Author Michael Lewis discussed his new book Flash Boys: a Wall Street Revolt in the Lisner Auditorium. The event was held on April 4 by Politics and Prose in conjunction with GW as part of their “News Maker” Series. Andrew Sullivan, founder of The Dish, fielded questions to Lewis about his book.
Lewis’ book follows Brad Katsuyama’s investigation into High Frequency Trading and the possibility of wrongdoing on the part of Wall Street. High Frequency Trading relies on supercomputers to make trades in milliseconds through several different stock exchanges. Katsuyama, the CEO of the IEX Exchange, found that the millisecond delays at each exchange allowed for stock scalpers to purchase stock and raise prices preemptively of an order.
Sullivan asked Lewis what exactly makes High Frequency Trading so different than the past and why it seems that so much of Wall Street appears to rely on schemes.
“The deeper cause is that technology has deeply reduced the need for Wall Street,” Lewis said.
Lewis added that technology removed the human element from the stock exchange floor and now Wall Street has to invent ways to make profit that generally do not benefit the consumer.
Sullivan proceeded to ask what made Katsuyama different than his colleagues. Lewis replied that Katsuyama comes from a different banking environment and that debt and excess were seen more negatively in Canada (Katsuyama being from Canada) than the United States.
Regarding Wall Street bankers, “Everyone is thinking of their year-end bonus, not the career they will look back on,” Lewis said. “It’s a hard environment in American investment banks to be good. There are a lot of good people, but there are many bad incentives. The core of the issue is bad incentives.”
Sullivan then asked Lewis about his writing on the collapse of the Icelandic economy in 2008. Lewis said that the central problem in the Iceland case and that can be extrapolated to banking in general is the gender divide in the field. Lewis discussed that in Iceland many men were aggressive and unrestrained to banking, with many people leaving their previous positions to become bankers. After the collapse of the country’s economy, Lewis said there was a reaction to this gender inequality with the election of a lesbian Prime Minister. Lewis also pointed out that research shows that the best managed E-trade accounts are those of single women and the worst are those of single men.
Sullivan’s final questions were in regard to Lewis style of work itself. Sullivan asked, “Where does the moral code come from in your books?” Lewis replied that he is drawn to people with a purpose and that he found Katsuyama’s leadership and trust are worthy subject to write about.
Lewis also remarked that after his book had come out, both the FBI and the Justice Department announced shortly after that they will begin to investigate High Frequency Trading. Lewis said that he was amazed by the media’s reaction to his book and thinks that it may have helped to steer the system on a different path.
“Brad Katsuyama could restore trust in the financial system,” Lewis said.