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There is a lot going on in the world, to the point it is hard to keep up with the news, let alone spend time putting thought into what it means . 

The other day I wrote a post about the [*eight dollar trolls*](https://hive.blog/hive-167922/@tarazkp/8-dollar-troll) on Twitter affecting the markets and how it seems to me that the focus of the problem is being directed in the wrong direction. They are blaming the system that allows the trolls, not the processes that do not mitigate the risk of trolls. Not only are they apparently expecting there to be expecting there to be "no trolls", even though they know there *are trolls* looking to affect the markets, they haven't adjusted at all. For investment managers, risk mitigation should be part of their due diligence, yet they haven't changed their behavior at all.

>Perhaps they deserve to get burned.

![image.png](https://images.hive.blog/DQmVorRdAC9Lce46HkPg55AabDgGkQWUFD4qTHH3dgs5QUL/image.png)

*Deserve* might not be the right word here, but they themselves would often cite the, "fool and their money are soon parted" position, where people without financial literacy will ultimately throw their money away, or be unable to hold onto it. In a knowingly compromised system, acting as if it isn't compromised is folly.

![image.png](https://images.hive.blog/DQmREsVjPKAXvhwYHfkGPfaFLYPHwHKPLpCV2ZUsAc5EfBB/image.png)

Who is to blame?

I have been thinking about ways to visualize this for myself through various examples and one that I have found useful so far, is a scenario where an appliance in a house fails and starts a fire. The fire takes hold during the night and unaware, the residents are lost. Is it the fault of the appliance? 

*Yes.*

But knowing that appliances can fail, what is the duty of care of the owners? While the appliance was the reason for the fire starting, as this is *always* a potential risk, the installation of fire alarms is recommended and in most countries these days, legislated to be so. It wouldn't have prevented the *catalyst* for the fire, or the early spread, but could very well have given the possibility to stop the spread or *get out of the house* in time. 

>How come these investment firms have no smoke alarms installed?

There is *plenty of smoke,* yet they keep on sleeping. 

There are a whole range of issues in play, but there are systematic errors that are bringing in poor results. Meaning, regardless of the catalyst that lights or speeds the failure, it is still up to the people relying on the system *to work* that are ultimately responsible for their outcomes. When people are *paying* for fund managers to *manage* their money, the excuse of "our bot followed the tweets of trolls" shouldn't be an acceptable excuse. 

>If all your friends jumped off a cliff, would you jump too?


This is a common thing parents might say to a preteen who says, "everyone else was doing it".

Yet, this is what we are dealing with now, where people whose responsibility it is to ensure that the systems and processes employed work and limit risk, are not *doing their job.* But it is par for the course in a society that looks to shift blame to anyone else, rather than actively improve the system that they utilize and in this case, *make money from.* If their systems are not equipped to mitigate known risks, what is their value proposition - what are the fees being paid for? 

Of course, as users of the services, it is up to us to do our own due diligence and question the value of what we are paying for and whether they are doing a good enough job that we want to keep using the services, but if we aren't even focusing on the right questions, what are we asking? It doesn't matter if Twitter is being used for investment information and signals, the question should be asked as to whether it *should be used,* especially under the current conditions. If the investment bots are unable to adjust for the conditions, switch them off and trade manually.

>This creates problems.

I know many people who have been driving a car with automated systems for so long, they can no longer drive without. Unless they have sensors to tell them if they are going to hit something, they can't reverse park, because they no longer understand *the dynamics* of the car and environment working in conjunction. They can't use their mirrors effectively and they don't know the dimensions of the car in relation to the cars in front and behind, because they rely on the digital layouts and the screens. The question starts to become, are they able to really drive, or do they have the impression they can drive, but in reality, they have very little control at all?

While automation increases efficiency, the more we rely upon it, the weaker our own manual skills become. Not only this, automation requires system design that is not necessarily good at taking into consideration random. We are hearing more and more the idea of "Black Swan" events, but this term is being diluted, because the events are actually not that rare, but there is a systematic failure that means they aren't factored into the equation for some reason. Failure in the system should be *expected,* so not having backup systems to mitigate the risk doesn't make failure an outlier, it makes the system, *poor in design.*

In a system like the financial economy that is *designed to fail,* failure should be expected, so the more we automate for the good times, the more common failures will happen and the larger the impact they will have, because a small catalytic event sets off a chain reaction that may have no redundancy systems in place to *stop the burn.*

Redundancy systems are expensive, so when maximization practices are employed to generate the highest ROI, it will eventually lead to a reduction or complete removal of the systems to increase the gains. When things are working as expected, everyone is happy, but a small change in the environment can change outcomes very fast indeed. 

With so much happening in the world - it is good to review our processes and, install some alarms.

To not do so shows a lack of good sense, understanding, and foresight. Can lead to an act or instance of foolishness. And can be a very costly undertaking having an absurd or ruinous outcome.

Folly.

Taraz
[ Gen1: Hive ]



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