On this day in 2013 the US stock markets saw a Flash Crash.
The Dow Jones fell by a whopping 130 points in the course of a few minutes whilst the S&P 500 index saw the removal of $136 billion before both markets recovered rapidly to their pre-crash rates. The Flash Crash phenomenon, with stock prices rapidly falling due to Black-Box (algorithmic) trading that relies on rapid stock and asset turnover, is a relatively new economic occurrence. What possible economic shock could have caused this flash crash: a natural disaster? A drop in the currency markets? A declaration of war?
It was a single tweet from the Associated Press’ twitter account sent out at 12.07pm to over 2 million of its followers.
The offending tweet that caused this havoc read: “”BREAKING: Two Explosions in the White House and Barack Obama is injured.” As the majority of you may be aware, no such incident occurred, and the tweet was sent as a result of the AP twitter being hacked. Despite this, wary stock brokers aided by “sophisticated” Black-Box systems begun to pull out of assets rapidly. This lead to the vast devaluation of the stock market as consumer confidence fell in the forthcoming minutes. Once the confusion had been cleared up, with a clarification from AP, the stock market rose back to its previous level a mere 10 minutes after the original crash.
The incident highlights the pure power of social media to influence the world we live in. The idea that a single tweet from a sole source can cause such monumental damage to the world’s biggest economy is truly frightening. The presidential campaign of Donald Trump again highlighted how out of touch the established political classes are with new era technology. Trump’s masterful use of 140 characters to outline policy, lambaste his opposition and send the media into meltdown was truly a demonstration of the influence of social media and partly the reason for his electoral success. Never in the breath of human history have so many people been able to, with ease and without cost, reach out and influence so tremendously the world around us. This day in 2013 personified the interconnect global era of technology to which we exist with both its vast beneficiaries but also countless risks.