1 00:00:10,320 --> 00:00:13,600 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:13,720 --> 00:00:15,160 Speaker 1: I'm Tracy Alloway. 3 00:00:14,800 --> 00:00:15,960 Speaker 2: And I'm Joe whysent Thal. 4 00:00:16,440 --> 00:00:20,079 Speaker 1: Joe, do you remember the episode we did with Stuart Butterfield, 5 00:00:20,280 --> 00:00:21,720 Speaker 1: the founder of Slack. 6 00:00:22,040 --> 00:00:25,639 Speaker 3: I do great episode Software Tech. I like when we 7 00:00:25,720 --> 00:00:29,000 Speaker 3: have tech and software episodes that aren't about just like 8 00:00:29,080 --> 00:00:32,000 Speaker 3: the markets, but like how technology actually. 9 00:00:31,720 --> 00:00:34,319 Speaker 1: Works, how it actually functions. Yes, all right, Well that's 10 00:00:34,360 --> 00:00:36,920 Speaker 1: a good jumping off point because there was a moment 11 00:00:37,240 --> 00:00:40,360 Speaker 1: in that episode where I think it was Stuart asked 12 00:00:40,360 --> 00:00:43,040 Speaker 1: a very innocent question, which is he basically said he 13 00:00:43,080 --> 00:00:47,360 Speaker 1: had no idea how banking worked before the advent of computers. 14 00:00:47,720 --> 00:00:50,160 Speaker 2: I'm glad he said that, because I have no idea either. 15 00:00:50,280 --> 00:00:52,080 Speaker 3: And when I you know, when I think about money, 16 00:00:52,200 --> 00:00:53,840 Speaker 3: and by this point we all sort of know like, oh, 17 00:00:53,920 --> 00:00:56,240 Speaker 3: like money is it is just a database entry? Right, 18 00:00:56,480 --> 00:00:58,160 Speaker 3: Well that makes a lot of sense to me at 19 00:00:58,160 --> 00:01:01,320 Speaker 3: a world of excel. But how do like databases work? 20 00:01:01,520 --> 00:01:05,360 Speaker 3: How did money as a database creation work before databases? 21 00:01:05,440 --> 00:01:08,480 Speaker 1: Well, that's exactly it, because nowadays I think money is 22 00:01:08,560 --> 00:01:12,880 Speaker 1: almost synonymous with an electronic database, Like that's basically what 23 00:01:13,000 --> 00:01:15,480 Speaker 1: it is at this point. But of course, for hundreds 24 00:01:15,520 --> 00:01:18,160 Speaker 1: and hundreds of years we did not have things like 25 00:01:18,200 --> 00:01:22,360 Speaker 1: Excel spreadsheets, So how did banking and finance and trade 26 00:01:22,560 --> 00:01:24,160 Speaker 1: actually work in those conditions? 27 00:01:24,400 --> 00:01:27,080 Speaker 3: Yeah, and like I just don't understand how like people 28 00:01:27,120 --> 00:01:29,319 Speaker 3: traded stocks or people went into a bank and said 29 00:01:29,319 --> 00:01:31,319 Speaker 3: I want to get my money or without like, how 30 00:01:31,360 --> 00:01:33,400 Speaker 3: are they not just like always losing track of how 31 00:01:33,480 --> 00:01:35,760 Speaker 3: much money people had? How are they always not just 32 00:01:35,880 --> 00:01:38,800 Speaker 3: like forgetting oh you bought that stock, like it's on 33 00:01:38,880 --> 00:01:41,240 Speaker 3: pen and paper like type, Like in my mind, they 34 00:01:41,280 --> 00:01:42,840 Speaker 3: must have been losing track of stuff all the time. 35 00:01:42,880 --> 00:01:45,520 Speaker 1: Well, I think I said this in the Stewart episode, 36 00:01:45,520 --> 00:01:47,680 Speaker 1: but there were a lot of bank failures, there were 37 00:01:47,760 --> 00:01:50,000 Speaker 1: a lot of trading blow ups, so maybe they you know, 38 00:01:50,160 --> 00:01:53,120 Speaker 1: maybe the lack of technology was Actually that's sad. But 39 00:01:53,720 --> 00:01:56,760 Speaker 1: we do actually have the perfect guests to discuss this topic. 40 00:01:56,840 --> 00:01:59,240 Speaker 1: We are going to be speaking with Anne Murphy. She 41 00:01:59,320 --> 00:02:02,360 Speaker 1: is a professor of history and executive dean over at 42 00:02:02,400 --> 00:02:05,400 Speaker 1: the University of Portsmouth. She just wrote a new book. 43 00:02:05,440 --> 00:02:08,800 Speaker 1: It's called Virtuous Bankers, A Day in the Life of 44 00:02:08,919 --> 00:02:12,080 Speaker 1: the eighteenth century Bank of England. So the perfect person 45 00:02:12,360 --> 00:02:16,360 Speaker 1: to talk about pre computerized banking. We're also going to 46 00:02:16,360 --> 00:02:18,640 Speaker 1: be speaking. This is a double feature. We're going to 47 00:02:18,639 --> 00:02:23,359 Speaker 1: be speaking with John Handel, postdoctoral fellow at the McIntyre 48 00:02:23,440 --> 00:02:26,880 Speaker 1: School of Commerce at the University of Virginia. He's written 49 00:02:26,919 --> 00:02:30,480 Speaker 1: a lot about trade and technology in the eighteen hundreds 50 00:02:30,560 --> 00:02:33,440 Speaker 1: early nineteen hundreds, so we're going to take a journey 51 00:02:33,520 --> 00:02:35,280 Speaker 1: through the history of finance. 52 00:02:35,360 --> 00:02:37,040 Speaker 2: I can't wait. I'm really excited about this. So I 53 00:02:37,040 --> 00:02:38,079 Speaker 2: have so many questions. 54 00:02:38,120 --> 00:02:39,880 Speaker 1: All right, an in, John, thank you so much for 55 00:02:39,919 --> 00:02:41,040 Speaker 1: coming on our thoughts. 56 00:02:41,480 --> 00:02:43,600 Speaker 4: Oh, thank you for inviting me. It's lovely to be here. 57 00:02:44,919 --> 00:02:48,280 Speaker 5: As they say in sports talk radio, longtime listener, first 58 00:02:48,280 --> 00:02:49,880 Speaker 5: time caller, I was just so great to be here. 59 00:02:50,360 --> 00:02:50,640 Speaker 4: Nice. 60 00:02:51,280 --> 00:02:54,240 Speaker 1: So maybe I should start in sort of I'm going 61 00:02:54,280 --> 00:02:57,400 Speaker 1: to attempt chronological order here, but why don't we start 62 00:02:57,400 --> 00:02:59,560 Speaker 1: with you? And I mean, you know, the clue is 63 00:02:59,560 --> 00:03:01,800 Speaker 1: in the tie of your book. What was it actually 64 00:03:01,960 --> 00:03:04,520 Speaker 1: like a day in the life of the Bank of 65 00:03:04,560 --> 00:03:10,440 Speaker 1: England in the seventeen hundreds. 66 00:03:08,440 --> 00:03:12,320 Speaker 4: So it was a very busy place. The time I'm 67 00:03:12,320 --> 00:03:15,880 Speaker 4: writing about is the seventeen eighties, so it's just after 68 00:03:15,919 --> 00:03:19,720 Speaker 4: the War of American Independence and the British are having 69 00:03:19,720 --> 00:03:23,600 Speaker 4: a moment of real introspection about their finances and trying 70 00:03:23,600 --> 00:03:26,040 Speaker 4: to figure out whether everything is working well, which is 71 00:03:26,080 --> 00:03:28,440 Speaker 4: one of the reasons that the Bank of England kind 72 00:03:28,440 --> 00:03:31,480 Speaker 4: of looks inward at itself at this time and really 73 00:03:31,520 --> 00:03:34,000 Speaker 4: tries to figure out what it's doing and how it's 74 00:03:34,040 --> 00:03:36,080 Speaker 4: doing it and whether it's doing it well or not. 75 00:03:37,160 --> 00:03:39,240 Speaker 4: But the bank at this time, it's a twenty four 76 00:03:39,280 --> 00:03:44,640 Speaker 4: hour a day place. It opens at dawn, You've got 77 00:03:44,640 --> 00:03:48,200 Speaker 4: customers kind of milling around from about nine o'clock onwards, 78 00:03:48,680 --> 00:03:52,160 Speaker 4: and it's doing everything you would expect a bank to do, 79 00:03:53,680 --> 00:03:56,400 Speaker 4: but without those Excel spreadsheets. You know, it's doing them 80 00:03:56,440 --> 00:04:01,160 Speaker 4: all with ledgers and quill and ink. And it's my 81 00:04:01,320 --> 00:04:03,720 Speaker 4: view that it does it well and it doesn't lose 82 00:04:04,240 --> 00:04:07,160 Speaker 4: its customers money. It has a pretty good grasp of 83 00:04:07,200 --> 00:04:11,320 Speaker 4: where everybody is and whether there's money to trade, and 84 00:04:11,320 --> 00:04:12,440 Speaker 4: how it does all this stuff. 85 00:04:13,520 --> 00:04:15,760 Speaker 3: You said it's twenty four hours, and you know, even 86 00:04:15,840 --> 00:04:18,520 Speaker 3: like the FED, I don't think is twenty four hours, 87 00:04:18,720 --> 00:04:21,719 Speaker 3: or at least some of its operations have a certain 88 00:04:21,920 --> 00:04:25,480 Speaker 3: window or the closes or certain things don't happen on weekend. 89 00:04:25,880 --> 00:04:29,200 Speaker 3: So were there certain aspects of banking that from a 90 00:04:29,200 --> 00:04:32,040 Speaker 3: twenty four hour standpoint were more advanced I don't know, 91 00:04:32,160 --> 00:04:33,880 Speaker 3: a few hundred years ago than there are today. 92 00:04:35,279 --> 00:04:38,479 Speaker 4: So it's not necessarily operating twenty four hours a day, 93 00:04:38,600 --> 00:04:42,080 Speaker 4: so its standard business day is around about nine to five. 94 00:04:43,400 --> 00:04:47,240 Speaker 4: But because it can't just press an update button at 95 00:04:47,240 --> 00:04:49,240 Speaker 4: the end of the day to make sure all of 96 00:04:49,240 --> 00:04:51,400 Speaker 4: the accounts are updated for the start of the next 97 00:04:51,440 --> 00:04:55,760 Speaker 4: working day, the process of updating accounts takes place in 98 00:04:55,800 --> 00:05:00,680 Speaker 4: the evening, So from about four o'clock all the way 99 00:05:00,720 --> 00:05:04,400 Speaker 4: through sometimes to kind of ten eleven o'clock in the evening, 100 00:05:05,279 --> 00:05:10,040 Speaker 4: there are clerks updating the physical ledgers so that next day, 101 00:05:10,080 --> 00:05:13,440 Speaker 4: when the brokers walk in or when those business owners 102 00:05:13,520 --> 00:05:16,520 Speaker 4: who are there regularly walk in, their account is up 103 00:05:16,560 --> 00:05:18,279 Speaker 4: to date and they're ready to go for the new 104 00:05:18,279 --> 00:05:21,960 Speaker 4: business day. But the other reason it's twenty four hours 105 00:05:22,279 --> 00:05:27,080 Speaker 4: is because it's a vulnerable place. So it's at risk 106 00:05:27,160 --> 00:05:29,960 Speaker 4: of fire, it's at risk of wyatt, it's at risk 107 00:05:30,640 --> 00:05:34,040 Speaker 4: of people sort of wanting to break in, so it 108 00:05:34,120 --> 00:05:38,240 Speaker 4: has night watchmen who are there and active throughout the 109 00:05:38,320 --> 00:05:40,560 Speaker 4: night to make sure that the bank is safe. 110 00:05:41,360 --> 00:05:44,040 Speaker 1: I have a really basic question, which is what are 111 00:05:44,120 --> 00:05:47,799 Speaker 1: people doing at the bank of England in seventeen eighty. 