Take on what happened but also a look at the politics at the time that made the troops stay overseas in world war ii. Host lissa warren, you mentioned youre an acquiring editor. How long is the process of getting the book on the shelfs to the time you acquire it . Guest its just like having a baby, it takes about nine months from hand you script through the man you script, the copy editing process and then the cover design. I would have, at point, 20 children if i was having babies instead of publicizing books because ive been doing this for 20 books now. To write it, it usually takes a year or two, sometimes three if its a long book or one that requires a lot of research. They are pretty knee deep in evaluating copy edit suggestions that have been made. That can take several weeks. Occasionally a month or two, but we dont always have that long. We also need to keep books in the season that theyve been slotted, and so we have to keep the schedule, and the authors get some time with them, sometimes not as much time with them as they would like, but it is quite the process, and it all goes on, of course, behind the scenes so the consumer, the reader doesnt see it. Host and weve been talking with lissa warren of de capo books. We are at Bookexpo America where all the publishers come annually this new york city to display their wares for the fall season. Youre watching booktv on cspan cspan2, television for serious readers. Michael lewis talks about the rise of High Frequency traders in the stock market and discusses how they manipulate the workings of the market with the help of big banks to shortchange regular investors. This hourlong program is next on booktv. Thank you for coming. I wanted to start by explaining why it is i have the pleasure o interviewing michael thisart evening, and the i would direct your attention to the dust jacket of your book, the back, and there is a blurb here that reads i read Michael Lewis for the same reason i watch tiger woods. Ill never play like that, but its good to be reminded every now and again about what genius looks like. Malcolm gladwell. [laughter] and my question is, whos more shameless . Me for writing that or you for putting it on your book . [laughter] i just stopped them from putting it in an ad, because theyre wearing it out. It was kind of you to say it, and we both know its not completely true [laughter] there is a place for hyperbole, and i believe its the back jacket of books. [laughter] i have a theory, i have a grand, unified Michael Lewis theory,el and i thought that we would start there. I havent heard it, id love to hear it. And im going to this is g going to be i would like to see whether you, whether you get the theory, so im going to give you an opportunity to answer. Youll see. The theory [laughter] the preamble to the theory is that you are principally a moralist. In fact, i believe you are a americas leading nonfictionng moralist. What do you mean by that . Well, you are someone whoc explores deeply moral themes. As and as proof be, i would like to point out that in five of your best selling books are, essentially, biblicallal gories. Get it out there, lets get it out there, get it over with. Liars poker is what biblical story . [laughter] its daniel in the lions den. Youre daniel right. You descend into the lions den where you are beset by large beasts who you hold at bay, right . Duh. [laughter] moneyball. Moneyballs the easy one. [laughter] be moneyball is david and goliath, of course. A lot of them are david and goliath. Well, no, thats not true. [laughter] the blind side is the good samaritan, right . Quite literally very true. Thats a good one. Found the kid by the side of the road. I mean, its the same story, right . [laughter] big short, noahs ark. Laugh concern. [laughter] there was only one of each kind in my story. What do these guys do . They take refuge against the coming storm by building themselves, what . An ark, a financial ark. Perfect. [laughter] so, but flash boys is, the most perfect biblicallal doerly of all. O which one is it, do you know . Ic i have no idea. [laughter] its jesus and the money changers in thech temple. My Fathers House is a place of prayer, but you have turned it into a den of thieves, jesus said. Flash boys [applause][app i was, i was looking i gotk, the book, and i was like where w is the biblical epigraph from second matthew, matthew, whatever it is, 24. I couldnt find it. What i want to know is why i dont feel better understood than i did twoaugh minutes ago. [laughter] but its okay. The u, you wait, youre not kiss piewting that there is a deep disputing that there is a deeply moral center to all of your books. There certainly in this case, it is more moralistic, i think, than many of the thingsi ive written. I think theyre all moral. Probably, its probably hard to write without thinking,jdtqih some sort of moral sensibility. I, its on the surface more in this book because its on the surface with the characters. A lot of my characters dont feel that way about the world around them. In this case you have, you have a canadian such as yourself who walks into the american finance, and what he finds eventually appalls him because hes canadian. [laughter] and its a, that he is so clearly not just appalled, but he has such a clear sense of right and wrong and whats going on is wrong, and hes going to fix it. Its a little different for me. Its hard to make swing on the page than some ambiguity. Many of my characters have a lot of moral ambiguity about them. He has less than anyone ive ever written. Ill grant that, but you surely arent saying i mean, i find that same, i just explained, i find that same moral centeredness in think of all of your, think of the great, the characters in those five books. Theyre all this some way in opposition to the world around them. Yes, its absolutely true. And they all have a moral position on the world around them. What is billy beans moral position . [laughter] his, well, were going to get to that in a moment. [laughter] he has a moral position, and that is that the moneyball was an argument about privilege, right . On one level. To me, it was a book about privilege. I think of it as a book about value and about, about how i think it is a book about how difficult, how much difficulty markets have placing value on human beings. But billy bean didnt think of it that way. Billy bean could have given a ratskzr ass about things like that. He thought about it as a book of war. His war and the book around him. He budget thinking right and he wasnt thinking right and wrong in a moral way. He was thinking right and wrong like my math is better than your math. I know. But you dont think theres a moral dimension to someone who says we have fundamentally misunderstood peoples true values in the world . I say that. Yeah. He doesnt. But he didnt write the book. Yeah, thats true. [laughter] so, you know, i think it is true that but i dont think this makes me unusual as a writer. No, no. It is true that, i mean, what causes you the pick up, to sit at your machine and type words out in the first place . Its some sense of, like, somethings wrong or the world misperceives something. Yeah. You have a sense of, a view of events that feels at least to you perhaps erroneously fresh, different, and often that view is driven by some moral concern. Thats fair. Im not sure i think im more this way than other people. You think i am . Oh, heavily. Really . But i want to point