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shares or buy shares? But now there's no people at the exchange. Now it's just computers. Now it's just computers, and like all the orders are going into computers because you can't persuade a computer, can't persuade a computer, or you can't cheat a computer. Well, that's interesting, how do you What do you mean, Well, I mean, unless you can hack into it, it's pretty hard to cheat your way into getting stock without paying anything. It's funny, that is. Mine instantly went there. Mine had two when I was his age. I looked inside the little black ledger, studied my ten shares of chart House, worth roughly two hundred bucks, this unimaginably huge sum, and I noticed a line item twenty bucks broker's commission. What's a broker's commission, I asked my dad. He explained, a guy charged twenty bucks just to pick up the phone and tell someone to buy the stock. What's this guy's name? I asked. I still remember this feeling of outrage, the sheer unfairness of it all, twenty bucks for a phone call. My dad told me the stockbroker's name. Then I asked where the stockbroker lived, and my father told me that too. The guy lived in a great, big house a few blocks away from us. Then a where he looked across my dad's face. Why do you want to know where he lives, he asked, because I'm gonna go egg his house. I said, because that's just what you did to grown ups who behaved badly. You egged their houses, which is to say that when I first learned how the people inside the stock market got themselves paid, I was genuinely pissed off. I'm Michael Lewis and this is Against the Rules, a show about the attack on the authority of the referee in American life and what that's doing to our idea of fairness. And we're now at the end of our season, the final episode in which we try to answer the question why on earth would anyone ever want to be a referee? Do you want to get in front of the battle? You care? Yeah, that's good. This is where I'm in a car outside of Dublin, in the village of Dalky. God, it's gloomy. Thank you for coming and getting us. God, I'm with Am and Ryan. He'd spent his career in the nineteen seventies and eighties as a civil servant. His job was to encourage foreigners to invest in Ireland, which back then seemed a hopeless task. In nineteen ninety, the Irish government had moved him and his family to the United States to Greenwich, Connecticut. They were transported to what was and is ground zero for America's money culture, our bond traders and investment bankers and hedge fund managers. Did you all enjoy living in the States or was it the first months were difficult? What did you What made it difficult? It was the people were a bit snooty. Yeah, a bit snooty, he says, in case you didn't hear it, Well they are, yeah, they're there. Yeah. I guess there are places in the States where you could have found snoot to your people, but not many. I think there farkersies number five yeah, yeah, yeah, and sometimes they are yeah. When the Ryans moved from Ireland, they had no errors about anything except maybe the fact that they had no heirs. Ireland was still a poor country. The Ryans weren't fancy and didn't really care to be. They weren't inclined to look down on other people or look up to them, and were suspicious of anyone who did either. In other words, they were Irish desired in Jersey. What did he play soccer? Yeah, football, soccer, yeah, just there on the other side, and that's his sister. They remained in America four years. They sent their sixteen year old son, Ronan to Greenwich High School and then on to Fairfield University, where Ronan developed a secret love for a kind of person his parents never fully understood, the American money person. Take me back to the first encounter you ever have with the US stock market years ago, my junior year in college. They gave us tours of the New York Stock Exchange floor. This was in nineteen ninety five. That's Ronan, and there was literally thousands of people pushing and shoving. And at the end of the day, when I'm leaving the office AE five, these guys had walked out an hour before. It was flashy cars. They were wearing their jackets and the bars. They were kind of like the cool kids post college. So I just I just thought it was interesting. Actually more than interesting. Ronan wanted to be one of them, one of those people on the lucky side of America. He had no connections and no money and no real reason to think Wall Street was waiting for him. And really he wasn't much like the Wall Street traders. They were big and he was slight. They projected confidence and he projected doubt. Yet he insisted that Wall Street was where he was going to himself. That is, he didn't dare whisper any of this to his parents or his friends, it would have sounded phony. He knew his parents would say, going to Wall Street, why have you started farting channel number five? As Ronan approached college graduation, his interest in being a stock market trader became an obset. He wrote dozens of letters to every Wall Street firm, even the small ones. He received only one reply, a form letter. So I graduated in June. My parents had already moved back to Ireland. I was living with my friend's mother on the floor of her apartment, looking for a job, and it wasn't going swimmingly well. And then I got a call one day from a guy from MCI. MCI was a phone company. He went to work for the phone company, and not for the glamorous part of it, And it started off as something called a national account support consultant. And they shipped me off to Atlanta for a couple of weeks and started training me on fiber optic gables and the difference between glass and copper, and network switches and voice and data. And I was just doing pagers on people's belts. I was doing voice, you know, I was working with travel agents. You know. I would go up to some offices in the Bronx where they literally had phone boots for people who wanted to call home to Columbia or El Salvador and couldn't

