Flash Boys: A Wall Street RevoltFlash Boys: A Wall Street Revolt by Michael Lewis

My rating: 4 of 5 stars

A great read for the view it offers into the world of high-tech trading and the complexity of modern financial markets. The ways in which modern technology has changed share-trading is really mind-blowing. But, the best thing is, a lay-man can get a top-level view of this world of big money and high-technology in a very entertaining and gripping read thanks to Michael Lewis.

Before reading the book, I never really understood what flash-trading was all about. I just thought that it was a faster way of processing market information and using it to make relatively risk-free trades that make money for the people who invest in the required computing power.

Given my understanding I really couldn’t grasp why the people engaged in this were viewed as villains and getting pulled-up by law-enforcement now and then.

But, as I read the book, I understood that what was happening was not quite so simple. The manner in which HFTs colluded with stock-exchanges to access information that was not yet available to others to make risk-less trades against actual investors was shocking.

In a normal trade both sides gain something. It is not a zero-sum game. But, HFT is presented as a tax on the movement of capital. This is over and above what is required to solve the problem of connecting a genuine buyer with a seller. Instead of “taxes” like this reducing with better technology, they are in fact made possible and allowed to do so much damage by the growing abilities of modern information processing and transmission systems.

This book documents how a bunch of guys got together to build an exchange that would give the right incentives to the intermediaries to put the interests of their customers first.

There is no excessive moralizing. Which is a huge plus! And I really liked the concept of “long-term greedy”. It is something I have believed in myself. The problem with selfishness is not the mere fact of its existence. But, the inability of people to fully understand what really is good for them in the long-term. Of course, this is an over-simplification. The point is this. You don’t have to really suffer any pain or deny yourself stuff to be of value to your society. If the system of incentives were set up in such a way that people were rewarded for the value of their work to society then people could do good merely by doing their jobs well and earning to their maximum potential.

But, when the reward system gets corrupted you can expect the guys who lack a sense of empathy to swoop in and exploit the loop-holes for their benefit at a great cost to the broader society.

Instead of focusing on individual failures of conscience, this book tries to analyse why the scalpers wound up doing what they do and the enabling environment. Also, there is quite a bit of back-ground on “front-running” and how this practice has evolved over the decades. The author clearly explains how this activity has had increasingly deleterious effects on the markets because of the technology used nowadays to implement this conceptually simple but ethically-fraught technique.

Also, another subtle but extremely important aspect of the author’s style is how he manages to convey the difference between visualizing a corporate entity as an evil and sentient being and a mere agglomeration of groups fighting pitched battles internally for survival and supremacy. Ultimately, all businesses are made up of human beings and they can never be entirely evil or completely generous.

He merely tries to point out how faulty incentives can mistakenly reward people within the businesses to put their short-term interests above everything else and thus allow/sanction the happening of bad things.

Overall, 4/5. It is a great book. But, not quite as gripping as The Big Short! Maybe it is unfair to give a lower rating merely because the author has written an even better book! But, I am a little biased that way

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Second hand books

I had gone to MG Road on Saturday for a meet-up of the Bangalore Writing Club. After the meeting and some chit-chat at a CCD nearby I decided to roam around for a while.

While I was looking around I found a shop that sold second-hand books. I went in and bought a few books. They were all in very good condition and considerably cheaper than new copies.

These are the books I bought:

Lord Jim by Joseph Conrad

Lady Chatterley’s Lover by D.H. Lawrence

Faust (Part 1) by Johann Wolfgang Von Goethe

The Best of R.K. Laxman

The Island of Dr.Moreau by H.G.Wells

Pygmalion and Major Barbara by George Bernard Shaw

Un-read books are piling up in my cubicle now. My propensity for buying new books is getting ahead of my ability to finish reading them. Must make my reading more vigorous!

Moonwalking with Einstein by Joshua Foer

I had read this book a long time back and I thoroughly enjoyed it then. Recently, an especially striking part of it resurfaced in my mind. Since no one was prepared to endure a verbal explication of my thoughts I decided to put it down here.

Memory as the foundation of intelligence

There was a part of the book which resonated deeply with me. By the time we reach adulthood, there is not a single cell in our body which we had when we were a child. The meaning of this was shocking to me. Just imagine, my whole person has been materially replaced. But, still, there is something about the new person which follows from the child I once was. There is a continuum of existence, of experience, of thought and consciousness. I feel a deep connection with that child and I believe I am him despite not possessing his body. What is responsible for this phenomenon. There is something that permeates us and links us through time and changing biology. It is memory. That web of experiences, emotions, thoughts and memories that will mark me as unique and make me feel like I have some value, make me feel that despite all my failings, I am someone special. That is the magic of being able to recollect.

It marks time and adds life to existence. It makes one feel that he/she has lived for 10  or 80 yrs. It follows from this that if I wanted to feel myself, by which I mean my personality, my character, my uniqueness more strongly, then it is imperative that that web of experience be made denser and more extensive. Only when we learn to embrace experience and feel emotions strongly do we get to feel the intensity of the life that we are in possession of.

I know it sounds like sugary philosophy. But, this is something I had already realized. This was what sparked my passion for traveling, reading, cycling, weight-lifting etc.. I realized that being a grown-up is not about being “in-control”, being cynical, or being difficult to excite. It is not about having a routine. Settling-down is not what defines it. It is about realizing that we now have the power to make things happen and at the same time remembering the things we wanted as a child. To use our enhanced ability to satisfy the child in us and to keep that spirit alive. To never forget our most ardent desires and to always have the energy to go out and fulfill them.

If every day were the same then there wouldn’t be anything special about living for a long time. The “length of life” is something that should be measured not in time but in-depth and breadth of experience.

When we have lived life, it adds a certain color, dynamism and intensity to our character, I think. It makes a person seem intelligent and attracts people to him/her. A collection of memories can help us assimilate more things. It is a case of more knowledge leading to even more rapid acquisition of knowledge.

I really enjoyed that book. There are a lot more things in it that are worth thinking about when you have the time for it. I came across the author while reading a piece about Conlanging on the New York Review by him. I liked his style of clustering ideas and concepts around his personal experience as he gets intimate with the subject. This led me to the book and I am thankful for it. Hope you guys too enjoy the book and let me know about your thoughts on it…