Michal Lewis is a national treasure. He is able to take complex things and make them accessible to people like your mom – if you want to be condescending to your mother. In a way, he is one of the best nonfiction writers in English working today. I’d put him up there with Bill Bryson. But you know that already. This is a Michael Lewis book. You know: the guy who wrote Liar’s Poker, Moneyball, The Big Short, and that other book you like.
What Lewis does is take a look at an issue, but he does this thing where instead of boring you with a lot of details, he tells the story of a person (For real – this book has no index, no endnotes) and the problem they face and the cool things they do. The person isn’t really usually that far removed from what we imagine ourselves to be, but perhaps a better version than the self we really are. In Flash Boys, that person is Brad Katsuyama. Katsuyama was a worker on the exchange for the Royal Bank of Canada. He noticed that there were issues with trading. Namely that the trades that his traders were trying to make basically disappeared in front of him when they tried to execute them.
This lead the reader to go on a journey led by Lewis as the reader follows along with Katsuyama as everyone learns what the issue was and why those trades were disappearing. Mainly the story is computers, software, and companies using their smarts to insert themselves in the middle of a trade.
Eventually Brad and the reader learn all about this and is disenchanted with the system as it exists so he sets out to change this. His mission is to create a new exchange that disarms the smart “High Frequency Trading” and levels the playing field for everyone. It’s a good story, and Lewis tells it well.
My issue with it is that with the structure of the story, where it focuses on Katsuyama and his team, is that it is one-sided. The implicit message is that they are the good guys and the HFT guys are the bad guys. If you don’t know much about the world that Lewis describes then you take it for granted that he is right. The last third of the book becomes an advertisement for the exchange that was started. It has started a lot of conversations amongst finance and economic people about the value of HFT, but that is nowhere in the book. Does it help price discovery; does it provide liquidity; does it make trading more efficient ? Or is HFT just predatory; is it pure rent as Lewis quotes someone “The market is all about algos and routers. It’s hard to figure this stuff out. There’s no book you can read .” (209)? I don’t know, but thankfully this book is bringing those issues.
Ultimately, I have to hoist a footnote that Lewis writes that sums up the whole book for me: “’Glitch’ belongs in the same category as ‘liquidity’ or for that matter, ‘high frequency trading.’ All terms used to obscure rather than to clarify, and to put minds to early rest.”(203). Lewis lets in his editorial voice come in to show that even though he has written a whole book there is an inexactness to defining what HFT is – you have to get to the nitty-gritty to really know (He recommends a couple of books in the text but I didn’t highlight them). Because in the end, this book is only tangentially about HFT. It is really about Brad Katsuyama. All I wonder is who is going to play him in the movie