Paul Wilson

Paul is a regional sales manager for TownNews.com. He previously worked at three daily newspapers and was managing editor of the hyperlocal site EveryBlock.com. You can follow him on Twitter, @pwilson03.


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How high-frequency journalism is like high-frequency trading

In two very different industries — the news media and the financial sector — once unfathomable technology is feeding intense competition in ways that have prompted serious soul searching and some very troubling mistakes.

For the world’s financial markets, questions are being asked about high-frequency trading (HFT) where complex algorithms analyze markets and execute orders at incredibly quick speeds, often competing over milliseconds.

For journalism, there is no comparable term — though “high-frequency journalism” might be appropriate. Tools like Twitter have removed built-in, age-old safeguards (notably, time) that many reporters used to double-check information, amping up competition and lowering the bar for verification before publication.

This summer could be a case study in what can now go wrong in both industries.

And, of course, both industries struggle with a sort of “echo effect” — where a high degree of interconnectedness makes mistakes propagate faster than ever before.

With so much at stake, are the two industries, essentially, engaging in competition for competition’s sake, and dismissing the public good that is supposed to be part of the bargain?

Incentivizing speed

Wired notes that “Wall Street used to bet on companies that build things. Now it just bets on technologies that make faster and faster trades.”

Trading increasingly is an end in itself, operating at a remove from the goods-and-services-producing part of the economy and taking a growing share of GDP — twice what it did a century ago, when Wall Street was financing the enormous industrial expansion of the economy.

New Republic blogger Amy Sullivan made a similar point about the intense competition after the Supreme Court’s June 28 ruling.

Because if this is just about bragging rights, it needs to stop. … because the race to be first is no longer just a feature of news coverage but often the main factor driving it.

In both debates, defenders of the new orders take predictable stances. Progress is good, and technology saves money through efficiencies and by cutting out the need for intermediaries. In the case of journalism, that has meant traditional reporters and editors and in the case of the financial markets, floor traders.

“By eliminating the friction created by working through intermediaries, the net costs of trading have fallen dramatically — savings that benefit society as a whole,” John Lowrey, global head of electronic products and direct market services at commodities broker Marex Spectron, wrote in Financial Times last month.

The defenses also seem to come down to an unyielding belief in competition. One Canadian journalist last year wrote that HFT proponents believe it gives “Adam Smith’s invisible hand a bionic upgrade by making it better, stronger and faster.”

Meanwhile, Ad Week asked journalists who “have made a name for being fast and accurate” about the competition in the wake of the Supreme Court snafu. The magazine noted that “relentless news landscape of micro scoops can swallow up even the most reputable news organizations and journalists.”

One unidentified wire service editor probably said it most succinctly. “If I’m slow, I’m not doing my job.” And Business Insider Deputy Editor Joseph Weisenthal tweeted the following, comparing modern reporting to a classic arcade game:

Now, if journalists think they’re under the gun, they might take solace that they’re not on Wall Street. A new Transatlantic cable will transmit financial information across the Atlantic 5 milliseconds faster than current methods. A report from Finance Watch summed up the gain by noting that, “it takes the human eye 350 milliseconds to blink.”

The echo effect

Even if the speed measurements differ, there is an echo problem in both environments. Finance Watch noted that HFT created greater interconnectedness, which “could amplify and ‘facilitate’ the contagion effect of shocks across markets.” Commodity Futures Trading Commissioner Bart Chilton made a similar point, telling Barron’s that the 2010 crash “began in the futures market and quickly leapt over to the securities market.”

This might sound familiar in modern media, where an errant bit of news can be repeated by other outlets, bloggers or anyone on Twitter — which despite widespread use has resisted calls for a correction function. Even if the original outlet corrects the mistake, there’s no way to ensure that the “secondary” reports were corrected. Call it the RT problem.

