UNIT 4 INDIVIDUAL PROJECT: CASE STUDY THE FLASH CRASH: MACHINES GONE WILD? 1. Describe the conditions that preceded the flash crash. According to the text, Waddell & Reed Financial started to sell $4.1 billion in future contracts using a computer selling algorithm. Due to the algorithm being used, the program dumped 75,000 contracts onto the market over a 20 minute period. (Kenneth C. Laudon, Management Information Systems: Managing the Digital Firm) 2. What are some of the benefits of electronic trading? Some of the benefits include speed, cheaper price, and more liquid markets. (Kenneth C. Laudon, Management Information Systems: Managing the Digital Firm) 3. What features of electronic trading and automated trading programs contributed to the crash? An algorithm is a complex program that executes exactly what it was designed to do. In addition to the algorithm, the “stub quote” orders had already been placed, so when the prices dropped low enough, they were immediately bought. The lowering of prices and quick selling, caused a chain reaction that was not being monitored, and for the time being could not be stopped until completed. (Kenneth C. Laudon, Management Information Systems: Managing the Digital Firm) 4. Could this crash have been prevented? Why or why not? This crash could have been prevented if human beings were monitoring what was happening at all times. Although computer programs are terrific and seem to make life easier, they cannot
Interactive Session: Organizations: Green Data Centers: Good for Business? Case Study Questions 1. What business and social problems does data center power consumption cause? Excessive power consumption uses a vast amount of electricity that must be generated through hydroelectric plants or coal-fired power plants. While hydroelectric generation plants are less stressful on the environment than coal-fired, nevertheless, they do pull resources from more useful purposes. Coal-fired power plants generate huge amounts of carbon dioxide into the atmosphere which some scientists and politicians claim is a major cause of global warming. Social implications of increased power consumption point to global warming. Businesses must pay to power their servers and then pay again to keep them cool and operational. Cooling a server requires roughly the same number of kilowatts of energy as running one. 2. What solutions are available for these problems? Are they people, organizational, or technology solutions? Explain your answer. Some of the solutions to cut power consumption discussed in the case study are a good beginning. People: employee telecommuting; users understanding and abiding by policies in which they turn PCs off when not in use. Organizational: building data centers that take advantage of hydroelectric power generation rather than coal-fired power plants; renewable energy projects; alternative energy; better management of computing resources. Technology: thin client computers, software that automatically turns computers off; more efficient chips. Perhaps the most environment-friendly solutions are those that control the hardware and software, thereby controlling the problem at its source. Virtualization holds great promise as a way to reduce power requirements by reducing the number of servers required to run applications.