112 00:05:47,839 --> 00:05:51,279 Speaker 1: You mentioned customers sort of milling outside of the building. 113 00:05:51,440 --> 00:05:52,960 Speaker 1: What are they waiting to actually do? 114 00:05:54,440 --> 00:05:57,279 Speaker 4: So one thing they're not doing so much is borrowing 115 00:05:57,360 --> 00:06:03,120 Speaker 4: money from the bank. The bank's private lending is not 116 00:06:03,320 --> 00:06:05,839 Speaker 4: very well advanced. They have their little bit of private 117 00:06:05,920 --> 00:06:10,599 Speaker 4: lending early in the sixteen late sixteen hundreds, early seventeen hundreds, 118 00:06:10,800 --> 00:06:13,479 Speaker 4: but it doesn't really take off. What a lot of 119 00:06:13,480 --> 00:06:17,560 Speaker 4: people there are doing is discounting bills of exchange, so 120 00:06:17,600 --> 00:06:21,719 Speaker 4: they're borrowing money in that way and facilitating trade. Also 121 00:06:21,800 --> 00:06:26,400 Speaker 4: in that way, they are managing notes, so they're coming 122 00:06:26,400 --> 00:06:31,440 Speaker 4: to the bank to exchange ready money for banknotes, other banknotes, 123 00:06:32,279 --> 00:06:36,000 Speaker 4: for Bank of England notes, or their banknotes that they 124 00:06:36,040 --> 00:06:39,480 Speaker 4: have back to ready money again. And the note business 125 00:06:39,560 --> 00:06:44,320 Speaker 4: is huge and occupies a lot of everybody's time. But 126 00:06:44,360 --> 00:06:47,880 Speaker 4: they're also there to buy and sell government debt. So 127 00:06:47,920 --> 00:06:50,120 Speaker 4: you could buy and sell government debt at the bank. 128 00:06:50,160 --> 00:06:52,240 Speaker 4: It's probably the main place where you could do that 129 00:06:53,400 --> 00:06:56,359 Speaker 4: throughout most of the eighteenth century. So that's one of 130 00:06:56,360 --> 00:06:57,480 Speaker 4: the things that they're there to do. 131 00:06:57,760 --> 00:06:59,920 Speaker 3: So I want to get more into the sort of 132 00:07:00,160 --> 00:07:02,719 Speaker 3: like pen and paper and the actual physical operations. 133 00:07:02,960 --> 00:07:05,280 Speaker 2: But John, why do you come in talk to us. 134 00:07:05,240 --> 00:07:08,479 Speaker 3: A little bit about your area of focus and just 135 00:07:08,520 --> 00:07:10,680 Speaker 3: sort of you're a little bit more on the trading 136 00:07:10,880 --> 00:07:13,600 Speaker 3: and financial activities side. Let do you talk a little 137 00:07:13,640 --> 00:07:16,800 Speaker 3: bit about your specific years in aero focus into sort 138 00:07:16,800 --> 00:07:19,080 Speaker 3: of like finance and trading pre computers. 139 00:07:20,000 --> 00:07:23,000 Speaker 5: So my work is essentially the sequel to Anne's work. 140 00:07:23,080 --> 00:07:26,160 Speaker 5: I pick up in the early eighteen hundreds around when 141 00:07:26,280 --> 00:07:29,280 Speaker 5: her book on the Bank of England finishes and what's 142 00:07:29,280 --> 00:07:32,600 Speaker 5: happening I focus primarily in the London Stock Exchange. And 143 00:07:32,680 --> 00:07:35,840 Speaker 5: what's happening in this period is a lot of the 144 00:07:35,880 --> 00:07:39,240 Speaker 5: trading that had gone on during the seventeen hundreds went 145 00:07:39,320 --> 00:07:43,240 Speaker 5: on in dispersed, often open locations, the lobby of the 146 00:07:43,280 --> 00:07:48,280 Speaker 5: Bank of England, in alleyways, in coffee shops, in taverns 147 00:07:48,320 --> 00:07:51,160 Speaker 5: even but beginning in the early eighteen hundreds, there's this 148 00:07:51,240 --> 00:07:54,280 Speaker 5: move to enclose financial markets and make them their own, 149 00:07:54,320 --> 00:07:58,880 Speaker 5: discreete spaces that would be governed by the association of 150 00:07:59,160 --> 00:08:01,960 Speaker 5: brokers who were met members of those exchanges. And so 151 00:08:02,040 --> 00:08:05,200 Speaker 5: the London Stock Exchange adopts a new set of rules 152 00:08:05,240 --> 00:08:08,680 Speaker 5: and begins to build its own premises, starting in eighteen 153 00:08:08,720 --> 00:08:14,000 Speaker 5: oh one and essentially stops allowing members of the public, clients, investors, 154 00:08:14,080 --> 00:08:17,520 Speaker 5: whomever to enter the exchange. The exchange becomes solely the 155 00:08:17,520 --> 00:08:21,320 Speaker 5: province of brokers. But much like what Anne was saying, 156 00:08:21,560 --> 00:08:24,240 Speaker 5: the London Stock Exchange is also a twenty four to 157 00:08:24,320 --> 00:08:28,600 Speaker 5: seven institution. It's not just the brokers who are there 158 00:08:28,600 --> 00:08:31,360 Speaker 5: on the trading floor from eleven to four, but there 159 00:08:31,440 --> 00:08:34,840 Speaker 5: are armies of clerks who are responsible for settling and 160 00:08:34,880 --> 00:08:38,280 Speaker 5: clearing trades after hours. Because the London Stock Exchange is 161 00:08:38,280 --> 00:08:42,080 Speaker 5: global and it's trading with markets in North America, in 162 00:08:42,160 --> 00:08:46,040 Speaker 5: Australia and Asia. During the nineteenth century, members are there 163 00:08:46,080 --> 00:08:50,360 Speaker 5: working at telegraph offices basically laid into the night as 164 00:08:50,400 --> 00:08:52,959 Speaker 5: late as eight or nine pm. And then one of 165 00:08:53,000 --> 00:08:56,439 Speaker 5: the other things that's often overlooked is that there is 166 00:08:56,480 --> 00:08:59,960 Speaker 5: a whole army of household servants basically live in servants 167 00:09:00,000 --> 00:09:02,240 Speaker 5: who actually lived at the London Stock Exchange. They brought 168 00:09:02,280 --> 00:09:05,320 Speaker 5: their families. They were called waiters, but they were essentially 169 00:09:05,320 --> 00:09:09,320 Speaker 5: the equivalent of porters, and they worked to guard the 170 00:09:09,440 --> 00:09:13,360 Speaker 5: entrances of the exchange, deliver telegrams and letters to the brokers, 171 00:09:13,480 --> 00:09:16,760 Speaker 5: keep the exchange clean and they lived there twenty four 172 00:09:16,760 --> 00:09:18,640 Speaker 5: to seven for most of the nineteenth century, so the 173 00:09:18,679 --> 00:09:21,640 Speaker 5: London Stock Exchange too, was a twenty four to seven 174 00:09:21,679 --> 00:09:25,120 Speaker 5: institution with a very complex human ecosystem. 175 00:09:25,559 --> 00:09:27,120 Speaker 3: Tracy, do you think you know what I really want 176 00:09:27,160 --> 00:09:29,160 Speaker 3: to say? I want a Netflix show that takes place 177 00:09:29,200 --> 00:09:29,959 Speaker 3: in the lobby of. 178 00:09:29,880 --> 00:09:30,680 Speaker 2: The Bank of England. 179 00:09:30,840 --> 00:09:33,400 Speaker 3: I think like a big series of like over the years. 180 00:09:33,559 --> 00:09:35,679 Speaker 3: I just like now, I really want their show to exist. 181 00:09:35,760 --> 00:09:39,240 Speaker 1: I think that would be perfect for like Sorkin treatment. Yes, 182 00:09:39,559 --> 00:09:42,240 Speaker 1: all right, but actually this reminds me. I was having 183 00:09:42,280 --> 00:09:45,680 Speaker 1: lunch just last week with a couple of traders who 184 00:09:45,720 --> 00:09:47,760 Speaker 1: were active in the eighties and the nineties, and they 185 00:09:47,760 --> 00:09:50,240 Speaker 1: were talking about board boys. So they used to have 186 00:09:50,320 --> 00:09:53,840 Speaker 1: board boys who would write down trades on a blackboard 187 00:09:53,920 --> 00:09:56,199 Speaker 1: or a whiteboard. I don't know, you know, who owes 188 00:09:56,240 --> 00:09:59,200 Speaker 1: what to whom when there was active trading activity on 189 00:09:59,240 --> 00:10:02,319 Speaker 1: the floor. But this leads nicely into my next question, 190 00:10:02,360 --> 00:10:05,120 Speaker 1: which is it sounds like a lot of the record 191 00:10:05,200 --> 00:10:09,640 Speaker 1: keeping or the distribution of money, the movement of money 192 00:10:09,960 --> 00:10:14,000 Speaker 1: was just being done by people in the seventeen hundreds 193 00:10:14,000 --> 00:10:15,440 Speaker 1: and the eighteen hundreds as well. 194 00:10:16,440 --> 00:10:21,760 Speaker 4: That's absolutely right, and one of the things we don't 195 00:10:21,800 --> 00:10:26,480 Speaker 4: really know is how those individual stockbrokers were keeping their ledgers. 196 00:10:27,240 --> 00:10:31,000 Speaker 4: So if you look at images of the bank's lobby, 197 00:10:31,240 --> 00:10:35,520 Speaker 4: the kind of brokers exchange, you don't see much evidence 198 00:10:35,559 --> 00:10:40,240 Speaker 4: of people writing things down, So it probably looks like 199 00:10:40,640 --> 00:10:43,800 Speaker 4: a lot of people were keeping a sense of what 200 00:10:43,840 --> 00:10:47,400 Speaker 4: they were doing in their head until such time as 201 00:10:47,400 --> 00:10:51,520 Speaker 4: they went and registered with the Bank of England's clerks. 