Tom Goldstein, publisher of SCOTUSblog, aptly noted how quickly an incorrect report metastasized within CNN on the morning of the Supreme Court decision, showing another angle of interconnectedness:

CNN had also converted itself into an integrated circuit in which its electronic media teams were tied directly into the broadcast operation. But not anticipating the possibility of an error or confusion, its first Web, electronic, and Twitter reports did not hedge.

The Supreme Court reporting gaffes were compared with the inaccurate headlines from an earlier era declaring, “Dewey beats Truman”, but UPI noted a key distinction:

[W]hat’s different in 2012 than it was in 1948 is the pressure on news organizations to get breaking news out first, and faster than everyone else. At its peak, at 10:17 a.m., more than 13,000 tweets about the Supreme Court decision per minute were flying, and many of them were simply wrong.

Interestingly, HFT’s recent time under the microscope probably isn’t due solely to high-profile meltdowns. Proponents for years pointed to HFT’s ability to lower costs to invest. But that trend is reversing itself. Obviously, it’s very difficult to track anything similar in journalism — though maybe someone is doing the research — so it’s harder to quantify the loss (or gain) provided by a high-frequency method.

Is regulation a solution?

There’s another important difference. Those in the financial industry might flinch at increased regulation, but even some HFT fans advocate the use of “circuit breakers,” which Securities and Exchange Commission Chairman Mary Schapiro said helped prevent the Knight Capital fiasco from spreading in a way similar to the 2010 “flash crash.”

Some question whether circuit breakers are enough, but they’re more than the news media will have (or, really, would want). Federal regulation is anathema to journalists and runs counter to the First Amendment. That means it’s difficult to systematically cut down on problems like the errant Supreme Court reporting — other than best efforts to strike a balance between being first and being right.

Following inaccurate reporting that U.S. Rep. Gabrielle Giffords had died last year, Bill Keller, executive editor of the New York Times, told his own publication that “the tension between speed and accuracy is ‘real but exaggerated.’ ” In that story, Associated Press Executive Editor Kathleen Carroll said, “We have to be able to do both.”

Billions of dollars, maybe more, are on the line with HFT. For the media, the stakes are less concrete, and more about reputations and trustworthiness. It’s debatable which camp is more self-aware — the media has predictably done a fair bit of navel-gazing on the matter. Last month, one of the early architects of HFT, Thomas Peterffy, reportedly told NPR that he’s in favor of more regulation.

“Whether you can shave off three milliseconds in the execution of an order has absolutely no social value,” he said, before comparing the current climate with the Cold War arms race. “It’s a situation where I do not quite see how this will resolve itself … to the benefit of the marketplace. It’s a quandary.” Read more

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Cubs player learned about pending trade just an hour before reporter tweeted about it

Cubs President Theo Epstein weighed in Wednesday on the controversy leading up to the trade of popular pitcher Ryan Dempster, saying one factor in the nine-day drama was how quickly news spread through social media.

Early last week, Epstein worked out a deal to send Dempster to the Atlanta Braves. The news was leaked and MLB.com reporter Mark Bowman reported that the deal was “confirmed.”

But Dempster hadn’t approved the trade, which players of his seniority level have the right to do. Dempster decided to hold out for a deal to the Los Angeles Dodgers, and the Braves decided not to wait.

The affair set off a firestorm among some fans and in the blogosphere, as some turned on Dempster for costing the Cubs valuable pitching prospect Randall Delgado. A week later, and just minutes before Tuesday afternoon’s trade deadline, the Cubs sent Dempster to the Texas Rangers for two lesser prospects.

Up-to-the-second reporting via social media may have affected the outcomes for four teams.

Epstein, speaking to reporters Wednesday, said Dempster knew the terms of the trade for only an hour before Bowman tweeted about it.

After that, “the story leaked and with the nature of technology and social media these things obviously spread quickly like wildfire,” Epstein said, according to the Chicago Sun-Times. “So Ryan never got the opportunity for more than I’d say an hour to fully contemplate Atlanta with a deal actually in place.”

