Comments on: When information systems fail A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: JohnAllspaw Tue, 17 Dec 2013 13:57:37 +0000 Please don’t refer to Reason’s swiss cheese model, it’s inadequate for explanation and prevention of these sorts of events, and has unfortunately been through a confusing history in the domains in which Reason originally spoke about (aviation, patient safety, power plants, etc.)

As to how indignant we can feel about Knight Capital’s shortcomings, we cannot take the SEC report as a postmortem document or accident investigation. I’ve written a good amount about that here: unterfactuals-knight-capital/

By: ckbryant Mon, 28 Oct 2013 13:26:00 +0000 You are kidding me, yes? Megan McArdle wrote a book about failing upwards? Although, I guess it would come down to her or George W. Bush in terms of qualifications.

By: CDN_Rebel Sun, 27 Oct 2013 01:53:43 +0000 Maybe (hopefully?) this means the end of suffering though Ms McArdle’s ‘work’ in otherwise reputable publications…?

By: Kaleberg Sat, 26 Oct 2013 03:47:59 +0000 The usual model for studying failure in the engineering world involves a web of causality and when something fails, there is talk of the chain of failure, the path through the web which led to disaster.

If you read NTSB reports after an airline crash or close call, you’ll see that the chain of failure often starts early, perhaps with a bit of fog, an overly optimistic assessment, failure to double check some piece of equipment. Then it builds intensity as failure leads to failure leads to failure, usually while well above ground level. The safety engineer’s goal is to break the chain, ideally as soon as possible which is why aviation and other high risk fields are full of checklists, test and safety gear, reams of documentation and big labels.

In the computer security world, they talk about defense in depth, designing so that if one security element fails, others will be in place to maintain security. (Diebold, when it was manufacturing voting machines was notorious for weakness in depth. One blogger discovered that the sample keys shown in their online catalog were the actual master keys for most of their systems.)

In fact, our economy has a certain defense in debt. Kicking out the Glass-Steagal firewall was expensive – try pricing an $800B emergency credit line on the free market – but there were mechanisms in place. Unfortunately, it is much more profitable to operate unsafely and then go on welfare than operating within safe parameters. We missed a major opportunity to restructure our increasingly inefficient, ineffective and unstable financial system.

(The recent $100 fine imposed on Morgan Stanley was ridiculous. If we treated small scale bank robbers like that, you’d be an idiot not to put a demand for $10,000 in small bills on the back of every deposit slip. After all, you could just pay the $100 fine and keep the rest of the money.)

By: Altoid Sat, 26 Oct 2013 01:24:51 +0000 @y2kurtus, you say “I drive my SUV into a telephone pole or worse yet a pedestrian … I am 100% at fault but the government does not impose a negative outcome on me.”

Hmm. On my own property, maybe no charges for hitting a pole. But otherwise, I don’t have such superpowers. If I drove my car into a telephone pole on a public roadway, stone cold sober and no weather issues or darting animals or whatever, I’d expect to get charged with reckless driving or something like that and take some points on my record.

And if I hit a pedestrian I can say with some confidence that I should expect several different and related charges even if the lucky victim didn’t sustain a scratch. (Unless I lived in Ottawa, where I understand there’s no penalty for that kind of innocent fun.)

So I’m afraid I simply don’t understand how the analogy could work, unless vehicular violations charges and points don’t count as government-imposed negative outcomes.

By: willid3 Fri, 25 Oct 2013 21:25:34 +0000 IT systems fail all the time. they just usually dont make headlines. and thats because they are basically an art form, with parts of planning, experience and skill. take any part out, and you are likely heading to a failure. most only effect the users of the system for a time. other failures this year, would include an airline, an IT/MEDIA company plus 100s of others. most never make the news

By: Strych09 Fri, 25 Oct 2013 18:12:10 +0000 Have to agree with Matthew_Saroff on this one.

Shorter start for a review of the book: “Because at heart they are hedonists, many journalists need a way to finance their lifestyles at a level higher than their current salary or family support affords. This means they either have to grind away writing numerous freelance pieces over many years in addition to working their day jobs, or they can write a best selling non-fiction book and then spend their later years raking in royalties and basking in notoriety.

Having Ivy League credentials, but otherwise an obscure and talent-challenged blogger, Megan McArdle, has apparently opted for the latter career approach, and has a new book out. Robert Wright and Malcolm Gladwell are definitely not looking over their shoulders…”

By: Matthew_Saroff Fri, 25 Oct 2013 16:55:16 +0000 Have to agree with crocodilechuck.

Looking for insights from Megan “Math is Hard” McArdle is like looking for a Polar Bear in Egypt.

It will only be there if someone else caught it, and delivered it to the zoo.

By: SteveHamlin Fri, 25 Oct 2013 14:30:59 +0000 @y2kurtus: you wrote “JPM made some terrible decisions in the Whale trade fiasco but absolutely broke no laws”

That is incorrect. “Laws” include mandatory regulations imposed by statue, which JPM violated without question.

“Through those fines, the bank acknowledged that it violated banking rules by not properly overseeing its trading operations. In legal language, regulators said that the bank engaged in “unsafe and unsound practices.””

Source: panies/jpmorgan-whale-settlement/

“The Justice Department, even after filing criminal charges against two former JPMorgan traders who allegedly helped conceal the losses, is still investigating whether to bring any action against the bank.”

“The CFTC, in its case, charged the bank with violating a prohibition on manipulative conduct when it traded in the credit default swaps that the bank had built an outsized exposure to by early 2012 and then needed to quickly exit to try to minimize the losses. By selling a huge volume of swaps in a concentrated period, the bank’s traders “recklessly disregarded” the principle that legitimate market forces should set prices, the CFTC said.”

“JPMorgan traders acted recklessly with respect to this fundamental precept by employing an aggressive trading strategy,” the CFTC said in a portion of the settlement to which the bank admitted to.”

Source: 6/us-jpmorgan-cftc-idUSBRE99F0JW20131016

By: crocodilechuck Fri, 25 Oct 2013 10:44:54 +0000 Felix,

Read Proust.

Not Megan McCardle