In recent years, these two teams have used engineering and science skills to analyse what they call socio-technical risks, or the dangers that occur whenever complex technological systems proliferate, creating “systems of systems” that nobody understands. In early 2010, well before May 6, they released a brilliantly prescient report that predicted that a systems failure loomed.
Since then, they have continued their research, with sobering conclusions. Most notably, these researchers believe that the flash crash was not an isolated event; on the contrary, it was entirely predictable given how IT systems have proliferated to create a system of systems that is now interacting in unpredictable ways that regulators and investors cannot comprehend, far less control.
“Any complex system that works is inevitably found to have evolved organically from a simpler system that worked.”
Well, duh!
“The law of unintended consequences” is not up there with Murphy, Godwin, Moore, et al but it is indeed out there. Drives engineer types crazy.
From the article:
“Is there any solution? …regulators and bankers should replicate what some scientists have done elsewhere and join forces to create a cross-border computing centre that is capable of extremely advanced, large-scale financial simulation. Their idea is that this would essentially replicate what is done in meteorology … to test new financial products and ideas, and warn of looming trouble.”
Yeah. Great idea.
Skynet …decided our fate in a micro-second.
Kyle Reese
“Their idea is that this would essentially replicate what is done in meteorology … to test new financial products and ideas, and warn of looming trouble.”
Yeah. Great idea.
Posted by: SC at December 30, 2011 5:54 PM ”
It IS a great idea, SC. Don’t you realize how well it works for Globull warming and Sucksoosuki sky is falling????
(Gawd. I hope I don’t need a /sarc tag)
Texas Canuck
“The law of unintended consequences” is not up there with Murphy, Godwin, Moore, et al but it is indeed out there.”
Nah Godwins is not a law…just a debating ploy used by leftys…like the race card….
The inconvenient truth…….is that leftys, even the Soviets were more fascist than communist…a situation of they are very aware and vigourously endeaver to conceal….hence Godwin’s…..
As far as complex systems, Long before Hollywood got the script, the military was well aware of the “skynet” scenario, as well as the need for manual redundencies in the event their whiz bang fire control systems crash.
That’s why even the F22 and the F35 carry GUNS.
Didn’t Arthur C. Clarke write a sci-fi story where the world’s telephone systems got so large they interconnected and became artificial intelligence? Gaia with a brain is an interesting, if terrifying, thought and the ultimate “system of systems”.
Our whole capitalistic survival now relies on computers. Popular Mechanics Jan/2012 edition has some sobering facts on who has been hacked, tracked and attacked. Much of it from China. A flash crash might be damaging but imagine the devastation a 2 or 3 week outage at banks or wall st. would cause. No access to bank accounts or ATM’s, no groceries or even gas pumps. No airplane travel and on and on. We would instantly be shuttled back to the 60’s with no access to anything we now take for granted. I won’t even get into the scenario of defence and our reliance on computers to protect us. They still have no idea what caused the flash crash. Might have been a test for something bigger to come. I’ll take my tin hat off now and have another beer 🙂
The exchanges operate under what is basically a gigantic “denial of service” attack these days. The exchange adds more and more bandwidth backbone and more and more servers to handle orders, while their “biggest clients” add more and more of their own servers to generate trillions of bogus orders designed to skim off money in one millionth of a penny increments per millisecond.
Exchange and client hardware is sited in the same building, and in fact mere feet away in the SAME RACKS, because something traveling the speed of light only goes about a foot in a nanosecond, and the clock-speeds of these machines are measured in nanoseconds.
So anybody with an order generator more than about ten yards away isn’t going to be able to know the actual price that’s being traded. They can only know the price that -was- being traded many hundred clock cycles ago, which is ancient history.
If you’re farther away you have to “watch the horizon”, observe what the Big Boys are doing and make bets accordingly. But you still have to be on the fiber backbone, which is why otherwise crappy and worthless real estate in NYC has become suddenly valuable. It sits over top of the exchange fiber.
So to me at least it isn’t surprising that the exchange is having flash crashes and DDOS crashes and etc. What’s surprising is that it works at all with all these guys out there hammering on it every day.
But hey, its probably nothing. ~:)
Revelation 18:15-17
15 The merchants of these things,
which were made rich by her,
shall stand afar off for the fear of her torment, weeping and wailing,
16 And saying, Alas, alas, that great city, that was clothed in fine linen, and purple, and scarlet, and decked with gold, and precious stones, and pearls!
17 For in one hour so great riches is come to naught.
–
Then when Facebook goes dark,
millions will jump from high buildings..
Maroons..
@ The Phantom
Fascinating……do you have a link for that information?
Now, we’ve got some smart people looking at the problem.
I love flashlights.
Don’t you?
I suppose a flashlight is not so bad as a Bic lighter or matches.
peterj, its physics. The Wikipedia entry for “speed of light” covers it rather nicely, with distances given and everything.
Nano= 10^-9
giga= 10^9 so 3.3 gigahertz is ~3 cycles per nanosecond unless I dropped a zero someplace. As a physicist I make a good house painter, so do your own sums it’ll be safer.
Either way, light travels one foot in one nanosecond, so ten feet is ten nanoseconds and that’s about 30 clock cycles. You want to get your order in at the front of the line, you have to be in the same server rack.
Kate posted some info about this back in May when flash crash happened the first time, there’s been some really interesting stuff done on these algorithmic engine stock traders too. I read this stuff over the course of months from many sources, google will be your friend.
Full disclosure, I am not a computer professional nor a scientist. I just read a lot.
@ Phantom
Thanks, looks very interesting and will do some digging.
Didn’t Arthur C. Clarke write a sci-fi story where the world’s telephone systems got so large they interconnected and became artificial intelligence? Gaia with a brain is an interesting, if terrifying, thought and the ultimate “system of systems”.
Posted by: Aviato
“Dial F for Frankenstein”
Bad News