On Near-Misses via Barry Ritholtz

I found the following article (via Barry Ritholtz's Big Picture blog) poignant and thought-provoking. Enjoy.
--------------------------------------------------------------------------------------------------------

“It is the paradox of the close call. Probability wise, near misses are not successes. They are indicators of near failure. And if the flaw is systemic, it requires only a small twist of fate for the next incident to result in disaster. Rather than celebrating then ignoring close calls, we should be learning from them and doing our very best to prevent their recurrence. But we often don’t. People don’t learn from a near miss, they just say, “It worked, so let’s do it again.” Other studies have shown that the more often someone gets away with risky behavior, the more likely they are to repeat it. Modern disaster prevention can and should be about stopping trouble before it strikes, not cleaning up afterward.”
-Ben Paynter, Wired Magazine

The near miss is a misnomer. As George Carlin once said, what we really mean is a “near hit.” Carlin, whose wonderful use of language made his comedy that much sharper, used to say “A collision is a near miss . . . Boom, they nearly missed — but not quite.”
The markets have had a series of “near misses” over the past few months — assorted single stock flash crashes, trading glitches, even the Facebook IPO were all market structure collisions. The snafu with Knight Trading as they were testing new algo trading execution software was reputed to cost them $10 million per minute — about $167,667 per second. (more here)

--------------------------------------------------------------------------------------------------------
Leaves you wondering if all the near misses we have had lately, be it economic or some computer-induced "glitch" causing the markets to roil, are not a systemic issue.