Are Google and Amazon leading us down the road to Digital Armageddon?

The global economy is undergoing a massive reconfiguration which – for good or bad – is rapidly gaining momentum and threatening to change our lives radically.

Last month the British government released a working paper which predicts that algorithmic or high-frequency trading powered by superfast computer systems will soon replace humans and human decision making in global stock markets. The report was compiled by the Foresight panel led by Dame Clara Furse, the former Chief Executive of the London Stock Exchange who in 2005 was ranked 19th in Fortune magazines’ Most powerful women in business’ list.

The report says that over the past few years “the volume of financial products traded through computer-automated trading taking place at high speed, and with little human involvement, has increased dramatically,” reducing the need for frontline traders. High frequency automated computer trading, it adds, currently accounts for over one third of equity trading volumes in Britain. In European equity markets it ranges from 30 – 50 percent, while in the US it’s closer to 70 percent.

Here’s how it works; powerful computers working at blazing speed scan scores of markets across the world and place orders for millions of stock prices every second. They’re located in banks, trading firms and hedge funds in most industrialised countries. The computers zero in on discrepancies in stock prices and they can trade literally thousands of stocks in seconds.

Not surprisingly, the Foresight panel makes an observation that is neatly summed up by Physorg.com – “human workers are made with hardware that is too slow and runs on limited bandwidth in comparison to their computer counterparts.”

The US-based Pew Research Centre, meanwhile, estimates thatby 2020 most people will access software applications online” and share and access information via remote server networks, rather than depending primarily on personal computers. Its prognosis is based on the views expressed by the majority of respondents in the fourth Future of the Internet survey of 895 technology experts and stakeholders conducted by the Pew Research Centre’s Internet and American Life Project and Elon University’s Imaging the Internet Centre. “They [the survey respondents] say that cloud computing will become more dominant than the desktop in the next decade,” the Pew Research Centre added.

It makes a further observation which most users of social network sites hardly give a thought, if we even think of it at all. Facebook with its half a billion users, along with webmail services Hotmail and Yahoo, and micro blogging and blogger services like WordPress and Google’s Blogger are all cloud services. Ditto services such as Twitter, sites like Google Docs and YouTube, picture-sharing sites such as Flickr, and business sites like eBay and TripAdvisor. Users of these sites are all socializing and doing business in the cloud.

“By 2020, most people won’t do their work with software running on a general-purpose PC,” the Pew Research Centre added. “Instead, they will work in Internet-based applications such as Google Docs, and in applications run from smartphones. Aspiring application developers will develop for smartphone vendors and companies that provide Internet-based applications, because most innovative work will be done in that domain, instead of designing applications that run on a PC operating system.”

The views expressed in the Pew Research Centre survey are echoed by James Bellini, a leading business analyst and purported futurologist. Speaking at a recent cloud computing conference hosted by the UK-based Telegraph and Microsoft in London, he said, “If you go forward to the 2020s a successful enterprise will probably have no chief executive, no headquarters and no IT infrastructure.”

He added, “A company’s most valuable resource will be its connected eco-system. We’ll probably have at least 80 percent of employees based outside an organisation … Businesses that don’t change their model and move to this ecosystem approach simply won’t survive.”

Cloud computing essentially allows companies to downsize their in-house IT departments and cut hardware and software costs.

Science writer, Patrick J. Kiger is also upbeat about the growth prospects for cloud computing. Writing in Discovery.com as far back as 2008 he envisioned a world in which “we not only won’t have to worry about whether our software is compatible with our OS, but in which we won’t ever have to install any software again, period. A world in which we’ll be able to do just about everything we need, from updating a spreadsheet to editing digital photos, inside the borders of a platform-agnostic browser.”

Money Morning, a leading source of investment news research for the global markets, noted in a recent article, “the potential of cloud computing goes well beyond storing and transferring data. Recent advances could actually make it possible for two people from different countries who speak two different languages to communicate by phone using software to translate the conversation on each end.”

Lurking in the wings, eager to make an all-or-nothing grab at the tantalizing cloud computing terrain are Amazon.com and Google. Their computing services in the cloud are reportedly the most frequently adopted by users. A report issued by Evans Data Corp. a market researcher in the field of computer and software developer opinion, indicated that Google and Amazon followed by VMware, Microsoft and IBM have the highest adoption rates for cloud computing.

