Flash Boys Introduction - Windows on the World and How Wall Street Changed Forever
Michael Lewis starts “Flash Boys: A Wall Street Revolt” with one of the best ironies I’ve seen in a finance book. After the 2008 financial crisis, after everything Goldman Sachs did, the only Goldman employee who got arrested was a guy who took something FROM Goldman. Not someone who helped crash the economy. A Russian programmer named Sergey Aleynikov who copied some code.
Think about that for a second.
The Arrest That Started Everything
So here’s what happened. In the summer of 2009, Sergey Aleynikov quit Goldman Sachs and got arrested by the FBI. The charge? Stealing Goldman’s computer code. The prosecutors actually argued he shouldn’t get bail because this code, in the wrong hands, could be used to “manipulate markets in unfair ways.”
And Lewis asks the obvious question. Goldman’s were the right hands? If Goldman Sachs could manipulate markets with this code, what does that say about what they were already doing?
But here’s the problem. Nobody could really explain what Aleynikov actually did for a living. He was called a “high-frequency trading programmer.” In 2009, most people, even on Wall Street, had no idea what that meant. What was so valuable about this code that Goldman called the FBI over it? And how did a guy who worked there for just two years get access to it?
Finding the People Who Knew
Lewis went looking for answers. He ended up in a room at One Liberty Plaza, looking out at the World Trade Center site. And what he found there surprised him.
A small army of people from every corner of Wall Street. Big banks, stock exchanges, high-frequency trading firms. Many of them had left high-paying jobs to fight against the very system they used to work in. They had become experts on all the questions Lewis was asking. Plus a lot more questions he didn’t even know to ask.
These people were basically at war with Wall Street. And that’s what the book is about.
The Day Everything Changed
Lewis takes us back to October 19, 1987. The stock market crash. He was working at Salomon Brothers at the time, on the fortieth floor. He watched the whole thing happen in real time.
The market dropped 22.61 percent in one day. Nobody knew why. Some Wall Street brokers literally stopped answering their phones so they wouldn’t have to deal with clients trying to sell. That’s how professional these guys were.
But here’s the thing. The authorities responded to this mess by making it easier for computers to replace those unreliable humans. The 1987 crash started a slow process. Weak at first. Stronger over the years. Until computers completely replaced people on the trading floor.
Your Mental Picture of Wall Street Is Wrong
Most people still picture the stock market as guys in colored jackets yelling in trading pits. That ticker tape running across the bottom of CNN. Lewis says that world is dead. Has been since about 2007.
The US stock market now lives inside black boxes. Heavily guarded buildings in New Jersey and Chicago. What happens inside those boxes? Hard to say. Even experts can’t tell you exactly what goes on in there. The ticker tape on TV shows only a tiny fraction of what actually happens.
And the average person? You log into your brokerage account, type a stock symbol, click “Buy.” Then what? Lewis says trust him, you have no idea what happens next. And if you did, you’d think twice before clicking.
That’s a pretty scary thing to read when you have a retirement account.
The Canadian at the Center
The world keeps its old picture of Wall Street because it’s comfortable. Because the real picture is hard to draw. And because the few people who could draw it have no reason to share it.
Lewis says this book is his attempt to draw that picture. And at the center of it stands a Canadian named Brad Katsuyama. A Canadian, of all people, as Lewis puts it. Brad was willing to open a window on the American financial world and show everyone what it had become.
The introduction ends where it began. With Sergey Aleynikov. The Goldman programmer who got arrested. He used to sit on the forty-second floor of One New York Plaza, the same building where Lewis once watched the 1987 crash. In July 2009, Aleynikov was on a flight from Chicago to Newark. He had no idea what was about to happen to him when he landed. And he had no idea how high the stakes had become in the financial game he’d been helping Goldman play.
My Take
I read a lot of books about finance. And I have to say, Lewis knows how to set up a story. This introduction does exactly what it should. It makes you angry. It makes you curious. And it makes you realize that the stock market you think you know doesn’t exist anymore.
The irony about Aleynikov is perfect. The whole financial system nearly collapsed because of what banks did, and the one guy who goes to jail is the programmer who copied some code. If that doesn’t tell you everything about how Wall Street works, I don’t know what does.
Next chapter gets into the actual story. A fiber optic cable. A straight line through mountains. And billions of dollars at stake. It only gets wilder from here.
This is part of my chapter-by-chapter retelling of “Flash Boys: A Wall Street Revolt” by Michael Lewis (ISBN: 978-0393244663). I’m retelling the story in my own words with my own thoughts mixed in.
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