Peter Phillips

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• Doctor of Philosophy
• Professor (Associate) at University of Southern Queensland

MicroStrategy's 2020 decision to position the company as the largest corporate holder of bitcoin (BTC) shook MicroStrategy stock out of a long slumber, raised the company's profile, and propelled founder Michael Saylor to the forefront of the Bitcoin community. By October 2023, MicroStrategy held 158,245 bitcoins acquired at an average price of $29...

Requiring substantial capital investment and immense patience yet exposed to volatility in the gold price and, more importantly, the whims of central banking, the gold mining business is replete with potential agency problems and other more macro-driven distortions, including huge fluctuations in free cash flow and the temptation to chase bad inves...

People are talking about how in the mid-2020s we are heading towards a repeat of the 1970s. And what they mean is that we're confronting the real possibility, if it is not already upon us, of 70s-style stagflation-unemployment and inflation. During the 1970s, when things didn't get any better as time went by, there were calls for monetary reform. T...

In October 2024, for a week or so, there was an unexpected decoupling of MicroStrategy stock from the Bitcoin price. This surprised some commentators, especially noted Bitcoin critic Peter Schiff, who wondered why the MicroStrategy stock price had suddenly spiked higher while Bitcoin remained steady. The proximate cause appears to have been new dev...

On November 12, about a week after Donald Trump’s 2024 election victory, it was announced that the incoming Trump administration would establish the Department of Government Efficiency (DOGE), headed by Elon Musk and Vivek Ramaswamy. On November 15, the new X account established for DOGE posted, “We are very grateful to the thousands of Americans w...

People are talking about how in the mid-2020s we are heading towards a repeat of the 1970s. And what they mean is that we’re confronting the real possibility, if it is not already upon us, of 70s-style stagflation— unemployment and inflation. During the 1970s, when things didn’t get any better as time went by, there were calls for monetary reform....

Requiring substantial capital investment and immense patience yet exposed to volatility in the gold price and, more importantly, the whims of central banking, the gold mining business is replete with potential agency problems and other more macro-driven distortions, including huge fluctuations in free cash flow and the temptation to chase bad inves...

A period of new warfare is high energy and high information. High energy, which may keep entropy at bay, can be mistaken for high information, which is negative entropy. There is a Cybernetic Hierarchy of Control. Systems that are high in information but low in energy can control the action within systems that are high in energy but low in informat...

Technological solutions cannot completely protect companies and governments from human actors driven by money, greed, or simply the thrill of the steal. In fact, each technological countermeasure for industrial espionage is itself the product of human decision-making attempting to pre-empt and inhibit the decisions and actions of the industrial spy...

Elon Musk says he doesn't follow business plans. This is because a plan as commonly understood is impossible when the entrepreneur is casting his steppingstones out into the unknown. In the mid-20th century, led by Norbert Wiener, Cybernetics emerged as a kind of collection of studies that drew on various aspects of decision theory, information the...

Elon Musk says he doesn't follow business plans. This is because a plan as commonly understood is impossible when the entrepreneur is casting his steppingstones out into the unknown. In the mid-20th century, led by Norbert Wiener, Cybernetics emerged as a kind of collection of studies that drew on various aspects of decision theory, information the...

Bitcoin is one of those less common financial innovations that threatens to upend the status quo in a more general sense. This not only instils fear in some decision-makers but loathing too. Which leads to an interesting question. That is, how does fear work itself into the construction of a Savage "Small World"? What happens if something terrifyin...

The May/June 2022 collapse of 'stablecoin' terraUSD (or UST) and its sister token Luna and the November/December collapse of FTX received lots of media attention and this media attention provided the opportunity to see what ordinary people thought about cryptocurrency. The reader comments posted to the fourteen media stories we reviewed contain ten...

