Shostack + Friends Blog Archive


"The Black Hat Tax?" Show me the money

A number of people have sent me links to “Black Hat Tariffs – The Black Hat Taxes on consumer Internet companies are on the rise:”

In May 2006, I made mention of the Black Hat Tax, in which most consumer Internet sites have an inherent time, resource, and mindshare tax of roughly 25% due to scamming, phishing, hacking, and government requests. And this drainage has gotten worse two years later which is extremely troubling.

All these little, annoying things consume time … and not just the time of customer service people, but time of the company’s executives and engineers as well. The Black Hat Tax exceeds 25% for most consumer Internet companies right now, with some approaching 40%. That means that 25% of your engineering and management time is about preventing fraud or dealing with these annoyances. That is one onerous tax!

So I’m curious: what’s the sample size? How does that 40% break out? Who’s spending all that time, and what are they doing? Are there things that could be outsourced? (Seems like a possibly huge business opportunity.) Are there design flaws that are being paid for? What size companies are in the set?

I don’t know Auren. Reading his blog, he seems like a smart guy. I’m just looking for more on where the 40% number comes from, where it’s happening, and where it goes.

2 comments on ""The Black Hat Tax?" Show me the money"

  • David Brodbck says:

    Maybe I’m missing something, but isn’t this a bit like figuring out the cost of putting locks on car doors, and then calling it the “auto theft tax?” It just strikes me as slightly absurd to phrase it that way.

  • the sample size before writing was only 12. admittedly, that’s super low to make a generalization. but after writing the article, i’ve gotten hundreds of responses from CEOs and CTOs at consumer internet cos — pretty much all them estimate it is at least 25% (and many say more). i will admit this is totally not scientific and it would be great if someone did a more comprehensive study that either backs up or refutes the Black Hat Tax claim.

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