Ok, so let’s get down to basics here, what do we have here, 
a bunch of investors sinking money into “algorithms” and a case of “algorithms” that had issues and didn’t perform as they were supposed to. I don’t know how much longer it will take until someone wakes up to see that we can’t base an entire economy on “algorithms” which is seems is the forefront of what we have going on today. Sure algorithms have value but we seem to be thinking there’s some “magic carpet ride” here with making money. The carpet will ride for a while but it will need to come in for a landing here and there.
It just makes one wonder if the US is ever going to clean up the math and code in so many areas of the financial markets. We have the same thing in healthcare with “flawed” data with queries and reports created to sell more software. Software, in the words of Bill Gates is nothing more than a bunch algorithms that work together and thus I focus on the algos.
We can go back to the BATS IPO and what happened there in March and I think they did the right thing, they pulled the plug before the real time algorithms that touch all the other exchanges did a lot of damage. Sure they took some criticism but I think it’s a whole lot better than what happened with NASDAQ and their algorithms. If you have something “rogue” running around in there, best to stop and take a look. You can create “software suicide” and I occasionally talk about that as you never get a second chance. People will understand issues and problems but when you see a problem and give the call to keep it running, well you saw what happened.
BATS Stock Exchange IPO Rogue Algos–Attack of the Killer Algorithms Chapter 25–See How Other Killer Algorithms Occur in Every Day Life With Healthcare & Credit
We have algorithms all around us all the time with formulas making life impacting decisions about all of us and some of this stuff is “flawed”. I watched the CEO interview with NASDAQ and I wouldn’t want to be him or the IT folks who made this call for sure. On the other side of the 
coin, you have some very savvy folks at Facebook and I can’t help but wonder what they think as they write the stuff day in and day out too. Facebook has had their issues with privacy and applications and maybe their engineers should have a sit down with the engineers at NASDAQ. Here’s a bunch of links that describe how “algorithms” that you can’t see, touch, feel etc. affect consumers every day. When they are flawed, consumers become “data chasers” to go and fix whatever became flawed with information that most of the time they had nothing to do with the creation and much of it contains a “risk” factor of some sort built in that denies or creates some kind of access.
Attack of the Killer Algorithms–Digest & Links for All Chapters–How Math and Crafty Formulas Today Running on Servers 24/7 Make Life Impacting Decisions About You–Updated 3-11-2012
This seems like a good place to repeat the TED video from Kevin Slavin on how algorithms shape our lives. You can find it as a static video on any page of the Medical Quack and I found it to be one of the best videos ever done explaining how some of this works and who’s involved. I saw some of the major news outlets run it as well but they didn’t really seem to get the real meaning and drift of all of this. It’s all about computer code.
We do have some pretty sharp folks out there that should really get a lot more recognition for what they do with their efforts to educate all of us and those are the folks over at Nanex,
who if you watch the video above are mentioned as the ones who dig in and get the bottom of this “mysterious” algorithm question all the time, and yet they don’t get enough recognition for all their “honest” analytic work that would help folks out in the long run. If you would like to see some of what they had to say, use this link and read up. This is not the first instance with NASDAQ with software as they had issues to where the FBI came in to investigate a big security leak with their “Director’s Desk” software. This goes back to February of 2011. Companies like SonoSite, a healthcare company use Director’s Desk. Why? Well when you are about ready to announce a new FDA approved product, you don’t want any top secret information out in the world until it’s time, insider trading potential again.
“It is a technological arms race in financial markets and the regulators are a bit caught unaware of how quickly the technology has evolved”
Another Item I wonder about too is how the financial folks market and sell “over clocked” processing too? I did some training a while back for Intel and used to see the gamers come back with “melted silicon” all the time from pushing the limits and over clocking and going beyond “best practices” with their computers, all in the need for speed. It’s a gamble like anything else. More about this topic at the link below. We do need some accountability somewhere along the line and some folks to step out of denial to address this.
Gamers Are Not the Only Ones to Over Clock Processors-Turns Out It’s Done on Wall Street To Run Those Algorithms at Rocket Speed
Back about 3 years years ago
I made an “opinion” post asking if “we need a Department of Algorithms”…maybe we are there as there are those algos created for “desired” results and those that generate “accurate” results and the two should be the same, but they are not always. Read this book on how some of this works from Twitter bud Professor Siefe at NYU, as he nails it pretty well.
“Proofiness–The Dark Side of Mathematical Deception”–Created by Those Algorithms
Even the SEC in their current state finds folks with “bad math” out there and I assumed this quant was pretty obvious for the SEC to find him, but for two years he knew he had “flawed algorithms” and kept running it. What’s that tell you? I see a couple things here, one a littler closer regulation on algorithms should be in the picture and two the fact that nobody really cares much or has the “engineer” knowledge to go after such issues. By the way I was glad to see the Goldman software engineer get out of jail and I’m not saying he was guilty or innocent, but I was appalled at how the case was handled as the man could not get a jury of peers with his trial and Goldman attorneys did a bit of a bum’s rush on this fact with the case.
