Gonna get busted. (Photo: Google)

There’s always some trader who’ll find a way to lose a couple billion dollars, no matter what kind of risk management software Wall Street installs on its servers. Tape the phone calls, monitor the emails, and somehow they still get around the safeguards.

Well, a columnist for American Banker has been giving the problem some thought, and he's decided the solution is Google Glasses.

"Orwellian or not, putting computer-enhanced glasses on traders is the next logical progression," he writes.

If traders knew that compliance staff was recording and occasionally live-monitoring their trading floor activities from their perspective, could we prevent future multibillion dollar losses? Unlike previous methods of keeping tabs on trading desks, Google's new device will record every conversation and store everything the trader sees.  Would the knowledge that everything we did was being recorded change our behavior?

Judging from the appalling misbehavior on the Real Housewives franchise, the answer to that question is no.

(h/t Felix Salmon)

Hey, they never promised you a rose garden, design-wise. (Photo: Jared Keller, Twitter)

Guess the guys on Wall Street were feeling a little left out: Earlier this week, the S.E.C. signed off on official company announcements via social media (as long as shareholders are warned in advance where to look). And now, Bloomberg L.P. has announced that it will integrate tweets into the stream of information pulsing through the terminals that grace desks all over the financial industry.

Like everything else on the Bloomberg terminals, the tweets look butt-ugly.

Don't get too excited, though: The service will be pulling in updates from "corporations, executives, government officials, economists, commentators, media outlets and other voices that can influence the financial markets." So you probably can't use it to monitor Amanda Bynes's antics. (That's what your smartphone is for, obviously.)

Jean-Paul Zammitt, head of sales and product development for the Bloomberg Professional service, said in an announcement:

"When important news is shared on Twitter, traders and investors need to be able to access it, and validate its importance in order to incorporate that information into their decision making process."

Just remember: In times of panic, it's best to assume everything on social media is a damn lie.

This man has no limits. (Photo: Think of a blue egg)

Provigil, the Adderall-like drug used to combat sleepiness, is experiencing a resurrgence fit for our maximum-efficiency lifestyle. Back in 2008, TechCrunch cofounder Michael Arrington penned a post about how Silicon Valley entrepreneurs were increasingly using the prescription pill to stay awake for long periods at a time and focus better. Now, New York Magazine reports Provigil is making a comeback among traders and entrepreneurs, some of whom affectionately refer to it as "Viagra for the Brain."

Though it was originally marketed as a treatment for narcolepsy, Provigil is currently used primarily as a "smart drug," helping keep users alert and focused. It's a lot like Adderall or Vyvanse, but minus some of those drugs' negative side effects. Limitless, the 2011 movie which showed Bradley Cooper finding a drug that allowed him to use 100 percent of his brain, is rumored to have been modeled off Provigil, according to New York. "I would describe it as being very much like Adderall, but without the speediness," one trader told New York.

Leave it to Silicon Valley geeks to use drugs for work instead of play.

(Photo: True Office)

“That’s not Jamie Dimon,” joked Adam Sodowick, founder and CEO of True Office, as an avatar in his game walked onto the screen. However, Mr. Dimon’s employer, J.P. Morgan, was one of the 12 banks that mentored the FinTech Innovation Lab participants who demoed their products to potential investors and senior executives in the financial industry Wednesday morning at Credit Suisse. (Duh, "FinTech" stands for Financial Tech--get in the game!)

True Office was one of six companies who participated in the three-month long mentoring process, during which these FinTech entrepreneurs presented their products to and received guidance from key executives in the banking industry. True Office is a mobile game that allows companies to conduct more interesting and engaging compliance training.

“This is a very large and deeply unsexy market,” Mr. Sodowick said about compliance training. “It is akin to getting a flu shot.” But TrueOffice makes the training a game, arguably incentivizing users to pay attention and learn from the process. People may even end up reading the company's policies, where they would inevitably learn that it is, in fact, unethical to lie about your Computer Science degree.

Another FinTech Lab graduate, BillGuard, helps users uncover fraudulent credit card charges and get their money back in an efficient manner. Yaron Samid, the founder and CEO of BillGuard, said that the company arose out of his laziness: he simply didn't want to have to check his credit card bills. But six months ago, he discovered that by clicking on a coupon on Ticketmaster, his wife had unintentionally subscribed to monthly charges on their credit card.