out, to go back to your characters again, i think theres, i think that if you list them, lee january tuohey, michael bury in big short, billy bean, brad whatever his last name, how do you pronounce his last name . Even maury taylor, they all have, theres a Common Thread that runs through them, dont you think . Um, i said before theyre all in opposition to the world around them. Every one of those people. But the ant, i mean, look, everybodys got a moral position even by default. Take a character like Michael Berry in the big short. Hes someone who goes into finance after he boons medicine abandoned med sane because he realizes i care about people but not really. [laughter] and is souon indifferent that he takes refuge in numbers. Now, i guess thats a moral position, but it isnt what most people think of as a moralistic character. Yeah. But the point is i thought when i read that i found Michael Berry to be very moving. He too. Yeah. I thought it because you did. [laughter] but this is true. Can i interrupt you for a sec . Im trying to find some truth in what you just said. [laughter] im doing my best here. My wheels are spinning. [laughter] there is some truth, its true that, um, i have no interest in writing a book unless, unless i feel something. The bottom of all of them is emotion. Its absolutely true. So i write about often very dry things; baseball statistics, subprime mortgage crisis, High Frequency trading. Who caresc really . I mean, the you had told me if you had told me, if all i knew was that the stock market was rigged and heres how its rigged and, michael, you can go explain how its rigged and no one else knows, im not sure i have that much interest. I care a little bit, but i dont care enough to sit down and write about it. What i cared about, what i care about is that this character walks on, walks into this world, discovers its rigged and how he behaves with, once he has the understanding. The moral choices he makes. No question about it. And that engages my emotions. Thats what causes me to care about the story. So i have to, i have to feel something. Yeah. And its funny, and it is true, i would also say its true that what i feel is quixotic sometimes. I was sitting there watching, i realized when i had my 7yearold on my lap and i was watching the 60 minutes show about the story two sundays ago, and i realized i was crying. I had tears coarsing down my face because i was kind of embarrassed. But i was crying because i could see the character of the main, of the guy i wrote about, brad, on the screen displayed so clearly, and i found that character moving. That causes me to put any effort into this. Were you more moved by his character than some of those previous, some of your previous heroes . I find all of them kind of moving. Yeah. He was i like brave people, and a lot of my characters are brave. He is, i will say this, what he has done is peculiarly brave because hes brought on the wrath of the gods. I mean, he really has, hes gone to war with his own industry in a way billy bean didnt even do until the book came out. Billy was forced into that position by the book with. Brad went to war with the industry all by himself. And so i found and i findc m as ac character, becauseni he t by nature a troublemaker. By nature someone who goes out of his way to antagonize systems. I find him, i find that moving, that he was forced by circumstances to make choices that were really almost unnatural to him, to step outside of a system in which he was quite comfortable personally this response to a moral reaction he had. So hes forced, almost forced into the role, and that once forced into the role, he behaved so bravely. So what i had in mind when i finished this book, i thought to i had this strange feeling that id read this book i just wrote. What is this reminding me of . And it took me a while to put my finger on it, but here you had this character, brad, who had unleashed, who had triggered was sitting in the middle of this great war, and the war was between people with money to invest and the people who were mishandling the money. The middleman and the investors. A war that none of them really wanted in some way but now is happening, he was in the middle. And hes short, very short. And hes in some ways a reluctant middleman in this war, reluctant participant. I thought, oh, my god, ive just written lord of the fringes. [laughter] and i think of him as frodo. Yeah. In a frodolike way. Hes got that situation. And i find his bravery, like frodos what does it say about the difference between you and me that im drawn to the most dramatic story in the new testament, and you think of lord of the rings, . [laughter] you were raised with religion. No, i have much grander aspirations for your imagination than you do. Right . [laughter] i think the lord of the rings is pretty terrific. Actually doesnt reread very well. But i read it the first time, i thought it was pretty terrific. So i think anyway, so what do all these people have this common . Theyre troublemakers this their environment, theyre disruptive in some way or another, they have problems with their environment all of which is very useful this describing the environment. Theyre all characters this situations. In situations. Beyond that what is it about you that is drawn to that specific profile . You know, its funny, malcolm and i have done this once before a long time ago. You wont remember because there were six people in a barnes noble in new york. The blind side came out, and you were perplexed that all my books seemed to be the work of, bp r p ly, someone who has radical hostility towards the world around him, and you couldnt understand because i had rich parents, i was raised by people who loved me look at you with your blond hair. And then im it was what is, where does this hidden neurosis come from, is basically your question. [laughter] and i dont know if i answered you properly at the time, but i dont know if it was a good answer, probably just partly in some way im wired. You know, i dont look the way im wired, but i do think that it helps me as a writer that i grew up in a world that i loved. I grew up in new orleans. And it was a world that was outside in many ways American Culture. And American Culture was clearly hostile to it. It was3z not going to survive American Culture. And a lot of things i valued this that world were crumbling in that world were crumbling before my eyes. So i could see that hi fathers way of life was unsustainable, for example. I think that probably helped. What do you mean by that . I mean do you mean what kind of what was unsustainable about your father . Well, it was unsustainable not to care very much what you did for a living or get your status from your achievements in the world as opposed to just your personal relationships from your family. It was not a success culture. It really people were largely indpirvelt to what other people did to make a living and much more focused on family relationships. And there was kind of an ironic twist or an ironic string in life, a kind of detachment, amusement, a gift for creating the culture had a gift for creating wonderful moments. It wasnt, it was a naturalness about it. I just felt but it was, it was not a successful place. It was a failed place in many ways, and a kid could see that. You could see that, you know, you could see that even the things you loved were not sustainable. So i think it makes you question, makes you