202 00:10:51,760 --> 00:10:53,800 Speaker 4: The other really interesting thing is the Bank of England 203 00:10:53,880 --> 00:10:59,800 Speaker 4: is operating a inscribed stock ledger system in which they 204 00:10:59,800 --> 00:11:03,920 Speaker 4: can keep the only legally binding record of stock ownership. 205 00:11:04,600 --> 00:11:09,080 Speaker 4: So individuals didn't have a receipt that they would take 206 00:11:09,120 --> 00:11:11,520 Speaker 4: away with them that would be legally binding. In fact, 207 00:11:11,520 --> 00:11:15,400 Speaker 4: that the receipt that they were given was worthless, and 208 00:11:15,600 --> 00:11:18,680 Speaker 4: thus they had to completely trust that the Bank of 209 00:11:18,679 --> 00:11:22,640 Speaker 4: England could keep their ledgers straight and that could keep 210 00:11:22,920 --> 00:11:26,920 Speaker 4: the sense of ownership within those ledgers, you know, completely trustworthy. 211 00:11:27,440 --> 00:11:29,920 Speaker 3: I'm so glad you brought that up, because I was 212 00:11:29,960 --> 00:11:31,679 Speaker 3: going to go to this question of the receipt right 213 00:11:31,679 --> 00:11:35,000 Speaker 3: Like we placed a trade online or do some transaction, 214 00:11:35,480 --> 00:11:38,440 Speaker 3: usually these days will get like some email that comes 215 00:11:38,520 --> 00:11:42,439 Speaker 3: from the financial entity might have some string of eleven 216 00:11:42,600 --> 00:11:44,600 Speaker 3: numbers and letters or something that we don't really care 217 00:11:44,640 --> 00:11:46,839 Speaker 3: about unless there's something that we need to go back 218 00:11:47,160 --> 00:11:49,920 Speaker 3: and dispute whether something has happened. 219 00:11:50,000 --> 00:11:51,120 Speaker 2: But talk to us a little bit more. 220 00:11:51,160 --> 00:11:53,400 Speaker 3: If like there's just these one entities in the background 221 00:11:53,559 --> 00:11:56,520 Speaker 3: and they're working overnight and they're humans and they're writing 222 00:11:56,559 --> 00:11:59,920 Speaker 3: things down, possibly making mistakes. Maybe both of you could 223 00:12:00,040 --> 00:12:02,160 Speaker 3: talk about this a little bit, like that role of 224 00:12:02,240 --> 00:12:05,560 Speaker 3: trust and the institution and what happens if you know 225 00:12:06,200 --> 00:12:07,160 Speaker 3: there's a dispute. 226 00:12:07,559 --> 00:12:11,760 Speaker 4: So it's trust, but with checks and balances. So when 227 00:12:12,440 --> 00:12:15,560 Speaker 4: a transaction happens, there's a buyer and there's a seller, 228 00:12:16,440 --> 00:12:18,520 Speaker 4: both the buyer and the seller are supposed to be 229 00:12:18,640 --> 00:12:21,640 Speaker 4: there to sign off on the trade. So to one 230 00:12:21,720 --> 00:12:25,199 Speaker 4: to sell and one to accept is also signed off 231 00:12:25,240 --> 00:12:29,120 Speaker 4: by a clerk. There's a whole process of checking between 232 00:12:29,320 --> 00:12:34,360 Speaker 4: the stock transfer books and the stock ledgers. And also 233 00:12:35,000 --> 00:12:37,959 Speaker 4: any individual could go into the Bank of England, either 234 00:12:38,000 --> 00:12:40,640 Speaker 4: them or their representatives, and they could look at the 235 00:12:40,640 --> 00:12:44,640 Speaker 4: stock ledgers to check that their account stood as they 236 00:12:44,760 --> 00:12:49,680 Speaker 4: understood it. So there are trust happens, but there's with 237 00:12:49,840 --> 00:12:52,600 Speaker 4: checks and balances also, So. 238 00:12:53,160 --> 00:12:56,280 Speaker 5: I would say in the nineteenth century again, this begins 239 00:12:56,320 --> 00:12:59,520 Speaker 5: to change this process of how you've established trust in 240 00:12:59,520 --> 00:13:03,480 Speaker 5: a financial market. So it's actually quite difficult to create 241 00:13:03,520 --> 00:13:07,439 Speaker 5: something like a receipt for a stock transaction, especially if 242 00:13:07,480 --> 00:13:10,720 Speaker 5: you were far away from London. So if you, for instance, 243 00:13:10,800 --> 00:13:14,320 Speaker 5: lived in the provinces of England, you sent an order 244 00:13:14,400 --> 00:13:17,920 Speaker 5: down by mail to your broker in London. Finding a 245 00:13:17,920 --> 00:13:19,800 Speaker 5: broker would be its own problem. But let's say you 246 00:13:19,880 --> 00:13:22,680 Speaker 5: find one, how do you know that he got you 247 00:13:22,920 --> 00:13:26,520 Speaker 5: a good market price. One of the big issues was 248 00:13:26,559 --> 00:13:29,400 Speaker 5: that the rule for marking prices, for putting a price 249 00:13:29,440 --> 00:13:32,000 Speaker 5: on the blackboard that would then be included in the 250 00:13:32,080 --> 00:13:36,880 Speaker 5: daily price list, it was by agreement of the brokers 251 00:13:36,920 --> 00:13:39,080 Speaker 5: doing the deal, so you had to actually agree with 252 00:13:39,120 --> 00:13:41,160 Speaker 5: the person that you either bought or sold stock for 253 00:13:41,280 --> 00:13:44,520 Speaker 5: that you would mark the price. Officially, you could often 254 00:13:44,559 --> 00:13:48,880 Speaker 5: not mark the price, so often the financial press calls 255 00:13:48,920 --> 00:13:51,640 Speaker 5: the price list that the Lendon Stock Exchange produce a 256 00:13:51,679 --> 00:13:55,000 Speaker 5: record of bad bargains, because it was essentially brokers who 257 00:13:55,040 --> 00:13:57,520 Speaker 5: would be covering themselves if they got something outside of 258 00:13:57,520 --> 00:14:00,200 Speaker 5: a market price for their client, they would rush to 259 00:14:00,600 --> 00:14:02,240 Speaker 5: have it marked on the board so that it would 260 00:14:02,240 --> 00:14:03,960 Speaker 5: show up in the newspapers or show up in a 261 00:14:03,960 --> 00:14:06,400 Speaker 5: priceless the next day, and they could go back to 262 00:14:06,400 --> 00:14:08,240 Speaker 5: their client and say, oh, look, I got you the 263 00:14:08,240 --> 00:14:10,120 Speaker 5: market price. It's here in the newspaper. It's here in 264 00:14:10,120 --> 00:14:13,160 Speaker 5: the price list, even though for most of the people 265 00:14:13,200 --> 00:14:15,679 Speaker 5: that were immediate in the market, that were in the 266 00:14:15,720 --> 00:14:19,080 Speaker 5: vicinity of the market that day, it was oftentimes not 267 00:14:19,320 --> 00:14:22,800 Speaker 5: actually the real price or the fair price that was predominant. 268 00:14:40,160 --> 00:14:43,480 Speaker 1: So this actually sounds like the ultimate opportunity for arbitrage, 269 00:14:43,560 --> 00:14:47,920 Speaker 1: right because you have different sources of information operating at 270 00:14:48,080 --> 00:14:51,520 Speaker 1: different latencies, really slow latencies where you know, someone is 271 00:14:51,600 --> 00:14:54,440 Speaker 1: running from one location to the other local literally mailing 272 00:14:54,640 --> 00:14:58,760 Speaker 1: yahiling broker in London, sending your servant to get the 273 00:14:58,840 --> 00:15:02,000 Speaker 1: latest price of something. I mean, how did that feed 274 00:15:02,160 --> 00:15:04,960 Speaker 1: into trading activity? Were there a lot of people trying 275 00:15:04,960 --> 00:15:05,880 Speaker 1: to take advantage of that. 276 00:15:07,640 --> 00:15:11,600 Speaker 5: Yeah, So the nineteenth century sees the emergence of the 277 00:15:11,640 --> 00:15:16,040 Speaker 5: first specialty arbitrage firms that are closing pricing gaps in 278 00:15:16,160 --> 00:15:20,640 Speaker 5: dual listed securities between different markets. But then there was 279 00:15:20,680 --> 00:15:23,760 Speaker 5: also just a lot of taking advantage of sort of 280 00:15:23,840 --> 00:15:27,360 Speaker 5: slow retail orders that showed up in the market. So 281 00:15:27,440 --> 00:15:30,240 Speaker 5: one of the things that happened. There's a recent paper 282 00:15:30,280 --> 00:15:32,080 Speaker 5: on this is that the introduction of something like the 283 00:15:32,120 --> 00:15:36,400 Speaker 5: ticker tape, rather than making stock trading more efficient, it 284 00:15:36,520 --> 00:15:44,880 Speaker 5: actually exacerbated irrational trend chasing in numbers because the ticker 285 00:15:44,920 --> 00:15:48,560 Speaker 5: tape numbers that were sent out to investors far away 286 00:15:48,640 --> 00:15:51,560 Speaker 5: were on a slight delay. It took some time to 287 00:15:51,800 --> 00:15:55,000 Speaker 5: even via a ticker tape send out numbers. But then, 288 00:15:55,080 --> 00:15:56,560 Speaker 5: if you think about it, the order has to be 289 00:15:56,640 --> 00:16:00,280 Speaker 5: routed back towards the initial exchange after you see a 290 00:16:00,320 --> 00:16:03,920 Speaker 5: number on the ticker tape, and so oftentimes the people 291 00:16:03,960 --> 00:16:08,440 Speaker 5: who are trading on ticker tape prices are smaller investors. 292 00:16:08,920 --> 00:16:11,800 Speaker 5: They send their order back to their broker, and per 293 00:16:11,800 --> 00:16:15,040 Speaker 5: the name of the show, the broker would not want 294 00:16:15,040 --> 00:16:18,160 Speaker 5: to place these small lots. They would wait until they 295 00:16:18,160 --> 00:16:21,960 Speaker 5: had aggregated a number of orders from smaller investors that 296 00:16:21,960 --> 00:16:24,200 Speaker 5: were trading off the ticker tape and only then go 297 00:16:24,320 --> 00:16:27,360 Speaker 5: back into the stock exchange and place a larger block order. 