We're living in the age of the hacker

Hack or be hacked.

Never in the history of written communication could 140 characters have the impact that they can have now

Two weeks ago, after gaining access to the Associated Press’s main Twitter account (@AP), the Syrian Electronic Army (SEA) posted a fake tweet reporting two explosions in the White House and the injury of President Barack Obama. Within seconds, US financial markets dropped by about 1%.

Minutes later, Twitter was abuzz with refutations. Reporters at the White House tweeted that they felt no explosion, and AP reporters and the AP Politics Twitter account announced that @AP had been hacked. At his afternoon briefing, White House press secretary Jay Carney confirmed that Obama was indeed unharmed. Financial markets returned to their pre-hoax level.

The @AP Twitter hoax represents systemic risk that cannot be eliminated, for it arises from the interaction of highly integrated financial markets and increasingly democratized news delivery. Given strong incentives for malicious parties to perpetrate such hoaxes, we should expect to see an increase in incidents.

Financial markets are vulnerable to manipulation, because they are not in the business of evaluating the truth. Trading often favours first movers, so being fast but wrong can still be profitable.

Imagine that a sophisticated trading firm has invested significant resources to develop an algorithm that quickly evaluates the potential market impact of news, and then automatically sends orders to trade based on that predicted impact. When that algorithm parses a tweet from the AP containing important keywords (explosion, White House, and Obama), it will send orders to sell with the expectation that the market will drop as others – first, slower algorithms, then even slower humans – start to process the same news.

The first mover is happy to make such trades without verifying that the news is true. If it is true, the market will stay down or continue dropping, and the first mover will profit from the sales that it has made. If the story is a hoax, the market will probably return to its earlier, fairly valued level, and the first mover will break even on its sales, and possibly profit from any position purchased as a hedge when the market was down. The first mover’s algorithm worked, regardless of the story’s veracity.

The likely losers in the @AP Twitter hoax were later movers who did not react quickly to the news, but reacted instead to the market’s movement.

These late movers were also likely to have been sophisticated electronic or institutional traders; some were probably using arbitrage-based strategies that relied on the futures market for a calculation of the fair price.

The market’s vulnerability to hoax stories is thus difficult to eliminate, for it is inherent in its structure. It cannot be regulated away or fixed by technology or surveillance.

Even if markets moved more slowly, there would still be a first mover who responded before such a news story was revealed as a hoax. This dynamic is similar to that of an asset bubble, albeit faster. In a bubble, valuations are based on collectively evaluated evidence, and those who enter the market earliest often benefit. Whether evaluating an assumption about the rise of house prices or whether a news story is true, the market does not provide a definitive answer instantaneously.

If protecting against hoaxes is not the market’s purview, can news agencies or new media entities like Twitter prevent such deception? To be sure, they have suffered reputational damage from this fiasco and will likely try to improve. But their efforts will not be enough.

Twitter’s vulnerabilities were technically understood before this event, and the service was already moving toward a more sophisticated authentication model (a password paired with a one-time key from a text message or other device). Twitter will likely implement this soon. It should also consider adding an optional “two-key” system, in which an independent signoff from a separate account is required before a proposed tweet is broadcast. But, while such measures would increase the difficulty of hacking the system, no technological fix can make it impenetrable.

What about the AP’s vulnerabilities? Attackers launched a “phishing” attempt against the AP’s emails shortly before the hoax tweet was sent. Phishing attacks, in which an employee is duped into sending a password to a third party or clicking an untrusted link that installs malicious software, represent a hybrid of cultural and technological failures.

As attackers become more sophisticated, they send better-crafted emails, sometimes impersonating trusted sources that lure unwary users. Crafting a culture of security is difficult and often at odds with the dynamic and decentralised work environment of a fast-moving newsroom.

This story can be read in full at economia

Chris Clearfield is a principal at System Logic, an independent research and consulting firm that focuses on issues of risk and complexity. András Tilcsik is an assistant professor of strategic management at the Rotman School of Management at the University of Toronto.

Photograph: Getty Images

This is a news story from economia.

Photo: Getty
Show Hide image

Unite stewards urge members to back Owen Smith

In a letter to Unite members, the officials have called for a vote for the longshot candidate.

29 Unite officials have broken ranks and thrown their weight behind Owen Smith’s longshot bid for the Labour leadership in an open letter to their members.