Epstein defended Dempster’s decision. However, he and Cubs General Manager Jed Hoyer disputed the notion that Dempster had been “blindsided” last week.

By all accounts, Dempster didn’t have much time to consider the trade once the two teams had an agreement in place. But Cubs executives Epstein, and Hoyer in a radio interview, said Dempster knew for days that Atlanta was the most aggressive suitor. While Dempster wasn’t really against going to Atlanta, he wanted to wait until the “last possible second” to rule out the Dodgers, Hoyer said.

In a radio interview, Dempster essentially said that his inaction had been interpreted as action. His explanation shows just how mucked up the situation had become:

I didn’t turn down any trades. All I asked for was more time on one particular trade. I didn’t really get that time. It got leaked out that I said yes and then I said no. And even after I said no — I never officially said no — I said I needed time to think about it, and I have the right to that time. I know people want an answer overnight, but I’ve been traded twice in my career with no say and so to have a little bit of say and time to make a decision, that’s all I wanted.

It’s hard to say exactly how much the deadline-is-now nature of modern journalism changed the fortunes of four baseball teams last week. The initial report, limited to 140 characters, didn’t note that Dempster had not yet approved the deal — a key factor.

A few years ago, Dempster may have had more than an hour to contemplate a major life change — one that he was considering amid some difficult personal issues, including a divorce and a daughter with a rare developmental disorder. In fact, one wonders if the Braves would’ve given him more time to consider going to Atlanta if word of the trade hadn’t become so public, so fast.

The whole affair apparently even confused some of Dempster’s teammates. Fellow starting pitcher Paul Maholm — who, instead of Dempster, was traded by the Cubs to Atlanta — reportedly had some fun with Dempster in their final hours together in Chicago.

“I looked at him and said ‘Well you said no, I guess they wanted somebody,’” Maholm told the Atlanta Journal-Constitution. Read more

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Premature tweets about Chicago Cubs trade may have changed outcome for 4 teams

People who aren’t baseball fans probably didn’t notice, but the continuing saga of the trade that nearly sent Chicago Cubs pitcher Ryan Dempster to the Atlanta Braves shows how different the media landscape is than just a few years ago.

Up-to-the-second reporting became part of the story, possibly affecting the trade and tarnishing, at least temporarily, Dempster’s strong popularity in Chicago.

Dempster has played on two playoff teams and been the team’s Opening Day starter twice since coming to Chicago in 2004. Since the Cubs are not in contention for the playoffs, Dempster is an attractive possible addition to teams still hoping to be playing baseball in October. All trades that don’t involve the more tricky process of sending players through waivers must be completed by 4 p.m. EST Tuesday.

Dempster has enough seniority to veto any trade, but reportedly told the Cubs his first choice was the Dodgers, and his second choice was Atlanta. Last week, a trade with the Braves seemed likely.

And then folks started Tweeting.

On Monday, July 23, Mark Bowman, who covers the Braves for MLB.com, reported via Twitter, “Confirmed Ryan Dempster is coming to the Braves.” No source was cited. Bloggers and other reporters jumped in, either expounding on the deal or trying to advance the story. It was reported that, in return, the Cubs would get Randall Delgado, a 22-year-old pitcher. The trade was viewed as a major coup for the Cubs, because Dempster is set to be a free agent after this season.

Dempster, in Pittsburgh as the Cubs started a three-game series, apparently learned of the trade via the media (it’s unclear exactly how) and not from the Cubs, and felt “blindsided.”

Less than an hour after Bowman’s tweet, a tweet from Dempster’s official account said, emphatically, “THERE IS NO TRADE dont [sic] know where this info came from!” Joking later, Dempster said that the report “must be true if it’s on the Internet.”

The trade was essentially dead the next day, as Dempster was reportedly holding out for a deal to LA, which surprised Cubs officials and left team President Theo Epstein “livid.” The Braves pulled the plug on the deal with the Cubs early Wednesday, as Braves GM Frank Wren said the team was “moving on.”