question success when something you feel is very successful at a very deep emotional level is by the standards of the world a failure. So thats probably, that probably has something to do with how i approach subjects, but i dont know how much. The answer to the question may be im, actually, basically lazy, and its much easier to write a story about a disruptive story in an environment than it is to do, say, the kind of thing you do where you actually have to think through the idea very clearly from beginning to end. [laughter] i mean, i weve had this conversation before. I maintain what you do is harder c0v yeah. So to tie these two things together, the lewis family motto, i kid you not, when i was growing up my father said on a coat of arms is passed down from generation to generation was this do as little as possible and that unwillingly. [laughter] [applause] wait, theres more. For it is better to receive a slight reprimand than to perform an arduous task. [laughter] and i thought that was serious. I mean, i thought that made total sense to me. [laughter] and so my writing life, it is influenced by that kind of approach. I mean, i dont look for trouble or hard things to do. I look for, i look for things i can to without too much trouble. And i you understand this, youre making no sense whatsoever right now. [laughter] why . You are, first of all, insanely prolific. Yeah, but its not hard. [laughter] that does not make me feel were better, by the way. Once i find a story that engages me and a character and a situation that engages me, its very easy. I mean, i have to spend time with him, which to other people might be onerous. But and i have to kind of learn some things. But if situation and the characters right, the rest often just kind of takes care of itself. And so maybe its just, for me, maybe given my proclivities, maybe its just what i am doing is finding the path of least resistance. Which of your books was the hardest . To write . To write. Probably the new new thing. And its a good way to judge t9n i think back on them, i think almost on olympic dives, you have to have the degree of difficulty as well as the execution. Yeah. And the degree of difficulty was high there because i had a character i knew the reader wasnt going to the whole point of the character is hestg incredibly uncomfortable to be with, that he doesnt the minute you get settled, he unsettles. So he never gives you a place to rest. And its the culture of Silicon Valley embodies in a embodied in a person. Thats are hard to make he doesnt form attachments. Very hard for the reader to form an attachment with him. So that was, i think, probably the hardest. This one and the big short had these Technical Details that were difficult to kind of bring across a bit. Its hard its basically impossible to describe a collateralized debt obligation. [laughter] i mean, nobody, no matter what you do, the best you hope for yeah. Is that you fool people into thinking they understand it. [laughter] and so when they put the book down they say, i got that, and they go tell people they understood it, but they dont really understand it. [laughter] so you have to give up artfully with some things. So that was true in this case. There are some laces where i just hope the reader felt they didnt want the know any more. [laughter] but the, but theyre all, i mean, i find the hard part of these things is structure. Its like what is the way to tell a story, and once you find a way to tell a story, it kind of tends to almost write itself. Uhhuh. And, by the way, which was the easiest . Wives poker because it was just about me. I was so vastly amused by myself too. [laughter] and it never, i mean, i am told this is true. My wife, tabitha, tells me so i write with headphones on, i listen to music, and i will listen to the same song over and over and over on a loop just because it shuts everything out. I wrote an entire chapter of this book to let it go. [laughter] i was like an insane person. I walk the world and i hear that song, i start to write because i got so used to it. [laughter] but liars poker, im told she tells he im cackling with, ic laugh at my own jokes. c [laughter]nrxd and i, and with liars poker, id never written a book. Id written very few magazine pieces. I had no sense thered be actually ay critical reaction to this except we love it. [laughter] so it didnt occur to me to have fears or anxieties. Yeah do you have any fears or anxieties . Of course. What are they . [laughter] well, i think i see, i mean, maybe not as much as some, but i fear the disapproval of others, and, you know, its not nice to get bad reviews. Beyond that, i mean, in my literary life . We have a lot of time. You can want to think about it . [laughter] no, i think could you come up with something . Not really. You know, probably not. Probably not. I dont feel so you have, i think you must be this way too. There are layers of insecurity underneath layers of confidence. At the bottom is confidence. I know at bottom im not really that worried about anything when i write. I dont worry its going to be bad really. I think that if i work hard enough at it, its going to be find, but usually it comes very easily, so i dont even get that far. Be so i dont its problematic, right . Because writers are supposed to be tortured and miserable. Yeah. [laughter] and poor. [laughter] and im none of those. [laughter] im very happy, more or less well adjusted. Plenty rich [laughter] and, you know, i just im at peace with the world around me more or less. So im sorry i cant give you what you need here. [laughter] im not requiring [applause] you know, i find this deeply refreshing. [laughter] our mutual friend, another michael, told me the key to understanding you is that the commencement address you gave at princeton several years ago, which i read this afternoon. Two years ago, yeah. Two years ago, which i read this afternoon. From the pulpit in the church. First time id within in the church, much less the pulpit. And you describe a little bit of what that commencement address was about, and then do you agree that there is something, do you agree that it encapsulates Something Real about the way you see the world . Yes. Central. So you have 12 minutes to address theze said. [laughter] would you like to come to dinner . So theyve actually become friends. [laughter] so the theme of the speech was the role of luck in life, accident in life. And that the people in the audience, probably even more so than when i was graduating from princeton, think of themselves as deserving, everything that comes to them, because theyve passed through this ruthless merit accuratic filter. Theyve gotten the right scores, the right grades, everybody tells them they deserve to be there. I knew i was there because my father had gone to princeton, so i didnt think i actually even deer deserved to be there. I thought it was a privilege to be there. But because they were programmed the way that theyre programmed now, i thought it was important to tell them how much luck was involved in them being there and how much luck would be involved in whatever happened to them afterwards. And that it wasnt just enough to appreciate their luck, that they owed a debt to the unlucky. And it was a way, what i was doing, was smuggling into princeton, back into princeton the ideology i grew up with which is, you know, its one of those ways to [y redress the inequality in the society for the people who are