Businessman without a country

Aside from his sexy first name and knack for computer programming, there’s nothing particularly outstanding about Vince Cate. And he certainly doesn’t look like an arms dealer.

But that’s exactly what the U.S. government would classify him as if he operated his business on U.S. soil. So Cate moved it to the little Caribbean paradise of Anguilla—and renounced his citizenship. It was the simplest way to avoid prosecution.

"Oh, my" I can hear you saying (so can the guy next to you in the atrium, by the way; it’s kind of weird to talk to yourself, you know). "This Cate fellow must be into some pretty heavy stuff! What’s he making? Tanks? Missiles? ATOM BOMBS????"

Well, actually, it’s…computer software.

Specifically, a very cool financial package that allows businesses to perform completely secure financial transactions over the Internet (check out http://www.secureaccounts.com/ for more info).

As you’ve no doubt learned (or are learning) in UT’s stellar core IT class, the Internet is nothing more than jillions of computers hooked together by glorified phone lines. When you send a message of any type across this network, you generally have no control over the number, location, and ownership of the many machines it hops across on the way to its destination.

If you’re sending sensitive data of any kind—especially electronic funds, or confidential financials, or even your credit card number—that’s pretty scary. Any computer in your message’s path poses a threat by virtue of its ability to theoretically stop, alter, or even just read your message.

Encryption is the easiest way to prevent this. Unfortunately, silly U.S. laws classify truly effective encryption techniques as munitions. Yeah, like tanks, missile, and atom bombs.

That’s not to say that you can’t use encryption. In fact, the government will let you use pretty strong encryption within U.S. borders; it’s when you want to send something overseas that you run into trouble. But to simplify distribution, most Internet software companies (e.g. Microsoft and Netscape) make it fairly difficult to get the more effective domestic-only versions of their programs.

The default versions you (and everyone else in the world) can buy use government approved 40-bit encryption keys. I’ll leave it to Larry Leibrock to enthrall you with the technical details of how these work, but suffice it to say that Berkeley grad student Ian Goldberg broke this standard key in less than 4 hours. In 1995. Using spare cycles on a network of Berkeley workstations. For fun.

"But TechnoCrat," you mumble to yourself, glancing up to see if the leftover bagels have been put out yet, "we need reasonable controls on our technology so that it can’t be put to improper use by devious foreigners like Karim Faraj, who might use it to transform Honduras into a global financial powerhouse that would handily topple the likes of Goldman Sachs!!"

Unfortunately, the mathematics behind the algorithms we’re talking about is so ancient and broadly published that any competent programmer with access to a recent-vintage PC could write a crypto program that makes the ones exportable from the U.S. look about as effective as a cereal-box decoder ring.

So why should we care about Mr. Cate? Well, along with his business, he took his ideas and his capital with him. The jobs and economic value he creates will now benefit a slightly more reasonable culture, as will his impressive philanthropic activities (http://web.ai/club/).

Cate won’t be eligible for Anguillan citizenship for another 11 years, but in the meantime he’s doing okay for himself in his $500/month beachfront house (http://www.offshore.com.ai/vince/). Makes a guy wonder if they have business schools in Anguilla.

Unfortunately, this doesn’t end with Cate; in fact, it’s likely that we’re only seeing the beginning of a great exodus away from the former "land of the free". Since our crypto restrictions make it impossible for U.S. companies to compete with foreign-based rivals in the electronic privacy market, many of them are following Cate’s lead. 23 year-old Sameer Parekh’s C2net Software Inc., maker of secure server software, is one such company (http://www.c2.net/). Larger companies, like Sun Microsystems, just open subsidiaries abroad, shipping even larger loads of jobs and tax dollars offshore.