298 00:16:27,640 --> 00:16:29,360 Speaker 5: And so there were all of these complaints that the 299 00:16:29,360 --> 00:16:31,760 Speaker 5: prices on the ticker tape were never actually accurate. You 300 00:16:31,760 --> 00:16:34,680 Speaker 5: could execute a price on a ticker tape, and so 301 00:16:34,720 --> 00:16:38,360 Speaker 5: there was all of these issues with matching up the 302 00:16:38,400 --> 00:16:41,000 Speaker 5: time and the latency of when information was produced, whether 303 00:16:41,040 --> 00:16:43,440 Speaker 5: it was the priceless after the fact, whether it was 304 00:16:43,480 --> 00:16:45,720 Speaker 5: the ticker tape during the day. It was very hard 305 00:16:45,760 --> 00:16:49,360 Speaker 5: to get those two actually match what an accurate market 306 00:16:49,400 --> 00:16:52,280 Speaker 5: price was. So the firms that tended to do better 307 00:16:52,600 --> 00:16:55,280 Speaker 5: were ones that use the telegraph and the telephone and 308 00:16:55,320 --> 00:16:58,760 Speaker 5: were more professional arbitrage traders that took advantage of these 309 00:16:58,760 --> 00:17:01,880 Speaker 5: prices again, rather than detail traders that had to rely 310 00:17:01,960 --> 00:17:03,720 Speaker 5: on things like the price list or the ticker ty. 311 00:17:06,000 --> 00:17:09,480 Speaker 4: So in the late seventeen hundreds, I guess it was 312 00:17:09,720 --> 00:17:14,000 Speaker 4: a somewhat different environment. There was less i think obvious 313 00:17:14,080 --> 00:17:17,080 Speaker 4: room for arbitrage, but there were a few people who 314 00:17:17,119 --> 00:17:21,280 Speaker 4: dominated in the market and therefore the number of transactions 315 00:17:21,359 --> 00:17:25,320 Speaker 4: that they could command gave them a pretty good return 316 00:17:26,040 --> 00:17:28,840 Speaker 4: on the investment of their time. So they're spending a 317 00:17:28,840 --> 00:17:31,679 Speaker 4: lot of time in the Bank of England's lobby, in 318 00:17:31,840 --> 00:17:35,399 Speaker 4: various different coffeehouses, they're picking up business with a lot 319 00:17:35,440 --> 00:17:38,760 Speaker 4: of people, and therefore, you know, sort of having a 320 00:17:38,800 --> 00:17:43,440 Speaker 4: lot of turnover. There's not enough i think movement very 321 00:17:43,480 --> 00:17:47,760 Speaker 4: often for arbitrage to be particularly easy for them, but 322 00:17:47,880 --> 00:17:51,760 Speaker 4: their dominance in the market certainly gives them a real 323 00:17:51,840 --> 00:17:56,919 Speaker 4: kind of command of information, a real command of the 324 00:17:56,960 --> 00:17:59,840 Speaker 4: market as a whole, and just that sort of turnover 325 00:18:00,760 --> 00:18:04,520 Speaker 4: definitely yields them profits. The other thing they're really picking 326 00:18:04,600 --> 00:18:09,560 Speaker 4: up profits from is the initial issues from the government. 327 00:18:09,680 --> 00:18:14,160 Speaker 4: So what the government is doing is issuing to trusted 328 00:18:14,240 --> 00:18:19,520 Speaker 4: contractors and prominent businessmans. So they're getting that initial issue 329 00:18:19,560 --> 00:18:22,639 Speaker 4: at very easy prices, which they're then selling into all 330 00:18:22,680 --> 00:18:24,960 Speaker 4: much wider markets, so that there's a there's a real 331 00:18:24,960 --> 00:18:27,640 Speaker 4: profit to be had there, and the government's very conscious 332 00:18:27,720 --> 00:18:31,560 Speaker 4: of that expense, but really up until the early nineteenth 333 00:18:31,600 --> 00:18:34,000 Speaker 4: century can't figure out how to do that and how 334 00:18:34,000 --> 00:18:35,480 Speaker 4: to make that operation work better. 335 00:18:36,480 --> 00:18:38,800 Speaker 3: It's so interesting once again, like all of these things 336 00:18:38,840 --> 00:18:40,560 Speaker 3: that are like what's the term in the US for 337 00:18:40,640 --> 00:18:43,080 Speaker 3: like the bevy or like the ten banks that get 338 00:18:43,080 --> 00:18:45,760 Speaker 3: to bid on the treasury primary deal the primary dealers, 339 00:18:45,960 --> 00:18:46,919 Speaker 3: all of these things, the. 340 00:18:47,040 --> 00:18:48,560 Speaker 1: New issue premium, there's new. 341 00:18:48,440 --> 00:18:50,160 Speaker 2: Issue premium exactly the same. 342 00:18:50,240 --> 00:18:52,879 Speaker 3: And then the idea of like the ticker tape exacerbating 343 00:18:53,000 --> 00:18:55,680 Speaker 3: trend following is opposed to making the market more efficient, 344 00:18:55,800 --> 00:18:58,520 Speaker 3: like all these things, just like we talk about all 345 00:18:58,520 --> 00:19:00,639 Speaker 3: the time. They come up over and over, and you know, 346 00:19:00,800 --> 00:19:04,160 Speaker 3: since both of you talked about this and the need 347 00:19:04,280 --> 00:19:08,760 Speaker 3: for twenty four to seven trade or transaction reconciliation. 348 00:19:08,880 --> 00:19:10,040 Speaker 2: So the market or the. 349 00:19:10,000 --> 00:19:13,199 Speaker 3: Banking day closes at some time and then all the 350 00:19:13,280 --> 00:19:15,639 Speaker 3: clerks get to work and make sure all the books 351 00:19:15,680 --> 00:19:17,840 Speaker 3: are settled. Can you talk a little bit more about 352 00:19:17,880 --> 00:19:20,879 Speaker 3: what happened overnight, maybe both of you and starting for 353 00:19:21,320 --> 00:19:24,240 Speaker 3: in terms of are we talking about handwriting down pieces 354 00:19:24,240 --> 00:19:26,960 Speaker 3: of paper, erasing pens like, can you talk a little 355 00:19:26,960 --> 00:19:29,640 Speaker 3: bit more about what the overnight clerks and all these 356 00:19:29,640 --> 00:19:32,520 Speaker 3: different institutions did overnight to get ready for the next day. 357 00:19:33,920 --> 00:19:37,600 Speaker 4: Sure, So the Bank of England's records actually preserve this 358 00:19:38,280 --> 00:19:40,399 Speaker 4: in a great amount of detail, so we kind of 359 00:19:40,400 --> 00:19:44,520 Speaker 4: know precisely what they're doing. So there are books that 360 00:19:44,560 --> 00:19:48,000 Speaker 4: are worked in the banking hall and so the environment 361 00:19:48,040 --> 00:19:51,000 Speaker 4: where most of the customers would be, and there are 362 00:19:51,080 --> 00:19:54,160 Speaker 4: books that are worked in the accounts department as well. 363 00:19:55,000 --> 00:19:58,480 Speaker 4: So the evening clerks they're kind of taking the books 364 00:19:58,520 --> 00:20:01,680 Speaker 4: that are worked in the banking hall and they are 365 00:20:01,720 --> 00:20:08,000 Speaker 4: transferring those records against customers accounts so that the customer's 366 00:20:08,080 --> 00:20:11,000 Speaker 4: accounts are updated. Not only are they transferring them, but 367 00:20:11,000 --> 00:20:15,080 Speaker 4: they're also checking them. So it goes through a process 368 00:20:15,320 --> 00:20:20,119 Speaker 4: of making sure that the books that are worked in 369 00:20:20,119 --> 00:20:23,960 Speaker 4: the banking hall are adding up in the same way 370 00:20:24,000 --> 00:20:25,920 Speaker 4: as the books that have worked in the account's department, 371 00:20:26,240 --> 00:20:30,199 Speaker 4: and then the customer's ledgers are adding up in the 372 00:20:30,240 --> 00:20:31,800 Speaker 4: same way as the books that are worked in the 373 00:20:31,800 --> 00:20:36,000 Speaker 4: account's department. Then somebody else checks it. The other thing 374 00:20:36,040 --> 00:20:40,200 Speaker 4: that they're doing is making sure that they're really regular 375 00:20:40,359 --> 00:20:45,080 Speaker 4: customers are kept on a separate account. So they would 376 00:20:45,119 --> 00:20:48,360 Speaker 4: work up particular accounts for certain customers because they knew 377 00:20:48,400 --> 00:20:50,199 Speaker 4: that they would be in early the next morning, and 378 00:20:50,240 --> 00:20:53,080 Speaker 4: they knew that they would come and trade very often, 379 00:20:53,119 --> 00:20:56,320 Speaker 4: so they knew that those accounts had to be updated early, 380 00:20:57,280 --> 00:21:00,000 Speaker 4: and they really needed to make sure that the custom 381 00:21:00,280 --> 00:21:04,840 Speaker 4: that they understood where those customers accounts sat. Protection of 382 00:21:04,840 --> 00:21:07,959 Speaker 4: the records is another thing that's really interesting. We can 383 00:21:07,960 --> 00:21:09,680 Speaker 4: go on to talk about that as well, if that 384 00:21:09,720 --> 00:21:10,480 Speaker 4: would be interesting. 385 00:21:11,000 --> 00:21:12,560 Speaker 3: Yeah, Actually, what are you interesting to talk about that? 386 00:21:12,800 --> 00:21:14,879 Speaker 3: You mentioned the fire aspect. I imagine that if it 387 00:21:14,920 --> 00:21:17,720 Speaker 3: all caught on fire be absolutely disastrous for everyone to 388 00:21:17,800 --> 00:21:19,480 Speaker 3: be able to like, so talk a little bit about 389 00:21:19,480 --> 00:21:20,120 Speaker 3: that aspect. 390 00:21:20,200 --> 00:21:22,800 Speaker 2: Just preserving the physical records. 