How $100 Billion Can Disappear in Seconds

After the markets had closed on Monday, July 1st, something strange happened: two dozen securities, including Amazon, Apple, and Microsoft, appeared to plummet in value. According to third party platforms including Google Finance, Yahoo Finance, and Bloomberg, Amazon went from a price of around $900 down to $123, or and 87% plunge. At the same time, it appeared Apple lost $104 billion in value in minutes.

I was first made aware of this pending tech apocalypse by an investor on Twitter.

While many people on the tweeter machine were running around with their hair on fire, it quickly became evident that this was some type of glitch on trading platforms, not an actual crash. After the dust cleared, fingers immediately began being pointed. Google & Bloomberg claimed they had received incorrect data, NASDAQ (where the stock data originates) claims that all the data they transmitted was correct.

What appears to have happened is some third party vendors incorrectly handled some test data which went out from NASDAQ after the market had closed.

While this glitch was just amusing, good fodder to whimsical tweets, it may serve as something of a warning about our increasingly interdependent interconnected world. A minor mistake by some developers made over a hundred billion dollars evaporate from the economy- had this happened while the market was open, it could have wiped out actual dollars.

Our financial system, and our whole world are tied together by networks and systems nobody fully understands.

In 2008 we found out that a hiccup in the American housing market could cascade across the entire world economy, and threaten to break it.

Current White House Strategist Steve Bannon discussing the financial system in 2011

In 2003 we found out a software bug in one power plant could cause a cascading power failure across the east coast and Canada affecting 55 million people.

In February of this year, we found out that a single typo by a single engineer at Amazon Web Services (AWS) could take down services like Slack, Giphy, GroupMe, Amazon Alexa, and Phillips Hue, along with thousands of other websites, all at once.

In 2016 we found out that a cyber attack on a single vendor used by DNS service Dyn could make large swaths of the internet, including Twitter, Facebook, New York Times, Reddit, and Spotify inaccessible.

Our wealth and technological preeminence have allowed us to build up unimaginably complex systems around us. From our financial system, to the power grid, to telecommunications, to anything that touches the Internet. We reap enormous benefits from these systems. However, their complexity and speed reduce the margin for error to virtually nothing. In 1960- one missed keystroke, by one engineer, could never affect millions of people’s day to day lives instantly.

Not only do we not fully grasp these systems- we have no adequate way of assessing their fragility or our exposure to risk from them. This isn’t to say that we should run away from technology, that we shouldn’t leverage technology and wealth for continued prosperity. We should, however, be wary of creating things which we do not understand and cannot control, and we should remember just how fragile, and miraculous, this world we’ve created is.

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