Friday, 19 September 2008

How Wall Street Lied to Its Computers

New York TimesI really like Saul Hansell's post in the NYT's Bits blog. He eloquently explains how it is that so many financial institutions managed to fail so spectacularly -- given that they are regulated as to how much risk they can expose themselves to.

In summary: the institutions had sophisticated computer models to warn management if things were getting too risky, but the people running the models didn't give the models the right data.

Saul summarizes the summary thus: "Lying to your risk-management computer is like lying to your doctor. You just aren’t going to get the help you really need."

To summarize the summary of the summary: garbage in, garbage out.

Hat tip: Techmeme.

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