NYSE, United glitches highlight precarious tech dependence

SAN FRANCISCO — Regardless of whether Wednesday's computer glitches at the New York Stock Exchange and United Airlines were due to hackers or bugs, the incidents shine a stark light on the world's tenuous dependence on technology.

Within instants, these tech troubles shut the NYSE for more than three hours with the Dow Jones Industrial Average closing down 261 points, while 800 United flights were delayed as a result of a two-hour halt in operations.

But what's perhaps most shocking about these events is how commonplace they have become.

Tech glitch cripples NYSE: Bloomberg West (07/08) Full episode of "Bloomberg West." Guests: Quip CEO Bret Taylor, Joe Saluzzi, co-head of equity trading at Themis Trading, Joe Greco, a former NYSE equities trader, China Market Research Group's Shaun Rein, GGV's Capital's Glenn Solomon, Ma

Certainly improving our lives through science has long been a hallmark of human progress, from Galileo's heretical sun-centric worldview to Steve Jobs and Bill Gates' twin gambits that one day there would be computers in every home. But with those leaps have come falls, perhaps none as glaring as those visiting us in the digital age.

From the 1998 failure of a Galaxy IV satellite that knocked out pagers and payment systems for days to recent hacks that have exposed credit card and personal data of millions of Target consumers and the off-color comments of Sony executives, the trajectory we are on suggests we will continue to pay the price for our tech addiction.

"Connectivity is the digital oxygen supply for our machines and therefore our lives — cut it off for a few tens of seconds, and our machines are gasping for air; cut it off for a few minutes, and the systems we depend upon slip into unconsciousness," says longtime Silicon Valley futurist Paul Saffo.

"Few people realize just how inherently unreliable our systems are," Saffo says. "For a public unfamiliar with the technical details, the simplest explanation is evildoers. For experts who understand the digital plumbing, the answer is system failure. Cyberspace lives atop a bird's-nest tangle of physical hardware and code held together with masking tape and baling wire. Hit a network in just the right spot, and it propagates cascading failure on a vast, unpredictable scale."

That's a sobering thought considering that by 2020 some 25 billion devices will be connected to the Web, including 250,000 cars. The prospect of having so much of our personal lives in the hands of technology that can be manipulated should give us pause, says Tim McElwee, chief operating officer of security firm Proficio.

"These (Internet of Things) devices that normally would not be connected to the Internet are now connected, even light bulbs," McElwee says. "Consumers used to think my threat is my home PC. Now every device that connects to the Internet is just another IP address to be attacked."

The irony is that as originally developed by the military, the Internet "was designed to survive a nuclear attack," says cyber-security expert Phil Lieberman, CEO of Lieberman Software. "But today, that system has been co-opted by players that include everyone from "nation-states to criminal enterprises as well as anarchists and crazy people."

Lieberman's advice? "You should expect to be compromised and you need to ask the question: And then what?"

Traders on the NYSE perhaps began to ask themselves that question as computers stayed down for more than three hours Wednesday. United Airlines managed to reset its system more quickly Wednesday, but that hasn't always been the case.

In April 2013, American Airlines grounded all of its flights in the U.S. for several hours, and ultimately canceled 970 flights, because of a systemwide glitch. Two months later, Southwest experienced a computer failure that led it to ground 250 flights, with the carrier unable to execute basic tasks such as printing boarding passes or checking the weight of its jets.

While the possibility of a criminal hack loomed large — the hacker group Anonymous tweeted late Tuesday that something "bad" might happen Wednesday at the NYSE — White House press secretary Josh Earnest said President Obama had been briefed by homeland security adviser Lisa Monaco, who said, "there is no indication that malicious actors are involved in these technology issues."

FBI officials also were in touch with all three companies Wednesday, noting there was "no indication of intrusion," FBI Director James Comey told the Senate Intelligence Committee at a hearing on encryption.

Still, these tech troubles — which included The Wall Street Journal's site going down briefly Wednesday morning — are unsettling reminders of the risks Americans face as they increasingly depend on technology.

"The use of technology is an overwhelming benefit in terms of cost-saving and convenience, but there are challenges," says Steve Grobman, chief technology officer for Intel Security Group. "We do see systems that are combining older legacy environments with new, modern technology to link them to mobile devices and the Web. What happened (Wednesday) heightens awareness that we need to invest in technical and human redundancy."

The biggest issue facing markets now is a hit to investor confidence, at a time when markets are already squeamish because of the debt crisis in Greece and massive stock sell-off in China in recent days.

"It is a big deal, but more of a confidence thing, says Joe Saluzzi of Themis Trading and author of Broken Markets, adding that these types of occasional outages caused by technical glitches are to be expected. "Anytime you design a high-speed, tech-driven market, there can always be tech outages," he says.

Markets can cope with a technical glitch, but if today's blackout at the NYSE turns out to be a hack attack, it will have a much more negative impact on the trading community, says Gary Kaltbaum, president of money management firm Kaltbaum Capital Management.

"Let's hope it's not a hack," says Kaltbaum. "Then the worry is, if they (hackers) can do this to the NYSE, what about our banking system or our electric grid. Our stock exchanges are one of the most protected systems out there, and if (hackers) can shut it down, then we have something to really worry about."

Worry is the stock in trade of Mr. Robot, a critically praised new hacker-themed drama on USA Network. It follows the exploits of a young hacker whose skills allow him to manipulate both friends and big companies. Show creator Sam Esmail says that humanity's "central point of failure is technology because it is our big vulnerability. There is no way to build a no-fault system."

Esmail says the best we can hope for is a digital network with complex, built-in warning systems that allow individuals and organizations alike to take appropriate actions once evidence of a breach is detected.

"The more these things happen, the more you hope companies and individuals will take this seriously," he says. "But in the end, truly controlling technology is like controlling the weather. You can't. You can only prepare for it."

Contributing: David Jackson, Charisse Jones, Adam Shell and Bart Jansen