Attack of the Killer Cucumbers: More on the Spanish Debt Crisis and Lower Quality Translation

Barbarino: That thing about the Great French Fry Phantom?Kotter:You mean the Irish Potato Famine?—Welcome Back Kotter

The need for speed in financial markets and the deceptive cornucopia of free information create the sensation that everything is available immediately. A parallelphenomenon is occurring in stock trading. As more and more trades areinitiated by algorithms at greater speed and greater volume, more and moremarket breakdowns are occurring. Although no one can say for certainwhat is happening, at least part of the problem seems to be that computersystems can sometimes be overwhelmed by the amount of data that humans are tryingto push through them. What lies in the future is no mystery: more and morespeed bumps are going to be put in place by regulators on algorithmic trading toprevent crazy fluctuations. We already have automatic stops in many stock marketswhen a stock rises or falls too much. The referees turn off the system, suspendthe stock, open the engine, and take a look to see what is wrong with themachine.
In translation, such technical fixes arenot available. Our capacity to generate the linguistic equivalent of crazystock prices is limited only by our common sense (always scarce) and the costof fast machine translation (essentially zero).
In the age of the Content Tsunami, there is still too little information ofdecent quality available for investors who are interested in a foreignsituation. The Internet and machine translation, though, create the deadly illusionthat a savvy investor can go beyond the tiny amount of analysis produced by theFinancial Times and The Wall Street Journal. Voilà. Ifyou’re an analyst in a tiny boutique investment firm with two years of high-schoolFrench and you dated a Mexican girl from Amarillo in college, maybe you can use GoogleTranslate to do the gisting of a few Spanish reports by the Bank of Spain or toparse one of Prime Minister Rajoy’s depressing statements (Machine-Translated InvestmentResearch and the Spanish Debt Crisis). After all, any tiny bit ofinformation (whether accurate or not) is necessary to get ahead of the crowd.
As in many other instances of how theInternet supposedly closes the gap between the tiny boutique firm and JPMorgan, this is a mirage. The big investment bank has a group of 20 or 30 Spanishanalysts who speak very good English and are able to provide verbal or written summaries of information that often isn’t evenwritten down. Moreover, these analysts are part of the local old boys' networks that communicate a lot faster and secretively than through the Internet. So when you see a blog such as ZeroHedge tryingto beat the market using machine translation, you have to smile a little. 
As Ihave noted, ZeroHedge is very much invested in the whole foul-mouthed,white-collar macho Wall Street ethos of the cynical tough guy fighting alone ina Darwinian world. With all of ZeroHedge’s gleeful references to regularinvestors as Muppets diving over the Facebook IPO cliff, you have to wonder howtheir positions fare when they are caught out by some central bank decision orsome European bailout plan because they don’t have access to off-the-recordconversations with this Greek minister or that Spanish lawmaker (or evensomething as pedestrian as decent translations). I am betting that many a bloody Muppetmassacre occurs behind the scenes that no one writes about. Maybe some ofthem are due to cheapo translation. 
In the markets, as in poker, the savvyplayer knows how to spot the sucker. The saying goes that if you can’t spot him,the sucker is probably you. And if you are using GoogleTranslate for your investment research, the sucker is definitely you.
Now, mind you, even half-responsible peoplewho honestly promote the virtues of automation usually add the caveatthree-fourths into their PowerPoint presentation that technologyshould not be used to handle messages in which nuance is important. In myopinion, investment is one of those fields in which nuance matters (although Ialways wonder: in how many linguistic messages is nuance not important?)
An investment thesis is not data, afterall. It may be based on data, but itis mostly a linguistic and conceptual construct. Allow me to use a veryconcrete example. Paul Kedrosky is a venture capitalist based in California whowrites a popular blog called InfectiousGreed. He is a very smart and successful investor who is well-read andwrites interesting and funny stuff. But even he is prone to what we might call a naïveapplication of Lower Quality Translation.  
You may recallthat around late May of last year, an outbreak of E. coli was detected in ashipment of Spanish cucumbers shipped to Germany. Normally, this would havebeen a rather typical spat in which a few borders are closed, Europeanagriculture ministers mutter passive-aggressive insults, andeverything is amicably resolved in some summit in which rather more caviar thancucumber is consumed. However, given the sensitivity over the Spanish debt problem, the cucumber problem suddenly popped up in the financial press.
Kedrosky went rooting aroundSpanish newspapers to see if he could get ahead of the market:

