Countless calculator eyes

Yesterday we noted that, in the New Orleans area alone, we've managed to count 7 incidents of false alarm "suspicious package" sightings in the week following the Boston Marathon bombing.  In at least two of those cases, it was reported that local authorities dispatched a specialized bomb robot to investigate.

You have to believe this was an exciting opportunity for them. "Come on, guys, we get to use the robot!" shout our SWAT heroes as they slide down their poles and leap through the windows of their General Lees on their way out to poke at the latest discarded bindle someone has called in.  Some day they'll have an opportunity to use the drone too but they're still not willing to admit they have one of those.  For now, though, they'll have to play with this toy.

We can call it a toy, by the way, because it was well within everyone's understanding that its only practical application in New Orleans this week was going to be recreational.  If at some unlikely point we're on Canal Street watching the robot confront something we think might actually explode, we'll be sure to adjust our terminology.  For example, the other night, @liprap suggested "Hurt Roomba," which seems about right. 

Whatever you call it, what we can say about the robot is that it was clearly the most calm, level-headed individual on the scene of any of our non-crises this week. But before you take this as a sign that it's time to dump the entirety of your business' manpower in favor of a full staff of cool, calm robots, consider this cautionary tale from today's news.  For about five seconds today, Twitter users were concerned  a bomb might have gone off at the White House.

Journalists inside the White House at the time of the tweet quickly refuted the claim and reported that no blast had been felt at 1600 Pennsylvania Avenue. The AP announced from a separate account moments later that the initial tweet was not true and that hackers wrote and published the incorrect claim.

In the same amount of time it took most of us to read the fake tweet and say, "Well that's probably bullshit," to ourselves, it had already been refuted.  No one had enough time think too much about this information, much less allow it to inform any serious practical decisions.  Well, almost no one, anyway.

Immediately after the fake tweet went live, both the Dow Jones Industrial Average and the S&P 500 took drastic nosedives before quickly rebounding.

How could that happen?  What species of sentient creature exhibits this kind of split-second lizard-brained  reaction?  Of course, you're tempted to answer commodities traders.  This Wall Street Journal item would agree with you, anyway.

Keith Bliss, senior vice president with New York brokerage Cuttone & Co. on the trading floor of the New York Stock Exchange, said he heard a slow wave of noise across the exchange floor as traders responded to the first tweet.

"We all started looking at it to figure out what was going on, and just as quickly there was another wave of noise after the AP denied the story," Mr. Bliss said. "Just goes to show, you shouldn't have a knee-jerk reaction to anything that comes across Twitter."

But isn't it as likely that this immediate unthinking reaction in the market was generated by the robots?

The acceleration of Wall Street cannot be separated from the automation of Wall Street. Since the dawn of the computer age, humans have worried about sophisticated artificial intelligence—HAL, Skynet, the Matrix—seizing control. But traders, in their quest for that million-dollar millisecond, have willingly handed over the reins. Although humans still run the banks and write the code, algorithms now make millions of moment-to-moment calls in the global markets. Some can even learn from their mistakes. Unfortunately, notes Weisenborn, "one thing you can't teach a computer is judgment."

Could high frequency trading algorithms be designed to respond automatically to world-changing headlines that flash over the wire? If so, then it would explain the remarkable speed with which so many stupid decisions were made today.  Besides, it's certainly no less likely than a robot writing that headline in that first place.  

Visit the website of Forbes.com and read the earnings forecasts for the New York Times Company, and you will notice the byline "By Narrative Science". Normally you have to open a copy of Wallpaper* to find someone with such a florid monicker. Except of course Narrative Science is not a person but a robot journalist – actually a set of algorithms which take data and turn it into words.

So not only have we automated the task of analyzing and responding to real world market information, but we're also putting the machines in charge of defining it. If we're going to outsource even the practice of bullshitting one another out of our money we're truly scraping the bottom of the barrel of what's left of human usefulness.