the elites, to think a little bit about their responsibility to the people who are not rather than just coast on the fact theyre elite. Part of the outrage of the story of this book is elites are doing the opposite. Elites are, instead of taking kind of responsibility for the rest of the society, are scamming it. But [applause] its good to get to know the audience, isnt it . [laughter] kind of know which way theyre going to drift. [laughter] so i think were drifting left in here. [laughter] the, so and the point, and it was true that this theme tied into some of my books. And i mentioned that moneyball yeah. Was, i mean, part of moneyball is the as, the oakland as figuring out how much luck there is in a baseball career and trying to strip out the luck to get to the true value of the player. But how hard that is to do. So i was justing, i was trying to bring that across to them. And im sure theyve forgotten it already. [laughter] i mean, their parents may not have though. [laughter] but its, do you think that idea, i mean, aside from moneyball, has that idea surfaced in i mean, because it is, to go back to my argument about moral themes in your work, there is a constant engagement with this idea of privilege about institutions that have become corrupted with this isnt something i guess when you put it that way, thats true. You mentioned books are about, so moneyball, you think about the privilege is the privilege its the club of the old baseball scouts. But more than that, moneyballs also about arrogance of the rich, the way arrogance has blinded the wealthier clubs. Thats the other half of the puz until that, right . True. How the new york yankees of the world have been his led by their riches. Whats more moral than that argument . We going to spendpv this whoe conversation you proving the point you made in the beginning . [laughter] no, no, no, i dont want to belabor it. Okay, i love bomb you and i cave, and i say, okay, youre absolutely right this is not about me making some, you know, ridiculous argument. God knows i do that enough. [laughter] this is, but, i mean, and then im going to leave it. Years ago when we had our thing on stage for blind side, the other thing i said then and i still believe is that, to me, blind side, i thought the book was mistitled. You made it sound like it was a book about football, and it wasnt a book about football. It was a book about charity, right . Its a book about lee january tuohey i think the book is about all the forces that affect the value of this child at the center. Yeah. And howc the outcomes in ths childs life are so serendipitous. Thats what it is. Its the football season, it all comes back. Thats, the question is structural. Whats this book about . The question is, is why how does this boy go from being the least valued human being on the planet, a homeless, illiterate kid eating out of garbage cans on the streets of memphis to four years later being among those highlyprized 18yearolds onbe the planet . One of those forces is things that have happened in football strategy to elevate the value of what are you so peculiarly, you do so peculiarly well, and then the mother that all of a sudden he had. So it all fit together for me. Youre right, it wasnt just about, obviously, it wasnt just about football. Yeah. I say that, by the way, thats the only i think that book is perfect. There is not a single word out of place. I mean, i love all your weeks, but books, but that is, to me, it will be read 50 years from now. I really believe that. It was hardly read at the time. [laughter] well, yes, you find when you write a book about football that people who like football dont like to read. [laughter] [applause] this is my gu anyway, we will, then it shouldnt, that was my frustration. I worried that people would think it was a football book when i felt that and the few people who do read who like football, they really, really dont want a chick flick in the middle of their football book. [laughter] they dont. So i liked shoving those two things together. But it did miss its market. And the movie, the movie solved that problem, but if the movie hadnt been made, it would be my leastread book. Will yeah. I liked it though. Im with you. I felt very good at the end of it. [laughter] lets talk about this one. I dont know how much i dont have a watch. I dont know how much time we have. [laughter] lets get to the book at least a little bit. [laughter] talk a little bit about the origins of this. Im guessing that, did this grow out of the piece you wrote for van an fair on the ru highspeed Trading Program . oniqok twominute summary of how this came about. E summary of how the russian Computer Programmer caught my eye, and this was in 2009. High frequency Trading Programmer in his early 30s, a russian kid, left Goldman Sachss and mailed himself some code. And a couple of days later the fbi arrested him, and i followed this in the newspapers. A year or so later hes sentenced to seven years in jail. And so the first thing i wondered was why on the back end of this financial crisis that goldman had so much to do with was the only person who went to jail the person Goldman Sachs wanted to go to jail. He was the only goldman employee that went to jail. But the thing that really caught my eye was that when they arrested him, the prosecutor said that this code, he had to be denied bail, couldnt be let back on the streets because this code that he had could be used to manipulate or crash Financial Markets if it was in the wrong hands. And i thought goldmans the right hands . [laughter] ask i couldnt [applause] it was breathtaking. I thought, could it have been in worse hands already . And then this stuff had to do with High Frequency trading which at that time no one had ever heard of. It was a term of art that all of a sudden was in the newspapers ex. It was just computerized trading. So it took he a couple of years to actually come around to doing the story. But when i got into it, i realized i needed a primer on High Frequency trading. And i just called friends on wall street, people who were investors, and i said do you know anybody . They said, very weirdly, theres this canadian guy whos wandering around, and youre not going to believe what he will tell you. And, yes, he knows it hes the only guy whos not an area 51 guy. So i went to find brad, but really just for background for the thing, the magazine piece i was doing about sergei, the russian. And a couple of days into it i realized just with him, i realized that, you know, i was very pleased to be doing a hag zien piece with magazine piece with the russian, but there was a book in this guys experience. And there was a question of persuading him to do it and persuading him to letted me move into his life which i did for a little more than a year. This is a small point. Im wondering whether it has larger i would notice when i was reading the book you return again and again to the question of with each of the, as brad gathersc his confederates aroud him, you over and again return to the question with each of these people about how they were changed by 9 11. Thats true. Three or four times. I feel like theres that and im curious, im guessing thats for a very good will be. So, a, id like to know what that reason, but more broadly, do you think the fact that 9 11 was so much a calamity of the financial district in some way alter the generation . I mean, is it, does it have a kind of material effect on