391 00:21:23,440 --> 00:21:26,000 Speaker 4: So the bank is doing a variety of things to 392 00:21:26,160 --> 00:21:28,800 Speaker 4: make sure that it's not at risk of fire. It's 393 00:21:28,840 --> 00:21:33,920 Speaker 4: really worried about fire throughout most of its existence, through 394 00:21:34,040 --> 00:21:36,760 Speaker 4: the sort of eighteenth century and into the nineteenth century, 395 00:21:36,960 --> 00:21:40,320 Speaker 4: so it's a really aggressive landlord. It kind of does 396 00:21:40,359 --> 00:21:44,159 Speaker 4: a slum clearance operation, particularly to create a fire break 397 00:21:44,800 --> 00:21:47,800 Speaker 4: around its buildings. It sort of pushes out resident population. 398 00:21:47,960 --> 00:21:51,520 Speaker 4: It pushes out all the old wooden buildings. It makes 399 00:21:51,600 --> 00:21:55,000 Speaker 4: duplicates of a lot of its accounts and sends them 400 00:21:55,000 --> 00:21:57,679 Speaker 4: out of the bank every night to the house of 401 00:21:57,720 --> 00:22:00,720 Speaker 4: one of its directors, so that they know that if 402 00:22:01,240 --> 00:22:04,639 Speaker 4: records are lost by fire, there is a duplicate sitting 403 00:22:04,680 --> 00:22:10,760 Speaker 4: out in another office. They have kind of technological solutions, 404 00:22:10,960 --> 00:22:13,720 Speaker 4: so they have wheeled trucks in which they put the 405 00:22:13,720 --> 00:22:18,119 Speaker 4: most important ledgers so that they can wheel them out overnight. 406 00:22:18,760 --> 00:22:21,280 Speaker 4: They keep their own fire engines and they train the 407 00:22:21,320 --> 00:22:25,880 Speaker 4: watchmen to operate those fire engines. And from the seventeen 408 00:22:26,040 --> 00:22:30,040 Speaker 4: sixties or so, they create a kind of archive building. 409 00:22:30,080 --> 00:22:33,240 Speaker 4: They call it a library, and they attempt to fireproof 410 00:22:33,320 --> 00:22:37,600 Speaker 4: that library by lining the building with copper, so that 411 00:22:37,800 --> 00:22:41,160 Speaker 4: you know there's a really elaborate set of protection against 412 00:22:41,160 --> 00:22:42,040 Speaker 4: attack and fire. 413 00:22:42,920 --> 00:22:45,440 Speaker 1: Yeah, I remember when I was living in London, actually 414 00:22:45,480 --> 00:22:47,760 Speaker 1: working at Bloomberg way back in the day. I used 415 00:22:47,760 --> 00:22:50,440 Speaker 1: to walk past the Bank of England building every day 416 00:22:50,480 --> 00:22:53,679 Speaker 1: on my way to work, and it's just this enormous, 417 00:22:53,960 --> 00:22:59,239 Speaker 1: imposing building with these famously thick walls. Was that for 418 00:22:59,359 --> 00:23:02,200 Speaker 1: fire prof or was that for fear of theft? 419 00:23:02,640 --> 00:23:06,639 Speaker 4: So probably not so much for fear of theft, but 420 00:23:06,760 --> 00:23:11,760 Speaker 4: it was for fear of unrest and rioting mobs in 421 00:23:12,000 --> 00:23:19,159 Speaker 4: eighteenth century London would very often, even if they weren't 422 00:23:19,200 --> 00:23:22,520 Speaker 4: interested in attacking a building, they would sort of they 423 00:23:22,520 --> 00:23:26,040 Speaker 4: would go into the building and sort of pull things apart, 424 00:23:26,720 --> 00:23:30,760 Speaker 4: particularly buildings that hadn't lit their windows. So you know, 425 00:23:30,760 --> 00:23:33,560 Speaker 4: putting lights in your window indicated to the mob that 426 00:23:33,560 --> 00:23:36,840 Speaker 4: you were you were supportive of whatever they were protesting against, 427 00:23:36,920 --> 00:23:39,840 Speaker 4: or what they were they were rioting against. If you 428 00:23:39,880 --> 00:23:42,360 Speaker 4: didn't put lights in your windows then then your your 429 00:23:42,400 --> 00:23:44,800 Speaker 4: property was at risk. So one of the things that 430 00:23:44,800 --> 00:23:47,080 Speaker 4: the Bank does very early on is has these sort 431 00:23:47,080 --> 00:23:50,800 Speaker 4: of windowless walls at the ground floor level so it 432 00:23:50,840 --> 00:23:52,919 Speaker 4: doesn't have to they don't have to light its windows. 433 00:23:52,960 --> 00:23:56,879 Speaker 4: But also it protects itself against that that possibility of 434 00:23:56,920 --> 00:23:59,119 Speaker 4: people sort of coming in through the windows or breaking 435 00:23:59,200 --> 00:24:02,040 Speaker 4: the windows the other thing it does. So there's a 436 00:24:02,160 --> 00:24:05,240 Speaker 4: church next door to the bank, which during the Gordon 437 00:24:05,320 --> 00:24:08,920 Speaker 4: Riots in seventeen eighty, the rioters try to get into 438 00:24:08,920 --> 00:24:12,600 Speaker 4: the bank through the church. So almost the next day 439 00:24:12,720 --> 00:24:15,000 Speaker 4: the Bank of England's directors take the decision that the 440 00:24:15,080 --> 00:24:18,960 Speaker 4: church has to go, and they eventually managed to buy 441 00:24:19,040 --> 00:24:21,280 Speaker 4: up the church and they buy out the churchyard. But 442 00:24:21,280 --> 00:24:24,040 Speaker 4: if you ever go into the Bank of England today, 443 00:24:24,280 --> 00:24:25,959 Speaker 4: you'll see one of the first things you see as 444 00:24:25,960 --> 00:24:28,120 Speaker 4: you walk through the door is that there's a nice 445 00:24:28,160 --> 00:24:32,560 Speaker 4: garden which the governor's office looks out onto this garden. 446 00:24:33,119 --> 00:24:36,320 Speaker 4: That garden is the graveyard of the old Saint Christophila 447 00:24:36,359 --> 00:24:38,720 Speaker 4: Stock's church, So when the governor is looking out onto 448 00:24:38,720 --> 00:24:41,159 Speaker 4: his garden, he's actually looking out onto a graveyard. 449 00:24:41,760 --> 00:24:43,679 Speaker 3: John, why did you come in and talk to us 450 00:24:43,680 --> 00:24:47,000 Speaker 3: about the overnight clerks and the trade reconciliation and how 451 00:24:47,000 --> 00:24:48,760 Speaker 3: it advanced at the point of your research. 452 00:24:50,119 --> 00:24:53,359 Speaker 5: Yeah, So in the nineteenth century, the brokers start to 453 00:24:53,400 --> 00:24:57,080 Speaker 5: be more organized than they were in Anne's period. In 454 00:24:57,160 --> 00:24:59,480 Speaker 5: her period, it's mostly the clerks at the Bank of 455 00:24:59,520 --> 00:25:02,199 Speaker 5: England doing the lion's share of work on behalf of 456 00:25:02,400 --> 00:25:04,600 Speaker 5: most of the rest of the system. But by the 457 00:25:04,680 --> 00:25:08,879 Speaker 5: nineteenth century, individual firms, brokerage firms have developed a pretty 458 00:25:08,920 --> 00:25:13,160 Speaker 5: advanced system of bookkeeping and again an army of clerks. 459 00:25:13,600 --> 00:25:18,440 Speaker 5: There's probably at least five clerks for every one broker. 460 00:25:18,480 --> 00:25:21,040 Speaker 5: I would say that would maybe a high estimate, but 461 00:25:21,080 --> 00:25:23,840 Speaker 5: there's quite a few. So just to give a quick 462 00:25:23,880 --> 00:25:26,719 Speaker 5: instance here, sure is there would be one clerk who 463 00:25:26,760 --> 00:25:29,679 Speaker 5: would be responsible for checking the bargains every day, so 464 00:25:29,760 --> 00:25:32,080 Speaker 5: he would get a series of slips or tickets from 465 00:25:32,160 --> 00:25:34,720 Speaker 5: the principal broker about all of the deals that had 466 00:25:34,720 --> 00:25:37,360 Speaker 5: been done. This clerk would record them in a day 467 00:25:37,359 --> 00:25:39,919 Speaker 5: book and then go back over and check with the 468 00:25:39,960 --> 00:25:43,399 Speaker 5: counterparties the next day, the next morning before the open, 469 00:25:44,080 --> 00:25:45,720 Speaker 5: just to make sure that they were on the same 470 00:25:45,760 --> 00:25:50,280 Speaker 5: page about having executed a deal the night before. The 471 00:25:50,359 --> 00:25:54,000 Speaker 5: second aspect of this is that settlements, the actual exchange 472 00:25:54,200 --> 00:25:58,320 Speaker 5: of cash or checks for securities, whether they're bonds or stocks, 473 00:25:58,800 --> 00:26:05,000 Speaker 5: only happened every two weeks at the London Stock Exchange. Yes, yes, 474 00:26:05,800 --> 00:26:09,320 Speaker 5: we can talk about settlement time. It was very complicated 475 00:26:09,320 --> 00:26:13,320 Speaker 5: in the nineteenth century because different exchanges had wildly different 476 00:26:13,359 --> 00:26:17,160 Speaker 5: settlement procedures and settlement times. The New York Stock Exchange 477 00:26:17,160 --> 00:26:21,879 Speaker 5: settled overnight, so it was t minus zero, while London 478 00:26:21,920 --> 00:26:25,199 Speaker 5: settled every two weeks, and this gave London brokers a 479 00:26:25,240 --> 00:26:30,240 Speaker 5: lot more opportunity to balance out their books to operate 480 00:26:30,280 --> 00:26:34,360 Speaker 5: with less capital, whereas a lot of firms that were 481 00:26:34,400 --> 00:26:37,600 Speaker 5: operating in London and New York would have to have 482 00:26:37,720 --> 00:26:41,639 Speaker 5: pretty large margin accounts parked in New York just to 483 00:26:41,680 --> 00:26:44,640 Speaker 5: meet any obligations that would come up in overnight settlement, 484 00:26:44,920 --> 00:26:47,199 Speaker 5: which was again not the case in London. Settlement in 485 00:26:47,240 --> 00:26:50,600 Speaker 5: London tended to be viewed as much easier. And what 486 00:26:50,600 --> 00:26:52,439 Speaker 5: would happen is at the end of the two weeks, 487 00:26:52,760 --> 00:26:56,160 Speaker 5: you would have hundreds of clerics cram into the basement 488 00:26:56,200 --> 00:26:58,560 Speaker 5: of the London Stock Exchange, it was the settlement room, 489 00:26:59,320 --> 00:27:02,840 Speaker 5: and they would