afford to a few years later, Ronan moved from the phone company to another company called Radiance. Radiance was in sort of the same business as MCI. It helped people to move their data around, Only Radiance was helping people who worked with Wall Street traders, traders who wanted to speed up their trades in various stock markets. In the early two thousands, all the stock markets, the New York Stock Exchange in NASDAC and the others had up and moved out of New York City to New Jersey, where floor space was cheaper. They had also gotten rid of all the human beings who worked on their trading floors. The guys Ronan had once found so cool. The stock markets were now simply stacks of computers inside New Jersey data centers. The old New York Stock Exchange basically became nothing more than a stage set for CNBC. One day at Radiance, Ronan got a strange call from a trader in Kansas City. The guy wanted Ronan to figure out why his stock market orders were taking so long to reach the stock exchanges in New Jersey, and it's taking him forty three milliseconds round trip for these trades to be acknowledged. And I remember my inner monologue at the time is I don't even know what the hell a millisecond is. But I said, Ted, that sounds terrible. I think I can help you. A millisecond is one thousandth of a second. It takes roughly four hundred milliseconds to blink your eye if you do it fast. Ronan knew that the guy's biggest problem was that he was in Kansas City. Data travels at the speed of light, but it still travels. The further you are from the stock exchanges, the longer it takes for your trades to get to them. So Ronan moved the guy's trading machines into a building in New Jersey near the stock exchanges and dropped his trading time from forty three milliseconds to three point nine milliseconds, or roughly one hundredth of the time it takes you to blink your eye if you do it fast. And this guy came up to visit his computer, as I guess a few weeks later and he was thrilled. And you know, according to what he told me, I was trying to ask him, I'm like, what's the value of a millisecond? I'm very pleased that you, as my client, are happy. I just have no idea why you are. And his explanation was in the first I believe, he said, the first four or five days of trading out of New Jersey, same strategy that I was running in Kansas. I've made more additional profit than to pay for your services for eighteen months. Anyway, words soon got out across Wall Street, and if you wanted to make your trades go faster, you call Ronan Ryan, and Ronan was soon helping all these high frequency traders, as they were called. Ronan had no idea how they were making their money, but they would use these mysterious terms like sniffing out the whale order, and they'd be like, yeah, you know, we can see footprints of large orders entering the market, and we can you know, basically, if we see there's demand of a stock because a big pension firm or mutual fund is trying to buy it,

we can buy it ahead of them and sell it back to them. For more, Ronan was running these super straight fiber optic lines across New Jersey. He was scoping out the data centers that housed the exchanges to find the shortest paths from the traders computers to the stock exchange computers. The stock exchanges didn't really understand what was going on, at least at first, but then high frequency traders started to offer the stock exchanges huge sums of money for what seemed like absurdly small things like a shorter cable between the traders computers and the stock exchanges computers, and they all insisted on having their computers inside the same buildings in New Jersey. Co location, they called it. The stock exchanges became a peculiar kind of landlord. Just the amount that they charge these co located clients to connect them. You pay it again into the building and then to get from your spot in the building to the exchanges meet me point is bananas like. They'll charge as much as forty thousand dollars a month for a cable. Forty thousand dollars a month for a cable that you could buy retail for two hundred bucks. Ronan had no clear idea why these big shots were throwing so much money around inside these New Jersey data centers, But then neither did the data centers. The American part of him just sort of went along for the ride. Whatever these people were doing must be cool and great, just another wonderful aspect of American capitalism. The Irish part of him began to wonder if that was true? And what is I X group? Group? Is a I X is a stock exchange? All people have things that set them apart. Would set Brad Katziamo apart? Was his refusal to be set apart. Ever since he was a little kid in the Toronto suburbs, people had been telling him that he was special, and he'd been refusing to take them too seriously. When he was seven, his mom told him he had been identified as gifted and offered a spot at a special school. Brad say he'd rather stay in the normal school with his friends. When he was fifteen, he ran a forty yard dash in four and a half seconds and the track