Contrasted with the boundless enthusiasm on crypto-X is the intense scepticism that others have when it comes to Bitcoin. Many people do not accept that Bitcoin can have any value independent of the backing of a nation-state. They think it is a scam, a Ponzi, a bubble, a fad, and a con. And they think it is a dangerous destabiliser for the status q...

The May/June 2022 collapse of 'stablecoin' terraUSD (or UST) and its sister token Luna and the November/December collapse of FTX received lots of media attention and this media attention provided the opportunity to see what ordinary people thought about cryptocurrency. The reader comments posted to the fourteen media stories we reviewed contain ten...

Bitcoin is one of those less common financial innovations that threatens to upend the status quo in a more general sense. This not only instils fear in some decision-makers but loathing too. Which leads to an interesting question. That is, how does fear work itself into the construction of a Savage "Small World"? What happens if something terrifyin...

Bitcoin could change the way global economic power is used. Bitcoin already represents an augmentation of the international price system and has increased the amount of information that the price system transmits, including information relevant to national security. For a country like Australia, where natural resources represent a pillar of the eco...

Contrasted with the boundless enthusiasm on crypto-X is the intense scepticism that others have when it comes to Bitcoin. Many people do not accept that Bitcoin can have any value independent of the backing of a nation-state. They think it is a scam, a Ponzi, a bubble, a fad, and a con. And they think it is a dangerous destabiliser for the status q...

Bitcoin could change the way global economic power is used. Bitcoin already represents an augmentation of the international price system and has increased the amount of information that the price system transmits, including information relevant to national security. For a country like Australia, where natural resources represent a pillar of the eco...

Bitcoin disseminates decentralised information relevant to national security, but intelligence agencies are non-market institutions that are not designed to monitor, interpret, and use that information. Once the strategic advantage of improving this capability is realised, a game of the survival of the most informationally fit begins. Like the impe...

This is a collection of 9 papers on the topic of Self-Managed Superannuation Funds. It includes our studies of risk aversion, diversification, performance, and my evaluation of the chances of survival of SMSFs.

Bitcoin disseminates decentralised information relevant to national security, but intelligence agencies are non-market institutions that are not designed to monitor, interpret, and use that information. Once the strategic advantage of improving this capability is realised, a game of the survival of the most informationally fit begins. Like the impe...

Some people don't see how decentralisation could possibly "work", in the sense of solving important problems such as resource allocation. Whether the economic system as a whole or a single business enterprise, they favour a system of centralisation and control. On the other side are those who have glimpsed the information-transmission function of m...

MicroStrategy's 2020 decision to position the company as the largest corporate holder of bitcoin (BTC) shook MicroStrategy stock out of a long slumber, raised the company's profile, and propelled founder Michael Saylor to the forefront of the Bitcoin community. By October 2023, MicroStrategy held 158,245 bitcoins acquired at an average price of $29...

Some people don't see how decentralisation could possibly "work", in the sense of solving important problems such as resource allocation. Whether the economic system as a whole or a single business enterprise, they favour a system of centralisation and control. On the other side are those who have glimpsed the information-transmission function of m...

Prospect theory can be used as part of geographic offender profiling.

Explains the length of time between a copycat terrorist's observation of an attack he would like to copy and his eventual action as a function of his prudence.

Combines geographic and offender profiling with decision theory to analyse the terrorist's choice of attack location.

Decision theory, especially prospect theory, is used to analyse the choices of terrorist copycat offenders.

Innovations must be worked into the existing order and then find their place in that order. Rejection, like a transplanted organ, is always possible. Or a long period where it is 'touch and go'. There are at least four ways to represent the existing order in financial economics: (1) mean-variance; (2) capital asset pricing models; (3) no arbitrage...

In this chapter, I analyse the terrorist financing decision from the terrorist's perspective. That is, confronted with different transfer methods, how does the terrorist or terrorist financier choose? I set the discussion within a risk-reward, mean-variance framework.

