We wanted flying cars, instead we got 140 characters.
Some of you might recognize the previous line, I guess now is a good time to reflect how much of an impact 140 characters can have in today’s world.
Associated Press’s Twitter account was hacked. The attackers posted a fake tweet claiming that the White House was hit by two explosions and that single tweet sent shock waves through the markets. A single tweet caused the Dow Jones industrial average to fall by more than 150 points and obviously the price of crude oil was affected too. So there you have it, a fake tweet wiped $136 billion from the Standard & Poor’s 500 Index in about two minutes highlighted the risks of the computerized trading that dominates the $18 trillion market.
The attack on AP’s Twitter account and the AP Mobile Twitter account was preceded by phishing attempts on AP’s corporate network. AP hasn’t clarified what exactly they mean by “phishing attack” but something tells me social engineering played a big role in this process.
This is absolutely ridiculous! How can we allow such sources to have the power of such impact? I think are two really important questions that need to be asked.
1. Does this incident indicate the influence of Associated Press on markets?
2. Does this incident indicate the influence of Twitter on markets?
Doesn’t matter how you answer those questions, the end result is the fact that we have created a bubble that can easily be burst by trivial elements.
How did we come to this? How did we end up using such easy to manipulate sources of information to have so much influence in our high frequency trading algorithms?
Obviously there will be some that would blame Twitter for its poor security but that shouldn’t be the central focus of the debate. The people who should really be held accountable are the decision makers that allow such relatively unreliable sources to have such a huge influence in their systems.
Mayor Bloomberg should really learn a lesson from this incident, integrating Twitter in your system is not a good decision but equally allowing a single news organization to have such an influence is not a good decision either.
“When news is received, Verify its source & authenticity. Only then should the news be passed on to another.”
Here is one of my favorite comments from HN on this post:
On June 18th, 74,000 French troops led by Napoleon, sizing up to meet 67,000 British and other European Troops 200 miles NE of Paris.
Nathan Rothschild knowing that information is power stationed his trusted agent named Rothworth near the battlefield. As soon as the battle was over Rothworth quickly returned to London, delivering the news to Rothschild 24 hours ahead of Wellington’s courier. A victory by Napoleon would have devastated Britain’s financial system.
Nathan stationed himself in his usual place next to an ancient pillar in the stock market. Knowing he would be observed he hung his head and began openly to sell huge numbers of British Government Bonds. Believing this to mean that Napoleon must have won, everyone started to sell their British Bonds as well. The bottom fell out of the market. Rothschild had his agents buying up all the hugely devalued bonds.