Daily Archives: April 2, 2012

The Fear Index – Robert Harris

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The Fear Index is a sci-fi thriller—or maybe not so sci-fi. The plot revolves around the hedge fund algorithm developed by a brilliant former CERN physicist who runs a phenomenally successful hedge fund based in Geneva. Dr. Alex Hoffmann’s brainchild, VIXAL-4, scans astonishing amounts of Internet data including the “fear index,” a measure of the volatility of market fluctuations in response to fear trigger words in the media. The fear index is an excellent tool for predicting gains and losses in the market. The computer program is so advanced that it is a kind of artificial intelligence that continually becomes more efficient—you can see where this is going.

Anyway, an odd and near-deadly break-in at the Hoffmann gated estate results in Hoffmann’s head taking a serious bashing and an almost retired cop poking around in his personal and hedge fund business. Hoffmann saw the assailant and now he glimpses the man everywhere, and is afraid he may be going crazy. A first edition of a Darwin book arrives at his home although he claims not to have purchased it. In the book is an early photograph of a test subject that looks uncannily like the attacker. The Amsterdam bookseller’s records show Hoffmann emailed an order and transferred funds from a personal bank account he didn’t know he had in the Cayman Islands.

With a headful of stitches and a doctor’s futile admonition to remain in the hospital under observation for 24 hours, Hoffmann goes to the office with his partner, the charming and voluble public “face” of the firm, Hugo Quarry. The two partners are scheduled to present their latest software iteration to favored investors in hopes of raising a billion or so for increased investment. Gabrielle, Hoffman’s wife, collects pieces from her studio at home for the opening of her first gallery exhibit and worries about what is happening to her marriage and her life. When Hoffmann finally makes it to the champagne launch at the gallery, an anonymous buyer wires funds to acquire every single piece of Gabrielle’s work, unheard of and highly suspect for an emerging artist. She confronts Hoffmann, who denies it, and is furious.

And so it goes. Stranger and stranger occurrences pile up over the day as the market and the hedge fund both begin to act oddly. The fund unloads shares of an airline that looks healthy hours before a catastrophic plane crash that sends its stocks plummeting. The algorithm steadily erodes the “hedge” that protects the fund from devastating losses but the fund is making multiple millions of dollars and Quarry is loathe to override the computer system to decrease risk. Hoffmann takes off in search of his assailant and Gabrielle is confronted with shocking secrets about the man she has been married to for seven years.

The Fear Index is a very taut, anxiety-producing novel with a very accessible amount of detail about how investing and markets work. It operates in the land of the ethers—extremely high wealth, extremely high risk, way out there science and a boatload of people at various stops on the autism spectrum. You can read it in one sitting and you might because it is hard to put down. As the financial world spins out of control and Hoffmann grows ever more paranoid, the evil mastermind of the international threat becomes harder to pin down. Harris’s book is scary—you may not have personal billions at risk but, in the world of VIXAL-4, your whole world is at risk of implosion and there isn’t a single thing you could ever do to prevent it.     

The Fear Index   Robert Harris | Alfred A. Knopf   2012