{"id":2096,"date":"2016-05-06T21:21:23","date_gmt":"2016-05-06T21:21:23","guid":{"rendered":"http:\/\/blogs.dickinson.edu\/hist-118pinsker\/?p=2096"},"modified":"2017-01-02T18:19:47","modified_gmt":"2017-01-02T18:19:47","slug":"ryan-cohane-less-and-less-human-thinking-technologys-role-in-the-1987-stock-market-crash","status":"publish","type":"post","link":"https:\/\/blogs.dickinson.edu\/hist-118pinsker\/2016\/05\/06\/ryan-cohane-less-and-less-human-thinking-technologys-role-in-the-1987-stock-market-crash\/","title":{"rendered":"Ryan Cohane- \u201cLess and less human thinking”: Technology’s Role in the 1987 Stock Market Crash"},"content":{"rendered":"

\u201cLess and less human thinking”: Technology’s Role in\u00a0the 1987 Stock Market Crash<\/strong><\/h2>\n

By Ryan Cohane<\/p>\n

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New York Stock Exchange trader\u00a0on Black Monday. Courtesy of Getty Images<\/p><\/div>\n

October 19, 1987, otherwise known as Black Monday, was a frightening day for many. Brian Cohane had been working on Wall Street for 3 years at that point. He was a junior mortgage-backed-securities trader at Paine Webber Inc and recalls\u00a0the technology that helped contribute to the crash. Cohane describes the beginning of a system where there was\u00a0\u201cless and less human thinking on things and we let computers do the thinking for us in terms of whether to buy or sell securities.\u201d [1] Technology was not very prevalent on Wall Street when Cohane started working there. Throughout the 80s, the use of technology increased and helped contribute to Black Monday.\u00a0In that one day alone, the Dow Jones Index dropped 508.32 points or 22.6%, losing over $500 billion of its value. [2] Markets around the world were affected and many feared that this would lead to another Great Depression. In\u00a0American Dreams, H.W. Brands attributes the main reason for the crash to the high interest rates due to the trade and federal budget deficits. [3] However, a large part of the reason that\u00a0Black Monday occurred was also the emergence of new technologies\u00a0in the 1980s.<\/p>\n

When Brian Cohane started on Wall Street, he did not have access to a lot of technology.<\/span><\/p>\nhttp:\/\/blogs.dickinson.edu\/hist-118pinsker\/files\/2016\/05\/Recording-1-1.m4a<\/a><\/audio>\n

\u201cOur technology was the phone, calculator, files\u2026 we would call some of the credit rating \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0agencies and get credit reports. Their credit reports of clients that we dealt with [were used] to back \u00a0up our own credit analysis, but that was it. We used computers to track numbers. If we assigned a \u00a0 \u00a0credit limit to a client, we would put that into a computer and the computer could track whether a \u00a0 \u00a0client\u2019s exposure was within the limits we established. We didn\u2019t really have spreadsheet analysis at \u00a0the time or the ability to go into databases and look up companies.\u201d [4]<\/p>\n

However, in the 80s the access to technology started to increase. With innovations such as the Bloomberg Terminal and the rise of the use of personal computers, technology became more integrated in the Wall Street process then ever before. While there were plenty of positives, such as more equal access to information and more efficiency, there were also computers taking over jobs that used to be done by humans. Technology could perform these jobs faster and more efficiently. [5] As technology became more ingrained in the industry, people became more comfortable using it. Thus, the rise of program trading was not too much of a surprise.<\/p>\n