The 80/20 Librarian: Focusing on the 20% that matters

Solving a massive informational disparity problem by way of Michael Lewis’ Flash Boys in 23 Steps. Librarians will love the part where John Schwall uses the Staten Island Branch of the New York Public Library. As librarians strive to solve information gaps I hope this blog post will appeal to those of us in the library industry.

• A Questioner Emerges: The questioner is the person that notices the informational disparity problem and acts to fix it. In this instance the questioner is Brad Katsumaya, who was a trader at the Royal Bank of Canada (RBC). Between late 2006 and mid 2007 Katsumaya noticed that the information concerning trades changed abruptly on the electronic trading platform he was using. The purchase price for stock listed on the platform was prone to change dramatically as soon as Katsumaya went to execute his trades. As noted on page 30, “By the spring of 2007, when his screens showed 10,000 shares of Intel offered at $22 and he pushed the button, the offers vanished.”
• The Questioner tries to fix the problem by calling on his IT Department for help. As noted on pages 32 to 34, Katsumaya is informed that the problem is “user error.” When the Questioner asks his IT department to dig deeper he gets no effective response.
• The Questioner then looks outside his organization for information that can help him understand what is happening. On page 37 Katsumaya talks to a broker in Toronto, selling stock to individual Canadians, and learns of Getco which owns 10% of the U.S. market.
• The Questioner proceeds to see if other people, especially those outside his organization, are experiencing the same problem. On page 40 Katsumaya travels to Connecticut to see a friend at SAC Capital trade stocks and there Katsumaya witnesses the same informational disparity problem in that the trading screens do not reveal an accurate picture of the stock market.
• The Questioner then seeks an ally to help him solve the problem. In this instance Katsumaya persuaded Rob Park to return to RBC, see page 42. Park had a good working relationship with Katsumaya and Park was tech savvy. Park could translate the technological problems (from “computer language to human language”) for Katsumaya.
• The Questioner and his ally seek to create a team of people that can collectively solve the informational disparity problem. They try to talk to as many people as they can. They concentrate on high frequency traders and people who had worked at large banks. The best results come from pulling people from “in or near the banks’ technology departments (page 45).” These include Billy Zhao (formerly a Deutsche Bank software programmer, John Schwall (formerly a manager in Bank of America’s electronic trading division), Dan Aisen (a recent Standford Computer Science graduate), and Allen Zhang (a programmer who worked on the elite Golden Goose team affiliated with RBC).
• The team then conducts a set of experiments to test out theories to solve or further understand the informational disparity problem. RBC permitted up to $10,000 to be lost a day to test out theories (p. 46).
• One of the team members develops a theory to explain the informational disparity problem. Rob Park makes a case that the informational disparity problem exists because the trading orders are not arriving at the same time to the various stock exchanges (p. 49).
• A team member builds a program to fix the problem. Allen Zhang creates a program that builds delays into the orders being sent to the exchanges so that the orders arrive at exactly the same time as they did at the exchanges that were slower to get to (p.49)
• The program is tested and it works. Traders can now accurately buy stock and trust the stock market on their trading screens. The program is now called Thor. (p.50)
• The Questioner turns into a Leader by taking the moral high ground. The Leader desires to use the tool that can fix the informational disparity problem to help others instead of taking advantage of them. Katsumaya goes about educating others, public information campaign style, on how to solve the problem (p.50)
• The Leader now has to find someone else in the industry (apart from his team) who can corroborate the extent of the informational disparity problem. Katsumaya goes looking for someone who knows high frequency trading (p.55).
• The Leader finds someone who is an expert in an important field no one knows much about and who is willing to make a change to join his team. On page 69, Ronan Ryan informs Katsumaya about the high value of speed to reach the exchanges (i.e. nano-seconds and micro-seconds). In one hour Ryan reveals more information about high frequency trading than Katsumaya learned in six months of reading about it. “The U.S. stock market was now a class system, rooted in speed, of haves and have-nots. The haves paid for nano-seconds; the have-nots had no idea that a nano-second had value.” A quid pro quo working relationship develops where Katsumaya teaches Ryan trading and Ryan teaches Katsumaya technology (p. 70).
• The expert in the important field no one knows much about, joins the team, and then tells the team how to improve their tool to fix the information disparity problem. On pages 70 and 71 we learn that the Thor program operates inconsistently because it has to guess what the travel time is to the stock exchanges. The reason Thor has to guess is that the team has no control over the path the signals take to get to the exchanges nor do they have control over how much traffic is on the network. Ronan Ryan tells Katsumaya that the team needs to build and control its own fiber network. One learns of the router’s importance in determining where the orders are sent and that the exchanges closest to you execute your requested trades the quickest.
• The team then starts to inform its industry of this problem and markets its tool (to solve the information disparity problem) to them. Ryan and Katsumaya start talking to leaders of important organizations in their industry such as T. Rowe Price (p.85).
• A team member seeks to understand the underlying cause as to why the information disparity problem existed in the first place. John Schwall performs cyber sleuthing and visits the Staten Island Branch of the New York Public Library. On page 96 he learns of the Regulation National Market System (passed by the SEC in 2005, but not implemented until 2007). The regulation required brokers to find the best market prices for the investors they represented. All the bids and offers for stock were to go to the Securities Information Processor which would then issue a best market price identified as the National Best Bid and Offer. However, the informational disparity arose because there was no specification of the speed of the Securities Information Processor. This leads to front running, “the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers.” Schwall concludes on page 101, that “every systemic market injustice arose from some loophole in a regulation created to correct some prior injustice.”
• The team has to decide what to do with its tool to fix the informational disparity problem. One page 119 Katsumaya as the leader moves to create a new stock exchange using what they have learned instead of licensing their product. Katsumaya surveys the most influential players in his industry and learns that his team will have to create a stock exchange on their own as the industry would question the credibility of a Wall Street bank such as RBC creating such an exchange.
• The team has to start fresh and as a new organization, separate itself from its former parent organization. Katsumaya has to raise money and attract new talent to the team. We also learn on page 156 that Thor will remain the property of RBC.
• The leader inspires people to follow him in his endeavor and brings key people on board to work on a myriad number of tasks. On page 162 Don Bollerman, formerly of NASADAQ, joins the team and provides a much needed skill set. Team members learn that Bollerman knows more about the inner workings of a stock exchange than anyone they have ever met. On page 166 Francis Chung and Constantine Sokoloff work on designing a stock exchange that protects investors from high frequency traders. On page 183 Matt Trudeau joins the team, he is vital because he is the only team member who has ever opened a new stock exchange. On page 200 Zoran Perkov, joins the team. Perkov had key experience running an electronic stock market. On page 220 Josh Blackburn is brought onboard to create for Katsumaya an idea of the activity on their new stock market. On pages 166 and 167 we learn that Katsumaya does not hire people who are very self serving or who are obsessed with titles and things that do not matter. He looks for “sponges,learners.”
• The leader raises money for the organization. On page 160 we learn that Katsumaya secured millions from big money managers/investors. However, we also learn that Katsumaya put his life savings on the life and friends/family also contribute.
• The team gives a name to their organization/ product. Investors Exchange, also known as IEX, is born on page 164.
• The product is launched. On page 206 we learn that on October 25, 2013 IEX opens.
• The organization garners industry support in order to survive and thrive. On page 241 Goldman Sachs trades 30 million shares on IEX. “Goldman Sachs was insisting that the U.S. stock market needed to change, and that IEX was the place to change it.

