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.

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As Donald Trump once asked, how do you impeach a President?

Starting the process is much easier than you might think. 

Yes, on Friday, Donald Trump will be inaugurated as the 45th President of the United States. And no, you can’t skip the next four years.

But look on the bright side. Those four years might never happen. On the one hand, he could tweet the nuclear codes before the day is out. On the other, his party might reach for their own nuclear button – impeachment. 

So, how exactly can you impeach a President? Here is our rough guide.

OK, what does impeachment actually mean?

Impeachment is the power to remove an elected official for misconduct. Here’s the relevant clause of the US Constitution:

“The President, Vice President and all Civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.”

Impeachment is actually a legacy of British constitutional history, and dates back as far as 1376, but according to our own parliamentary website, in the UK “this procedure is considered obsolete”. 

It’s up to the US Congress to decide whether to impeach and convict a President. Both houses are controlled by the Republicans, so impeaching Trump would mean turning against one who is – technically at least – one of their own. Since he’s already insulted the neighbouring country, supported discrimination against Muslim immigrants and mocked a disabled reporter, their impeachment threshold seems pretty high. But let’s imagine he surpasses himself. What next?

The impeachment process

Members of the House of Representatives – the lower chamber of the Congress – can start the impeachment process. They in turn may be encouraged to do so by voters. For example, there is a whole Wikipedia page dedicated to people who tried to impeach Barack Obama. One Impeach Obama supporter simply gave his reason as stopping the President from “pushing his agenda”. Another wanted to do so on the grounds of gross incompetence...

But for an impeachment attempt to actually work, the impeacher needs to get the support of the house. If a majority agree with the idea of impeaching the elected official, they nominate members to act as prosecutors during the subsequent trial. This takes place in the Senate, the upper house of Congress. In most impeachments, the Senate acts as judge and jury, but when a President is impeached, the chief justice of the United States presides.     

Two-thirds of the Senate must vote for impeachment in order to convict. 

What are the chances of impeaching Donald Trump?

So if Trump does something that even he can’t tweet away, and enough angry voters email their representatives, Congress can begin the process of impeachment. But will that be enough to get him out?

It’s often assumed that Richard Nixon was kicked out because he was impeached for the cover up known as the Watergate Scandal. In fact, we’ll never know, because he resigned before the House could vote on the process.

Two decades later, the House got further with Bill Clinton. When it emerged Clinton had an affair with Monica Lewinsky, an intern, he initially denied it. But after nearly 14 hours of debate, the Republican-controlled House of Representatives decided to impeach him on grounds including perjury and obstruction of justice.

In the Senate trial, Clinton’s defenders argued that his actions did not threaten the liberty of the people. The majority of Senators voted to acquit him. 

The only other Presidential impeachment took place in 1868, when President Andrew Johnson, removed a rabble-rouser from his Cabinet. The guilty vote fell short of the two-thirds majority, and he was acquitted.

So, what’s the chances of impeaching Trump? I’ll leave you with some numbers…

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.