concile all of the transactions that had 490 00:27:02,840 --> 00:27:06,080 Speaker 5: happened the previous two weeks. Often what happened is that 491 00:27:06,119 --> 00:27:08,880 Speaker 5: they would pass around a ticket, so someone would write 492 00:27:09,200 --> 00:27:13,920 Speaker 5: the name of a primary security like Union Pacific, and 493 00:27:13,960 --> 00:27:16,439 Speaker 5: they would pass around the ticket and you would write 494 00:27:16,520 --> 00:27:19,320 Speaker 5: how many shares you either bought or sold of Union 495 00:27:19,359 --> 00:27:21,680 Speaker 5: Pacific and at what price over those two weeks, and 496 00:27:21,680 --> 00:27:25,680 Speaker 5: it would get passed around until everyone had written their 497 00:27:25,720 --> 00:27:28,480 Speaker 5: transaction on the ticket, and then it would be essentially 498 00:27:28,480 --> 00:27:31,159 Speaker 5: translated into a balance sheet and netted out so that 499 00:27:31,200 --> 00:27:35,160 Speaker 5: there only needed to be one payment of differences and 500 00:27:35,320 --> 00:27:38,640 Speaker 5: shares if things had just been sort of like shuffled 501 00:27:38,680 --> 00:27:41,600 Speaker 5: back and forth on the books without actually netting out, 502 00:27:41,640 --> 00:27:44,240 Speaker 5: if that makes sense. So that was how they dealt 503 00:27:44,240 --> 00:27:47,680 Speaker 5: with this very cumbersome, large process of settlement was by 504 00:27:47,800 --> 00:27:50,920 Speaker 5: slowly recreating all of these individual transactions that took place 505 00:27:50,960 --> 00:27:53,119 Speaker 5: on the floor once every two weeks. 506 00:27:53,480 --> 00:27:55,439 Speaker 1: So John, you know we were talking about the actual 507 00:27:55,480 --> 00:27:58,440 Speaker 1: design of the Bank of England. Talk to us about 508 00:27:58,440 --> 00:28:01,520 Speaker 1: the design of the London Stock Exchange, because of course, 509 00:28:01,600 --> 00:28:03,879 Speaker 1: you know that was also a building that was built 510 00:28:03,880 --> 00:28:05,480 Speaker 1: for a specific purpose. 511 00:28:06,800 --> 00:28:07,159 Speaker 2: Sort of. 512 00:28:07,840 --> 00:28:10,399 Speaker 5: So one of the financial journalists in the early nineteen 513 00:28:10,480 --> 00:28:13,240 Speaker 5: hundreds calls the London Stock Exchange a monument to the 514 00:28:13,240 --> 00:28:15,560 Speaker 5: Middle Ages in the middle of the city. 515 00:28:15,920 --> 00:28:19,160 Speaker 1: I love how people were like complaining about infrastructure even 516 00:28:19,320 --> 00:28:19,800 Speaker 1: back then. 517 00:28:19,960 --> 00:28:23,359 Speaker 5: Right, this is from the Middle Ages and the London 518 00:28:23,359 --> 00:28:25,760 Speaker 5: Stock Exchange is opposed to, say, the Bank of England 519 00:28:25,840 --> 00:28:30,640 Speaker 5: was very There's a sociologist, one Pablo Pardo Guera, who 520 00:28:30,720 --> 00:28:34,000 Speaker 5: calls it opportunistic bricklage, which is it was just sort 521 00:28:34,040 --> 00:28:36,399 Speaker 5: of thrown together based on what they needed at a 522 00:28:36,400 --> 00:28:39,240 Speaker 5: particular moment, and so it becomes this sort of strange 523 00:28:39,240 --> 00:28:44,920 Speaker 5: agglomeration of buildings. For most of the eighteen hundreds, it's 524 00:28:45,080 --> 00:28:48,960 Speaker 5: just one wooden building, but they slowly add other buildings 525 00:28:48,960 --> 00:28:52,040 Speaker 5: around to it. It's not until the eighteen eighties that 526 00:28:52,120 --> 00:28:55,880 Speaker 5: they finally enclose it. It's marbled and it's like actually 527 00:28:55,960 --> 00:29:00,640 Speaker 5: looks like something more real and steady, and has one 528 00:29:00,680 --> 00:29:03,880 Speaker 5: continuous trading floor that doesn't happen till quite late in 529 00:29:03,920 --> 00:29:09,120 Speaker 5: the nineteenth century. The one part that is quite consciously designed, however, 530 00:29:09,400 --> 00:29:12,520 Speaker 5: is the settlement room in the basement and its connection 531 00:29:12,720 --> 00:29:16,000 Speaker 5: to the big safe room that they have. So one 532 00:29:16,040 --> 00:29:19,160 Speaker 5: of the problems with settlements in the eighteen hundreds and 533 00:29:19,200 --> 00:29:22,080 Speaker 5: the seventeen hundreds in Ann's period is that if you 534 00:29:22,080 --> 00:29:24,880 Speaker 5: were walking around to settle up your deals, you had 535 00:29:24,920 --> 00:29:26,840 Speaker 5: to carry a lot of especially if you were a 536 00:29:26,840 --> 00:29:29,479 Speaker 5: stockbroker that was doing a large amount of business, you 537 00:29:29,520 --> 00:29:31,920 Speaker 5: had to carry a lot of share certificates, a lot 538 00:29:31,960 --> 00:29:34,560 Speaker 5: of cash, and money with you, and it was very 539 00:29:34,600 --> 00:29:38,680 Speaker 5: easy to lose it in the traffic of city life, 540 00:29:39,000 --> 00:29:42,600 Speaker 5: let alone the bustle of an extremely crowded stock exchange. 541 00:29:42,920 --> 00:29:45,320 Speaker 5: So what the London Stock Exchange did was that they 542 00:29:45,480 --> 00:29:49,280 Speaker 5: connected their settlement room where deals were actually netted and 543 00:29:49,440 --> 00:29:52,240 Speaker 5: cleared and settled out, and right next door in the 544 00:29:52,240 --> 00:29:56,200 Speaker 5: basement they had a safe room where brokers could rent 545 00:29:56,320 --> 00:30:00,440 Speaker 5: essentially small lockers and safes and store their securities money 546 00:30:00,480 --> 00:30:02,680 Speaker 5: in the basement so that they didn't have to transport 547 00:30:02,760 --> 00:30:05,880 Speaker 5: it out in the street of the city. The one 548 00:30:05,920 --> 00:30:08,840 Speaker 5: complication to this was that one of these waiters, these 549 00:30:08,880 --> 00:30:12,160 Speaker 5: living servants that I talked about earlier, one of them 550 00:30:12,240 --> 00:30:14,440 Speaker 5: was in charge of the safe room, and it was 551 00:30:14,800 --> 00:30:18,080 Speaker 5: very common for them. This happened on a couple of occasions. 552 00:30:18,120 --> 00:30:20,640 Speaker 5: It was a very cool room, and so they would 553 00:30:20,720 --> 00:30:25,520 Speaker 5: show their friends the safe room. And these are lower 554 00:30:25,520 --> 00:30:28,880 Speaker 5: class guys who would sneak their friends in after hours 555 00:30:28,880 --> 00:30:31,200 Speaker 5: at the London Stock Exchange and show them the safe rooms, 556 00:30:31,200 --> 00:30:33,880 Speaker 5: show them all the cool aspects of the building. And 557 00:30:33,920 --> 00:30:36,720 Speaker 5: this really irked the brokers, and so there was a 558 00:30:36,720 --> 00:30:39,320 Speaker 5: lot of tension between these sort of lower class workers 559 00:30:39,320 --> 00:30:42,400 Speaker 5: who were responsible for maintaining a lot of the exchange's 560 00:30:42,400 --> 00:30:46,400 Speaker 5: critical infrastructure, and the brokers who depended on, you know, 561 00:30:46,560 --> 00:31:03,640 Speaker 5: safely storing their securities money in the exchange. 562 00:31:06,400 --> 00:31:09,800 Speaker 1: So we've been talking a lot about how finance used 563 00:31:09,840 --> 00:31:12,720 Speaker 1: to operate in the seventeen hundreds eighteen hundreds, and we've 564 00:31:12,760 --> 00:31:16,320 Speaker 1: been mostly focusing on how it was supposed to work. 565 00:31:16,560 --> 00:31:21,440 Speaker 1: Were there any famous or interesting examples of things going wrong? So, 566 00:31:21,600 --> 00:31:24,880 Speaker 1: you know, a ledger gets lost, or a certificate that's 567 00:31:24,920 --> 00:31:27,920 Speaker 1: supposed to go from one place to another doesn't show up, 568 00:31:28,240 --> 00:31:30,760 Speaker 1: settlement doesn't work, any examples. 569 00:31:31,720 --> 00:31:34,600 Speaker 4: So one of my favorite stories is the story of 570 00:31:35,000 --> 00:31:39,560 Speaker 4: Francis Fonton, and he's a very ordinary clerk in the 571 00:31:40,480 --> 00:31:45,400 Speaker 4: late eighteenth century, but sooner or later his marriage seems 572 00:31:45,400 --> 00:31:49,880 Speaker 4: to break down and he finds himself a lady friend 573 00:31:50,560 --> 00:31:55,640 Speaker 4: who has Antiinomian tendencies. So the Antiinomians believed that they 574 00:31:55,680 --> 00:31:58,800 Speaker 4: were saved by grace, so it didn't really matter how 575 00:31:58,840 --> 00:32:03,000 Speaker 4: they behaved because they were saved anyway. So that this 576 00:32:03,120 --> 00:32:07,000 Speaker 4: lady convinced Francis that they could sin all day, and 577 00:32:07,040 --> 00:32:09,920 Speaker 4: they could sin all night as long as they rose 578 00:32:09,960 --> 00:32:14,120 Speaker 4: early in the morning and went to the chapel run 579 00:32:14,160 --> 00:32:17,040 Speaker 4: by a kind of itinerant preacher who is a friend 580 00:32:17,040 --> 00:32:21,840 Speaker 4: of this lady. So Francis clearly enjoys this opportunity, but 581 00:32:21,920 --> 00:32:24,520 Speaker 4: his new lifestyle costs him quite a bit of money. 