“These guys messed with the wrong guy,” Mr. Samid said, perhaps only partially joking--his BillGuard co-founder Raphael Ouzon did previously work for Israeli military intelligence units.

Mr. Samid told Betabeat that his experience with the mentoring process was incredibly helpful because their company is not a traditional FinTech business.

“We are a bunch of mathematicians and data scientists who have a lot of experience in the consumer web space,” he said, adding that the process taught them “what not to do” when pitching to banking clients.

In the upcoming months, BillGuard will also be expanding into phone bills so users don’t have to scan through their teenage monster’s five million daily texts to find fraudulent charges.

Renee Lorton*, the CEO of Centrifuge, began her company’s demo “with a little mystery,” proceeding to show the crowd a very Discovery Channel-esque intro video to her product. Centrifuge finds relationships and patterns in Big Data and was initially used for cybercrime and terrorist network detection.

“Imagine if Sherlock Holmes could have had us in his bag of tricks,” she giggled.

EidoSearch also helps users uncover patterns, though through a search engine format. For example, David Kedmey, EidoSearch’s president and cofounder, explained that financial analysts could search to find historical examples of volatility spikes to compare to current spikes in volatility. He compared the technology to that used by Pandora to create playlists based on the mechanics of a single song.

“What the [FinTech Innovation Lab] has really helped us to do is… get a direction on the next steps on how to translate our capabilities into something that banks could use,” Jack Hoppe, EidioSearch’s Director of Operations, told Betabeat.

Digital Reasoning, a company that helps digitize the processing of unstructured data and is also working with a number of U.S. Government agencies, also demoed during the event.

Sadly, Mr. Dimon never showed--even in dapper avatar form.

*Update: Ms. Lorton's name was originally misspelled. Betabeat regrets the error. 

(http://www.flickr.com/photos/saulalbert)

"The End of Wall Street as They Knew It," proclaims the headline on the cover story of New York magazine this week, an epic account of the woes of post-crash bankers. The masters of the universe have had their bonuses slashed, the story says, due to the suffering economy and the provisions of the Dodd-Frank financial reform legislation. The industry also cut 200,000 jobs. Where's a young, mathematically inclined valedictorian to turn?

"If you're a smart Ph.D from MIT, you'd never go to Wall Street now," one hedge fund executive told the magazine. "You'd go to Silicon Valley. There's at least a propsect for a huge gain. You'd have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun."

By coincidence, Betabeat hopped on the phone yesterday with Lucas Nelson, associate at Draper Fisher Jurvetson Gotham Ventures, to get the Silicon Alley veteran's take on The Startup World Today. Mr. Nelson, a Kauffman Fellow, worked at Adobe and US Venture Partners. ("Prior to that, business school," he said. "Prior to that, I broke into computers for a living" for Symantec.)

A programmer and computer security expert, Mr. Nelson is on the nerdier side of VC, crunching numbers and sifting through DFJ Gotham's already robust dealflow. And what he's noticed is a stark contrast to the Silicon Alley of the early aughts.

The startup scene had no respect when he first started, he said, no respect. "Being an entrepreneur wasn't the rock star job that it is today," he said. "No one was on TV for starting their own company in '99."

In New York, being a programmer wasn't respected the way it was in Silicon Valley, he said. And if you worked for a startp? Well, that was weird. "A lot of people worked for banks because they just paid better," he said.

The Wall Street brain drain used to be something we wrung our hands over: the automated siphoning of the nation's brightest students into the richly-carpeted halls of Morgan Stanley, J.P. Morgan and Goldman Sachs, the "Ivy-to-Wall Street pipeline," as the Washington Post's Ezra Klein put it.

But, my, how the balance is shifting. “I think that respect for geeks has gone way up and I think that respect for quant hedge traders has gone down some," Mr. Nelson said. "And I don't know that those are necessarily linked but it’s a good thing in my opinion.”

If entrepreneurs are rock stars, then we imagine Mr. Zuckerberg as the understated frontman, Andrew Mason as the floppy-haired drummer, and Jack Dorsey as the guitarist with mystique. That would mean the Wall Street bankers are like... we dunno... the greasy-haired guy from the record company who manages the band's Pandora shares. No wonder more college grads say they'd rather work for tech companies than on Wall Street.