coach told him he could be a star. He said he'd rather stay on the football team with his friends. At seventeen, he could have gone to any university in the world. He chose to go to Wilfrid Laurier, west of Toronto to stay with his friends. Brad never thought much about what he would do for a living, but the Royal Bank of Canada found him and hired him, and naturally told him he was going to be a star. Brad had never set foot in the United States, but right after nine to eleven RBC sent him to Wall Street to run their stock trading. He was twenty three years old, and so when the two thousand and eight financial crisis happened, Brad Casiyama was making two million dollars a year running US stock market trading for the Royal Bank of Canada. But by then, at least to him, something was feeling very wrong. The trouble started with a computer he used to trade in the stock market. Up until early two thousand and eight, the screens on his trading desk had always given him real time pictures of the market. If he wanted to buy, say, Hewlett Packard stock, he checked his computer screens to see how much of it was offered. If they said ten thousand shares were offered for sale at a certain price, Brad could hit a button and buy all ten thousand shares. At that price. Then one day he couldn't Basically my just the computer says, okay, well you didn't buy ten thousand, you bought eight thousand, and so it was bothersome, But you kind of tend to rewire your brain to realize that tradings computerized. It's a fast moving market. Things are happening. Maybe someone else wanted to buy Hewlett Packard at the same time I wanted to buy it. The issue is that by two thousand and eight the problem got worse. Instead of buying eighty percent of what I saw, I'd get sixty percent. By two thousand and nine, instead of getting sixty I'd get forty percent of what I saw. So I was missing entire chunks of stock, millions of dollars worth of stock, of essentially just disappearing. Brad isn't buying and selling stock just for himself or for the Royal Bank of Canada. Mainly, he's acting on behalf of big American and Canadian pension funds and mutual funds and the ordinary people whose money they managed. His losses are also their losses, and he can't figure out why they're mounting. His first thought was it was a computer problem. Maybe the buttons on his keyboard didn't work or something. The Royal Bank of Canada's geek squad turned up at his desk and told him the computer buttons work fine. It was Brad who was the problem. They said. He wasn't pressing the button fast enough, and I'd count to five or seven or ten, whatever, nothing would happen. Then I'd press the button, and then I'd miss shares in the stock with your hires. It was very clear that it wasn't someone else wanted to buy Hewlett Packard because I wanted to buy it, and something between me pressing the button and my trade actually executing, something was happening, but I could never get a real answer as to what was happening. Brad figured out that whatever was happening had to do with the way information had started to travel. By two thousand and nine, the stock exchanges were in some weird relationship with these new traders, these so called high frequency traders. But Brad hadn't completely worked out was exactly what enabled these guys to know what he was doing before he even did it. But then he heard about this person who helped make high speed traders go faster, An Irish guy named Ronan Ryan, like people here, Oh, the exchanges are in New Jersey. If you don't live in New Jersey, I live in New Jersey. I happen to know where Mahwa is. I know where Secaucus is. You live in New York. Brad lived in New York and the clue where these places wore. And these are things that were fairly rudimentary to me. Not because I'm smarter than anybody else Wall Street, It's just this is the industry that I

grew up with. Ronan explained to Brad what happened when he pushed the button to trade that instantaneous was not instantaneous. The signal Brad sent to buy ten thousand shares of Hewlett Packard needed to travel from his desk at one Liberty Plaza in Lower Manhattan out to the data centers scattered across the Jersey suburbs, to the New stock markets full of server racks trading stocks. So one press of the button, what I thought was an instantaneous action was actually a series of action that happened over the course of many milliseconds. High speed traders were able to buy technology and data from the exchanges to pick up a signal at one exchange and race me while my order is in flight to the other exchanges to do one of two things. One, they wanted to cancel any sell orders they had out there because here comes a big buyer. I don't want to sell any more because I know there's a buyer coming. But two, to actually buy stock ahead of me to sell back to me at a higher price. It's called front running. It's not really about being an investor yourself. It's about finding out what real investors are about to buy and buying it before they do so you can sell it to them for a higher price. You're only buying because you know I want to buy, and you're buying not to own shares in a company that you think is going to help you know, you know develop, you know, an investment return because you understand their business model. No, you're buying it just to flip it back to me because you know I want to buy it. So Brad figures all this out with a lot of help from Ronan, after which Brad takes a long look at this guy, this oddly wary irishman. Ronan still longed to be