The New York Times magazine has posted an excerpt/adaptation of Michael Lewis's new book Flash Boys: A Wall Street Revolt, which is about high frequency trading. Today's Times also covers the book with two articles on the front of the business section (here and here) and a book review on the front of the arts section.
Different people will take away different things from the coverage and from the book excerpt, but what struck me was, at least as it was described, the whole situation is a great example of the way a competitive free market corrects itself. People disturbed by funny business in stock exchange order execution could have called on the government to rewrite the laws or prosecute offenders. Some people still are calling for that.
But the tale Mr. Lewis tells is of some bankers who didn't like what was going on creating a new exchange and then seeking customers with the unique selling proposition that they were a non-rigged, honest exchange. The new entrant seems to have been pretty successful. This is a big important idea — that honesty in business can actually be a comparative advantage. The more uniformly crooked your competitors are, the greater the advantage. If an industry is mired in corruption, it might be a business opportunity to create an honest business.
