Mike, Meghan, and I spent the gorgeous afternoon taking the dogs out, and then ended the day with Settlers of Catan:
A new trader could leap into a market and trade frantically inside it without adding anything of value to it. Imagine, for instance, that someone passed a rule, in the U.S. stock market as it is currently configured, that required every stock market trade to be front-run by a firm called Scalpers inc. Under this rule, each time you went to buy 1,000 shares of Microsoft, Scalpers Inc. would be informed, whereupon it would set off to but 1,000 shares of Microsoft offered in the market and, without taking the risk of owning the stock for even an instant, sell it to you at a higher price. Scalpers Inc. is prohibited from taking the slightest market risk; when it buys, it has the seller firmly in hand; when it sells, it has the buyer in hand; and at the end of every trading day, it will have no position at all in the stock market. Scalpers Inc trades for the sole purpose of interfering with trading that would have happened without it. In buying from every seller and selling to every buyer, it winds up: a) doubling the trades in the marketplace and b) being exactly 50 percent of that booming volume. It adds nothing to the market but at the same time might be mistaken for the central player in that market.
This state of affairs, as it happens, resembles the United States stock market after the passage of Reg NMS. From 2006 to 2008, high-frequency traders’ share of total U.S. stock market trading doubled, from 26 percent to 52 percent—and it has never fallen below 50 percent since then. The total number of trades made in the stock market also spiked dramatically, from roughly 10 million per day in 2006 to just over 20 million per day in 2009.
Michael Lewis has written about Wall Street before. His books Liar’s Poker and The Big Short describe 80s excess and the 2008 financial crisis, so this book can be thought of as the third part in that saga: what happens when high finance meets high technology and well-intention but flawed government regulation? The answer is high-frequency trading, which is described in the analogy above.
Flash Boys is the story of a group of finance and technology people who come together to make an honest stock exchange, one impervious to high-tech middle men taking advantage of the millisecond lag-time in traders’ internet connection. In other words, “a tool whose only purpose was to protect investors from the rest of Wall Street.”
Alain de Botton is uniquely about to write about the peculiarities of the modern age with the utmost compassion. His writing has a deep sympathy (not without humor) for what it means to be a human being. He’s written books about travel, status anxiety, religion, and the ways in which architecture and our jobs affect our well-being. Here he turns his attention to the daily news.
Here, he examines the political, world news, economic, celebrity gossip, disaster, and advertising pages. He dissects their intentions and subsequent effects on our psyches, and has some suggestions to make each section more useful and enlightening to the reader. A better news service will help us all keep our anxieties in check, as well as provide us with consolation for our failures.
After all, each of us want to live a fulfilling life while being a well-informed citizen.
It is not that the average is never useful. Averages have their place. If you’re comparing two different groups of people, like comparing the performance of Chilean pilots with French pilots—as opposed to comparing two individuals from each of those groups—then the average can be useful. But the moment you need a pilot, or a plumber, or a doctor, the moment you need to teach this child or decide whether to hire that employee—the moment you need to make a decision about any individual—the average is useless. Worse than useless, in fact, because it creates the illusion of knowledge, when in fact the average disguises what is most important about an individual.
The takeaway from this book? That ‘average’ is a meaningless concept when applied to the individual person or situation. ‘Average’ might be calculable but it doesn’t exist in nature—it’s a comfortable but unrealistic concept. Regardless, most of our scientific understanding has been based around it because in many cases it’s the best we have.
The tragedy is when we fail to measure up to what is considered average. And it’s unavoidable, because NOBODY is exceptional in every regard. To think otherwise is to succumb to outdated thinking. This book calls for a more empathetic and accommodating education system, as well as pointing out ways to be humanized by your unique profile of strengths and weakness instead of dehumanized by feeling obligated to measure up to an imaginary standard. That all sounds goody goody and touchy-feely, but on the contrary, I find this book to be a useful contribution to thinking about the world.