Spy Software Gets a Second Life on Wall Street | Hacker News Reader

Spy Software Gets a Second Life on Wall Street

wsj.com

31 pointsjackgavigan25 comments

I love the part about the software being able to "predict" trouble at Enron when fed a bunch of email from that era. Just like everyone and their brother has come up with an algorithm that can "predict" past movements in the stock market, but every single one of them has trouble predicting the actual future. Folks on Wall Street, of all places, should be wary of people who present such "evidence" of their algorithm's efficacy.

Wall street has 2 parts. First, there's the efficient allocation of resources. There are a few people that consistently make money, like Warren Buffet. But they play on very small edges. Sorta like poker, they consistently come out a few percent ahead of the competition. But there's terrible variance. Is this likely to be a tool that gives real market insight? No.

The other part of Wall Street is like matthew mcconaughey in the wolf of wall street. It's getting people's money in the circus. Go around and around the ferris wheel again and again. This is the sort of thing that can convince people to invest.

I seriously doubt i'd put my own money in just because of this. But people like that exist, and really, they're probably better off with some money in stocks. They'll get a better return than a savings account. So, some people will do the right thing for the wrong reasons.

Of course, everyone needs to be cautious of pure snake oil, but a respectable company putting on a little sideshow from time to time is pretty reasonable.

My thoughts exactly. The same fallacy exists with back testing. OMG this system made 100,000% ROI from 1987~2010! There's so much that happened in that time frame completely unpredictable yet so catastrophic. The fact that they naively trust a bunch of academics to catch rogue traders or terrorists based on past data is laughable. When will people fucking learn? Not my problem I guess.

I also thought originally this was about Hacking Team-esque firms selling spy tools and play cat and mouse with the SEC. SEC always wins.

Come on guys. So many negative quotes about wall street from people here who didn't even bother to read the article.

The article discusses the use of software to catch rouge employee's before they can do any harm and somehow this gets translated to anti wall street comments?

Having said that, the article itself is garbage, its a submarine piece for a Tennessee based ML company that doesn't really provide any real insight to this world and what they do.

Peoples' frustration has nothing to do with the actions of 'rogue employees'... to the contrary, it often seems that when a 'rogue' is trotted out as the culprit for malfeasance, many people with a brain to think come to conclusion that the 'rogue' is simply being scapegoated to paper over an systemic problem (viz LIBOR scandal, 2010 flash crash in US markets, etc.)

> The article discusses the use of software to catch rouge employee's before they can do any harm

It's amazing how much harm you can do with a bit of blush. ;-)

Sorry, couldn't resist poking fun at "rouge", even though it is a perfectly understandable typo.

Even in the midst of Enron rising so fast, there were a ton of people who knew something wasn't right and none of them did anything about it. And why was that?

Money and a LOT of it. Management didn't want to do anything because of they were getting rewarded for how well the company was doing. Why kill your own gravy train? Why would the auditors stop it? The same reason, they were making millions in consulting fees and had no reason to stop the train. Congress could have done something, but thwarted Arthur Levitt's proposed new rule barring accountants acting as consultants. The rule was shot down and the SEC was threatened with losing their funding if they did this by some 50 senators.

So even if this software predicts rouge traders, it can only alert the right people to do something about it. And even if it does, what are the odds those people have the morale compass to make the right decision? Probably less than 50/50 because of the money involved.

Having the software is only the first step in a long chain of decisions which are made by the weakest link in the chain, the human being.

If anyone cared to look, the troubles with Enron's accounting were right there in their SEC filings - long before the shit hit the fan.

In fact the reporter who broke the story did it by simply analyzing the SEC filings, as opposed to getting some insider information, or talking to a whistleblower.

can you recommend any resources to read more about this? I wasn't aware and it sounds incredibly interesting to me.

"The Smartest Guys in the Room" is a fantastic documentary about the whole ordeal. It's not too information dense so you probably want other resources. It's a very good low-effort primer that will leave you with a "what the f*?!" look on your face for the rest of the week.

http://money.cnn.com/2006/01/13/news/companies/enronoriginal...

http://www.newyorker.com/magazine/2007/01/08/open-secrets-3

So Wall Street has their own set of "threat indicators" now. Imagine what happens when CISA (Cyber Intelligence Sharing Act) passes, allowing them to share this data with military and police surveillance agencies. Suddenly, anyone who does "suspiciously" well on the stock market could have a federal investigation secretly launched against them.

> Suddenly, anyone who does "suspiciously" well on the stock market could have a federal investigation secretly launched against them.

Do you not think that's the case today?

That's what the SEC does.

infragard.net

A lot of the impetus behind investment banks' interest in these types of products stems from the need to be able to demonstrate to regulators that they are doing something about past failings. Software is attractive because if you have a "system" to manage these risks, it means you don't have to hire (expensive) staff.

The problem I'm seeing is that the industry is so complex that software companies often don't fully understand the problems that financial services companies need to solve, so the solutions they're producing come up short. I reckon it's going to be a couple more years before these solutions evolve/develop to the point where they start delivering on their promise.

What would be intereting is to feed it The Hacking Team emails https://wikileaks.org/hackingteam/emails/

Surprise! Wall Street is all in on manipulation and abuse.

If you read the actual article, you'd see that financial firms are using this software to try and detect rogue traders and fraudulent activity.

Bypass the paywall with Google's referrer:

https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web...

Is bypassing paywalls illegal, like circumventing DRM?

Nope not at all.

And thanks for the link I appreciate it @witty_username

I doubt you.

I think there should be a "soft rule" against submitting content behind a paywall. "Soft" in the sense that there are known exceptions to the rule; unique story or voice, life changing story, etc.

I don't think "hacking team rehash + greedy wall street" is going to make the list of exceptions.

I agree. I get so much frustrated everytime I end up behind a paywall for an article I was genuinely interested to read. Plus, content behind paywalls is not something that should be acceptable in an open community like KN where no one should have exclusive access to knowledge shared on the platform

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