Germanyand much of Europe are blocking Spanish cucumber exports on fear of theagricultural product’s connection to the outbreak of a virulent and dangerousform of E. coli. The variant has caused multiple deaths, and worries areincreasing, particularly in Germany. 

Whatare the consequences? From a Spanish paper this morning: 

Spanishagrictultural [sic] trade is 3.8 billion euros, and the cucumber is 10 percent of totalexports.
Ninetypercent of production is exported.

The source cited is ABC, the more conservative of Spain’s three main broadsheets. Thelink (which is gone from the Bloomberg archive version I hyperlinked above butwhich I retrieved from my Google Reader) pointed to a Google Translate version of theSpanish article (the original non-translated version is here). Did Kedroskylink to the MT version because he wanted to be helpful to the reader or becausehe used the translated version to write his blog post? I really can’t tell youfor certain. But one small detail suggests that he might have relied on themachine to formulate an investment thesis.
This is where Kedrosky gets in trouble: “Spanish agrictultural trade is 3.8 billioneuros, and the cucumber is 10 percent of total exports.” That is a littleambiguous. If you don’t know the first thing about Spain, is 3.8 billion eurosa lot or a little? Moreover, does “10 percent of total exports” mean: A) “10percent of all the stuff Spain exports” (i.e., a lot) or B) “10 percent of allagricultural exports” (i.e., still a lot, but considerably less than A)? Thetranslation doesn’t really provide any firm answer. But lookat the subheading. It states the following in the MT version: “90% of production is exported and cucumber sales abroad suppose 10% oftotal vegetable.” Which is a mangled (Google Translate) version of thisstatement: “El 90% de la producción seexporta y las ventas de pepino en el exterior supon [sic] el 10% del total de legumbres y hortalizas.” Aha. So it's 10% not of all exports. Not even 10% of agricultural exports. It is 10% of exports of vegetables (!). But because the unambiguous sentence was mangled in the MT version, Kedrosky fixated on the more badly written--but better translated sentence--that contained a fantastic claim (Note the typo in the Spanish sub-headline and the brevity of the ABC item: this was obviously written athigh speed in order to make some deadline or to put something up on thenewspaper’s homepage; the figures may have been slapped together haphazardly atthe last minute or may have been taken from outdated sources; a bilingualanalyzing all of this non-linguistic information might have warned a researcherto dig further.) 
It was actually much ado about nothing. Sales ofSpanish cucumber outside of Spain only account for 10 percent of total vegetable sales abroad. That is only 380 million euros, which is a paltry 0.15% of total Spanish exports. That is far from adecisive tipping point in a trillion-euro crisis. 
That little mistake marks thedifference that drags you down from being the investor hero that makes a winningcucumber call to being the blogger zero who raises the alarm about a cucumber-fueled financial panic.  
To go from 10% of total exports by one ofthe largest economies in the world to little over a tenth of one percent oftotal exports is nothing more than a little nuance. So then: is this useof Lower Quality Translation for gisting justified? Well, I guess it is justifiedif you get it right. But that is a mighty big “if.” The problem is thefrequency with which amateur users (and please note that Kedrosky is a highlysophisticated observer of both technology and the markets) mess up using thetechnology should highlight the fact that proselytizing in favor of cheap andquick translation can often be tantamount to placing razor-sharp blades in thehands of hyperactive, over-caffeinated chimpanzees. 
Miguel Llorens is a freelance financial translator based in Madrid who works from Spanish into English. He is specialized in equity research, economics, accounting, and investment strategy. To contact him, visit his website and write to the address listed there. Feel free to join his LinkedIn network or to follow him on Twitter.