#74 - Imposters
Flash Boys, Brad, and winging it
I have no idea what I’m doing.
I’m sure you’ve had that realisation at some point.
And if you’re lucky, you’ve had the bigger breakthrough:
No one else does either.
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I’m reading Flash Boys by Michael Lewis. Like all his books it’s about how little we understand the world around us.
This time he tells it through the rise of High Frequency Trading.
“HFT” is a whole industry designed to syphon money out of the financial markets. For years the “professionals” on Wall Street didn’t have a clue what was happening.
The HFT firms prey on complexity. Once Wall Street went digital, post 2008, no one understood how the system worked. The traders left the tech to the techies and the techies left the trading to the traders. Complexity spiralled.
The pros lost track and the markets became ripe for manipulation. HFTs stepped into the fog and pulled out billions. Which is where Brad Katsuyama comes in.
The book's protagonist, he figured out what was happening and sounded the alarm. He figured it out because he saw the professionals for what they were: Clueless.
Strange things started happening on Wall Street. Simple trades suddenly became complicated. Most of Wall Street’s traders accepted it. But not Brad.
Brad was sceptical. An outsider, from Canada, Brad thought Wall Street was full of s**t. He wasn’t wrong. He soon realised no one really had a clue what was happening. He decided to do something about it. He dug in.
Brad found that a whole industry has emerged in the complexity of digital trading. One might think when you hit a button to trade the next steps are straightforward. Far from it. It’s an endlessly complicated process which enabled HFT to emerge.
They prey on ordinary investors. Inserting themselves between a trade and the market. They take a cut. The ordinary investor buys a little higher or sells a little lower. Not the end of the world but it’s prolific.
It’s a tricky leap to make. Realising you don’t have a clue is the easy bit. Realising no one else does either is harder. But it’s the realisation that empowers you to do something about it.
Wall Street’s not alone. It’s certainly appears in the startup world.
Starting a venture it’s hard to escape the feeling: I have no idea what I’m doing. You see companies decades ahead. They must know what they’re doing.
You wing it. You get something launched. You learn a few things. And you talk to more people, the “experts” even. The jargon that was so impressive a few months ago is less impressive. And you see the truth. They’re winging it too. Everyone is.
It’s an empowering realisation: No one knows what they’re doing. People learn, they improve, but it’s a fast changing world we live in.
I’m not writing this to preach. If anything I’m writing it to remind myself. Because intellectually knowing it is one thing, but practicing it is quite another.
It’s easy to take the world around us at face value. Things are a certain way because that’s how everyone says they are. Why question it? It’s the way we’re conditioned.
But if you do question it. If you pull the string. You might just find it unravels. And once it does, you’ll see it’s all to play for. You’re not the only one making it up. Everyone is.
My Week in Books📚
Unbroken by Laura Hillenbrand
An amazing book. It tells the true story of Louis Zamperini, an Olympian who spent two years as a POW in Japan during the second world war. A humbling read.
A Final Thought 💡
“I was born not knowing and have had only a little time to change that here and there.”
- Richard P. Feynman