We assess the certainty with which terrorist groups can repeatedly inflict fatalities in terrorist attacks. A terrorist group is particularly dangerous that can inflict higher levels of fatalities with more certainty than other groups. We develop a fatalities–to–variability (F-V) measurement statistic to shed some light on the risk-adjusted brutali...

This is the introduction to The Economics of Terrorism. We explore the orthodox and behavioural economics of terrorism, especially in explaining the role of brutality in the contemporary terrorism context. The book explains how we might use orthodox and behavioural models of the decision-making process to think differently about lone wolf terrorism...

In this chapter, I look into the nature of terrorism perpetrated by individuals vis-a-vis terrorist groups. I use the Herfindahl-Hirschman Index to measure the degree of concentration and Entropy to measure diversification of attack method and weapons choices. I introduce what I call a 'fatalities-to-variability' ratio to investigate the relative c...

Terrorist groups located in far away places can inspire or, worse, train, equip and finance individuals to undertake acts of terror on their behalf. I analyse the efficiency of this type of terrorist financing strategy with reference to the 'rotten kid theorem' and the economics of incentives. In short, can the individual or individuals receiving f...

There is something visceral about fear. You feel it in a way that you don't feel risk. Some people think that fear affects decisions by changing people's probability judgements about the outcomes that might be experienced upon choosing one of the available alternatives from the problem space. Fear affects decisions because fear makes people want to...

The sharp correction in cryptocurrency markets in May (and June) 2022, especially the dramatic price collapse of 'stablecoin' terraUSD (or UST) and its sister token Luna, was covered extensively by the press. We looked at 4,400 reader comments that were posted in response to news and opinion pieces during the crisis. We focus on several stories pub...

Michael Saylor's decision to position MicroStrategy as the largest corporate holder of bitcoin (BTC) turned MicroStrategy stock into a partial BTC derivative and, in the eyes of some commentators, a quasi BTC exchange-traded-fund (ETF). The decision certainly shook MicroStrategy stock out of a long slumber, and Michael Saylor has since risen to pro...

We interpret bitcoin's 200-day moving average (MA) price as a prospect theory (PT) reference point. PT says that risk preferences "toggle" around the reference point. Above the reference point, investors are risk averse. Below the reference point, investors are risk seeking. Degrees of risk aversion and risk seeking determine the investor's sensiti...

We look at several of Elon Musk's business ventures, forays, and interests: (1) X.com; (2) SpaceX; (3) Tesla; (4) cryptocurrency; and (5) Twitter. We discuss Musk's decision-making and see whether behavioural economics, especially prospect theory, can help us to better understand his motivations and choices and the ways in which he proceeds in the...

For seven cryptocurrencies-Bitcoin (BTC), Ether (ETH), Cardano (ADA), Ripple (XRP), Solana (SOL), Litecoin (LTC), and Dogecoin (DOGE)-we compute the efficient set of portfolios for daily returns for the period January 2020 to September 2022. The paper reports the "background" statistics, including the mean and standard deviation for each crypto and...

Bitcoin is digital energy. This is part metaphor, part description. It is part explanation, part prophecy. It is part engineering, part finance. The digital energy that is Bitcoin is not mechanical, chemical, or electrical. It is the same “stuff” that saves you time when you draw on a store of knowledge. Digital energy is the “stuff” of networks. D...

Intelligence scholars are drawing on behavioural decision theory to improve decision-making under risk and uncertainty in intelligence and counterintelligence. Such an undertaking is essentially lacking without the Austrian school's concepts of knowledge, discovery, (entrepreneurial) judgement, ignorance, rational calculation and, more generally, i...

There have been calls to treat hackers as pirates and to enlist private companies as 'privateers' with the legal power to upend hacking operations. This led us to consider what our experience with maritime piracy can teach us about hackers and computer security. We found much of value in the experiences recorded and debated in the piracy literature...