the way people involved in the markets thought about what they did . Is that a point you were making by bringing it up . No, that wasnt the point i was making. But i do think that 9 11 gave wall street cover to behave very badly for a26n long stretch, because all of we were, we shared an enemy with them. And, but that was almost a separate point. The point i was making, one of the things i wanted to kind of get at without actually saying it was, kind of just raise the question why do some people in this environment decide to behave well . Why does someone who sees whats going on in the markets a lot of people knew that the stock market was rigged. Why this canadianfy canadian guy and this group of people that he brings together, why does it bother them more than anybody else . And i think the answer is more complicated than a few of them had traumatic experiences during 9 11. But all of them did have this tendency to have a long view, a perspective on their lives from kind of trying to live their lives the way they wanted to look back on it rather than living their lives looking forward to the next bonus. So they werent as narrowly motivated by money as others. In a couple of cases, i really think 9 11 had a lot to do with that. And so thats why i kept coming back to that. The most specific, the person thats most blunt at it, theres a great hes only in the book for a little bit, but theres a kid who works for brad named josh blackburn, and he was a freshman in college when 9 11 happened, on 9 11. He walked out of college and over to the air force recruitment center. They wouldnt take him for a year, and he ends up, anyway, devoting his life to helping generals map the battlefield in iraq, and when he comes back after seven years, hes traumatized because he cant find anything in the economy, any job for his skill set that feels purpose beful. Purposeful. Hes a computer, a technologist. He got job offers from all the High Frequency trading firms. Hes perfect for them. He goes in and and finds it completely hollow, like he doesnt actually want t to gett of bed every morning until he bumps into brad. So they all had this need for a sense of purpose that was greater than just how well they were doing that day. And so i wanted the reader to have some clues as about why they might be that way, why they were different. Because this this is a question. I mean, its why them, you know . Its really, its odd that the messenger in this case is odd, this canadian guy who really is not in the center of things in the beginning decides that the world needs to know some truth thats going on and ends up i mean, this is the role hes going to play in life he is, essentially, has walked into a place with a advantage can qume of trust a vacuum of trust, and he becomes a source of trust, and everybody trusts him. And the power of that is incredible. But why . Why him . And so thats the, those were ways to prod the reader into thinking along those lines. Uhhuh. Do you, has your own feeling about over the course of say youve returned to you started off writing about wall street, and now youve written about it twice if you include boom rang, three times. Have your feelings about Financial Markets evolved over that time . Are you more outraged now than you were at time of liars poker . Re. Whats changed . What looked like comedy has become tragedy. When i was leaving solomon brothers, i had very mixed feelings. I didnt think i was i thought it was silly. What bothered me then was i had seen just too many young people who really had some other purpose in their lives be diverted into work that wasnt of the money. And i thought that was dumb, and i thought that i could write a book then that would show people what it was, and that they would be, they would demythologize it. Instead, of course, what i did n advertisement for what i did wall street. [laughter] i mean, i did think, i mean, it is amazing. You never know what book youve written until people read it. But, you know, six months after liars poker i had a thousand letters from students at Ohio University that said, dear mr. Lewis, ive read your instruction manual how to get ahead on wall street, and i just want to make sure there were no tips you left out, because i really want to work on wall street. [laughter] so there was enough ambivalence in me, i didnt feel, i didnt feel i was on some i wasnt writing from a moral, it wasnt a moral high ground exactly, it was just a distance, a detachment i had from it. What changed my mind was the financial crisis. I mean, what particularly started to change my mind was when all these places, all these big banks committed suicide. I mean, when they all made all these horrible bets, and they all should have failed or almost all of them should have failed. And i thought, because up to that point i thought i thought a couple of things. I thought they were exposed to Market Forces measure they actually were more than they actually were. But i also thought how peculiar it was that these institutions that suck in the best and the brightest, they can have anybody they want almost, and these people who they suck in are not unselfinterested people. These are very ambitious, you know, people that when brought together, they commit, they were a failure. In the way they were brought together. I thought that was interesting. But i also thought that things that seemed absurd and comic in 1987 or 1988 seemed disastrous now. How much more complex the whole system had gotten so nobody could actually see what was going on inside of it. The consequences for the larger economy, all that. And the kind of steady draining of the soul of the place. Its become much more corporate, much slicker. Soc ive become,cco[jw6vonr, feeling less warm and fuzzy about it. Yeah. And the stories, look, and a lot of times youre just sort of at the mercy of the story that walks in the door. This particular story is so much more black and white than most of the stories ive had to deal with. I mean, it isnt a question of whos right and whos wrong. Theres not, and theres not a lot of middle ground. You have, you have its about a young man figuring out how the stock market works, and he shows you how its rigged. He shows you the predatory activity thats going on. The evidence is incontrovertible, and it shouldnt be going on. And that, he is attacked for delivering the truth. I dont know. So i, it just seemed that, the interesting thing about the story wasnt is this you could read liars poker, and you could obviously say i admire this sort of economic activity, i dont admire this. There was a choice. I dont think you can read this and say i admire this sort of economic activity. E have you, i want to headache sure, one more question one more, time for one more . Yeah. I have to go to q a, we have to go to q a. Sure. But before we do, one last bit. Were you prepared . Is this what you expected would happen . I did think it was an explosive story. I dont think i could have ever imagined it would be as explosive as it has been, and its played out as theater on tv. In the most extraordinary ways. I didnt so i didnt know exactly what to expect. Heres what it had going against it. Its complicated, and the main characters a nice canadian. [laughter] i mean, no offense. [laughter] but, no, i you remember this. At the new republic, they used to have a headline, a boring headline competition. And every week readers would submit the most boring headline they could find