Flash Boys, Michael Lewis, and Fiber Optics – Why STEM Matters to Everyone

On the latest great breakthrough in Wall Street high finance

In Michael Lewis’s latest book, Flash Boys, Lewis describes the inside story behind perhaps the latest great breakthrough in the Wall Street high finance. In particular, one anecdote stands out, and was even featured in the New York Times Magazine. It is the story of Brad Katsuyama and the founding of the Investors Exchange (aka the IEX).

In 2006, Katsuyama encountered a problem while trading with RBC in its newfound brokerage. Essentially, when he traded across multiple stock exchanges, people were always beating him to the stocks he wanted. Finally, after a crash course in engineering and help from a computer programmer from Ireland, Katsuyama discovered that his trades were being snatched up literally milliseconds, and in some cases nanoseconds, before his orders went through. I’ll spare the entire detail (for those who want a more in depth look into the process, check out the full article), but the quick summary is that the discovery of high frequency trading and its intricacies came down not to pulling the right strings or knowing the right people, but down to an intimate understanding of how a fiber optic cable works, how networks route electronic signals, and how, depending on which side of the street you were on, two signals going to the same place could travel less than a mile or more than 30 miles.

While Lewis deals with only one specific example, and how it affects the world of Wall Street, the story of Katsuyama indicates a broader trend in the modern world. In the past, we could count on generally having a passable understanding of what went on when we performed a process. Traditional thinking has held that while a STEM based education could get you a highly paid job in STEM fields, it was not necessary to be successful in all fields. The engineers built the bridges or got the oil, and everyone else simply drove. In our modern and high- paced world, built around computers, fiber optic, and wireless signals, it is no longer enough to simply “drive”. No longer can we just send out the signal and trust that it will reach its target. As Brad Katsuyama’s experience illustrates, it become increasingly important that we must actually understand the processes by which the signal travels, for the methods and engineering behind it can have a drastic impact on our wallets and our well being.

So, as the debate about what a Dartmouth education should consist of rages on, it is more important than ever to remember that if the job of a university is to prepare its students for a successful life in the real world, a more than passing understanding of STEM fields and applications in a invaluable asset.