Published in: Journal of Diplomacy and International Relations Both orthodox and behavioral decision theory are concerned with the prioritization of alternative risky prospects. We are concerned with how this ranking or prioritization process is impacted by disinformation. This might interest those who support the use of decision theory in interna...

Abstract. To design and apply effective countermeasures to hacking and related threats, it helps to have some way to structure one’s educated guesses and inferences about hackers’ current activities and future moves. This is especially the case when the decision-maker must consider not only the risk of attack but the unquantifiable risk of an att...

In this chapter, I introduce a model of decision-making under risk and uncertainty and explain how it can be used to study terrorists' attack method choices.

Using prospect theory as our core descriptive model of the decision-making process, we explore how behavioural economics can be used to expand what can be said about terrorist behaviour and align the inferences about terrorist behaviour that have been drawn from a diverse collection of disciplines. Prospect theory played a key role in the emergence...

This is an open source monograph about the economics of teams and the collection of intelligence in an espionage, counter-intelligence context. Our focus is decision-making, including search processes, under ambiguity or true uncertainty and the way that idiosyncratic human reactions to ambiguity affect team decision-making in intelligence agencies...

This is the fifth and sixth chapters in our open source book: Intelligence Sharing, Networks, Teams and Ambiguity: How Working Together Shapes Decision-Making Under Risk and Uncertainty. Here we explore the economics of networks, behavioural economics and decision-making within intelligence agencies. The results of economics experiments are mixed....

To show how the drawing of inferences from ‘revealed risk preference’ may work in practice, we examine three prominent cases of lone wolf terrorism: the cases of George Metesky (the Mad Bomber), Franz Fuchs and Theodore Kaczynski (the Unabomber). Each of these cases attracted considerable law enforcement attention and profiles were constructed in e...

There is something worthwhile in making Shackle's ideas more accessible by identifying the common structural elements shared by Shackle's theory of potential surprise and mainstream orthodox and behavioural decision theory, including prospect theory. To this end, it became clear to me that some sort of reader's guide would be very useful. As such,...

This chapter is the fourth in our open source monograph. In this chapter, we look at the effect of career aspirations, the influence of "yes men" and the role of impatience in shaping the search processes and decision-making of teams in an intelligence or espionage setting.

We explain how specialist expertise, relative expertise and optimism interact with ambiguity aversion and team dynamics to influence choices in contexts where outcomes and probabilities are ambiguous. We explain how espionage can be a stabilising influence, especially when it can produce information that switches an ambiguous situation to one that...

Changing the nature of a team, changes the information structure. Changes to team membership, the way it works, or the way its performance is monitored change the information structure. When new team members are introduced, their new information must be assimilated into the team's existing information structure, requiring time and effort that some...

Working together introduces many nuances into the practical decision-making processes and routines that have been established on the foundation of orthodox decision theory. Decision theorists have documented many of the things that people do when confronted with risk and ambiguity. They haven’t always considered what happens when people with differ...

Data concerning the financial costs inflicted by different categories of cyber-attack methods is used to analyse 'attack method' choice. Cyber-attacks represent opportunities to inflict financial costs on individuals, organisations and governments. The analysis examines how a perpetrator weighing up the risks and rewards of cyber-crime or cyber-ter...

In this book, we present the science of quirky human decision-making and its implications for terrorism and law enforcement decision-making. We believe that behavioural economics, along with other parts of decision theory, gives us the frameworks we need for thinking about thinking. Our goal is to explain the ideas as clearly as possible so that ev...

Given their technical sophistication, it is easy to overlook the human choices that underpin predictive policing algorithms and, importantly, the basic structures of decision theory that it embeds. To make a problem amenable to algorithmic computation, the problem must be transformed, often metaphorically, and the problem space delineated. Problem...

Before a lone wolf terrorist strikes, no-one knows who he is. No-one knows what type of lone wolf he is. No-one knows his preference for risk. When he strikes, he reveals something about himself. He reveals his existence and he reveals his preference for risk. Like the offender profilers and investigative psychologists who try to build a sketch of...

