One of the biggest news stories that popped up on our Twitter feeds today was the hacking of the Associated Press’ Twitter account. Earlier today, the AP’s account stated that there had been explosions at the White House and that President Barack Obama had been injured. The S&P Index, in about two minutes, lost $136 billion. Once the world realized this was due to a hacked account, the market recovered. This massive event, that lasted about 3 minutes, highlights two huge risks that technology imposes on people using Twitter and engaging in algorithmic stock trading.
The first and more relevant issue raised by this incident, in relation to our class, is IT security. Hacks have been steadily escalating over the past few years even though Twitter has vastly improved its security quality. Recently, 60 Minutes and 48 Hours, both CBS News sites, were hacked over the weekend in relation to the Boston Bombings. In February of this year, an estimated 250,000 passwords were hacked in a cyber-attack on Twitter. As Twitter becomes more heavily relied on for immediate news, as it was with the Boston Bombings, something has got to give. In order to combat this, Twitter must either increase their security and/or editing capabilities in regard to erroneous tweets, or people will have to stop relying on Twitter for important news. Google, Facebook, Dropbox, Yahoo Mail, and Amazon all require a two-step verification system. While, if one can simply guess major news corporation’s or company’s password, than one can hack into their account.
Rick Fier, director of equity trading at Conifer Securities LLC, said this earlier today in an interview, “No human believed the story. Only computers react to something that serious disseminated in such a way. I bought some stock well and did not sell into it. Humans win.” This quote raises another question about the double-edge sword of technology interfering with normal every-day transactions. Walter Todd, chief investment officer of Greenwood Capital Associates LLC, said in an interview, “It’s one thing for an illiquid stock to do that but how does a multitrillion-dollar market do that? That’s very disturbing to me. It’s unnerving.” I would have to agree that computers placing bets worth billions of dollars based on false information at an instant is indeed quite unnerving. This brings into question the reliability of algorithmic trading programs. Some of these programs scan news headlines, and tweets, and are told to buy or sell stocks depending on what information is gathered. Granted, the computer trading systems would not have rapidly sold stocks without Twitter being hacked in the first place, but they lacked the judgment to realize Twitter’s errors.
Based on today’s events and Professor Ransbotham’s lecture on the importance of IT security, we must slow down and remember that technology is in fact a double-edged sword. This past week, because of the tragic events that took place, we were able to see first-hand how good and bad technology can be in a world where information is demanded immediately. It was incredible to see on Twitter, in real time, the events that were occurring, especially when we all were so close in proximity to the action. It was not incredible for the missing Brown student to be falsely identified as one of the suspects by Reddit. We, as users of social media tools, need to understand this reality in order to effectively use these tools in a beneficial manner. In conclusion, the lessons we have learned today are: don’t believe everything you see on Twitter, create an extremely complicated Twitter password, and, according to Barry Schwartz, a financial manager, “Don’t let computers rule your investments.”