a big shot Wall Street stock Market trader, and Brad decided to make him one. Inside of a year, Ronan was earning more than a million bucks. Brad builds this team of people inside the Royal Bank of Canada. The team consists mostly of immigrants who are running tests on the American stock market to see how to unrig it, to see if they can make it impossible for their own stock market orders to be front run. So they try this. Instead of sending one signal to the four New Jersey centers, they send four different signals, so they all arrive at the four different centers at precisely the same moment each signal was in order to buy. However, many Hewlett Packard or whatever shares were for sale in just that data center, and just like that, the whole problem vanished, at least for RBC. Brad was once again able to buy all the shares for sale on his trading screen without being scalped, without electronic frontrunners in the middle of his trade. But the problem still bothered Brad because it was so obviously outrageously unfair. The US government had granted licenses to these stock changes on the condition that they referee the stock market. Winners and losers are no longer determined solely based on who understands a company better and fundamentals. It's now based on how long my cable is and do I use microwave versus fiber optic cable. We've talked about this sort of thing before in this podcast. It happened with CEO pay consultants and the ratings agencies and art connoisseurs and probably all kinds of other referees. The ref got bought. In this case, the refs are the stock exchanges. They were now providing a slow picture of the stock market to ordinary investors while selling a faster picture of that same market to a select group of high speed traders. That is like finding out the umpire makes more from selling things to one of the teams than they do from umpiring the game. One thing a lot of people don't realize is that right now New York Stock Exchange in AzaC, they make more money selling high speed data and technology than they do from matching buyers and sellers. Back in twenty fifteen, I wrote a book called Flashboys about Brad and Ronan and the problem of high frequency trading. Because I was as outraged as I had been as a kid when my father tried to explain to me that some stockbroker had charged twenty bucks to make a phone call, and I wanted to egg his house. And I assumed that any right thinking person would share my outrage. This is what's weird. The computers aren't in one place anymore. They're they're all in New Jersey, right outside of New York City. But they're in like four or five different places in New Jersey. So you see what it says that ap that it's called their ticker, and we say buy let's say we want to buy one share, we want to buy it. Let's buy ten shares? Okay, all right, isn't that a lot? You're right with that? Yeah? Um, this is gonna how are you get into college? It's going to pay my college could if it goes up a lot? You want to click it? You can do it. Yeah, you sit in my chair. So what you do is you go place order Place order. That's it, place order. So what does it say. It says right now, it says your estimated total amount is one nine dollars fifty five cents, and you go down the air place order do it. Yeah, so they're not allowed to buy in the night. It's closed at night. Oh, so people are gonna breaks. People have so people can have breaks, and the computers, I would bet and the computers need to break too. They probably do. Now I hit him with it right between the eyes, the brutal facts of life. I explained that when he bought his first Apple shares, these other computers get to see what he's doing before anyone else, Like there are people out there who get to live in the few milliseconds ahead of us. This is the funny thing about the start man. I'm trying to explain to you, is that you think about You understand why stocks exist, You understand why people would want to buy them and sell them. But it's harder to understand why anybody needs to sit in the middle between the people who would buy and sell and be given different information from everybody else, better information so they can make money off the people who want to buy and sell. The reason all this happens is it happens so fast that nobody

sees it. These signals move at the speed of light, which is the second fastest thing. What's the first fastest thing? Thought? Thought that threw me for a second. I mean, is it true? Do thoughts move faster than light? Did I just prove that they don't? I honestly don't know or if it matters. But then I realized he didn't pick up on what I was trying to tell him. Let's see what we got it for. We got it one hundred and fifty dollars and forty five cents. Actually it's even smaller. See one hundred fifty forty five point four cents. That's what we paid for the stock. Someone's computer in the one of the exchanges in New Jersey was looking at it and seeing that Apple was below that, and ah, I can buy it cheaper and sell it to that kid in Berkeley, California and steal a few pennies from him. It is not illegal for kids to buy stock, but their parents have to do it for them. That's correct, So we didn't break the law technically, I clicked the button. So what we'll never do is buy stock drunk. Yeah, it's illegal for kids to buy to stock drunk, so never trade stocks while drinking. Even an eleven year old senses that with all this money lying around, there must be laws involved here, and there are. He's required by a law to send his order to a stock