The use of artificial intelligence (AI) and algorithms by intelligence agencies requires the capability to counter their use by rival agencies. A formal-technical development of this capability can be assisted by decision theory, including behavioural economics. Peter J Phillips and Gabriela Pohl argue that decision theory provides a useful framewo...

The economic analysis of terrorism has usually focused on extraordinary events such as hostage-taking situations or sieges or large-scale assaults on important targets. What about the everyday of counter-terrorism and law enforcement? The relentless grind of information gathering, assessments, surveillance, interviews. And let’s not forget the ever...

All academic research is an ongoing conversation. The people contributing to it are unique individuals from all backgrounds, each with their own individual perspective. And when a newcomer picks up the conversation and engages with it, he or she brings his or her own unique interpretation of it. We present a guide to the conversation (how to access...

Multiple reference points, including organisational or career aspiration reference points, can shape risk preferences and decision-making. Prospect theory can be extended so that it can treat situations where decision-makers navigate a status quo reference point while keeping their eye on an aspirational reference point. The amount of ‘slack’ in th...

When attacks on the embassies of Western nations became more and more difficult due to increased fortification and security, terrorist groups switched to attacks outside of the embassies, including kidnapping embassy staff. These types of patterns, including the gradual transition towards mass casualty bombings in the early 1980s, can be encompasse...

Expected utility theory can be used to measure the satisfaction a terrorist decision-maker expects to garner from using different attack methods or from attacking different targets. We measure the utility garnered from a series of attacks perpetrated by Carlos, The Jackal. Measurements produced by expected utility theory are compared with prospect...

Alexander Alekhine is famous for playing more than twenty simultaneous games of chess without even looking at a single board. He visualised the playing surfaces, the moves, the pieces and, most importantly, the patterns. Patterns are essential building blocks for human thought and decision processes. We can use both orthodox and behavioural economi...

There is a mainstream within behavioural economics, even though the whole field sits outside the mainstream of orthodox economics. To help people to go off the beaten track and find some more amazing and thought-provoking patterns of human decision-making, we end with a road map or guide to behavioural economics that can be used by someone wishing...

The choices of copycat terrorists depend on the outcomes achieved by their predecessors, rivals or idols. The predecessors’ outcomes are the reference point against which the outcomes of prospective actions are evaluated. Depending on the position of the reference point, the copycat takes more or less risk in selecting attack methods and targets. T...

Overconfidence turns up again and again in every setting that psychologists have investigated. Overconfidence leads to risk seeking and too much risky activity. Too much terrorism, from the terrorist’s point of view, is terrorism beyond the point at which expected payoffs begin to decline. One possible reason for the difference in the outcomes achi...

A tree, needing light to survive, grows upwards towards the forest canopy. But the tree does not need to grow as tall as it possibly can. It only needs to grow marginally taller than its competitors to shade them out and win the contest for survival. Likewise, to survive, a terrorist group does not need to maximise, in some absolute sense, the numb...

Terrorists form an identity that they do not want to lose and this makes their choices rigid and insensitive to changing conditions. In economics, this rigidity is explained as a manifestation of the endowment effect, which in turn is explained by loss aversion. The endowment effect, loss aversion and identity combine to explain patterns of engagem...

The Unabomber, Theordore Kaczynski, would disappear for long stretches of time. The Red Army Faction in Germany found itself competing for attention with rival groups such as the 2nd of June Movement. And airplane hijackings in the United States surged and then suddenly dissipated in the 1960s and 1970s. A mixture of orthodox and behavioural econom...

Mistakes such as wrongful convictions have bothered researchers and practitioners for years. One explanation is confirmation bias. We discuss the deeper roots of confirmation bias (in Bayesian updating) before going even deeper to look at the fascinating phenomenon of information cascades. How easily can a cascade start? How many decision-makers do...

