CrowdStrike stock has plunged nearly 30% since its disaster unfolded last week. Millions of Americans who never heard of CrowdStrike are aware of it now, after being stranded at airports, locked out of their computer systems, and stymied in business.
Before all this happened, CrowdStrike was a Wall Street darling. For example, Downtown Josh Brown called it the "hottest software stock of 2024" on July 8, and gave Kurtz an absolutely cloying interview.
Brown is a money manager and frequent bloviator on CNBC. He's smart, quick-witted and has a tight grip on the data, but like a lot of talking heads on CNBC, he talks his book. Following the crash, he wrote a piece on why he's not selling his Crowdstrike shares.
For now, though, CrowdStrike has put the "down" in Downtown Josh Brown.
The lesson here is that you can lose a lot of money getting your stock tips on platforms where optimism bias abounds and nobody adequately explores the risk factors.
What could possibly go wrong? E verything, everywhere, all at once.
This has happened before and it will happen again because global corporations are increasingly centralizing everything on computer systems.
A recent column from MarketWatch recalls a 2021 glitch from Amazon's cloud services that crippled websites around the world:
"As tech companies get bigger, they create more 'single points of failure' that can lead to cascading catastrophes across our connected world."
We live in a complex web of cause and effect and the digital world puts us all in great peril. As big tech consolidates, it creates fewer options when global resilience requires more. The latest revolution in artificial intelligence will only accelerate this trend.
If you'd like to learn more about how the tiniest of actions can lead to enormous outcomes, I recommend Fluke: Chance, Chaos, and Why Everything We Do Matters by political scientist Brian Klaas.
Klaas recently wrote a Substack post observing that the CrowdStrike debacle is a warning of things to come.
He writes:
"There is often a trade-off between maximum optimization and resilience.
"Our endless worship at the Altar of Endless Optimization, in which we aim to squeeze every last drop of inefficiency out of our social systems, is making us more prone to disaster.
"Can we really trust our species to flawlessly govern unimaginably complex systems - systems we don't always fully understand - that can be brought down by a single screw-up?"
Like the proverbial wings of butterflies spawning hurricanes, a software developer farts and the whole world gets gassed.
We're going to need a lot more canaries.
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Al Lewis has written for The Wall Street Journal, Dow Jones, CNBC, Houston Chronicle, Denver Post, Rocky Mountain News, and until recently, The Messenger - one of the biggest blunders in digital media history. ubscribe to Al's Business Blunders Newsletter to keep up with the most spectacular business blunders as they, inevitably, arise. >