exchange through a stockbroker, and that stockbroker gets paid by the exchanges for those orders, so the stockbroker is in on the game too. The game is to maximize the kill of the high speed traders so that they can afford to pay the stock exchanges, and the stock exchanges can in turn pay the stockbrokers. Everyone in the middle takes a bite out of the prey. The prey is us, and it's all legal because the people who make the laws screwed up and they're only now beginning to admit it. The parent company that owns the New York Stock Exchange is among the few most profitable companies in the United States, which is astonishing if you think about it, because their business is simply the exchange of financial instruments rather than the creation of anything real. That's Robert Jackson, who in twenty seventeen was named one of the five commissioners that the Securities in Exchange Commission it's supposed to oversee the stock exchanges. Think of it as the referees. Referee. I totally understand why a car manufacturer might be or why an incredibly innovative internet company might be, but the idea that the place you go to make investments is the most profitable business in America tells me that something's wrong. Can you think of any analogy to this situation where you've got the companies that are responsible for both providing this public good, this public service, or this public information and are also competing with it in the private sector. I can't, And that just shows how backward our system for stock markets are. I can think of lots of examples in the American economy and in our history where we've had a publicly provided good and a privately provided good, and sometimes that you even compete with each other. It would be an example of that. So there's public transportation that's available in the subway, and there's privately available substitutes. But this is a little like letting Uber run the subway and being surprised that the subway sucks, yeah, Or like having Barnes and Noble run the library. That's right, and then it's acting surprised when you get to the library and you realize it doesn't have that many books. Let's talk just a little bit about what it says about fairness in the American economy that this has been allowed to happen. Do you worry about that subject at all? Here's what I worry about that if we stop somebody on the street and said, hey, here's what happens when you buy and sell a share of stock. It's not that it goes to some central place where people figure out what the price should be and then give you the best price possible. No, no, no. This order bounces around data centers in northern New Jersey and then is routed to one of twelve exchanges, where the guy who you gave the order too is paid best to send it there, and then you're given a price that's probably reflective of a second class quality of data. If we told that to somebody, I think they'd be out But would they I mean, would they really be that outraged? I just want to know how this makes you feel. Some guy has got a penny or two, maybe just a fraction of a penny. Well, it's probably a penny or two of your money because the stock exchange told him a walker's coming to buy apple stock. You can go see if you can get it cheaper and sell it to him. You can stand in the middle of his trade. You can get between him and the person who's actually trying to sell the stock and make money. You feel our care about that? I don't really care. Why not, because the original order we placed we got we that's that was our choice right to place it, and if we were willing to do that, it really shouldn't have mattered. It was true. He really didn't care. It was just a few pennies and it wasn't even really his money. He didn't even care when I told him that if you added it up across the entire market, the theft from all the little kids and grown ups, it came to many billions of dollars a year. He didn't care that the cost was spread across millions of victims while the benefits were concentrated in the hands of the rich few. I obviously found the situation outrageous. My son did not. It's like the lottery. You're happy when if you win it and just stick with that, and you don't really care about where the lottery is fair enough if you want, and if you lose, you just let go. Well, well, if people are really addicted to it and they know if that they're gonna lose, but if they win, they're like Hallie Ella's go home, let's go. It crossed my mind, and not for the first time that about the best joke life might play on me is from my son to end up a Wall Street trader. He already seems to have a useful character trait, a sense that the game is not about right and wrong, but about winning and

losing a certain shall we say, lack of interest in the moral question. Hi, I'm Beth. I'm a senior studying social studies with a focus on Brazil, and I'm from Sacramento, and I'll be returning to Bank of America in a sales rolera. I'm a senior at the College I studying math and computer science, and I'll be returning to Goldman in a trading role. We're at Harvard in a seminar mainly juniors and seniors. Anyway, they're all older than eleven years old and supposedly interested in fairness, since that's what the class is about. My name is Michael Sandel, and I teach political philosophy at Harvard University. He teaches a course called Justice. It's one of the most sought after courses at Harvard. This seminar, called Casino Capitalism, is its first cousins. Oh, Vinnie, all right, we'll wait till three. Is this Vinnie? Yeah, welcome