How an Orbiting Teapot Led to the Wall Street Collapse

How an Orbiting Teapot Led to the Wall Street Collapse

Could it be that Wikipedia indirectly encouraged the state of affairs that led to the credit crunch and the recent crash in the US economy? Could it be that the fears of internet misinformation and manipulation I’ve previously discussed have been shown to be very true indeed with ramifications for us all? Could the interests of a few unscrupulous individuals with social media accounts distort market behaviour resulting in billions of dollars in economic damage?

I started writing this post about Bertrand Russell’s orbiting teapot proposition a few days ago. To adequately illustrate my point, I wanted to create a fictional scenario to illustrate how someone with an agenda may use the principle to manipulate information with potentially far-reaching and highly damaging results.

Turns out that truth is stranger — and more frightening — than fiction.

Short Selling Becomes a Tall Story

Last week, The Register featured an article on Overstock.com CEO Patrick Byrne. Two and a half years ago he penned an editorial for The Wall Street Journal describing how naked short selling posed a risk to financial markets. He was not surprised when The Journal didn’t publish his views but was dismayed at what seemed a one-sided campaign against his fears waged by anonymous sources throughout the web. Until recently, when Byrne’s predictions became horribly true, he was portrayed as a ‘raving madman’. Blogs and financial forums were flooded with attempts to undermine Byrne and his views. But, most worryingly of all, Wikipedia continued to present articles highly sympathetic to naked short selling while refuting claims of bias or impropriety.

Recently, Byrne unearthed emails that prove financial journalist Gary Weiss, among others, was behind the online attack as well as the Wikipedia bias. Weiss deliberately edited Wikipedia articles on short selling under the pseudonym Mananmoreland. The tactic was designed to dampen Byrne’s attempts to raise the alarm on short selling. For the full story on how Weiss was discovered and the extent of the manipulation, read the article.

Byrne asserts that the goal was always to shut down his arguments. In The Register article, Byrne admits that journalists almost always conducted fact-checking by consulting Wikipedia when researching naked short selling. “At some level, you can control the public discourse from Wikipedia,” Byrne says. “No matter what journalists say about the reliability of Wikipedia, they still use it as a resource. I have no doubt that journalists who I discussed [naked shorting] with decided not to do stories after reading Wikipedia — whose treatment [of naked short selling] was completely divorced from reality.”

So what does all this have to do with an orbiting teapot?

Bertrand Russell and the China Teapot

The philosopher Bertrand Russell once illustrated the problem of misinformation and the distortion of reason by hypothesising about a orbiting china teapot.

If I were to suggest that between the Earth and Mars there is a china teapot revolving about the sun in an elliptical orbit, nobody would be able to disprove my assertion provided I were careful to add that the teapot is too small to be revealed even by our most powerful telescopes. But if I were to go on to say that, since my assertion cannot be disproved, it is an intolerable presumption on the part of human reason to doubt it, I should rightly be thought to be talking nonsense. If, however, the existence of such a teapot were affirmed in ancient books, taught as the sacred truth every Sunday, and instilled into the minds of children at school, hesitation to believe in its existence would become a mark of eccentricity and entitle the doubter to the attentions of the psychiatrist in an enlightened age or of the Inquisitor in an earlier time.

Leaving aside Russell’s obvious atheism, the point he raises does bear discussion when considering how information or opinion is distributed through the internet. Replace ‘ancient books’ with Wikipedia and ‘sacred teachings’ with ‘online media, blogs and news sites’ and the power of the internet to distort reality becomes obvious.

The point is that the orbiting teapot — although incredibly improbable — is not provably impossible. And should enough sources agree with the notion of the orbiting teapot, it becomes harder for sceptics to criticise the theory.

All it takes is for one person with a story of an orbiting china teapot to use social media to spread the belief under different names and in places where journalists and other commentators of record are known to source information.

Replace the orbiting teapot with short selling. Byrne holds that the views on naked short selling presented on Wikipedia were ‘completely divorced from reality’, just like an orbiting teapot. However, if enough websites and reputable sources support the belief, it becomes harder to speak out or present a sceptical view — as Byrne discovered.

Eventually, the erroneous facts start corroborating themselves. Other reputable sources perpetuate the misinformation after fact-checking at Wikipedia. This feeds back to Wikipedia to further corroborate the articles. Suddenly, myth, rumour and biased opinion gain acceptance and validity.

An Internet Full of Teapots

I’ve written about the dangers of online misinformation before. I’ve also covered the deliberate fabrication of news and the interesting feedback loop caused by Wikipedia fact-checking. In my view, the internet is full of orbiting teapots, deliberately created to serve personal agendas or skew perceptions. Yet the dangers of social media manipulation could be far bigger than I ever expected.

Could the trend for naked short selling have been curtailed earlier if Byrne’s views were heard? Would the financial meltdown have still occurred if journalists were made aware of the true risks of naked shorting instead of the being presented with the biased Wikipedia views designed by those with a vested interest?

A few people with social media accounts and a biased agenda prevented the alarm being raised. Everyone foots the bill.

Comments

  1. Finally. Finally, Finally.
    Finally, I come across a sign of intelligent life out there in the universe.
    Thanks, Kimota, for getting it.
    Patrick Byrne

  2. Kimota says:

    Wow, great to have you aboard Patrick. Yes, I have long held reservations about how the internet is in desperate need of clearer regulation to prevent social media manipulation of information. Although I often get talked down as an alarmist and anal, your story and the current economic crash is one of the best examples I have seen of exactly this problem. Wikipedia was always going to be a flawed experiment, but those flaws have become very dangerous indeed. I will be following your blog on this issue from now on.

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