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Friday, February 13, 2015

Flash Boys. Cracking the Money Code. Michael Lewis. Allen Lane (2014)

This is a gripping and exciting book about two potentially dull topics, stockbroking and technology. Stockbroking, shares something in common with technology, there seems to be no space to be sort of interested. Either someone is really interested and dives into the details or you see it as a series of boxes that produce more or less desirable results from processes that are brain drainingly uninteresting. It is a measure of Michael Lewis's skill as a writer that he can find and present a context which makes them gripping while never excluding any relevant technical details.
Michael Lewis has a fantastic story to tell, how computers have made the apparently simple business of selling and buying shares into a nearly risk free money making process for s select group of companies. At the heart of the process is a very simple idea, if you know someone is going to buy something, they have placed an order for it, and you buy it before they do and you sell it to them you have the opportunity to make some risk free money.
The problem is that up to a certain point in time the technology used to tell a seller about an order from a buyer meant that everyone knew more or less at the same time. Any third party got the same information at more or less the same time, too short a space of time to intervene in the process for profit.Then computers were introduced and the matter of speed became much more relative, the technology meant that the time taken to communicate an order could be accurately and effectively sliced into fantastically small divisions, and technology could use the relative speed of the different computers in the process to create a space to intervene.
This unimaginably small space is a crowed place where a wonderful cast of people try to understand what is going on and for some do something about it. Michael Lewis has used a superb structure to explain a technically complex problem that has all the appearances of a "victimless crime". People are buying and selling shares on a stock exchange, they are not being held to ransom, someone is making money from the process, the biggest problem that Michael Lewis has to overcome is the simple question of "So what?"
They way that that question is answered is deceptively simple, Michael Lewis lets the people concerned talk for themselves and the reader follows along as they discover exactly what is going on and why they care about it. The reader in effect is taken on the shared journey of discovery that the cast follows, this allows the reader to be informed at a comprehensible rate. Where specific details are needed to make something plain, they are provided in the shortest and clearest form, they never interrupt the drama.
There is lashings of drama as the sheer scale and scope of what is going on becomes clear and the determination to do something about it develops.Some of the greatest pleasures in the book are the incidental details it reveals about Wall Street as an financial industry. One of my favourites was when Michael Lewis remarked about a very prominent bank that when it wanted to find out what its competitors were up to the followed a plan, they interviewed people from that competitor for jobs with themselves. Later he remarks that in an era when organisations are becoming ever more paranoid about the security and secrecy of their data their employee loyalty was falling at an equal rate.
Greed is a wonderful motivator of ingenuity to exploit any possible marginal advantage that any unintended consequence of a  process change may create. It is also a spark to others to oppose it, it is this classic human friction that Michael Lewis explores so grippingly. A great read.

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