The officials serve as stewards, conveners and negotiators in Britain’s aerospace and shipbuilding industries, and are believed in part to be driven by Jeremy Corbyn’s longstanding opposition to the nuclear deterrent and defence spending more generally.

In the letter to Unite members, who are believed to have been signed up in large numbers to vote in the Labour leadership race, the stewards highlight Smith’s support for extra funding in the NHS and his vision for an industrial strategy.

Corbyn was endorsed by Unite, Labour's largest affliated union and the largest trades union in the country, following votes by Unite's ruling executive committee and policy conference. 

Although few expect the intervention to have a decisive role in the Labour leadership, regarded as a formality for Corbyn, the opposition of Unite workers in these industries may prove significant in Len McCluskey’s bid to be re-elected as general secretary of Unite.

 

The full letter is below:

Britain needs a Labour Government to defend jobs, industry and skills and to promote strong trade unions. As convenors and shop stewards in the manufacturing, defence, aerospace and energy sectors we believe that Owen Smith is the best candidate to lead the Labour Party in opposition and in government.

Owen has made clear his support for the industries we work in. He has spelt out his vision for an industrial strategy which supports great British businesses: investing in infrastructure, research and development, skills and training. He has set out ways to back British industry with new procurement rules to protect jobs and contracts from being outsourced to the lowest bidder. He has demanded a seat at the table during the Brexit negotiations to defend trade union and workers’ rights. Defending manufacturing jobs threatened by Brexit must be at the forefront of the negotiations. He has called for the final deal to be put to the British people via a second referendum or at a general election.

But Owen has also talked about the issues which affect our families and our communities. Investing £60 billion extra over 5 years in the NHS funded through new taxes on the wealthiest. Building 300,000 new homes a year over 5 years, half of which should be social housing. Investing in Sure Start schemes by scrapping the charitable status of private schools. That’s why we are backing Owen.

The Labour Party is at a crossroads. We cannot ignore reality – we need to be radical but we also need to be credible – capable of winning the support of the British people. We need an effective Opposition and we need a Labour Government to put policies into practice that will defend our members’ and their families’ interests. That’s why we are backing Owen.

Steve Hibbert, Convenor Rolls Royce, Derby
Howard Turner, Senior Steward, Walter Frank & Sons Limited
Danny Coleman, Branch Secretary, GE Aviation, Wales
Karl Daly, Deputy Convenor, Rolls Royce, Derby
Nigel Stott, Convenor, BASSA, British Airways
John Brough, Works Convenor, Rolls Royce, Barnoldswick
John Bennett, Site Convenor, Babcock Marine, Devonport, Plymouth
Kevin Langford, Mechanical Convenor, Babcock, Devonport, Plymouth
John McAllister, Convenor, Vector Aerospace Helicopter Services
Garry Andrews, Works Convenor, Rolls Royce, Sunderland
Steve Froggatt, Deputy Convenor, Rolls Royce, Derby
Jim McGivern, Convenor, Rolls Royce, Derby
Alan Bird, Chairman & Senior Rep, Rolls Royce, Derby
Raymond Duguid, Convenor, Babcock, Rosyth
Steve Duke, Senior Staff Rep, Rolls Royce, Barnoldswick
Paul Welsh, Works Convenor, Brush Electrical Machines, Loughborough
Bob Holmes, Manual Convenor, BAE Systems, Warton, Lancs
Simon Hemmings, Staff Convenor, Rolls Royce, Derby
Mick Forbes, Works Convenor, GKN, Birmingham
Ian Bestwick, Chief Negotiator, Rolls Royce Submarines, Derby
Mark Barron, Senior Staff Rep, Pallion, Sunderland
Ian Hodgkison, Chief Negotiator, PCO, Rolls Royce
Joe O’Gorman, Convenor, BAE Systems, Maritime Services, Portsmouth
Azza Samms, Manual Workers Convenor, BAE Systems Submarines, Barrow
Dave Thompson, Staff Convenor, BAE Systems Submarines, Barrow
Tim Griffiths, Convenor, BAE Systems Submarines, Barrow
Paul Blake, Convenor, Princess Yachts, Plymouth
Steve Jones, Convenor, Rolls Royce, Bristol
Colin Gosling, Senior Rep, Siemens Traffic Solutions, Poole

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.