Vini. It's a chance for thirteen hand picked students to discuss the fairness of a lot of real world situations, especially real world situations on Wall Street. Many of the students have already worked on Wall Street and planned to return. Well, why don't we begin. I'm delighted that Michael Lewis and Brad katzi im I could join us for the discussion of Flashboys. Shall we go around you? Yeah? So, I'm Michael Lewis. I'm the author of Flashboys and a bunch of other books and working on this podcast, which gonna be called Against the Rules. I remember classes like this, the semi preparedness, the homework half done, the thoughts half baked, the warrior that today I'm going to be found out. Although today that's not the problem. I'm the homework. So is Brad. Brad Katsiamma. I'm CEO, one of the co founders of IX. Obviously, I work in finance. That's fortunately or unfortunately, originally Canadian from just outside of Toronto, living Darren, Connecticut. Now, after Brad figured out how the stock market got rigged, He set out to fix it. He quit his two million dollars a year job as the head of stock market trading at the Royal Bank of Canada. He took no pay and lots of abuse from Wall Street as he set out to create a fair stock exchange, the Investors Exchange. He called it I e X. What's interesting is that never in my life have I been a controversial person or looking to fight against the system. I guess in a way, that was the first time I think I was motivated to fight against the system. Did everyone come away from reading the book believing that Wall Street is rigged? Yes, say, rate your handed. You did all but a few hands go up. And those of you who who do not think it's trigged, Kade Marius Shara is not sure. That's how you don't think it's rigged, even having read Flash Boys, Well, I'm so here. I'm a little like vacillating, only for the fact that maybe, like I didn't understand it as well as I could have. But in my mind, it seems to be like a trade gets executed. Someone catches on the trade and just gets to make a better price because they get to dump it out. Real quickly, and in my mind, why is that a problem? A moral problem? I mean, when Lebron James goes to dunk a basketball and Jalen Brown stops him and then passes it to Tatum on the other side and he dunks it, no one says anything. It kind of sounds like to me, this is the same thing. You gotta love him just for giving it a whirl, but most everyone else seems to disagree with him. The Dutch student Marius is the only one who expresses anything like outrage at Bay. I think what I found very surprising is when you talk with traders that had been active in the fifties sixteen seventies, when they were still like runners around and phone calls, everyone will say, yes, there was also a use of arbitrage, and there was people like taking their bit out of the market, but it was clear, it's clear for everyone that was an illegal action, and it was kind of still frowned upon but tolerated. But I feel like in this book it sounds like the same thing as happening only on an institutionalized scale with those high frequency traders. But yet still it's not illegal, or it's not really frowned upon. Or not properly regulated. I feel like there's like a moral decay from back then to appear even though the whole problem has increased in scale. It's a great point because I think people are willing to do things behind a computer screen they might not be willing to do in person. And I think because you don't have that interface with the person that, let's say you're taking advantage of it kind of lets you tell yourself a lot of lies about what you do when you are not getting that direct feedback. Morally, the story Brad tells is as black and white as it gets. The students see that, they argue some about who deserves the most blame for the situation. Who's the biggest villain, the high speed traders, the people like Ronan Ryan who wants helped the high speed traders, or maybe it's the SEC. Brad says, none of the above. It's like sitting in a casino with a broken slot machine. You know, either person that puts your hand up and says it's broken, or do you drain it of all it's you know, you know money, it's you know they're capitalists. But the exchange is I think broke the system on purpose to make money by selling people, the ability to take advantage of that system, the fact that they're villains on Wall Street, Well, that turns out to be not all that interesting. At Harvard, the students know too much to be upset. They've long since adapted to this world. They don't want to talk about corruption of the refs, or the elaborate system of bribes and kickbacks, or what it all says about modern life. They want to talk about the person who strikes them as the freak of the story. Brad katze Yama, a student named Keller, kind of puts his finger on it. I think it's extremely impressive that you guys were able to figure out the problem and then march right against it. You guys were able to say no to the broken slot machine. It would have been very easy to make a lot of money understanding the market this way. But and then he says

