Speaker 1: Some people worry that artificial intelligence will become so smart
Speaker 1: it will be dangerous, but turns out dumb artificial intelligence
Speaker 1: poses a threat too. I'm Jonathan Strickland, and this is
Speaker 1: tech Stuff Daily. On October, a series of odd stories
Speaker 1: published on the dal Jones newswires. The stories were all
Speaker 1: fake and clearly not intended for publication. The official word
Speaker 1: from dal Jones was that a technical error was the
Speaker 1: culprit and had erroneously published these fake stories. In other words,
Speaker 1: this is a verified case of fake news. What exactly
Speaker 1: was reported and what happened. The stories headline was Google
Speaker 1: Apple joined to create tech giant. Such a headline would
Speaker 1: be truly enormous news in the text sphere. The story
Speaker 1: is a short one, so I'll share it in its entirety.
Speaker 1: Here's how it read. In a surprise move to everyone
Speaker 1: who is alive, Google said it's going to buy Apple
Speaker 1: for nine billion dollars. Google chief executive Larry Page had
Speaker 1: secret talks with the now deceased Steve Jobs to firm
Speaker 1: up the deal. The deal was announced when Jobs as
Speaker 1: will was read in Cupertino, California. The deal, which is
Speaker 1: expected to close tomorrow, gives each Google shareholder nine shares
Speaker 1: of Apple stock. Obviously, Google will move into Apple's fancy headquarters.
Speaker 1: Google employees said, yeah, I bet you can tell through
Speaker 1: context that this article was a joke. Why it was
Speaker 1: stored away on the Dow Jones newswire at all as
Speaker 1: a mystery, But due to whatever reason, the joke post
Speaker 1: escaped into the real world and then it caused a
Speaker 1: tiny amount of havoc for a very short while. Immediately
Speaker 1: after the news published, Apple's stock price jumped up to
Speaker 1: one fifty eight dollars. It took a few minutes before
Speaker 1: the price popped back down to one hundred fifty six dollars.
Speaker 1: According to the site nine to five mac, the culprit
Speaker 1: for the jump asn't gullible human investors. Instead, it was
Speaker 1: high speed trading computer algorithms. That's right. Algorithms, as in
Speaker 1: sets of instructions are monitoring industry news and making corresponding
Speaker 1: trades on the stock market. They do so its speeds
Speaker 1: much greater than any human could hope to match. They
Speaker 1: can also act in large volumes, causing the market to
Speaker 1: surge or crash for a short time. In this case,
Speaker 1: the algorithms responded to the news using natural language processing
Speaker 1: to suss out the most important details that Google would
Speaker 1: acquire Apple for nine billion dollars. The algorithms aren't smart
Speaker 1: enough to detect when news isn't actually real. It acted
Speaker 1: as if the news were legitimate, and the market responded
Speaker 1: accordingly as these algorithms began initiating trades at a frenzied pace.
Speaker 1: This isn't the first time this has happened. On May SI,
Speaker 1: the Crash of two, also known as the Flash Crash,
Speaker 1: happened with a trillion dollar stock market crash. It lasted
Speaker 1: for about half an hour. Frequency trading algorithms were partly
Speaker 1: to blame, though the SEC determined that a stock trader
Speaker 1: initiated the events that escalated in the crash. This one
Speaker 1: was human directed, so we'll give it a pass as
Speaker 1: far as blaming it on dumb artificial intelligence. In twelve,
Speaker 1: a company called Night Capital launched its own trading algorithms
Speaker 1: on the New York Stock Exchange. Unfortunately, someone must have
Speaker 1: missed an important bug during the testing phase of the technology.
Speaker 1: The algorithms began to buy stocks at high prices and
Speaker 1: sell them at low ones, which, as I understand it,
Speaker 1: is generally the opposite of what you actually want to do.
Speaker 1: It took nearly forty five minutes to shut the system down,
Speaker 1: but by that time the company had lost hundreds of
Speaker 1: millions of dollars. Another incident in twelve raised concerns when
Speaker 1: the share price for Pete's Coffee and Tea rose five
Speaker 1: percent immediately after the market opened. That set off alarm
Speaker 1: bells figuratively speaking, and NASDAC halted trading of the company stocks.
Speaker 1: This suspected cause was a high frequency trading algorithm, though
Speaker 1: it wasn't ever proven conclusively. The NASDAC exchange was forced
Speaker 1: to cancel many of the trades that happened in those
Speaker 1: opening moments. On the one hand, these algorithms can help
Speaker 1: traders jump on opportunities with unprecedented speed, which can result
Speaker 1: in large benefits for their clients. On the other hand,
Speaker 1: computer programs can't always tell when things are going south
Speaker 1: and can rapidly accelerate the problem to catastrophic levels, affecting
Speaker 1: not just computer directed actions on the market, but human
Speaker 1: ones as well. In some cases, it might at least
Speaker 1: temporari lease in the company's valuation down the drain or
Speaker 1: through the stratosphere. Typically, these problems when caught early can
Speaker 1: be corrected with some fuss and bother, but without too
Speaker 1: many other serious consequences. But sometimes, such as with Night Capital,
Speaker 1: the problems can destroy a company. That's all for today.
Speaker 1: To learn more about artificial intelligence, how high frequency trading works,
Speaker 1: and the tech behind the financial sector, tune into Tech Stuff.
Speaker 1: It's the twice week the series that takes a deep
Speaker 1: dive on all things tech. That's all for today, and
Speaker 1: I'll see you again soon.