582 00:32:24,560 --> 00:32:27,800 Speaker 4: So he uses his position as a transfer clerk in 583 00:32:27,840 --> 00:32:33,040 Speaker 4: the Bank of England to transfer shares from people he 584 00:32:33,160 --> 00:32:37,040 Speaker 4: knows who are dead to himself, and so he makes 585 00:32:37,040 --> 00:32:39,480 Speaker 4: a fair bit of money out of that, until, of course, 586 00:32:39,520 --> 00:32:42,480 Speaker 4: inevitably he gets caught. And the Bank of England at 587 00:32:42,520 --> 00:32:46,960 Speaker 4: this point is exacting the ultimate penalty from its clerks 588 00:32:47,240 --> 00:32:50,440 Speaker 4: who it catches transgressing in this way. So poor old 589 00:32:50,440 --> 00:32:54,440 Speaker 4: Francis Fontan is condemned to death and is hung for 590 00:32:54,480 --> 00:32:59,479 Speaker 4: his crimes. And there were several other incidents like this, 591 00:33:00,200 --> 00:33:03,280 Speaker 4: and the Bank of England, no matter how well the 592 00:33:03,360 --> 00:33:07,160 Speaker 4: clerk had behaved up until that point, it always extracts 593 00:33:07,200 --> 00:33:10,040 Speaker 4: the ultimate penalty, so it always seeks the death penalty 594 00:33:10,040 --> 00:33:12,680 Speaker 4: against them as an example to the others. 595 00:33:13,040 --> 00:33:17,000 Speaker 3: Penalties for financial crimes in general were really more severe 596 00:33:17,040 --> 00:33:17,920 Speaker 3: back then, weren't they. 597 00:33:18,680 --> 00:33:23,360 Speaker 4: Yeah, And there's some really interesting work, particularly by a 598 00:33:23,400 --> 00:33:28,800 Speaker 4: scholar called Carl Wennelund, who really equates that sort of 599 00:33:28,840 --> 00:33:33,480 Speaker 4: the gallows as monetary policy in eighteenth century Britain that 600 00:33:34,040 --> 00:33:38,760 Speaker 4: Britain is a commercial nation, and a commercial nation needs 601 00:33:38,760 --> 00:33:41,640 Speaker 4: to be able to trust paper and trust the integrity 602 00:33:41,640 --> 00:33:45,840 Speaker 4: of paper, and therefore the death penalty becomes part of 603 00:33:45,920 --> 00:33:51,000 Speaker 4: that process of protecting the integrity of paper and making 604 00:33:51,080 --> 00:33:53,080 Speaker 4: sure that fraud is limited. 605 00:33:54,240 --> 00:33:56,600 Speaker 1: And John, what about in the eighteen hundreds. 606 00:33:56,760 --> 00:33:59,600 Speaker 5: Oh man, there are a ton I could choose from, 607 00:34:00,160 --> 00:34:03,960 Speaker 5: I'll choose I'll stay with two on this theme of 608 00:34:04,000 --> 00:34:06,640 Speaker 5: the waiters. So one of the main points that I 609 00:34:06,640 --> 00:34:10,200 Speaker 5: think is important to understand is that as financial markets 610 00:34:10,239 --> 00:34:14,400 Speaker 5: became more complicated and larger, as things like the telegraph 611 00:34:14,440 --> 00:34:17,680 Speaker 5: and the ticker tape were introduced to financial markets, this 612 00:34:17,760 --> 00:34:22,640 Speaker 5: actually made the brokers the principles more dependent on an 613 00:34:22,800 --> 00:34:27,880 Speaker 5: army of secondary laborers to execute trades profitably and quickly, 614 00:34:28,320 --> 00:34:32,520 Speaker 5: whether it was telegraph operators, whether it was their clerks, 615 00:34:32,560 --> 00:34:35,480 Speaker 5: whether it was telegraph messenger boys or waiters who delivered 616 00:34:35,480 --> 00:34:38,160 Speaker 5: the messages. And so the London Stock Exchange is this 617 00:34:38,239 --> 00:34:40,800 Speaker 5: really massive place. By the end of the nineteenth century, 618 00:34:40,800 --> 00:34:44,080 Speaker 5: there are twenty five hundred member brokers and that's not 619 00:34:44,160 --> 00:34:47,120 Speaker 5: including any of their clerks. So it was very hard 620 00:34:47,160 --> 00:34:50,760 Speaker 5: to keep track of where messages needed to be delivered 621 00:34:50,800 --> 00:34:53,279 Speaker 5: into whom often. One of the ways that this was 622 00:34:53,400 --> 00:34:56,640 Speaker 5: organized was there would be waiters stationed at the different 623 00:34:56,680 --> 00:34:59,839 Speaker 5: doors at the London Stock Exchange, and if you entered 624 00:34:59,840 --> 00:35:03,000 Speaker 5: in exited one door each day, you sort of had 625 00:35:03,040 --> 00:35:05,719 Speaker 5: your waiter who knew you, who knew your schedule, who 626 00:35:05,840 --> 00:35:07,640 Speaker 5: knew where he could find you if he needed to 627 00:35:07,640 --> 00:35:11,680 Speaker 5: get you a message. But oftentimes there was one. There 628 00:35:11,760 --> 00:35:15,040 Speaker 5: was one order that was sent and a messenger boy ran, 629 00:35:15,400 --> 00:35:17,560 Speaker 5: ran it to the wrong door, delivered it to the 630 00:35:17,600 --> 00:35:19,719 Speaker 5: wrong waiter, and the waiter looked at the message and said, 631 00:35:19,760 --> 00:35:21,319 Speaker 5: I don't know this guy, he's not here, and sent 632 00:35:21,400 --> 00:35:24,399 Speaker 5: it back and the broker never got his order for 633 00:35:24,760 --> 00:35:27,319 Speaker 5: days after the fact, and then dragged this waiter in 634 00:35:27,360 --> 00:35:30,400 Speaker 5: front of the managers of the London Stock Exchange and 635 00:35:30,440 --> 00:35:33,040 Speaker 5: complained that he should have just directed it to another door. 636 00:35:33,440 --> 00:35:36,920 Speaker 5: But again, there were twenty five hundred brokers in the exchange, 637 00:35:37,000 --> 00:35:39,439 Speaker 5: and so they let the waiter off the hook because 638 00:35:39,440 --> 00:35:44,120 Speaker 5: they excused his ignorance of this random broker who operated 639 00:35:44,200 --> 00:35:45,880 Speaker 5: on the other side of the exchange. 640 00:35:46,239 --> 00:35:48,080 Speaker 1: They didn't send him to the gallows. 641 00:35:48,480 --> 00:35:51,759 Speaker 5: No, they did not it was very nice. The only 642 00:35:51,840 --> 00:35:54,040 Speaker 5: other thing I'd add to this as well is that 643 00:35:55,160 --> 00:35:59,360 Speaker 5: there was still a prevalence for these These waiters needed 644 00:35:59,360 --> 00:36:01,600 Speaker 5: to have a lot of dependence in order to do 645 00:36:01,680 --> 00:36:04,800 Speaker 5: their job well. So one of the waiters was always 646 00:36:04,800 --> 00:36:07,840 Speaker 5: responsible for going and collecting the mail from the General 647 00:36:07,840 --> 00:36:10,560 Speaker 5: Post Office early in the morning and then making sure 648 00:36:10,600 --> 00:36:13,280 Speaker 5: it was distributed to brokers in a timely manner before 649 00:36:13,280 --> 00:36:15,600 Speaker 5: the market opened, so that they could place any orders 650 00:36:15,640 --> 00:36:18,520 Speaker 5: they'd received in the mail. One of the waiters tended 651 00:36:18,520 --> 00:36:21,560 Speaker 5: to abuse this privilege and he was gone for long 652 00:36:21,640 --> 00:36:25,560 Speaker 5: periods of time. He claimed that he was delayed at 653 00:36:25,560 --> 00:36:28,360 Speaker 5: the Dead Letter Office, where they would ask for the 654 00:36:28,440 --> 00:36:31,520 Speaker 5: names of letters that hadn't been delayed or delivered at 655 00:36:31,560 --> 00:36:35,040 Speaker 5: the Stock Exchange, but really he was out drinking and 656 00:36:35,200 --> 00:36:38,480 Speaker 5: visiting pubs, and he finally gets caught when they find 657 00:36:38,520 --> 00:36:41,799 Speaker 5: him passed out in the London Stock Exchange's bathroom with 658 00:36:42,160 --> 00:36:43,440 Speaker 5: letters spewn everywhere. 659 00:36:44,200 --> 00:36:46,359 Speaker 3: So, and you know you talked about the scene at 660 00:36:46,360 --> 00:36:48,640 Speaker 3: the Bank of England with the bustling lobby and the 661 00:36:48,680 --> 00:36:51,080 Speaker 3: clerks in twenty four to seven, can you talk a 662 00:36:51,160 --> 00:36:54,239 Speaker 3: little bit more about like was that scene replicated at 663 00:36:54,400 --> 00:36:57,280 Speaker 3: other banks? Around the country, whether it was private banks 664 00:36:57,360 --> 00:36:59,799 Speaker 3: or regional banks, and how much was that sort of 665 00:37:00,160 --> 00:37:02,640 Speaker 3: like ai is that seen at the Bank of England 666 00:37:02,680 --> 00:37:05,560 Speaker 3: reflective of what other banks were like at that time. 667 00:37:06,880 --> 00:37:09,120 Speaker 4: So the Bank of England has a monopoly at this time, 668 00:37:09,560 --> 00:37:12,960 Speaker 4: so and it deliberately seeks this monopoly in order to 669 00:37:13,040 --> 00:37:16,960 Speaker 4: keep other banks small. So banks in London are allowed 670 00:37:17,000 --> 00:37:19,440 Speaker 4: to have no more than six partners, so you know, 671 00:37:19,440 --> 00:37:23,160 Speaker 4: they are very small, very discrete, very discrete, an elite 672 00:37:23,239 --> 00:37:27,040 Speaker 4: set of customers. Very often. You get many more provincial 673 00:37:27,080 --> 00:37:30,960 Speaker 4: banks emerging from the seventeen eighties onwards, but often they're 674 00:37:31,000 --> 00:37:35,399 Speaker 4: quite small as well, and relatively unstable because they're very 675 00:37:35,440 --> 00:37:38,520 Speaker 4: reliant on the regional economy. And if the regional economy 676 00:37:38,920 --> 00:37:43,000 Speaker 4: becomes problematic in some way or goes into recession, then 677 00:37:43,040 --> 00:37:45,960 Speaker 4: the banks are immediately affected. So you get a lot 678 00:37:46,000 --> 00:37:49,080 Speaker 4: of growth of banks and then a decline of banks. 