Clip of the Week

I'm on the move today (back up in Boston with the family for the holidays), so I won't be posting as regularly as usual. But I do have a Clip of the Week this week, which comes from this past Sunday's 60 Minutes. It's about "superior autobiographical memory"--the rare ability to remember details about every single day of one's life--and it's absolutely wild (a little long--but I promise, it's worth it).

I'll post a quick excerpt from the online story as a teaser, and then link to the video.

There has been a discovery in the field of memory recently, so new you won't find it in any textbook. It's so hard to fathom, there are some who remain unconvinced. 

For the moment, the scientists studying it are simply calling it "superior autobiographical memory." And unless you happen to know one of the handful of people discovered so far who have it, get ready to be amazed. 

Louise Owen is 37 years old and a professional violinist living in New York City. But she has another gift too, one that is far more rare. 

When correspondent Lesley Stahl mentioned a date, Jan. 2, 1990, Owen told her, "Right now, I'm remembering the jogging class that I started that morning." "And you're actually back there?" Stahl asked. 

"I can feel it. I can remember the coach saying, 'Keep going,'" Owen remembered. 

That was more than 20 years ago, when she was 16, a date Stahl picked completely at random.

That's crazy. There's a bunch of other characters in the video with similar gifts, and it's worth a watch. I've always been fascinated by the seemingly limitless potential of our brains, and the rare glimpses of that potential that people like these afford. It's pretty interesting to see them get together and share their experiences.

As usual, 60 Minutes videos don't work properly when I try to embed them, so click here for Part 1 and here for Part 2.

Clip of the Week

This week's Clip of the Week isn't a new clip. Not by a long shot. It's from 1906, and it was the focus of a very interesting 60 Minutes piece this weekend. Taken by a cable car operator just days before the infamous San Francisco earthquake, the clip is simultaneously a rare time capsule and an eerie view of a city unwittingly enjoying the calm before an unimaginable storm.



You can also see the 60 Minutes report on the clip (including some cool commentary) here. I would've embedded the 60 Minutes report itself, but CBS News' embed function is notoriously screwy, and YouTube's worked better. Watch them both if you want the full effect.

I think it's both poignant and unsettling to watch these people going about their business without a hint of an idea of what's coming. Many (or most) of the buildings pictured were completely destroyed days later, and undoubtedly many of the people filmed were killed.

But besides all that, it's also just pretty cool to watch. The way they dress, the way there's basically no traffic laws whatsoever (and a bunch of close calls of people and cars cutting in front of the cable cars), the fact that most of the license plates on the cars are simple 4-digit numbers, indicating just how few cars were on the roads back then... It's fun to watch, and the history of the matter just makes it that much more impactful. Cool clip.


[60 Minutes]

A solid primer on high-frequency trading

For those who are unfamiliar with high-frequency trading (HFT) robots and how they've taken over the market, this 60 Minutes piece does a terrific job of laying out the key issues. It's the best summary I've seen yet, placing things in layman's terms for non-professionals. If you're invested in this market in any way, it's essential that you understand how HFTs have changed market dynamics and the relevant risks.

I could have excerpted pretty much the whole piece here (it's that much of a must-read), but I focused on some of the basics.

It may surprise you to learn that most of the stock trades in the U.S. are no longer being made by human beings, but by robot computers capable of buying and selling thousands of different securities in the time it takes you to blink an eye. 

These supercomputers...are operating on highly secret instructions programmed into them by math wizards who may or may not know anything about the value of the companies that are being traded...

The players range from firms like Goldman Sachs, Barclays, Credit-Suisse and Morgan Stanley to hedge funds and smaller operations like Tradeworx, which is the only high frequency trading firm that would talk to us or let us in. 

It's run by Manoj Narang and a small group of mathematicians and scientists called "quants," which is short for quantitative analysts. Their high speed computers trade 40 million shares every day. What Narang and other high frequency traders tell their computers to do is to make a profit of a penny or less, 40 million times day. 

They scan the different exchanges, trying to anticipate which direction individual stocks are likely to move in the next fraction of a second based on current market conditions and statistical analysis of past performance. But the computers have no real understanding of who these companies are and what they do. 

Asked if it's all math, Narang said, "It's all probability and statistics - a procedure that you can define precisely."

The problem, of course, comes during particularly volatile periods, when traditional "probability and statistics" break down. During these times of panic, most of these algorithms freak out, and behave unpredictably. In other words, the robots that we rely on to provide 70% of market liquidity are at their worst when we need them the most. That's why any attempt to explain May's "flash crash" without focusing on HFT activities is inherently flawed. As long as HFTs dominate the market, we can expect many more flash crashes.

Note: I tried to embed the video here, but CBS's embed function was screwy, so click here to watch.

[CBS News]