in the apers, and thered be papers, and thered be a winner. At the end of the year, wed put all of them in a bucket, and the winner was Worthwhile Canadian Initiative. Do you remember what came in second . I dont remember what came in second. Second was university of rochester decides not to change name. [laughter] so, so i cant believe we i know. So ive written a book, its about a Worthwhile Canadian Initiative. [laughter] and so i had that, i had that going against me. I feel like i deserve some credit for taking a Worthwhile Canadian Initiative and putting it in the middle of my narrative. And im not getting that credit yet, but i will eventually. Yeah. What i had going for me is that there is a war waiting to happen, and its a war about, over the role of the Financial Sector in our lives. And, so theres one moment that crystallized this whole, the war for me, and it was i was sitting there, i was on tv, but i was just watching it. Cnwc. The cnbc the first day the book comes out decided to stage a debate. It wasnt really a debate, it was people shouting at each other. I was in one room in midtown manhattan, and brad is on the New York Stock Exchange sitting beside one of the head of the exchanges thats been rigged by High Frequency traders, created and owned by High Frequency traders. And the head of the batts exchange. And this guy proceeded to make an ass of himself. He was a crazy person, screaming and yelling. He was very odd. But it was a story i heard after that told me why, you know, why this thing is so explosive. Apparently, the trading floor, a lot of the trading floors on wall street just stopped. The New York Stock Exchanges stopped when this was going on. Its now the most watched show in cnbc history which is, i mean, its the tallest midget, but never the less. [laughter] we did something right. And, with by the way, i try to get the word midget this every one of hi book. The first one i used it, people were offended, ive got my back up against the wall about it. [laughter] theres a him jet in that midget in that book. [laughter] but the, on one of these trading floors it was a Goldman Sachs trading floor. Theyre all watching, and the guy that tells me the story says were watch, and the guy next to me, old Goldman Sachs guy, says the angry guy, is it true we own a piece of his exchange . And he goes, yeah. He goes, the little guy. We dont own a piece of his exchange . No, we dont own he goes, were fucked. [laughter] and so wall street realized, the smart people realize theyre fucked. Theyre on the wrong side of the argument. And its gone that change. And so, but what does that mean . Finish that means sucking. In just the narrow sector of the stock market billions of dollars a year out of wall street. But this model for how our computerized market works, if if a fair market becomes the model, wall streets screwed. [laughter] its all, it only works if theres unfairness. A lot of wall street just vanishes. So youve got at stake huge sums of money and the sense theyre screwed. And once you get that, you get a different sort of reaction from wall street than you get from my previous books. And this is what with what it feels like in retrospect, not at the time. But in retrospect be, what i have been doing is kind of blindly whacking away with a great beast with a baseball book. And liars poker was the first whack, and it didnt really bother the beast. I hit it someplace where its nerves were not very sensitive. The big short was the second whack. Again, didnt really do very much. This time i whacked it in the balls [laughter] and it just the beast woke up. [laughter] was i hit it because i hit it where the moneys made. I mean, the money is going to be taken away, and they know its going to be taken away, and it just erupted. And it erupted in every which way. Financial journals, part of the eruption. Anybody whos got a stake in the revenues is disturbed. So that explains the reaction. Yeah, yeah. [applause] well, thank you, michael. [applause] we have time thank you very much, malcolm. Now we go into the q and a part of the evening. Just a quick reminder, questions general bly start with a w or an h and sometimes a d. They are short, we do not believe in twopart questions, and only malcolm gets to ask followup questions. [laughter] my first question. I havent read the book [inaudible] who are these bad guys with these high speed trading im sorry, who are the who . Who are they . Who are these bad people collecting billions of dollars . I didnt see that in the piece. The so im not going to name names, and ill tell you why, because the problem as unsatisfying as it sounds is the entire system. The point of take where the scalp happens right now in the market, a High Frequency trading is scalping you in the market. Ands that the intake for the revenues for this system of a lot of unnecessary financial intermediation. But the revenues are shared with the exchanges who rig the exchange for the High Frequency traders, and the banks and the Online Brokers who sell, essentially, one way or another the customers stock market orders to the High Frequency traders to trade against. So identifying single villains is nuts. The minute, at some reputational risk, i kept names out on the other side. The villain is not named, not a one, because i now know what would have happened. What happened is someone would have gotten lynched, the best case. And the problem is if you go and lynch one or two High Frequency traders, youre not attacks the system. The problem is the guys up against the system. So if you google High Frequency trading, if you really wanted to know who the people are who are the best at scalping you in the market, but thats, you know, arguably, theyre not the villains. Exchanges are the villains because theyve created this environment, or the banks and brokers have sold your information out to them. But if you really want to know who the bad ones are, what you really need to know who are the High Frequency trading firms that care much about speed. There are those who dont care, and those who care a lot. The more they care about speed, the more theyre involved in the bad activity. And you can google and get the answer. Next question. Michael, malcolm, thank you so much for being here. Michael, i know youve been critical of the goliaths of the Financial Services industry, who would you say are the davids . And also, what would People Like Us do, what should we do [inaudible] to save for our futures, to safe for retirement, etc. So the brook book is about a david in the financial system, and its this Stock Exchange called ix. Theyve built an exchange thats owned by investors. The whole point is it creates an environment where investors are not exposed to the predator. Who else are the davids . Theyre the first, best david because theyve actually created a kind of solution to a problem. And if it works, what youve got is a model for how you solve other problems, through disruptive entrepreneurship and bringing Market Forces to bear this a particular market. Your own moneys a different question because when i say its rigged, theres a systematic scalp every time an order to enters a market. Its pennies, its tiny sums of money. Spread out over the whole market, it adds up to huge sums of hundred. So its not that youre never going to make money in the stock market, thats not the point. The point is the market is charging, its found a way to tax you in all investment dollars