Opinion: What Peter Thiel and the 'Pudding Guy' revealed

Hacking is a computer term, but all sorts of systems of rules can be hacked, Bruce Schneier says.

Bruce Schneier is a security technologist and author of "A Hacker's Mind: How the Powerful Bend Society's Rules, and How to Bend them Back," "Click Here to Kill Everybody" and "Data and Goliath." The following essay is adapted from "A Hacker's Mind." The opinions expressed in this commentary are his own. View more opinion on CNN.

(CNN)The Roth IRA is a retirement account allowed by a 1997 law. It's intended for middle-​class investors and has limits on both the investor's income level and the amount that can be invested.

Bruce Schneier
But billionaire Peter Thiel and others found a hack. As one of the founders of PayPal, Thiel was able — entirely legally — to use an investment of less than $2,000 to buy 1.7 million shares of the company at $0.001 per share, turning it into $5 billion in 20 years — all forever tax-free, according to ProPublica. (Thiel's spokesperson didn't respond to ProPublica's questions about its 2021 report.)
    Less profitable, but maybe more fun, was the "Pudding Guy." In 1999, he found a loophole in how airline frequent flyer programs worked, buying 12,150 single Healthy Choice pudding cups at 25 cents each, giving him 1.2 million miles for $3,150 — ​and lifetime gold frequent flyer status on American Airlines.
      Hacking is a computer term. It refers to finding unanticipated and unintended functionality in a system and using that functionality to make the system do things it wasn't intended to do. In the computer world, it usually means gaining some sort of unauthorized access.
      But all sorts of systems of rules can be hacked. Tax loopholes are hacks. So too are gerrymandering, the filibuster (invented by a Roman senator), and — if you think about it — the way Covid-19 hijacks our cells' protein production. People can hack market systems, financial regulations, political rules, religious codes ... anything.
      I just published a book about hacking. In "A Hacker's Mind," I paint a picture of powerful hackers bending systems of rules to their own advantage at the expense of society. But hacking has its positive uses as well. At its core, hacking is about finding novel failure modes that have not yet been exploited. When they work, they result in the rules evolving — for better or worse.
        Orthodox Jews are masters at hacking their religious rules. Work is prohibited on the Jewish Sabbath. This includes lighting a fire, which has been extended to include creating a light of any kind or doing anything that requires electricity.
        Growing up in the 1970s, my cousins had a timer attached to the television's power cord. The timer would turn the television on and off automatically — no human action required — so the only debate was what single channel to set the TV to before sundown Friday.
        Carrying things in public is prohibited, which means you can't carry a house key with you when you go out. But if that key is integrated into a wearable piece of jewelry, that doesn't count, and you can take it with you.
        When I was a kid, these sorts of ways of precisely following the letter of the rules to avoid their spirit felt contrived. But they're really the method by which the 2,000-year-old Jewish law has adapted over the centuries to modern times. It's hacking and — more importantly — the integration of those hacks into our ever-evolving society.
        A successful hack changes the hacked system as it is repeatedly used and becomes popular. It changes how the system works, either because the system gets patched to prevent it or expands to encompass it. Hacking is a process by which those who use a system change it for the better — in response to new technology, new ideas and new ways of looking at the world.
        This is hacking as evolution. In my book, I write about modern banking, high-frequency trading, luxury real estate and my thoughts about what much of what the gig economy companies are doing. These are all innovations that have changed society. And it continues. Today, there's a Bluetooth device that makes a smartphone usable on Shabbat. The hack is that the buttons constantly have a small current