This short story was inspired by a writing prompt by Jon Westenberg: “After the crash, he vanished. Some say he moved to a compound in Africa, some say he went off the grid. But the Silicon Valley genius who engineered the greatest stock market disaster in history is hiding in plain sight…”
Blog Post – “I’m sorry. You may want to read this.”
Posted by: Anonymous
Posted on: 29 May, 2018
It started as a joke. An experiment. A dorm-room prank.
Neither of us had any idea where this would go and now we can’t stop it. Even if I came clean, it wouldn’t make any difference. It has taken on a life of it’s own and doesn’t vaguely resemble what we intended it to. But I need to make this confession.
Don’t get me wrong, I’m not going to take the fall for it, I just need to get this off my chest. I am sorry, truly, I am, but there is also just a little part of me that feels like it’s not a bad thing to level the playing field every now and then.
Lots of people lost a significant amount of money, and I get that they’re mad, but I think they will thank me in the long run. I’ve helped highlight the flaws in their system, which will protect future generations from a similar fate. Once they’ve worked out how to patch it that is…
For me, this is cathartic — a release. For you, well, hopefully this post will give you some indication of where to start with fixing systemic issues.
I’m airing this in the only way my generation knows how: by blogging about it anonymously. So, where shall I start?
Three months ago, my dorm buddies (who also happen to be my fellow classmates) were mocking me for my poor performance in our fictional stock market trading game. It was our final semester at Business School and the pinnacle of our prestigious undergraduate degree program.
We followed in the wake of some of the most successful investment bankers and hedge fund managers in the market today. Only the most academically talented were selected for the course, and more than 70% dropped out before the end of the first semester. It was so intense, that the university offered rehab for dropouts, to reintegrate them into every day society. Yep, bonkers!
But we made it. There were twenty of us left in total, and we lived together in dorms of five.
We didn’t survive because we were more academically gifted than the people who dropped out, we just grafted and refused to give up! We had an unquenchable thirst for finding an answer to everything and we didn’t approach things in the traditional academic sense. Don’t get me wrong, we liked numbers and data as much as the next man or woman, but we also ‘felt’ our way through the program, using our intuition as much as our intellect. But what really brought us together as a group was our obsession with human behavior and the downright destructive tendency for ‘group-think.’ It fascinated us, and we wanted to understand what makes the large majority of the human population so malleable—and also, how to make money from the tendency towards group-think. Clearly, that backfired.
Sorry, I digressed.
The stock market game involved researching and investing in a portfolio of equity stocks using our own fictional $100k fund that we were given at the start of the semester. The winner not only got the kudos for out-smarting the rest of their cohort, but also $100k in cold, hard, actual cash to go and do the same thing in the real world.
The monetary goal was enough to get us fired up, but the competitive nature within each of us definitely brought out some dark undertones.
The game was administered by the Business School and was designed to mimic a live trading platform. We each had our own accounts to log in to and trade on. The stock prices were updated on a live feed and all the key global equity markets were represented. There were rules, and I won’t go into all of those details, however I will say that the platform allowed us to undertake legal, but sometimes frowned-upon, tactics like ‘short selling’ stock. I’m not going to explain what that means here, but let’s just say that if you can predict a stock price decline in advance, you can make a handsome sum of money from short selling. More on this in a moment…
My performance in the game had been pretty dismal up to that date. I poured time and effort into analyzing stocks, reading investor threads, and basically immersing myself in the market. I tried all of the textbook strategies, but nothing seemed to work for me. It wasn’t a great market in general, but my classmates were pulling away from me and I needed to do something about it. The sweet taste of those Benjamin Franklins were clouding my mind, and I could barely think of anything else.
That brings me to the fateful night when the seed was planted. It wasn’t long after the Trump inauguration and the simultaneous media frenzy that surrounded social media and fake news. One of my dorm buddies, who was annoyingly topping the stock market game league table, joked with me about how great it would be if I could fake some news about a stock and make some quick money from short selling. This was one of those jokes made over a few beers, late at night, but it stuck with me. It festered in the back of my mind and haunted my dreams.
I started doing some reading into the fake news scandals and came across snippets about AI bots being used to gauge what people were reacting to and splicing together content that would be read and shared. This stuff was spreading like wildfire and there was nothing in place to fact-check quickly enough before it went viral.
Social media became a bit of an obsession of mine for a while. Previously I hadn’t really understood it (I know that is shocking for a millennial!), but I started to see the power of the masses for not only getting a message out quickly, but even potentially affecting an outcome. It was crazy: people would blindly read content, get angry and share it with friends, without even giving a second thought to whether or not it was true. This was group-think at its very worst, with all the sheep blindly running in the same direction.
What if I got myself a sheep dog? Imagine what I could do with it!
“No, that’s wrong,” I hear you say. There is something morally corrupt about that, isn’t there? Well, you would be surprised how quickly I forgot about the ethical implications and started running with it. I am slightly sickened by it myself as I write these words.
Despite moral objections, I reconnected with a childhood friend who was lurking in some basement cooking up clever code for a Computer Science program at an Ivy League university. He was doing some really amazing stuff with AI and he was discrete, which was the perfect breeding ground for this idea. We’ll call him Frank. Which has no bearing to his real name, identity, or even his favorite pet’s identity.
Anyway, Frank and I brainstormed this AI bot which would basically ‘listen’ to social media. It would piece together what people were reacting to, who the key influencers were, how messages moved through networks, and what news seemed to be affecting stock market results and sentiments. It was pretty extraordinary how quickly he built this thing, but once it went live, it started learning astonishingly quickly.
The output from the AI bot was an email sent to a special, anonymous account we had set up, outlining which stocks I should short sell and when. The simplicity of the message lulled me into a false sense of security. I also really doubted that it could work. I was so wrapped up in my little fictional world that I didn’t think about the wider implications.
I got my first email on Thursday, 26 May 2017, stating that I should short sell Corporation X stock, to then buy it back on Friday 2 June 2017 and make a margin. That was it. It seemed quite mundane to be honest. I logged on to the game, tapped in the details of the short sale and kind of forgot about it. It was nearing the end of the semester so I was busy with a few other assignments as well.
I forgot about it until that following Friday, at least. I woke up to a deluge of alerts on my phone about Corporation X and how more than 30% had been knocked off the value of the stock at market opening, and how it was still in free fall. I followed threads on all of the stocks I traded in the game, so there was no way I could miss this news. Social media was going crazy about some corporate scandal with Corporation X, fraud, cover-ups, the whole shebang!
I jumped out of bed without thinking, switched on my laptop and logged in to the game. Before I knew it, I was buying the stock on autopilot to complete my margin on the short sale. I sat in my room all day with the curtains still drawn, fixated on my screen, seeing the story as it unfolded.
Corporation X pushed out a press release, denying the claims and trying to calm the market. Sadly, the damage had been done. They were one small voice surrounded by a swarm of angry investors baying for blood and social media posts going viral. It was a juggernaut that couldn’t be stopped, and I had let off the handbrake…
In one day, the stock lost 50% of its value before trading was suspended. Real life. Real money. Real people’s livelihoods.
On the flip-side, the profit I had made by short selling the stock in the game catapulted me from last in the league to third. This was a phenomenal result. I could hardly believe it. The elation and rampant desire for the win blindsided me from the reality of what was happening.
Frank called. He had also seen the news and was jabbering like a mad man about how cool the AI bot was. He was waxing lyrical about the neural network and how it was thinking independently and learning more with every second. Frank had put measures in place to ensure the bot couldn’t be tracked. It was bouncing around different servers dynamically and on a completely random basis.
Suddenly, it struck me. This thing that we created had destroyed the value of a company, all based on a lie—a lie that this bot had conjured up. OK, I hadn’t profited in the real world, but there were plenty of people who had lost very real money. When the dust settled, there would be a serious investigation and people would be looking for the origin. Here’s hoping Frank is as good as I think he is!
I hung up the phone, as I needed to get my thoughts together. Frank was distracted anyway, and had seemed to barely heard a word I had said. I didn’t get a chance to think, though, because almost immediately my door burst open and in flooded my dorm buddies. They had seen my performance that day and wanted to know how I had done it. I looked like some sort of junkie, sitting in my boxer shorts, surrounded by empty Coke cans and snack packets, which had fueled me during the day.
I told them I had been lucky, and that everyone deserved a break at some point. “Don’t worry,” I assured them, “my lucky streak will be short lived no doubt!”
I got another email from the bot that night. It suggested another short selling trade to make within the next week. I nearly did it, but then I realized that if it did work, and if I made such a huge profit again, people would start getting suspicious. Everyone’s positions bounced around the league fairly frequently, so if I played it right, it wouldn’t be obvious. I chose to leave this trade and see what happened.
Sure enough, another corporation was hit by the bot with fake news a week later. This time the stock only lost 35% of its value, but that still equated to billions of dollars. I could hardly believe how effective it was.
You see, the thing about the stock market is that trades are based on imperfect information: bad news tends to trickle out slowly so that nobody notices, or the company puts out a press release and the market simultaneously reacts in an instant. News travels fast in our modern world! Therefore, making significant gains on stocks requires insider knowledge (very illegal!) Or luck.
Until now that is.
I won the stock market game, by the way. I played my trades very strategically. Given that I had a proven tactic, I could just bump up my profits to leapfrog my classmates as needed when they were making incremental gains.
After a while, Frank started making tweaks to the bot. He got a little carried away and expanded the bandwidth to allow it to target multiple companies at once. I have to say, the elaborate yarns that it wove were very impressive for a computer, and really believable. The bot started making links of bad news between companies around the world and was causing domino-like effects in all of the equity markets at once.
Once I had won the game, I started to feel huge pangs of guilt. There was an unprecedented market decline and I knew why. I asked Frank to kill the bot, but much to my horror he said that it was too late. Some of his final measures to anonymise the source meant that it could continue to develop itself independently, with no way to shut it off. Which it was doing, with frightening results.
And here we are, one year on, and nobody knows what to believe anymore or where to safely invest their money. It’s a very strange feeling: conversing with friends who are aghast at what’s going on in the markets when I know the truth behind it all. They are completely oblivious to my involvement. I scare myself sometimes when I start to suggest ridiculous scenarios to them, which I know to be true—like an AI bot producing fake news, just to see how they will react. It also makes me feel alive.
And another thing: I’ve stopped logging into the email account for the bot because I didn’t want to risk it getting traced. Let’s just say that I’ve made enough money to tide me over, but I’m spending it carefully so nobody notices. Everyone I know just thinks I have a steady, low-level trader’s job, so a Ferrari and beach house in the Bahamas might seem a bit out of place!
Well, I have to say, it feels so much better getting the truth out. As I mentioned earlier, I am sorry, but I can’t turn back the clock now. What’s done is done, and hopefully things will go back to normal soon.
Let me know if you have any questions, though. Leave them in the comments below and I will get back to you. Maybe I will write a book about this all one day.
Over and out!
Comments:
@SeriousFraudOffice posted on 6 June 2018: Scott, thank you for your confession. The ego is a wonderful thing and despite how clever we think we are, it tends to trip us up somewhere. However good you think you were at covering your tracks, the details in this blog post allowed us to track you down. We appreciate the story as it makes our case easier. Hopefully you will co-operate and provide us with Frank’s details too. Unless you are already reading this Frank?
About the writer:
Ryan Storey, is a Co-Founder of Kakeibo, a social enterprise working to improve everyone’s financial literacy. Head over to our website to find out more, or follow us here, on Facebook or Twitter.
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