Archive for September 2012
The past six months have seen a rash of headlines about computer glitches and failures affecting financial firms. First, BATS had to pull its IPO due to problems with its own trading platform. Then the start of trading in Facebook shares was delayed due to a NASDAQ systems failure. In June, a failed system upgrade affected hundreds of thousands of RBS customers in the UK. Finally, on August 1st, Knight Capital lost $440m in just 45 minutes due to problems with its market-making software.
Now the Chicago Fed has released a letter (PDF) containing the results of a survey, which reveals that “two-thirds of proprietary trading firms, and every exchange interviewed had experienced one or more errant algorithms”. I’m not surprised. I’ve done it myself, creating a ad-hoc market-making tool which malfunctioned when there were no other quotes in the market.
Admiral Hyman G. Rickover of the United States Navy is regarded as the “father of the nuclear navy”, having served as director of Naval Reactors for over three decades. He wrote:
Responsibility is a unique concept: it can only reside and inhere in a single individual. You may share it with others, but your portion is not diminished. You may delegate it, but it is still with you. You may disclaim it, but you cannot divest yourself of it. Even if you do not recognize it or admit its presence, you cannot escape it. If responsibility is rightfully yours, no evasion, or ignorance, or passing the blame can shift the burden to someone else. Unless you can point your finger at the person who is responsible when something goes wrong, then you have never had anyone really responsible.
Since my first purposeful trip to Silicon Valley last summer, I’ve visited the area twice more, spending more than six weeks there in total. My experiences have been overwhelmingly positive. The people I’ve met out there have been welcoming and helpful. They’ve spared the time to meet with me and leveraged their network to make introductions to people and companies that I would never have been able to access otherwise. The overwhelming impression is one of openness, optimism, a desire to help others succeed and a collaborative, “pay it forward” culture. There’s no sense of “What’s in it for me?”.
I hate to say this but, regrettably, I don’t think we can say the same about the tech startup sector here in London. I think we’re making progress with the growing success of open, inclusive networking events like Silicon Drinkabout, but I think we have a long way to go. To quote James Clark’s MBA dissertation (in which he looked at the question “Why is there no British ‘Google’ and what can be done about it?“), “rather than being open and free flowing, business networks in Britain are stratified, resulting in poor transference of information”. We simply don’t have the same open, collaborative, helpful culture that exists in Silicon Valley.