Book Review: 'Flash Boys': Repairing Wall Street potholes



  • 'FLASH BOYS: A WALL STREET REVOLT' by Michael Lewis; W.W. Norton & Co. ($27.95)

Michael Lewis writes that before he began working on "Flash Boys," he had little interest in the stock market, "though, like most people, I enjoy watching it go boom and crash." And like most people, he had an antiquated notion of what the stock market was.

At the start of "Flash Boys," his dazzling, troublemaking new work of reportorial storytelling, Lewis summons that sweet old image of a trading floor full of screaming brokers, slamming telephones and hysteria-inducing ticker tape. Picture that, he suggests. And then forget it, because it's gone.

"Flash Boys" describes the surreal-seeming technology that replaced it. And it also explores the breakup of big, central stock exchanges into many small ones; the impossibility of investors' knowing exactly what is being done with their money; and the immense new opportunities for skimming, kickbacks, secret fees and opacity the new system has spawned.

Because Lewis is at the helm, finding clear, simple metaphors for even the most impenetrable financial minutiae of this tawdry tale should make sense to anyone, and so should their shock value. "Flash Boys" is guaranteed to make blood boil.

And because this is Lewis, it's a book about white-hatted heroes who set out to rectify the system. The principal figures in "Flash Boys" were not widely known outside the business world, or even within it, though they will be now. You could find some on LinkedIn, but Wikipedia had never heard of them or their accomplishments. That only adds to the excitement surrounding a book that has been kept carefully under wraps. It went on sale less than two weeks ago.

Lewis' first illustration of high-frequency trading depicts the kind that can transmit stock market information from New York to Chicago and back in one-tenth of the blink of an eye and has divided the world of stock traders into the haves and have-nots, depending on what speeds they can afford.

It involves the stealthy building of an absolutely straight tunnel to run fiber-optic cable through the mountains of Pennsylvania. The firm building the tunnel calls itself Spread Network, and the job is monstrous. Huge mountains need to be drilled through. Every small town needs to grant permission. No one can know what the tunnel is for, and the cost of the digging is beyond astronomical.

But this was 2010, when the stock market was obsessed with speed, and Wall Street traders considered no proposition too unreasonable, no cost too steep. Sure, they asked questions. "Where is the backup if your line goes down?" ("Sorry, there isn't one.") "When can you supply us with the five years of audited financial statements that we require before we do business with any firm?" ("Um, in five years.") But they also paid $14 million each just for initial access to the thing because milliseconds could be worth huge fortunes if properly and secretly manipulated.

With the story of the cable, "Flash Boys" inspires both awe and horror at the same time.

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