totally unnecessarily. And its more of a systemwide problem than it is a problem for your individual savings. For, as an investor, you almost should be more concerned about the instability caused by the rigging. Its not the pennies you lose every time you trade in the stock market, its this whole, you know, as the guys at Goldman Sachs say when they decide they dont want any more to do with High Frequency trading in the current stock market structure, theres going to be a calamity. If we dont, if we continue down this path of exchanges making this system ever more complicated for the benefit of High Frequency traders. What can you do . The simple answer is go on a web site that iex has created called i am an investor. Org, and it explains how you take control of your own stock market orders and create pressure on the banks and brokers not to sell you out. Its already happening. Its actually, its interesting, theres a Political Movement going on in finance right now. In the last week, Charles Schwab has come out and said this is a cancer on the industry that needs to be stopped. An Online Brokerage Firm called Interactive Brokers has said theyre now going to allow their customers to send their orders into iax. I have no doubt the competition will arrive, but whatever the Fair Exchange is, you starve the predator. You starve the beast. So that thats what you do. You try to put pressure on whatever Stock Market Investments you have, you try to direct them away from the m. From the system. Mr. Lewis, my questions about front running. I wasnt aware that there was such a multitude of exchanges, and fund running is reliant [inaudible] so hi question is my question is brads solution is to create an exchange which disallows front running to happen by slowing the process down. Wouldnt a simpler solution be just to have a Single Exchange so that the process couldnt take place at all . Absolutely. Theres no question about that. And the problem with that is that regulators believe competition is necessary for the exchanges to stay, to be efficient. And so in the name of we be decision, they have en name of competition, theyve encouraged it. But it doesnt benefit the investor. Yes, the simple solution is for the exchange to be a utility. And it could happen. I mean, one path this whole episode may take, the New York Stock Exchange has been trying for several months to buy iax, and iax has, theyve already turned down they all could have been rich already. They just, theyve turned it down because they cant allow themselves to be sold to the New York Stock Exchange unless the New York Stock Exchange gets rid of all the bad stuff thats going on. Otherwise its not credible. But if the New York Stock Exchange caves and says we will, not only will we buy you, but well get rid of all the High Frequency traders that were in the place, no longer giving them preferential access, youll be the New York Stock Exchange, its easy to imagine exchanges totaling. Then folding. All the businesses going on in the New York Stock Exchange, and wed kind of go back to the way the market was structured ages ago. But without human beings in the middle of it. So without the investment orders passing through hands at all. Just buyers and and sellers just meeting. So that is the natural solution. So i think you kind of just touched on this a little bit, you know, before i decided to come up here, i but my question was going to be iex. I mean, up until now how successful have they been in doing what theyre trying to do, and i dont know if theres other exchanges how successful have they been so far . Well, if you talk to investors whose orders are being directed on the exchange, extremely. That all of a sudden, you know, the problem, you know, as it hand fests itself to investors is that they think theres a market. They think this these 13 stock markets in these 13 stock markets say their 10,000 shares bid for microsoft at 20 a share, and then they go to do it, and the market anticipates what they want to do and vanishes and goes up. It doesnt happen when they go onto iex. So theyve been very successful in, you know, the measure of how successful theyve been in eliminating the activity is basically High Frequency traders dont want to be connected to them, because theres no point. But the size of the exchange is still small. Theyre incredibly successful for a new exchange, starting a new Stock Exchange always takes time. Theyre trading, yesterday they traded 65 million shares. Its a fraction of the stock market. Its enough so that theyre profitable or just about profitable and sustainable. But theres a break. And the break right now is 70 of the stock market orders are handled by eight banks. Only one of these banks is actually treating this exchange honestly. The other seven are doing what they can to avoid sending their orders onto the exchange. And so pressure has to be brought to bear on those banks to start moving orders onto the exchange when their customers ask them to. The one is goldman. One is goldman, yeah. The other seven arent behaving uniformly badly, there are different degrees of badness, but it means that combined with the fact that none until Interactive Brokers did this then of the online brokage firms are sending their orders on there either. Theyre starved of activity a bit. But its changing, you can see. I mean, this is the books been out eight days. Theres enormous pressure in the system for people to, if the investors ask for their orders to be directed this way, for them to be directed this way. So its a pretty hopeful looking situation right now. Hi. Thanks for being here. So id like your opinion about what i look at as the 50,000foot view, and that is when you have guys like hank paulson who used to run goldman and then was running the Treasury Department and other former bank guys in government positions, its sort of like the fox and the chicken coop. Regardless of all the things that are going on with High Frequency traders, if the problems stem at the top, and that is the guy that winds up going to jail is some shmuck for seven years and the big guys like Lloyd Blankfein or other goldman execs who are personally betting against their clients, and nobodys going to do anything about it was they wind up working for the banks. Whats to be done . You know whats amazing, if youd have asked me that sort of question say when liars poker came out, id have thought you were a nut case. [laughter] really, another conspiracy guy. Its absolutely true, what you said. And you didnt just say it. Two days ago a prosecutor from the sec who is just retiring stood up in front of the sec and got to applause and said the problem with this institution is every one of you want to get a higher paying job on wall street, and youre afraid to do anything but address very small streetlevel crime, you want to be nothing but polite to the people running the institution. Were corrupted by the money. And they all said [applause] yes. There are they know it. [applause] and its, so its a problem, right . [laughter] so how do you solve this problem . I mean, you can, brad katsyama, when he first discovers himself being front run, very cleverly is able to demonstrate it, because hes canadian instead of making a mistake, he decides i ought to tell the u. S. Government because it would be rude without making a stink. So he goes to the sec and describes this to them, and he leaves. After the conversation in which sec people are