the pronoun he referring to you just chose not to. And so I was wondering, you know, like why and how? Because I know and even with my positions about finance, I think it would have been extremely difficult for me to walk away from a broken slot machine that was paying out. So heavily. Yeah, Michael and I obviously talked a lot about this. Of course we had, because he begs the question why you Why would any big time Wall Street trader rebel against his industry? Why would anyone quit him multimillion dollar job to become a referee? Have you come away from this experience thinking that maybe you care more about fairness than a lot of people. I think this is a complicated subject, and we're fighting a system who are trying to confuse people into thinking the world works one way, and we're trying to explain it in a different way. And to figure out who's right or wrong, you have to put in the work to actually understand the details to come to the conclusion that the market is not fair. And so I don't think it's necessarily I care more about fairness than others. I think it's I've put in the work to understand what's fair or not. Brad katsa Yama is great at explaining things. The one thing he can't seem to explain is himself. Good people don't like to explain to you why they're good people, So that these questions he will not I could promise you he will never answer this question to your satisfaction. No, he actually won't because because he's not righteous. He's not self righteous. He's actually just a great guy. And the people who follow him follow him because they sense that he's thinking more about their well being than his own. And it's a it's a rare quality. I associate it with being a Canadian. So the simple answer is he's just a Canadian. And then if he was an American, there's no chance he would have ever done any of this. If I were you, I wouldn't say a word brat. But you know what, even as I said it, I realized I was wrong or anyway that I'd let my mind come to rest before it should. But you know, it's was peculiar about your situation and character was It's it's odd to find someone get as deep into Wall Street as you got before experiencing extreme moral revulsion. So it's the combination of the power of the feeling you had and how far into it you were when you had it that the kind of person who's going to be you got a long way into it before they offended your sensibilities, and then they offended it in a big way. Yeah, So that that's actually that's a fair point. So this is the piece where you know, I don't use this as a place to try to take the moral high ground because I did tolerate a lot of stuff. I saw a lot of stuff that I just did not think was good. Um, and I just I just like looked at it. That's really screwed up, and I moved on. So what was it about this particular situation that led him to turn his back on money and risk it all to make the world fair. Brad's decision was hard for the Harvard students to understand. Ronan Ryan's would have been utterly incomprehensible. It's right, it's right that it's in this building. They and the Hey, they have direct fiber optic connections to every NBA arena from here. Uh. Crazy, it is crazy, and it's right. It's right. And see see the NBA logo. Oh yeah, that's funny. Because you know the lady who wanted me to meet you like this, nobody shoot them. The NBA Replay Center is where this podcast began. It's also just down the road from where Ronan's career collided with Wall Street. The whole area looks as if it's waiting for someone to replace the rock on top of it that they wish they'd never removed. But a lot happens here. Let's see, wonder can we just pull in here? There you go. It takes us five minutes to drive from the replay center to the first Wall Street data center where Ronan worked for Radiance. It could be a self storage facility except for one thing. There's a tower on top festooned with satellite dishes. Look where we're sitting right now, Michael. We're in a crappy park lot across the street from one of the most important capital market building on the globe. On the globe, you just wouldn't picture the epitome of markets being here. It's it's a very curious situation. And if CNBC was being honest, they just have a camera on that building the whole time while they're talking about what's going on in the stock market. Yeah, yeah, because that's where it is. Yeah, eight trillion dollars of stocks traded inside this place in the last year, and it would occur to no one to visit it to watch. You know, you look up. You just take for granted the massive number of wires and power cables and all the way stuff, and you don't never ask what the hell they are. All of those towers up there are microwave towers. You have to pay them from a cable from your computers up onto the roof, and they sell you roof rights and roof rights basically means they'll bolt on your satellite dish, your your microwave dish. Yeah. Ronan taught Brad about all this new technology inside the stock market, and he did it so well that Brad created a stock exchange that might put the entire racket out of business. Brad taught Ronan how to trade stocks so well that when Brad ditched his job, the Royal Bank of Canada wanted Ronan to replace him, which is to say that Ronan Ryan, finally, after fifteen years, got the job offer he had dreamed of that, a big shot Wall Street trader making millions of dollars a year. But when Brad left to start I e X, Ronan left with him to build the fair exchange, to create the honest ref And they didn't do it in the American way by getting outraged or appealing to a higher authority or electing a crazy person. They just did an end run around the whole problem of high frequency trading. Inside the same Bland, New Jersey warehouse, I e X coiled miles of fiber optic cable and stuck it in a box. Then they announced that anyone who traded on I ex would have to send their orders through this box. The magic shoe box. Ronan called it.

