In the "Terminator" movies, computers become sentient and declare war on humanity. Since the machines control all of mankind's weapon systems, including nuclear weapons, their victory is swift.
We fear we may be on the verge of our own sort of "Judgment Day." We don't worry so much about the increasing intelligence of computers as we do about the lack of intelligence--or at least foresight--of their programmers. And we worry less about a nuclear holocaust than we do about a sort of financial armageddon that could have the same civilization-destroying capacity.
If you needed any more proof that the entire financial industry is (ahem) a solipsistic enterprise that ultimately produces nothing other than more grist for its own mills, consider the advent of "High Frequency Trading." In HFT, computer algorithms allow traders to execute trades within millionths of seconds. By taking advantage of the slightest--and we mean slightest--head start, traders can exploit fractional differences in stock prices and make fast profits.
If we understand this phenomenon correctly, it works like this: Computers programmed to scan the markets for--well, for whatever: We don't know what programmers base their algorithms on--identify a stock and execute a "buy" order. Let's say that the price is $100.0001. The computer makes the purchase, and then the stock may "skyrocket" to $100.0002 (perhaps in response to the very purchases the automated trader just made). Other (ever-so-slightly) slower autotraders notice the movement and begin making their own purchases. By now, the stock may have shot up to, oh, $100.0004. So it's time for the first trader to sell! Sure, we're dealing with fractions of a penny, but if you consider the fact that tens of thousands of trades can be executed every minute, the profits can accumulate quickly.
Note that profit and loss seem to have absolutely nothing to do with the inherent worth of any sort of product or business. The only commodity of value in HFT is speed--microseconds of speed. If a programmer sets up an algorithm to make purchases of a company specializing in snail-poop, he can presumably attract the notice of enough other high-frequency traders to turn a tidy profit before these other investors realize they're buying crap. And if autotraders misread market signals, they can provoke a panic that can quickly send the broader market crashing (as happened last spring).
(We realize our explanation is probably extremely simplistic. If anyone can offer a more thorough explanation of HFT--and ideally explain HOW it adds any real value to the world--please feel free to do so in the "Comments.")
What can be done? Probably not much. It does make one wish that these traders--indeed, most of the high-flying financiers who make money for nothing while playing video games with other people's actual savings--could simply be sealed off in their own sector of society. They could then safely play their games and we could watch (or not) while we go about the real business of the world.
"The New Speed of Money, Reshaping Markets"
If you're among the few people on the planet who haven't seen "Terminator 2," you should: It was from James Cameron's pre-"Titanic" days when he just made really cool science-fiction movies.