saying, oh, whats the problem with that . [laughter] he thinks nothings going to happen. Theyre never going to do anything. And he goes back to his canadian bank, and they Start Talking about why would they be that way . And they do a little study, and they find out that in the reeves three years previous three years more than 200 people had left the sec to go to work for High Frequency traders or lobbying firms. He said, well, maybe thats why they do that. [laughter] so what do you do . Do you despair because the whole system seems to be riddled . And the industry, this problem in the marketplace in this particular market is a hydrocoz m of the larger problem, and the larger problem is the industry generates so much money that its captured. Not just the regulatory process, but the legislative process. And so you could, theres no its, i think, futile to look to washington for a solution to the problem. However, we live in a country where people worship entrepreneurship, love marketbased solutions. So whats so clever about what this guy has done is he has created a solution that does not require really much in the way of anything from washington. All theyve gotta do is stay out of the way. Stay out of the way and let him provoke the war between investors, between capital and the people who are abusing the capital. And i think hell win. And i think he thinks hes going to win. So this may be be the way forward. And if you do this, the if he succeeds, i think so much is at stake. If he succeeds and he has a huge, successful Stock Exchange and hes gotten rich and all the people who work for him, what happens next . Venture capital pours in to do it again and again and again in different sectors of wall street. And then all you require really at that point is for the regulators or legislators not to get the way of in the way of successful entrepreneurship so customers can make informed decisions about what theyre doing. And its fixed. I mean, i think theres a path towards a marketbased solution he has opened up which is, you know, thats, so thats whats at stake here. Because, precisely what you said is true. The. If, by the way, if the sec permitted the growth of many competing exchanges because it felt that Competition Among exchanges was good, why didnt they also at the same time allow investors to choose which exchange they wanted . Its a really good question. The truth is there is a rule that does allow investors to insist its not an sec rule, its a finra rule which is another governing body that allows investors to insist on knowing where their orders go, its being broken. The rules are being broken. I dont know what kind of violation it is. You will read about this at some point in the month next month or two. Theres a news story waiting to be written. So the rules are actually in place, investors arent exercising their rights. They have no history of it. Theyve never asked where the order goes. Its very hard for them to find out where the order goes and how its directed. So its a problem. Its more of a problem of its just historically its never been done. And now it was a radical act for a bankruptcy to go to fidelity or go to start telling them where to send your orders, because theyd never done it before. And the banks were furious that he was telling them to do that, but thats what hes done, and theyre doing it. So now its a matter of the rules being enforced more than anything else. And our final question. All right, last one. So is after what you just said, i can see why you have some optimism that this could get turned around, because the individual does have some power. So, therefore, how would you rank this against Something Like the libor scandal of the Municipal Bond rigging that, you know, scam that, like, jpmorgan does to places like alabama and stuff where they get no big contracts . So heres what i think, so heres the, this is clearly the other thick about this thing about this story is its of a piece of the spirit and age of the Financial Markets. Everywhere you look, markets are getting rigged. The Foreign Exchange rigging scandal. The commodities price rigging scandals. Why are markets all of a sudden so, seem to be heavily manipulated by big wall street banks . Well, its the well, probably its because they can, but partly its because the historic a lot of the historic sources of revenue for wall street have dried up. And style has been cramped by doddfrank. So art of it is a response part of it is a response to, its a survival instinct, i think, in banks and the individual predators in the banks. And be this is the rigging of the stock market, its the same thing playing out in the stock market. So i new, and i think thats why its happened. I think, basically, technology highways ru dossed reduced the natural role, the useful role played by wall street historically. And eliminated it in some markets. And theyve got to find other things to do, and one of the things you do is you rig markets. [laughter] on that note [applause] thank you very much. Thank you, michael. Thank you, malcolm. Give them a round of applause. Thank you. [applause] so the bookstore has some presigned books for those who dont want to stick around. For those of you who are going to have your book signed, were going to bring you up by row. Were just going to bring a table out here, just give us a couple minutes to get organized. Thank you for coming. If you have any questions, visit our web site, live talk l. A. Org, barnes and noble is out on the patio. They have some presigned Malcolm Gladwell books available for sale. Only Michael Lewis will be signing books up here though. Thank you. [inaudible conversations] wed like to hear from you. Tweet us your feedback, twitter. Com booktv. Author alan huffman shares a tale of two mississippis as we visit Prospect Hill this jackson. Prospect hill was founded by isaac roth who is a revolutionary war veteran are from south carolina. And when he realized that he was going to die and the slaves would end up being sold or would just become common slaves, he wrote in his will that at the time of his daughters death, the plantation would be sold, and the money used to pay the way for those slaves to emigrate to liberia where a freed slave colony had been established by the american colonization society. They call it repatriation, and they talk about them going back to africa. But you have to understand, these people, most of them, they were americans. They had been here for three, four, five generations. So it wasnt like they were just going home. They were going back to the continent that their ancestors originally inhas been fitted. Inhabited, but it was quite a risk. And so they took their culture, what they knew here, there. Of course, some of them took the bad aspects too, the slavery. But that was all they had ever known, and they built houses like this one because, after all, theyre the ones who built this house. There were a lot of, basically, greek revival houses that the freed slaves built in mississippi in africa. And across the river was louisiana in liberia which was settled by freed slaves from louisiana. There was a georgia, virginia, kentucky, maryland county, and all of those people came from those states in the u. S. Explore the history and literary life of jackson this weekend saturday at noon eastern on cspan2s booktv and sunday at 2 p. M. On American History tv on cspan3. Heres a look at some books that are being published this week