Commentary: The moral power of curiosity
Most of us have at one time or another felt ourselves in the grip of the explanatory drive. You’re confronted by some puzzle, confusion or mystery. Your inability to come up with an answer gnaws at you. You’re up at night, turning the problem over in your mind. Then, suddenly: clarity. The pieces click into place. There’s a jolt of pure satisfaction.
We’re all familiar with this drive, but I wasn’t really conscious of the moral force of this longing until I read Michael Lewis’ book, “Flash Boys.”
As you’re probably aware, this book is about how a small number of Wall Street-types figured out that the stock markets were rigged by high-frequency traders who used complex technologies to give themselves a head start on everybody else. It’s nominally a book about finance, but it’s really a morality tale. The core question Lewis forces us to ask is: Why did some people do the right thing while most of their peers did not?
The answer, I think, is that most people on Wall Street are primarily motivated to make money, but a few people are primarily motivated by an intense desire to figure stuff out.
If you are primarily motivated to make money, you just need to get as much information as you need to do your job. You don’t have time for deep dives into abstract matters. You certainly don’t want to let people know how confused you are by something, or how shallow your knowledge is in certain areas. You want to project an image of mastery and omniscience.
On Wall Street, as in other areas of the modern economy, this attitude leads to a culture of knowingness. People learn to bluff their way through, day to day. Executives don’t really understand the complex things going on in their own companies. Traders don’t understand how their technological tools really work. Programmers may know their little piece of code, but they don’t have a broader knowledge of what their work is being used for.
These people are content to possess information, but they don’t seek knowledge. Information is what you need to make money short term. Knowledge is the deeper understanding of how things work. It’s obtained only by long and inefficient study. It’s gained by those who set aside the profit motive and instead possess an intrinsic desire just to know.
The heroes of Lewis’ book have this intrinsic desire. The central figure, Brad Katsuyama, observes that the markets are not working the way they are supposed to. Like thousands of others, he observes that funny things are happening on his screen when he places a trading order. But, unlike those others, this puzzling discrepancy between how things are and how things are supposed to be gnaws at him. He just has to understand what’s going on.
He conducts a long, arduous research project to go beneath the technology and figure things out. At one point he and his superiors at the Royal Bank of Canada conduct a series of trades not to make money but just to test theories.
Another character, Ronan Ryan, taught himself how electronic signals move through the telecommunications system. A third, John Schwall, is an obsessive who buried himself in the library so he could understand the history of a particular form of stock-rigging called front-running.
These people eventually figure out what was happening in the market. They acquire knowledge both of how the markets are actually working and of how they are supposed to work. They become indignant about the discrepancy.
They could have used their knowledge to participate in the very market-rigging they were observing. But remember, the pleasure they derived from satisfying their curiosity surpassed the pleasure they derived from making money. So some of them ended up creating a separate stock exchange that could not be rigged in this way.
One lesson of this tale is that capitalism doesn’t really work when it relies on the profit motive alone. If everybody is just chasing material self-interest, the invisible hand won’t lead to well-functioning markets. It will just lead to arrangements in which market insiders take advantage of everybody else. Capitalism requires the full range of motivation, including the intrinsic drive for knowledge and fairness.
Second, you can’t tame the desire for money with sermons. You can only counteract greed with some superior love, like the love of knowledge.
Third, if market-rigging is defeated, it won’t be by government regulators. It will be through a market innovation in which a good exchange replaces bad exchanges, designed by those who fundamentally understood the old system.
And here’s a phenomenon often true in innovation stories: The people who go to work pursuing knowledge, or because they intrinsically love writing code, sometimes end up making more money than the people who go to work pursuing money as their main purpose.