I know, I know–reviewing Flash Boys is so last week. But I approach my reading the way I approach my running: Don’t worry about what everyone else is doing, just get there in your own time. (Incidentally, this is also how I approach fashion, new music, travel, food fads, and pool.)
If you’ve managed to miss out on the Flash Boys Extravaganza (which sounds like a raunchy Chippendales show), it goes like this: Michael Lewis, best known for writing the seminal Wall Street memoir Liar’s Poker, as well as The Blind Side and Moneyball, published a book about high-frequency trading in which he said, essentially, that the stock market is rigged against the average investor. Flash Boys, which primarily investigates high-frequency trading through the eyes of Royal Bank of Canada whiz kid Brad Katsuyama, unpacks the wonky details of HFT to a damning conclusion: Firms are exploiting technological and regulatory limitations in the system to receive, and act on, advance knowledge of trades. More broadly, Flash Boys explains how over the last decade, the stock market has gotten more complex (in addition to the NYSE and Nasdaq, there a dozen other exchanges now) and less transparent (an increasing number of trading is done in “dark pools” whose makeup and workings aren’t public). As is his style, Lewis tells a great story, and what emerges is both a condemnation of HFT firms, banks and regulators for ignoring or taking advantage of the unfair market, and a bit of a love letter to Katsuyama, who Lewis paints as the humble hero, the guy who chooses to expose injustice rather than profit from it.
Flash Boys is the third book I’ve read by Michael Lewis (I really enjoyed Liar’s Poker and The Big Short) and I’m willing to concede that it’s probably not his best. Liar’s Poker had, from the first page, the air of a classic about it—a book that perfectly epitomized the machismo and greed of Wall Street without relying on the debauchery of a Jordan Belfort, or the thinly veiled sour grapes of a Greg Smith. Even The Big Short, which spared little energy on back-to-basics explanations of complicated mortgage securities, was riveting–though I did have to read a few paragraphs 17 times. But FB is still a solid addition to the Wall Street canon, and as Robin Hoods go, Katsuyama is effective (even if Lewis does treat him with kid gloves). Brad is charismatic and smart, and mostly seems incredulous at having figured out what HFT is all about.
While Flash Boys isn’t perfect, the biggest critiques of the book—that it was oversimplified and that it didn’t break news—feel nitpicky to me. It’s true that Scott Patterson’s Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market touched on many of the same topics, but it’s also true that Patterson should have rethought that title if he actually wanted people to read his book.
As to whether Flash Boys oversimplifies high-frequency trading, it’s like asking me whether a sentence in Russian is using the right tense, or if a particular shoe color is “too bold” for the season. While I’m sure there are elements of HFT that Lewis dumbs down for us intellectual peons, the book certainly feels sophisticated, and his goal as a writer has always seemed to be bridging the gap between story and nonfiction. Flash Boys, like Liar’s Poker, doesn’t only want to be a finance book for finance people.
Criticisms aside, Flash Boys has many champions, and immediately after its release, the SEC went all “oops we’ll look into that” on high-frequency trading. That’s no small potatoes. “From where I’m sitting, it is a blessing that Lewis chose to write about high-frequency traders,” Joe Nocera wrote in the NYT this month. “Others may have come before, but nobody else could have created the firestorm that Lewis did by going on ’60 Minutes’ … and announcing that high-frequency traders had rigged the market.”
Ultimately, this is the truth about Flash Boys, and about Michael Lewis. To the extent that financial journalism has rock stars (nerdy nerdy rock stars), he is one, and maybe the occasional injustice of that is, well, unjust. But that perhaps outsized impact is the Power of Lewis, and while there are surely unsung heroes in the Wall Street Public Awareness Campaign, we should be grateful to have a Michael Lewis. We should be nurturing the Michael Lewises of tomorrow. After all, we’re going to need them. From Flash Boys:
“The entire history of Wall Street was the story of scandals…linked together tail to trunk like circus elephants. Every systemic injustice arose from a loophole in a regulation created to correct some prior injustice. … There was nothing new about the behavior they were at war with: The U.S. financial markets had always been either corrupt or about to be corrupted.”
TITLE: Flash Boys
AUTHOR: Michael Lewis
PAGES: 288 (in hardcover)
ALSO WROTE: Liar’s Poker, Moneyball, The Blind Side, The Big Short
SORTA LIKE: The Big Short meets Ocean’s 11
FIRST LINE: “By the summer of 2009 the line had a life of its own, and two thousand men were digging and boring the strange home it needed to survive.”