Runaway metaphors aside, there's one other reason tech is giving finance a run for its money: windfalls.

"There's no other industry where you could get paid so much for doing so little," a former Lehman Brothers trader told New York. Considering Morgan Stanley's bonuses were capped at a mere $125,000 this year, while a graffiti artist who got stock options for spray-painting phalluses on Facebook's walls could be worth upward of $200 million, that may not be the case anymore.

Wait...they're using computer too?

One of the reason that Bernie Madoff was able to stay undetected for so long was that he could alternately charm and intimidate the young SEC staffers sent to investigate his firm. In the wake of that scandal, reports The Wall Street Journal, the SEC has developed a computer system that analyzes performance from thousands of hedge funds and looks for  unusually good performance year-over-year that, like Mr. Madoff, seems too good to be true. 

So far the data crunching effort has led to four indictments, a positive sign that has the SEC thinking about expanding the scope of their computerized scrutiny to include up to 20,000 mutual funds and private equity firms.

Wall Street's reaction has been to suggest that this kind of scrutiny will have a chilling effect on managers who perform well. "There are people out there who have been committing fraud, and we want to get them and get them out of the system," Robert Leonard, a partner at law firm Bingham McCutchen LLP who represents hedge funds told The Wall Street Journal. "I'm concerned there probably will be some chilling effect for managers who are knocking the cover off the ball."

Right. Money managers with nothing to hide are going to begin tanking their own returns, rather than risk a SEC investigation? The financial sector has been relying on the world's best mathematical minds and most powerful computers for decades to gain an edge. The fact that the SEC is just now beginning to use these methods to detect fraud is a shocking, if welcome sign that they realize they have a lot of catching up to do if they are going to keep pace with the bad actors in these markets. This will help them do a better job detecting those hard-to-identify bogus firms, the ones with zero name recognition and no website who list their address as a non-existent street in New Jersey.

TAKE MAI $$$$

As Betabeat has been pointing out, Occupy Wall Street presents sort of a gray area for Startupland. Sure, both parties waive their anti-corporate banner proudly and the rhetoric of disruption can be used interchangeably. But bootstrapped, self-interested Ayn Rand-o-philes and Zuccotti Park's concern with economic inequality don't necessarily see eye-to-eye.

Thankfully higher authorities have decided to weigh in on one problematic area. In fact, the entire Ethicist column in this weekend's New York Times magazine is devoted to it.

An anonymous inquirer from New York City writes:

I support Occupy Wall Street and am appalled by the behavior of the corporations they’re rallying against. While I do not work on Wall Street, my small start-up is financed primarily by one of the biggest Wall Street companies. Am I a hypocrite who should resign immediately?

Ariel Kaminer's answer? In short: eh, life's a compromise. And this is one of them. Also: good luck extricating yourself from the big finance:

"If you decide that your current situation is morally untenable, then yes, you should quit. But be forewarned: even such a bold action will not prevent Wall Street from enriching itself off you. The financial industry is so vast, and so inextricably entwined in every aspect of our lives, that to stand apart from it you pretty much have to go off the grid — no possessions, no transactions, no nothing."

Why do we get the feeling Ms. Kaminer might have read an issue or two of Occupy Wall Street Journal?

First, consider the tech savvy of people who look at valuations and stock prices and make enormous moves off of how they understand these companies. As evidenced by Groupon—a company some think is a massive Ponzi scheme, which (let's face it) Wall Street has had a hard time catching in recent years—analysts are not the last word.

Next, consider the reasons Amazon priced their Kindle Fire so low. At $200 cheaper than the iPad, even if Amazon's profits are marginal because of the sunken price, they're selling what essentially amounts to a license to buy more stuff from Amazon.com, in the same way buying an iPad or an iPhone—the reasons you don't even need a computer anymore to operate at full functionality—is a license to buy from the iTunes Store. They're betting on the lesser profits on the Fire to equal an uptick in purchasing from Amazon. Makes enough sense, no?