In keeping with my philosophy of letting a book speak for itself instead of writing a formal book review, here are the most meaningful quotes I found from the Icarus Deception by Seth Godin.

“It’s far more dangerous to fly too low than too high… By flying too low we shortchange not only ourselves but also those who depend on us or might benefit from our work. We’re so obsessed about the risk of shining brightly that we’ve traded in everything that matters to avoid it. The path that’s available to us is to be human, to do art, and to fly far higher than we’ve been taught is possible.” (Page 2)

“Art is the unique work of a human being, work that touches another. Seizing new ground, making connections between people or ideas, working without a map-these are works of art, and if you do them, you are an artist, regardless of whether you wear a smock, use a computer, or work with others all day long. Speaking up when there is no obvious right answer, making yourself vulnerable when it’s possible to put up shields, and caring about both the process and the outcome-these are works of art that our society embraces and the economy demands.” (Page 6)

“There isn’t a pain free way to achieve your goals” (Page 7)

“I’ve witnessed countless opportunities squandered by people who could have taken action but didn’t. Not because they couldn’t figure out what to do but because they weren’t willing to do it.” (Page 7)

“The connection economy rewards the leader, the initiator, and the rebel “(Page13).

“Sometimes, courage is the willingness to speak the truth about what you see and to own what you say. In order for there to be courage, there must be risk.” (Page 17)

“Our success turns not on being the low-price leader but on being the high trust leader.” (Page 25)

“Don’t worry about your stuff. Worry about making meaning instead.” (Page 25)

“College started as universitas magistrorum et scholarium- a community of masters and scholars. It was a refuge; it was a place you went to get lost in ideas, to discover and wander, and to plot a course as an academic.” (Page 32)

“This economy demands that we spin the log ever faster-doing not the work of making the same widget faster and cheaper in a race to the bottom but the work of connecting and entertaining and amazing with our most vivid dreams.” (Page 34)

“Art has no right answer. The best we can hope for is an interesting answer.” (Page 36)

“There are so many places that art and connection are needed, so many avenues that are open, so many opportunities, that no one is boxed out. It’s not about whether we have what it takes; it’s about whether we choose to pursue it.” (Page 37)

“It’s impossible to connect with a device or an automaton. It’s worthwhile to connect with a person, to someone we have granted the dignity that she deserves.” (Page 56)

“Art is personal. Art is untested. Art is intended to connect.” (Page 64).

“Who decides if your work is good? When you are at your best, you do. If the work doesn’t deliver on its purpose, if the pot you made leaks or the hammer you forged breaks, then you should learn to make a better one.” (Page 71)

“The artist wonders, “Where is there an opportunity for me to change everything and make an impact?” (Page 85).”

