BOOK REVIEW: ‘The Fear Index’

OPINION:

THE FEAR INDEX
By Robert Harris
Alfred A. Knopf, $25.95, 304 pages

It is a safe bet that bad things are going to happen when the central character of a novel argues for - and imposes - a paperless office. What author sitting down to write fiction could possibly write approvingly of paperlessness? Certainly not Robert Harris: He is a former writer for the British newspapers the Observer and the Sunday Times, and the author of seven previous novels (including “The Ghost Writer”), so his career has been devoted to words on paper. No surprise then that when virtual alternatives replace them in “The Fear Index” he pursues the effects to the end of the road, where things look very scary indeed.

Alex Hoffman is the physicist at the center of Mr. Harris’ tale. Formerly an ace mathematician at the CERN - the European Organization for Nuclear Research in Geneva - he has taken his work on artificial intelligence to the business world, and founded a hedge fund. Year after year, its profits increase. The secret to the company’s success is an algorithm, called VIXAL. VIX is the acronym for the Chicago Mercantile Exchange’s Volatility Index, which measures anticipated volatility in financial markets. Since volatility is frequently the financial effect of anxiety, the VIX is sometimes called “the fear index.”

Among other things, Hoffman’s VIXAL scans the Web, gathering worrisome information likely to impact share prices, and then shorts those shares it judges will go down. Often, it holds shares only for minutes, or even seconds before selling at a profit. VIXAL also scans historic patterns, and since it is a learning device, it uses the information it gathers to develop new stock-picking paradigms. Thus Hoffman’s fund is managed by what he calls autonomous machine reasoning rather than the old-fashioned method of stockbrokers examining business conditions, making judgments about companies and calling investors with advice.

As “The Fear Index” opens, Hoffman and his partner, Hugo Quarry, are showcasing the latest version of VIXAL to their richest clients, hoping that they will all agree to invest more millions. Everyone loves and trusts VIXAL, yet they are surprised to note that it has taken a huge position in Vista Airlines. The airline is doing well, and its price has been going up, so it’s an unlikely bet for a hedge fund.

However, no sooner have they raised their eyebrows than a news flash reports the crash of a Vista plane, and the share price plummets. Apparently no one could have foreseen the crash. Later it turns out that VIXAL spotted the possibility after scanning an obscure jihadist website that threatened a terrorist attack on the plane. That’s all to the good because the collapse of Vista’s price makes even more millions for the fund.

But while the would-be investors slaver at VIXAL’s promise of certain money, Hoffman himself is getting anxious. The apparently infallible security system at his $60 million home has been breached, and he has been attacked by an intruder who hit him over the head with a fire extinguisher.

Then, mysteriously, he receives a first edition of Darwin in the mail. He collects old books, so he’s thrilled to have it, but when he inquires who sent it, he learns that he emailed the order himself. He has no memory of this. Nor does he remember buying every piece of work in his wife’s first art show. He understands why she’s devastated, and swears he never bought them. Has he simply forgotten? Is he suffering from the concussion? Is he mentally ill?

At the beginning of “The Fear Index,” events seem improbable, or even impossible, given the level of security that protects Hoffman and his business. But as this intricately plotted novel reveals more about algorithms that control computers, the orderly world of Geneva and faith in human control over events judders under the impact of the paperless, frictionless business that deals in figures rather than money, virtual reality rather than actuality.

By the end of the book, we are looking at a dystopian vision of a computer-driven society. Since most of us whine about the vagaries of the cyberworld, it is easy to accept this vision, not least because the admirably paced exposition speeds the reader along. Only the chapter epigraphs brake this headlong pace and provide pause for thought. Most of them come from Darwin and refer to the manifestations or fear or the tiny advantages that sway evolution.

One epigraph is a quotation from Mary Shelley’s “Frankenstein” warning about the effects of knowledge acquisition. Another records Bill Gates enthusing about computers as the nerve centers of business. While these epigraphs reinforce “The Fear Index” with historical backbone, allusions to recent events give it contemporary immediacy. Hoffman’s world unravels as financial markets dither about a meltdown in the eurozone and Athenians riot over the Greek government’s austerity measures.

Is “The Fear Index” fearmongering? Possibly. Like most dystopian novels, it taps into anxieties - about the mysterious workings of computers in this case. Like the best novels of this genre, it offers something to chew on - and it’s entertaining.

Claire Hopley is the author of “The History of Tea and Tea Times” (RW Publishing, 2009).