The Fear Index

Robert Harris “The Fear Index” Alfred A. Knopf., 2012, 286 pp.

I really enjoyed this book up until the last third, it then became somewhat too fanciful for my synaptic connections. Robert Harris, the author, often has most of his books made into movies and I expect he writes with this in mind.

Plot: Dr. Alexander Hoffman, an American physicist, is listed as 177th on the worlds’ list of wealthy people. He became quite adept at constructing “machine-learning algorithms” when working on the Large Hadron Collider at Cern. Leaving that job and building on the skills acquired at Cern, he began a hedge fund using a super-computer to analyze news stories and then automatically trade stocks and options world-wide. This dealer-machine, called VIXAL-4, is sensitive to detecting fear of traders and anticipates their reactions, generally shorting stocks. You cannot read this book without recalling HAL in 2001 and the conundrum of whether the computer has moved beyond the control of its creator. Amazingly, after Harris wrote this book, the real market had a crash which was blamed on…drumroll… use of computers using algorithms.