“Cassidy Dale points out that many people are either knights or gardeners. The knights view the world as a cataclysmic conflict with winners and losers, with battles to be fought, and with right and wrong as the dominant drivers. Gardeners, on the other hand, have the instinct to look for ways to heal, to connect, and to grow the people they encounter. (Page 86)”

“When the critic pushes you to make better art, art that you are capable of, then her response is worth cherishing. But the critic who pushes you to fit in or dumb down your work-take that criticism with caution.” (Page 94)

“Art is a commitment to a process and to a direction and to generosity, not to a result.” (Page 95)

“Foolish risks are for the gods. That’s what we write myths about. Not their everyday, banal lives. No, we write about and talk about and dream about their brave exploits and their foolish risks. The gods are us. And yes, the gods are crazy.” (Page 102)

“The value of art is in your willingness to stare down the risk and to embrace the void of possible failure.” (Page 105)

“We talk about “sink or swim”, but there’s not as much sinking going on as you might expect. There’s a fair amount of treading water, a whole lot of people unwilling to get into the pool at all, but not so much sinking. We’ve greatly exaggerated the risk of sinking, without celebrating the value of swimming.” (Page 106)

“Art has no safety map, no easy-to-follow manual, no guaranteed method.” (Page 106)

“Your goal as an artist is to make art that moves the audience of your choice.” (Page 128)

“When those who love you speak of a life well lived, we’ll talk about the lines you managed to color outside of, the people you touched, and the ruckus you made. Most of all, we’ll remember how you took a chance and connected with us.” (Page 129)

“The reason we don’t get talker’s block is that we’re in the habit of talking without a lot of concern for whether or not our inane blather will come back to haunt us. Talk is cheap. Talk is ephemeral. Talk can be easily denied. We talk poorly and then eventually (or sometimes), we talk smart. We get better at talking precisely because we talk. We see what works and what doesn’t and, if we’re insightful, do more of what works. How can one get talker’s block after all this practice? Writer’s block isn’t hard to cure. Just write. Write poorly. Continue to write poorly, in public, until you can write better. Everyone should learn to write in public. Get a blog. Do it every day. Every single day. Not a dairy, not fiction, but analysis. Clear, crisp, honest writing about what you see in the world. Or want to see. Or teach (in writing). Tell us how to do something.” (Page 166)

“Your biggest failure is the thing you dreamed of contributing but didn’t find the guts to do.” (Page 216)

Rex Huppke, of the Chicago Tribune, came out with an article highlighting the growing interest the Millennial generation has in leadership opportunities. One challenge that this generation faces is how to communicate. Effective communication is a key characteristic of valuable leadership.

Here are some important facts from the article:

• A Pew Research Center analysis of U.S. Census Bureau data now shows that 1 in 3 current U.S. workers are Millennials (adults in the age range of 18 to 34)
• The Millennials are now the largest segment of the US workforce
• WorkplaceTrends.com, a research group, and Virtuali, a leadership training firm, conducted the “Millennial Leadership Study.”
• What were some of the key results of the Millennial Leadership Study?
  1. 91% of Millennials aspire to be leaders
  2. 43% of those wanting to be leaders cited “empowering others to succeed” as their primary motivation for entering leadership
  3. 5% of those wanting to be leaders cited money as their primary motivation
  4. 1% of those wanting to be leaders cited power as their primary motivation
  5. 58% believe that communication is the most important leadership skill
  6. 51% believe that communication is one of their strongest skills
• What is the concern?
  1. Millennial communication is overly reliant on electronic communication (i.e. text messaging, Face Time, Skype, etc.). Check out the excellent quote by Dan Schwabel in Huppke’s article. Many of the Millennials grew up as digital natives so electronic communication became second nature for them.
  2. Millenials, however, do believe that in-person meetings, phone calls, and “soft skills” are the most important skills for leadership.
  3. Millennials believe that their strongest communication skills are in-person, telephone, and other “soft skills”.
  4. While work communication is increasingly technologically focused, “we’re a long way from personal interaction being irrelevant.”
  5. Millennials face a learning curve with regards to learning to effectively communicate in the non-electronic environment.
  6. The great news is that Millennials want to learn to be better communicators.
• What are some possible ways Millennials can learn to be better communicators? Sean Graber of Virtuali noted the following:
  1. Workplace training opportunities (i.e. workshops) and workplace experiences (transfer to another part of the organization to get another perspective, an international posting can do this effectively)
  2. Providing Millennials with mentors
  3. Millennials need to be open to feedback
  4. Millennials need to develop time for self reflection and cultivating emotional intelligence
• What can workplace veterans do to help Millennials with their communication? Huppke notes the following:
  1. Teach them
  2. Give them experiences they can build on
  3. Encourage them to turn away from electronic devices and look inward
• Huppke’s final words are worth repeating: “The Millennials want to do good, and companies would be foolish not to harness that desire. If they want to lead, let them lead. Just show them how to do it right.”