Funny enough, I’ve read Michael Lewis before, and I’ve seen The Big Short, but having never read the source book (and since the book from Lewis I have read is on a topic I’m VERY familiar with), I never realized how good he is at taking the unfamiliar and making it accessible. Because wow, do I know nothing about nothing about Wall Street.
Depressingly, as Flash Boys shows, neither do most of the people on Wall Street.
I must add this quote from the book because it perfectly expresses how I feel about most things with a power imbalance in this country: “It was just extremely difficult for Ronan to say what he felt without using the word “fuck.” Girl, same.
Flash Boys details how proximity gave high frequency traders an advantage in buying and selling stocks even now that the market itself is nearly completely digital. Being slightly closer to the computers where data is processed gave certain traders a leg up, which they (of course, because capitalism) exploited. The proximity advantage is expressed in fractions of a second – literal microseconds – but enough time for the act of buying or selling a stock to change the market itself.
The most interesting thing about this book is not that someone noticed that slight advantage, but that the heroes of the book Brad Katsuyama and Ronan Ryan create a more equitable exchange by slowing down times to level the playing field instead of leveraging their knowledge for personal gain; they even have to couch their true motivation (making trading fair) in the language of money because saying “we’re greedy in the long term” was the only way they were understood. (Which is itself unsurprising, demonstrations of 12 microseconds of improvement were said to be perceived by the traders despite it literally being a fraction of the blink of an eye). In Lewis’s words: “Brad was not by nature a radical. He was simply in possession of radical truths.”
The frustrating part is how long things were allowed to be as rigged as they were, and all because no one bothered to figure out WHY certain trades were faster than others, and WHY the bias existed without merely taking advantage of it.. “It didn’t need in some sick way the kickbacks, and payment for order flow, and co-location, and all sorts of unfair advantages handed to a small handful of traders. All it needed was for the men in the room and other investors like them to take responsibility for understanding it, and then to seize its controls.”