I met Michael Lewis when he was on his The Big Short book tour and I asked him why John Gutfruend would meet with him at all? You may recall that Gutfruend was the guy that took Solomon Brothers public in the '80s, which was like giving all of the Wall Street piranhas steroids and testosterone supplements. At the time Michael Lewis worked at Solomon Brothers and he was so affected by the way the industry gleefully devoured its own customers that he left the firm and wrote Liar's Poker. Thirty years later, and it would take at least that long for anyone to get over begin skewered the way John Gutfruend was in Liar's Poker, Michael Lewis called him up and asked him to lunch! And he went! And Michael Lewis wrote all about it in The Big Short.
Anyway, the answer Michael Lewis gave me was illuminating, he said (and I am paraphrasing) that John Gutfruend was incapable of understanding how people outside of Wall Street perceived him and his industry. The converse to his incapacity, is the ability to understand what is going on inside an industry when viewed from the outside. It is just that understanding that makes Michael Lewis so fun to read. Time and again he pulls back the curtain and reveals the inner workings of very complicated, mostly financial, businesses in a way that educates and entertains all at once. Clearly, I am a Michael Lewis fan. I eagerly anticipated the release of Flash Boys last week and read it right away. So if you don't like him or you want a balanced review, just skip to the reviews I linked to at Slate or The Guardian.
This time around the fun of reading the book was followed up by the fun of reading all of his detractors right after. The Wall Street Journal is on the attack and every day comes out with another effort to discredit Lewis. On April 2 they published a piece by money managers saying that your money is safe (with them!), and that Lewis is pumping up IEX for personal gain, and on 4/3 the editorial board said Lewis was just selling books, and yesterday they tried to get the blame to stick to the regulators. (see my twitter feed for links to all of these articles)
Felix Salmon on Slate did a pretty good job, but dismisses the book as just more of the same from Michael Lewis. John Naughton at The Guardian delivered the most balanced review agreeing that in fact front running is bad and manages not to get sucked into the argument that we should be happy that there is less corruption on Wall Street now than there used to be.
Just about every Lewis detractor takes the angle that high frequency traders do front run the market (make risk free return by profiting from the prior knowledge of investor's intent in the time between when they know what the investor wants, and the time the trade is placed), but that they front run less than they used to. Good point. It is getting harder and harder to skim money off of each trade, but at the same time it is getting easier and easier to do so systematically with the aid of computers. Who knows if the aggregate skimming is more or less than before.
I cannot speak for Michael Lewis, but if I had to guess I would say he is mostly aiming to again expose the culture of Wall Street and how everyone considers the customer a fool and easy prey. Just like when he was at Solomon Brothers in the 80s.