These $200 Fire units have yet to go on sale. The problem with iPad imitators is that they've thus far been too expensive and too associated with brands the general consumer isn't fully acquainted with (Motorola, HP). Unlike Amazon, who'll be running Google's Android on the Fire. Amazon + Google = Companies People Are Well-Acquainted With. But here's the really interesting piece of analysis on Amazon, buried all the way at the bottom of Bloomberg's report:

Amazon also is at risk from the drop in sales of traditional media, even as it benefits from the shift to digital, Gillis said. “Amazon is neither the fastest growing, or most profitable, company in our coverage and given the disruption occurring in physical books, music and movies, it is hard to justify the premium valuation,” he said.

Let's not forget, Amazon sells way more than simply media, "traditional" (i.e. analog?) or otherwise. They're becoming a publishing imprint that makes the transaction between author and reader a significantly more direct one, in a format people are used to working with. For example, are consumers more likely to trust book reviews on iTunes or on Amazon, based on appearances alone? Furthermore, who goes to Wal-Mart and walks out with only that which they came to shop for? Apple's limited in its ability to upsell merchandise once the customer is in the store to, well, computer stuff and media.

Question: What else can customers be upsold on at Amazon once you're already inside, purchasing digital content?

Answer: How many different brands of cat scratch boards do you think are out there?

As The Register put it a few weeks ago:

Amazon wants it both ways: use the Fire as a loss-leader as IHS suggests, and use it as a free razor-handle into which you can insert an endless stream – pun intended – of disposible-blade digital content. And, it should also be noted, use it to drive the public's perception of what a tablet should cost down into that magic sub-$200 range. Cupertino may continue to charge a premium for its iPad hardware – ever hear that said of Apple before? – but other fondleslab punters are now in a whole new world: one that starts at $199. And without Amazon's vast digital and real-world retail offerings surrounding competing tablets, it will be hard for them to continue that competition – as if they're doing all that well at present.

Amazon's planning for the future of future growth, which isn't going to show at the moment while their units are costing them a pretty penny. It's smart; it's sacrifice. It might've hurt them more than they expected, but so goes the delayed gratification of working ahead of a curve. It's a pretty simple case of spending money to make money, and their stock is dropping because simple thinking sees a low number and jumps ship. Don't mistake it for a sophisticated play. Amazon didn't get where they are by not planning for the future, or past that, making a ton of cash and putting their competition to bed in the process.

fkamer@observer.com | @weareyourfek

Dude just realized he closed his SecondMarket account too soon.

If you followed the downward trend of tech stocks like LinkedIn, Pandora, and Zillow in the media yesterday, chances are, at some point, you had to avert your eyes. USA Today uses no less than four foreboding verbs to describe how all three newly-public tech companies performed Monday after the S&P demoted America's credit rating down to AA+:

"Shares of professional social network LinkedIn plunged 17%, to $75.47. Internet radio company Pandora tumbled 8% to $12.49. Real estate website Zillow crumbled 7% to $26.09. That came as the Dow skidded 635 points."

Based on just that day of trading, Geoff Yang, a partner a Redpoint Ventures, told the paper, "The sound you just heard was the IPO window slamming shut."

Nevermind then, we guess, that LinkedIn has already seen big fluctuations in its share price, which dropped as low as $63.71 back in June. Or that both LinkedIn and Pandora stock suffered in July months after their IPOs. No, the narrative we're being told is that these tech stocks were "a bright spot" and are, as of yesterday, a blight for other start-ups hoping to go public. Scott Kessler, S&P's head of equity research for the technology sector, told USA Today, "The reality is that it is definitely a different market than we had a month ago, and companies have to proceed differently."

Get ready for all the hand-wringing over whether or not we're in a bubble to pivot toward whether or not we're headed for a bust.

Ovum expects the market to reach pre-recession levels by 2012, predicting growth in every region, so expect to see more Wall Street recruiters salivating over talented engineers. But the bulk of growth won't be in New York, historically one of the capitals of the world financial system, Ovum says, but in China, Singapore and Hong Kong. Ditto for the incumbent U.K. and Ireland, where spending on finance IT is also expected to lag behind Asia's.

“While there will be growth in nearly every major market, the Asia-Pacific countries will be at the forefront. This is mainly due to global companies shifting their decision-making power from New York and London to cities such as Beijing, because of their growing economic influence," Daniel Mayo, Ovum financial markets technology analyst, said in the release.

Any devs out there getting LinkedIn requests from Hong Kong-ers (Kongsters?) or Singaporeans? Let us know.