Google’s ongoing and controversial attempt to create a universal online library – the largest library in the history of the world – is a clear demonstration of its enormous cloud computing potential. In 2004 it struck a deal with several major libraries to digitally copy the books in their collections. The Authors Guild and the Association of American Publishers, among others, have decried the project as breach of copyright and theft on a massive scale, and in 2005 they sued Google to try and kill it.  This has not dampened Google’s enthusiasm for the project.  To date it has scanned and archived some 12 million books in 40 languages from several major US libraries to make them available online. Meantime the legal battles continue.

Amazon, for its part, has created its own cloud computing web service called Elastic Compute Cloud (Amazon EC2), which provides businesses and individual users with compute capacity in the cloud. It’s also designed to make web-scale computing easier for developers. It’s new Kindle Fire web browser ‘Amazon Silk’ runs on the EC2 cloud computing engine. The Silk software resides both on Kindle Fire and the server that comprises the Amazon Elastic Compute Cloud.

The ambitions of these two e-tailing behemoths have serious implications for the storage and transfer of global data and knowledge. If predictions about the future prospects of cloud computing prove to be correct, it means that vast numbers of users, including many companies with an eye on the bottom line, will be doing their computing and storing their data and software, and even their payment processes, in one basket in cyberspace, apportioned between and controlled by a limited number of providers.

It’s not a stretch of the imagination to assume that the global commodity and equity markets will join them in the cloud. Ponder on this for a moment, then consider what happened on the morning of Thursday, September1, 1859. Richard Carrington, 33, a British solar astronomer was in an observatory peering through a telescope at the heavens when he spotted a huge cluster of solar spots followed by two blinding flashes of white light over the sun. A NASA report recounts what transpired afterwards.

“Just before dawn the next day, skies all over planet Earth erupted in red, green, and purple auroras so brilliant that newspapers could be read as easily as in daylight. Indeed, stunning auroras pulsated even at near tropical latitudes over Cuba, the Bahamas, Jamaica, El Salvador, and Hawaii.

“Even more disconcerting, telegraph systems worldwide went haywire. Spark discharges shocked telegraph operators and set the telegraph paper on fire. Even when telegraphers disconnected the batteries powering the lines, aurora-induced electric currents in the wires still allowed messages to be transmitted.”

David Hathaway, solar physics team lead at NASA’s Marshall Space Flight Center in Huntsville, Alabama explained that what Carrington saw was a white-light solar flare, “a magnetic explosion on the sun.”

Way back in December, 2008 National Geographic reported that there was a thick layer of solar particles inside the earth’s magnetic field, an indication that there are huge breaks in the earth’s solar defences, according to scientists.

“These breaches indicate that during the next period of high solar activity, due to start in 2012, Earth will experience some of the worst solar storms seen in decades,” National Geographic explained.

Solar Flare (science.nasa.gov)

It is believed that solar winds – blasts of electrically charged magnetic clouds from the sun — can trigger solar storms which can knock out power grids and disrupt radio communications, GPS units, satellites power sources, railway signalling, magnetic surveying, even drilling operations for oil and gas. Severe solar storms in 1989 and 2003 caused blackouts in Sweden and Canada.

Earlier this year, on February 14, National Geographic reported that the sun had erupted with the largest solar flares seen in four years, “big enough to interfere with radio communications and GPS signals for airplanes on long-distance flights.”

“The burst of activity is only the start of the upcoming solar maximum, due to peak in the next couple of years,” it added.

Commenting on the phenomenon, Tom Bogdan, director of the Space Weather Prediction Center in Boulder, Colorado, said, ”The sun has an activity cycle, much like [the] hurricane season. It’s been hibernating for four or five years, not doing much of anything.”

Evidently this is about to change as we approach 2013, the peak of the sun’s magnetic cycle, when a spike in solar flares and sun spot activity are likely to occur. Space weather officer of the Regional Space Warning Centre for Africa, Kobus Olckers told Business Day back in August that an X-class flare — the most destructive for technology and telecommunications — was detected during the month, and more were expected.

