to later stages.

The entire point of this system is to enable cards which can be programmed with maximum daily fees etc. So basically after 16 years, all they have managed to do is allow 300 buses to take EFTPOS. This is something that you could probably do in around a week, as mobile EFTPOS terminals are very common.

The NTS was slated to be launched in South Canterbury in 2024, but by the middle of this year, Transport Minister Chris Bishop weighed in, saying the project was facing technology, delivery and governance issues and was “not on track”.

Bishop said nothing was “off the table”, as consultants conducted an independent review of the project.”

What would your employment prospects look like if you were this good?

Thanks to David Farrar

Categories: Economics micro, General Tags: