Friday, April 24, 2015

Flash crash revisited

If you try to boil water in pyrex glass container, you may well see the water's temperature go past boiling point (100c/212F), because the smoothness of the glass is not providing any starting point for the boiling to start. Then if you take a wooden spoon and drop it in to the water... the boiling starts in an explosif manner, triggered by the spoon.

Would it be right to say that the spoon caused the water to boil? Yes.

Would it be right to say that heating the water caused it to boil? Also yes!

Would it be right to say that choosing a glass container caused the water to boil explosively? Yes.

Would it be right to say that dropping the spoon in caused the water to boil explosively? Also yes!

The analogy here is that the wooden spoon is a single trader. Take lots of spoons, the first one that touches that water will cause it to boil.

Would it be right to say that there was one trader that caused the flash crash? Just as much as that first wooden spoon makes that water boil.

Should this trader be prosecuted?
Well they did burn Joan of Arc...

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