Terrorist groups usually combine attack methods and we use modern portfolio theory (MPT) and behavioural portfolio theory (BPT) to provide a rationale for this behaviour and a way to analyse what it means for terrorists’ risks, rewards and international activities. Combining different attack methods and diversifying across geographical locations re...

Developments in technology have facilitated the emergence of new crowd counting organisations. Some of the organisations have established platforms to disseminate their data, making it available to researchers for the first time. These databases promise to increase the quality and quantity of research in various fields. In the late 2010s, specialis...

Crime scenes are classified as organised or disorganised. An organised crime scene may be one where the offender plans the crime, restrains the victim and carries a weapon to and from the crime scene. A disorganised crime scene may be one where the crime scene is left in disarray, a murder weapon or other evidence is left at the scene and the victi...

Information cascades occur when decision-makers beyond some point in a decision-making sequence find that it is optimal to follow the decision that others have taken even if their own private information indicates a contrary course of action. Information cascades are studied because they can help us to explain decision-making conformity and behavio...

Offender profiling is the activity of drawing inferences about the offender from evidence left at the crime scene. To do this, the profiler usually makes use of some typology or classification scheme. The evidence at the crime scene allows the profiler to classify the crime as being of a certain type. The offender will have characteristics associat...

The arrival of “FinTech” – non-bank companies offering financial services through new technology – has changed the regulatory landscape of the financial markets. This is especially the case in the funds transfer market. While terrorist finance might have once been more at risk of detection in some jurisdictions than others, FinTech threatens to bri...

At this point, we pause to summarise our analytical work before moving on to part two of the book. An approach to the analysis of the lone wolf terrorist from the perspective of economic science deals with the lone wolf’s opportunities and choices. Fundamentally, the lone wolf’s opportunities consist of expected payoffs and risks. To reach the poin...

The lone wolf must choose from the opportunity set. He will choose the attack methods or combinations of attack methods that inflict the highest amount of human tragedy at each given level of risk. The lone wolf’s preferences for risk play a critical role in determining which attack method or combination of attack methods he will choose. If he is n...

The use and exploration of outer space is, according to the Outer Space Treaty (OST), to be carried out for the benefit and interest of all parties. Outer space is critically important to the defence and national security interests of many nations, none more so than the United States. Over time, a significant space junk problem has emerged. There i...

All of the lone wolf’s opportunities are contained within the opportunity set. This contains every possible pair of expected payoff and risk associated with every possible combination of attack methods. The lone wolf terrorist will prefer those opportunities that provide the highest expected payoffs at each level of risk. The constituents of this ‘...

What we know about human decision-making under risk and uncertainty has expanded rapidly over the past forty years. Much of this work has been undertaken by psychologists and economists working together in the new field of behavioural economics. We work through the steps that led to the development of behavioural economics and explore the most robu...

Statistical structure enables an economic analytical framework to be constructed and allows the lone wolf terrorist’s opportunities to be determined. Mean-variance expected utility analysis takes the statistical structure of the attack methods and builds an economic framework of opportunities and choices around that structure. The result is that th...

Using the same executive function that allows him to plan a terrorist attack, the terrorist can consider the possibility that the outcomes of the attack will be imperfect in some way and that he will regret not having chosen a different type of attack or a different target. He can anticipate regret. In terrorism studies, a lot has been written abou...

Each attack method has an expected payoff and a risk. Additional expected payoffs are available only by bearing additional risk. But there is a special property embedded within the statistical structure which emerges because expected payoffs of each of the attack methods are imperfectly correlated. The lone wolf terrorist may obtain ‘gains from com...

The first step towards trapping the lone wolf terrorist within the economic framework is to identify the categories of attack methods from which the lone wolf may choose. The RAND categories for transnational terrorist attack methods are: armed attacks, arson, assassination, hostage, bombing, hijacking, kidnapping, unconventional and ‘other’. Lone...