SEC Sues Quant–Undisclosed Error in Trading Algorithm- Miscalculating “Risk”-Healthcare Software Evaluates This Factor Too
High Frequency Trading Firm Fined $850k for Losing Control of an Algorithm in Rapid Succession Buying–Bad Math and Some Killer Algos At Work- Keep Occupying…
Lesson here for all of us is to ask questions when the data and formulas appear to be faulting as it does happen and it’s something here we have to live with and granted there’s more that goes “right” than “wrong” but that side is out there. I have addressed the issue of taxing the folks to making billions with algorithms and it seems to be what drives the investor frenzy here with folks thinking they are getting ownership to a “piece of code” but not as they are just using other algorithms to valuate the algorithms that make billions mining data and at times hurting consumers with the ever growing “flawed” data issue we have out there. I thought I was the only one talking about this but recently was contacted by the National Institute of Statistical Sciences that told me to keep blowing the horn and that someone will eventually listen. It’s all about the math, algorithms, data, and “flawed data” that creates markets sometimes where they don’t belong.
So as an investor, what do you have here? Stock in algorithms that may or may not work as sold? It’s just something to think about here when you look at how the US and the banking industry is out of balance with tangibles and intangibles and why companies won’t build factories so we can create products again when they can hire a few geeks, mine the web, create queries and sell the results in a format to again be used to query and qualify with risk assessment. Again don’t get me wrong in the fact that we need some of this for sure and there are reputable software companies like Microsoft, Apple, Oracle, IBM and so on that create such for us but they are not responsible for how everyone decides to use the tools and thus comes the rub with those systems created for “desired” results while perhaps overlooking the word “accurate” at the same time.
Again to maybe restore balance we need to begin licensing and taxing some of these folks making billions selling data that is obtained for free in so many cases. It would sure help shore up the imbalance between tangibles and intangibles that we have. As a consumer I get stuck with Federal excise taxes when I buy a tire to run my car, but do the billionaires running algorithms with little overhead chip in, nope. What’s good for the “duck” is good for the “gander” in this case and corporate America should chip in here otherwise those banks and financial folks are going to keep blowing out of proportion the value of algorithms. Leave the medical device folks alone and if they sell data they would be included like everyone else in taxing the data selling elements created with those algorithms.
We Pay Gasoline Tax to Keep Up the US Highway Infrastructure–Why Not Tax the Data Selling Companies and Banks to Keep Up the US Government IT Infrastructure? A “Buffett Tax” Alternative
They have value and I like technology and used to write software, but we crossing some dangerous territory here with forgetting that I can’t eat an algorithm for dinner, can’t use an algorithm to get well if I am sick (need a pill or shot) and I can’t talk to most of them either. The documentary “Inside Job” was very educational and barely touched on the “algorithm” side of all of this though but still very much worth watching.
“Inside Job”–A Learning Experience and Documentary About Financial Algorithms-And Some of Same Exists in Healthcare
Let’s give some thought along the line here to “de-valuating” some of these algorithms that are out there, especially the ones with “flawed” data as well all know in life anything that has a “dent” in it is not worth anywhere near a product without a dent and we seem to be shopping the “outlet store” of algorithms today. This radio show also stands to enlighten as well.
“Numbers Don’t Lie, But People Do”–Radio Interview from Charles Siefe–Journalists Take Note, He Addresses How Marketing And Bogus Statistics Are Sources of Problems That Mislead the Public & Government
DEVALUATE THE ALGORITHM AND BRING SOME BALANCE BACK TO THE WORLD OF THE TANGIBLES BECAUSE THAT’S WHAT WE EAT AND LIVE IN (HOUSES).
“Devaluate the Algorithm” And “Tax the Data Sellers”–A Cure for Both Healthcare and an Economy Based Heavily on Intangibles–We’ve Lost Our Balance
I read where the other exchanges are not happy with the decision NASDAQ has reached and they have good reason as the
fix is only partial and folks at NASDAQ may seem to forget how integrated we are today and the impact the failure had on other transactions. Why in the world can we not have heavily accredited IT and computer code folks running the show instead of CEO figureheads that have never written a stick of code? Even the Madoff IT folks had it dialed in with computer coding, they said so too and were paid well for “flawed code” that hid certain items and kept the false store front going.
A Case of “Dirty” Algorithms – 2 Madoff Computer Administrators are Indicted – Illegal Coding and Networking for Big Profits
I don’t care what line of business you are in today, but so many of those folks are proving to be more useless as time moves forward as they are just “magpies” that reiterate what the the “real” folks (engineers) are doing. It will be interesting to see the CEO of NASDAQ continue to “worm” as this is not going away anytime soon as the “Attacks of the Killer Algorithms” are amongst us everywhere you go and we need a higher level of intelligence than “greedy magpies” to lead us in the right direction. BD
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