It's slowed down the high speed traders just enough. Explain in the simplest way that you could resume mom could explain what the speed bump does. It's literally coiled cable, thirty eight miles of cable, which takes the light signal three hundred and fifty millions of a second to go around it. So we're not talking about slowing things down dramatically. But what that allows us to do as an exchange is it gives us the exchange the clearest picture on what's going on in the market, whereas other exchanges, because they're slower than the people trading on their market, they're printing trades without a clear picture of what's going on. The magic shoebox is a machine for slowing things down in a speeded up world, an engine of fairness. There's been a bunch of studies about its effects. It saves investors somewhere between one and twelve basis points. A basis point is one hundredth of a percent, which sounds like a tiny amount, right, But across the American stock market, each basis point comes to seven billion dollars a year. If the entire stock market traded on IX, investors would be spared being ripped off somewhere between seven and eighty four billion dollars a year. This shit adds up in Jersey. The skimming of the American investor isn't a street mugging. It's fantastically complicated and at bottom a little boring. There was no reason Ronan had to leave his dream job to step in between Wall Street and its investors and say stop, you're not doing this anymore. I think had I not worked at RBC for a couple of years, I might have thought this was a great business opportunity. But the level of full of shitness on the people that we were meeting was just making me more and more angry. So it was more like a challenge to make this fair because people What was most annoying is people are saying it's already fair. Nothing to see here, Ronan could have walked away from his middle class Irish self and acquired whatever he wanted, including airs. Instead, he flew to Ireland. His parents still had no real idea what their son did for a limit, but he wanted to talk to them about it because somehow they were still important to him. Their voices were still in his head, hanging over a chair, maybe he said, okay, okay, that's why I'd gone to visit Ronan's mom and dad just outside of Dublin, in the village of Dalkey, to hear their voices. What did you think when he told you was making a million dollars a year? Holy shit, No, it's hard to believe, you know, I couldn't kind of think. You know, they're saying every business deal there are two people. There's a Funk and Fucky and a new Ronan could be the funker, you know, so that's see. Yeah, how do it feeling? How it feeling about him? And then, in the same breath that Ronan revealed his new Wall Street power and wealth, he confessed that he was thinking of walking away from it all, plus tossing a match over his shoulder to burn the place down in a way that would make it virtually impossible to go back as a regular trader on Wall Street. And for Ronan's dad, here was the kicker. His son was leaving the playing field to become a referee. It all struck me that if you see referees, that was kind of skinny legs, and they're always popping around the place. And I was thinking, you know, those who can do, those who can't teach. You know, those who can kick the ball, play football, those can't referee. And it just sort of thoughts strange. You know that anybody would want to be one? Why would you want to be one? Why would you want to be a trap? Why would you want to be a policeman? Gona making people miserable every day? I X did not so much open for business as explode. After its opening, Wall Street's biggest banks were fine hundreds of millions of dollars for cheating ordinary investors. I X itself as a target of an expensive and mendacious political media campaign bought and paid for by the exchanges and high frequency traders. Brad and Ronan were threatened and slandered. They needed bodyguards. It took them two years to get the SEC's approval to open for business more than four times as long as it took an exchange built by high frequency traders, all because they were doing the most seditious thing that you could do. At the heart of American capitalism introduced fairness. Right, Yeah, fathers never know their sons are like my father, nephy knew a job I had, he taught I'd worked for since HSIPOL chargeable organization give them money to companies. He didn't understand inward investment. But I didn't fully understand for Ronan was that Ronan Ryan. I don't think he particularly even wanted to be a referee. It just so happened that the place he landed, Wall Street, couldn't accommodate both his ambition and his character. His Mama and daddy raised him a certain way, and he couldn't quite forget it. They raised him to see other people as just people who are either full of shit or not. It turned out that Wall Street had a crying need for someone who is not full of shit, and Ronan Ryan had a serious talent for it. Now right, I did, I got everything. Why do people become referees actual refs, I mean, not the ones who get into it because some powerful player has bribed them to play the role. I don't think there's a single simple reason the refs in the NBA may there, mainly because they love the game and it's their way into it. Ken Feinberg, he discovered in himself a gift for a kind of ferocious neutrality, found ways to exercise that gift, and discovered that our society just now desperately needs it. Let's pause a moment to thank our refs, the honest ones. We can tell ourselves that they're doing what they're doing for the same self serving reasons the rest of us do what we do. But there really are people who step up in certain moments, in certain situations to insist on fairness, even if their fathers never fully understand what they do, and even though the world never fully appreciates it. All right, consider it a birthday present. Ten shares of Apple, all right, all right, give me Apple screws us. Not my fault, if not your fault, Thanks for being Thanks for being my getting paid. You're a good podcast job. Do you think in the olden days just is very off topic, But it's about money. When money was like a dollar, you could buy a lot of stuff. M Do you think in the olden days people called people with over one hundred dollars hundred nays, one hundred air as opposed to a millionaire. Yeah, and then a thousand air. They must have had a word before a millionaire, right, Yeah, it was called rich because they're rich. They're just a rich I'm Michael Lewis. Thanks for listening to Against the Rules. Against the Rules is brought to you by Pushkin Industries. The show is produced by Audrey Dilling and Catherine Girdo, with research assistance from Zoe Oliver Gray and Beth Johnson. Our editor is Julia Barton. Mia Lobelle is our executive producer. Our theme was composed by Nick Brittell, with additional scoring by Seth Samuel, mastering by Jason Gambrel. Our show was recorded at Northgate Studios in Berkeley by Tofa Ruth Special thanks to our founders Jacob Weisberg and Malcolm Gladwell. That's not Yours