Dempster, one of the most popular Cubs just days earlier, became a target of Internet scorn. As one Cubs beat reporter put it, “Dempster is in a tough spot, all his own making, which doesn’t make him wrong on principle.”

Meanwhile, the Cubs were left in a bad situation, without a prized pitching prospect from Atlanta and with a veteran pitcher who just became much, much harder to trade. By rejecting (or, at least, stalling) the Atlanta trade, Dempster essentially limited the Cubs’ potential trading partners to the Dodgers, who were in a stronger bargaining position given Dempster’s preference to go to LA. Without mentioning names, Dempster told reporters he had “a pretty good idea,” of where he wanted to go, but the Cubs and Dodgers had not yet worked out a deal as of early Tuesday.

Dempster reportedly preferred Los Angeles because it’s close to a home he has in the Phoenix area, and the Dodgers, like the Cubs, hold spring training in Arizona, while the Braves train in Florida. Finally, Ted Lilly, a former Cub and a close friend, pitches for the Dodgers.

Dempster declined to talk to the Sun-Times about the crazy 24 hours in Pittsburgh last week, though the publication, quoting an unnamed source close to him, said Dempster “literally awoke from a nap last Monday to discover he ‘had been traded’ via leaked information before being allowed to weigh in.”

Cubs fans have been left to wonder why Dempster initially told Braves players he would accept a trade to Atlanta, then appeared to change his mind once the news leaked last week. One explanation: he “didn’t want to have to make a decision so publicly while he was weighing family concerns.” Those family concerns were unrelated to divorce proceedings that began before the season, he said in an interview published late Sunday on the Chicago Sun-Times’ website. But they may have included concerns about his 3-year-old daughter Riley, who was born with a rare developmental disorder.

That begs some questions: How much did his feeling blindsided — thanks to news circulated by tools unthinkable even five years ago — contribute to Dempster’s actions? How much will this episode, and the fact that so many parts of it became public, change his legacy as a Cub?

Now, to be sure, something similar could have happened in an earlier era. If this had been, say, 2002, Bowman could have posted the news on MLB.com. A newspaper reporter could have posted something online, as could have reporters for TV or radio stations.

I’d argue that this experience illustrates how the rules of the game (in the news media, not in baseball) have changed, because of the deadline-is-now approach and new tools like Twitter. In other words, intense competition begets intense competition, inevitably lowering standards — both in terms of relevancy and accuracy — of what gets reported. In this case, Bowman’s initial report, which said Dempster was “coming to the Braves,” was premature. Dempster had not yet approved the deal.

Again, trade rumors and publishing deadlines are nothing new. But today, technology and audience habits make every minute deadline. The already competitive practices of the news media have been accentuated, tempting reporters to share information before a competitor does.

In this case, the cost was accuracy.

Dempster was still a Cub as of early Tuesday, though he could be traded (possibly to the Dodgers) before his next scheduled start Tuesday night in Chicago. If he remains a Cub, Dempster’s first pitch would be about four hours after the trade deadline, and he likely will face some boos at Wrigley Field, the alleged “Friendly Confines” – at least if talk radio and the blogosphere are any indication.

If that happens, it suggests the media’s obsessive competitiveness, fueled by technology, could have contributed to fans turning on one of Chicago’s most popular athletes. Depending on how you view Dempster’s actions — whether he was selfish or just doing what he had every right to do and what he thought was best for his family — perhaps that’s appropriate.

4:40 p.m. update: Right at the deadline, Dempster was reportedly traded to the Texas Rangers for two prospects. We’ll never know how Cubs fans would have greeted Dempster if he had started tonight, and Texas isn’t scheduled to play at Wrigley later this season.
Earlier in the day, former baseball executive-turned reporter Jim Bowden tweeted the following about this year’s trade deadline:

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