It is believed that solar flares were the possible cause of slow internet, signal reception problems and GPS issues reported in August this year by several telecom providers. The flare activity reportedly affected long- distance radio communications and navigation systems and other satellite-based systems, including TV broadcasting.

What’s the likely worst case scenario if the sun unleashes a powerful solar storm?

According to the Washington Post, “Communications satellites will be knocked offline. Financial transactions, timed and transmitted via those satellites, will fail, causing millions or billions in losses. The GPS system will go wonky. Astronauts on the space station will huddle in a shielded module, as they have done three times in the past decade due to “space weather,” the scientific term for all of the sun’s freaky activity. Flights between North America and Asia, over the North Pole, will have to be rerouted, as they were in April during a weak solar storm at a cost to the airlines of $100,000 a flight. And oil pipelines, particularly in Alaska and Canada, will suffer corrosion as they, like power lines, conduct electricity from the solar storm.”

Reportedly, there are some 936 operating satellites in space, valued at approximately $200 billion. They generate well over $210 billion in revenue for the international telecommunications industry annually.

Now here’s the million dollar question. How will the cloud computing giants and other purveyors of communications technology (not to mention the financial markets) cope if the world economy gets spooked by a credible threat of power disruptions by solar storms? The 2008-09 global financial crisis and the resultant bruising recession proved, as never before, how fragile the markets are, and how susceptible equity traders and corporations are to fear and uncertainty.

Case in point – on May 6, 2010 the Dow Jones Industrial Average plunged more than 1,000 points with nothing in the news to indicate the cause of the sudden crash. Minutes later it rose again and closed down 347.80 points for the day. It reportedly took the US Federal Communications Commission (FCC) months to figure out what caused the crash. That’s how vulnerable and volatile the markets are.

Let’s take this hypothesis a step further. What happens if – God forbid – Earth does in fact get hit by geomagnetic storms powerful enough to knock out the computing and digital infrastructure of corporations like Google and Amazon? Where would this leave the global book trade and the publishing industry which are steadily going digital with the rise of ebooks, ereaders and tablets? Industry experts have cited the collapse of Borders, as well as REDgroup, owners of Australia’s largest bookshop chain Angus & Robertson, and the Whitcoulls group of newsagencies in New Zealand as further signs that books, magazines, music, videos and a host of other media products are increasingly being consumed online. Nielsen Book sales data presented at the Tools of Change conference in Frankfurt this week show that print book sales continued to decline in 2010 across several major book markets. In contrast ebook sales continued their steady rise.

Moreover, worldwide revenues from social media sites such as Facebook (the bulk of it from advertising) are projected to reach $10bn this year – up 41% from 2010, according to technology research firm Gartner. It’s all happening in the cloud.

What’s more, if the EU and North America (both in the grip of economic woes and severe sovereign debt crises) follow the example of the British government who are under fire in Britain for allowing local councils to shut down libraries all over the country as part of the government’s fiscal austerity measures, expect to see further erosion of print book sales in Western markets. Conversely, the urge to go digital would quite likely increase in the western hemisphere.

According to The Telegraph’s Deputy Political Editor, Robert Winnet, “The [British] Government believes that the spread of the internet and other social changes may mean that councils should be free to close libraries.”

Scientific advisers have recommended mitigation measures against possible mass power and communications outages by solar storms to both the U.S. and UK governments. They include backups for GPS systems, tougher protective shields for satellites, blocking devices for power grids and the implementation of advance warning systems to alert telecommunications centres, internet server hubs, and financial institutions to possible disruptions. Hopefully, the warnings would also give power plant operators enough time to disconnect transformers. Of course, early-warning systems and backup measures have become the normal response to threats of hurricanes and tsunamis but as anyone who lives in areas prone to natural disasters will tell you, even being prepared is no guarantee that you will be spared the destructive force of nature.

Clearly, the world, particularly the developed countries, have a great deal at stake and would do well to resist the urge to trivialize or dismiss what the scientific community appear to be taking quite seriously.

Dr Tony Phillips from NASA talks about solar storms and their effects on Earth.

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One response to “Are Google and Amazon leading us down the road to Digital Armageddon?

  1. Pingback: Are Google and Amazon leading us down the road to Digital … - Best Electronics N Computers Review | Best Electronics N Computers Review·

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