679 00:37:49,880 --> 00:37:54,000 Speaker 4: You do see banks represented in the banker's lobby though, 680 00:37:55,080 --> 00:37:59,600 Speaker 4: and you do see a lot of their work being 681 00:37:59,680 --> 00:38:03,320 Speaker 4: done there, but they are they're not a huge force 682 00:38:03,360 --> 00:38:05,680 Speaker 4: to be reckoned with. So the Bank of England is 683 00:38:05,800 --> 00:38:10,600 Speaker 4: dominant throughout this period, and it exercises that dominance as 684 00:38:10,640 --> 00:38:14,000 Speaker 4: far as I can see. Also, the Bank of England's 685 00:38:14,040 --> 00:38:18,600 Speaker 4: clerks are not taking their skills out to other banking environments, 686 00:38:19,000 --> 00:38:21,120 Speaker 4: so they come into the Bank of England and they 687 00:38:21,160 --> 00:38:22,719 Speaker 4: pretty much stay there until they die. 688 00:38:24,880 --> 00:38:27,919 Speaker 1: So let me ask a big picture question now, which 689 00:38:27,960 --> 00:38:30,680 Speaker 1: is you know, we started this discussion talking about the 690 00:38:30,719 --> 00:38:34,279 Speaker 1: episode we did with Stuart Butterfield that was a conversation 691 00:38:34,480 --> 00:38:39,000 Speaker 1: largely about technological revolution, the introduction of artificial intelligence and 692 00:38:39,040 --> 00:38:42,680 Speaker 1: what it might mean for technology in particular. But as 693 00:38:42,800 --> 00:38:46,360 Speaker 1: both of you look in the past, through your work 694 00:38:46,440 --> 00:38:51,480 Speaker 1: at previous technological developments or revolutions in the world of 695 00:38:51,560 --> 00:38:56,440 Speaker 1: finance and banking, what can history tell us about these 696 00:38:56,480 --> 00:38:59,920 Speaker 1: sort of developmental arcs. What should our takeaway be as 697 00:38:59,920 --> 00:39:02,720 Speaker 1: we look at how things worked in the seventeen hundreds 698 00:39:02,719 --> 00:39:05,680 Speaker 1: and eighteen hundreds to how they might work in the future. 699 00:39:06,280 --> 00:39:10,040 Speaker 5: I think my big takeaway is that most technological revolutions 700 00:39:10,280 --> 00:39:14,839 Speaker 5: never really replace human labor, They just transform the relationships 701 00:39:14,840 --> 00:39:17,360 Speaker 5: of it. So what I mean by that again I 702 00:39:17,440 --> 00:39:20,160 Speaker 5: mentioned like the introduction of something like the telegraph or 703 00:39:20,200 --> 00:39:22,759 Speaker 5: the ticker tape didn't actually replace a lot of the 704 00:39:22,800 --> 00:39:26,160 Speaker 5: functions of people in the stock Exchange, the paper price 705 00:39:26,239 --> 00:39:29,839 Speaker 5: list was still a really important check that was sent 706 00:39:29,880 --> 00:39:32,200 Speaker 5: out to investors at the end of each day, and 707 00:39:32,239 --> 00:39:35,960 Speaker 5: it created this influx of new laborers into financial markets 708 00:39:36,000 --> 00:39:39,080 Speaker 5: to help operate the telegraph and the ticker tape. And 709 00:39:39,080 --> 00:39:41,640 Speaker 5: then you see this sort of similar thing happen in 710 00:39:41,680 --> 00:39:44,840 Speaker 5: the twentieth century with the move to automated systems as well. 711 00:39:45,320 --> 00:39:48,439 Speaker 5: Even though the waiters of the London Stock Exchange are 712 00:39:48,920 --> 00:39:52,760 Speaker 5: essentially put out of business by the automation of stock trading, 713 00:39:52,800 --> 00:39:55,440 Speaker 5: you no longer need these guys to deliver messages. In 714 00:39:55,480 --> 00:39:58,880 Speaker 5: a world of computers and telephones, you get an influx 715 00:39:59,000 --> 00:40:03,440 Speaker 5: of compute your coders and electrical engineers into exchanges in 716 00:40:03,480 --> 00:40:07,719 Speaker 5: the nineteen sixties through the eighties to begin implementing technological systems. 717 00:40:08,320 --> 00:40:12,920 Speaker 5: So the relationship between human work and technology shifts around. 718 00:40:13,160 --> 00:40:16,640 Speaker 5: It ends up the crucial locus of that changes, but 719 00:40:16,840 --> 00:40:19,880 Speaker 5: there's always a human element that emerges, and there is 720 00:40:20,000 --> 00:40:24,799 Speaker 5: critical human labor in maintaining and implementing these technological systems whenever. 721 00:40:24,520 --> 00:40:40,680 Speaker 1: They are Indeed, so Joe, you know, I love Financial 722 00:40:40,760 --> 00:40:43,760 Speaker 1: history episodes. That was like the ultimate Finance History episodes. 723 00:40:43,760 --> 00:40:46,560 Speaker 2: It was so much in there that I really liked, and. 724 00:40:46,640 --> 00:40:49,080 Speaker 3: All these light bulbs go off about like, Okay, what 725 00:40:49,200 --> 00:40:52,279 Speaker 3: is the connection between like T plus two and the 726 00:40:52,320 --> 00:40:54,759 Speaker 3: fact that like they had T minus one, well they 727 00:40:54,760 --> 00:40:57,080 Speaker 3: had T minus one, and like people think like why 728 00:40:57,080 --> 00:40:59,640 Speaker 3: do we have two plus zero? And as John explained, 729 00:41:00,160 --> 00:41:02,040 Speaker 3: like well you have to keep more money and there's 730 00:41:02,120 --> 00:41:05,719 Speaker 3: like a financial inefficiency aspect of that, like all of 731 00:41:05,760 --> 00:41:07,880 Speaker 3: the every time we talk finance history, like all of 732 00:41:07,920 --> 00:41:10,040 Speaker 3: these things like just suddenly make more. 733 00:41:09,880 --> 00:41:12,920 Speaker 1: Sense, right. And also it feels like we often talk 734 00:41:12,960 --> 00:41:15,880 Speaker 1: about things and we think the restraints are technological, h well, 735 00:41:15,880 --> 00:41:18,600 Speaker 1: why don't we settle things faster? But so often they're 736 00:41:18,680 --> 00:41:23,960 Speaker 1: actually about you know, preferences, habits, incentives that people have 737 00:41:24,040 --> 00:41:27,000 Speaker 1: built up over time, and not the actual underlying technology. 738 00:41:27,280 --> 00:41:27,520 Speaker 2: Yeah. 739 00:41:27,560 --> 00:41:29,759 Speaker 3: And you know, even like we talked about like we 740 00:41:29,840 --> 00:41:32,680 Speaker 3: framed this as like before computers, but we remember, like 741 00:41:32,840 --> 00:41:36,040 Speaker 3: both of us like remember floor trading, right, yes, and 742 00:41:36,080 --> 00:41:37,960 Speaker 3: that seems crazy and I wonder how that worked and 743 00:41:38,000 --> 00:41:40,200 Speaker 3: why would they weren't losing? How could you trust that 744 00:41:40,239 --> 00:41:42,680 Speaker 3: person you were talking to? Like even that sort of 745 00:41:42,719 --> 00:41:45,200 Speaker 3: like blows in my mind, and you know, it's interesting, 746 00:41:45,200 --> 00:41:47,200 Speaker 3: I've never really thought about this before but I remember 747 00:41:47,200 --> 00:41:49,279 Speaker 3: reading in history about how like the death penalty was 748 00:41:49,320 --> 00:41:49,920 Speaker 3: often applied. 749 00:41:49,960 --> 00:41:52,480 Speaker 2: And finally, oh yeah, and it kind of makes sense, like. 750 00:41:53,000 --> 00:41:57,280 Speaker 3: Not to be an apologist for you know, hanging clerks. 751 00:41:56,880 --> 00:41:59,000 Speaker 1: Hanging white collar criminals in the seven gen. 752 00:41:59,200 --> 00:42:02,840 Speaker 3: You know, hanging in the seventeen hundreds. But like, okay, 753 00:42:02,880 --> 00:42:04,719 Speaker 3: like this is like that you have to have some 754 00:42:04,880 --> 00:42:06,840 Speaker 3: sort of like you know, this is everyone trust the 755 00:42:06,840 --> 00:42:07,480 Speaker 3: Bank of England. 756 00:42:07,520 --> 00:42:09,840 Speaker 2: Well this is right, and this right, Yeah. 757 00:42:09,680 --> 00:42:12,200 Speaker 1: AD's whole point is that like so much of what 758 00:42:12,239 --> 00:42:16,840 Speaker 1: the Bank of England does is mixed in with Britain's 759 00:42:16,880 --> 00:42:20,880 Speaker 1: reputation trust as an empire, trust in the financial system, 760 00:42:20,920 --> 00:42:23,880 Speaker 1: and like ultimately all that political power is built on 761 00:42:23,960 --> 00:42:25,080 Speaker 1: that foundation. 762 00:42:24,840 --> 00:42:26,400 Speaker 3: Right, And so you could imagine if you have like 763 00:42:26,600 --> 00:42:29,360 Speaker 3: any sort of like lenients and you're a little slipping 764 00:42:29,400 --> 00:42:31,640 Speaker 3: and you know, too many pages lost or too and 765 00:42:31,760 --> 00:42:33,920 Speaker 3: you could see how easy it was. Also the part 766 00:42:33,920 --> 00:42:37,799 Speaker 3: about architecture and clearing the space around the Bank of 767 00:42:37,880 --> 00:42:41,640 Speaker 3: England so that no fires could come in. Yeah, duplicates 768 00:42:41,680 --> 00:42:44,520 Speaker 3: like sending someone home with records, you know, again, like 769 00:42:44,560 --> 00:42:46,560 Speaker 3: they do the same thing today with like storing things 770 00:42:46,640 --> 00:42:47,800 Speaker 3: in multiple data centers. 771 00:42:47,840 --> 00:42:51,080 Speaker 1: So yeah, Also the dead letter office. That's fascinating. 772 00:42:51,080 --> 00:42:51,920 Speaker 2: Nothing ever changes. 773 00:42:51,960 --> 00:42:53,880 Speaker 1: All right, Well, we could go on, but shall we 774 00:42:53,960 --> 00:42:54,279 Speaker 1: leave it there? 775 00:42:54,400 --> 00:42:54,960 Speaker 2: Let's leave it there? 776 00:42:55,000 --> 00:42:57,400 Speaker 1: All right? This has been another episode of the All 777 00:42:57,480 --> 00:43:00,359 Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on 778 00:43:00,400 --> 00:43:01,800 Speaker 1: Twitter at Tracy Alloway. 779 00:43:01,960 --> 00:43:04,840 Speaker 3: And I'm Joe Wisenthal. You can follow me on Twitter 780 00:43:04,960 --> 00:43:09,120 Speaker 3: at the Stalwart. Follow our guests on Twitter. Professor Ann Murphy, 781 00:43:09,280 --> 00:43:14,440 Speaker 3: She's at eighteenth c Underscore Finance, John Handel, He's at 782 00:43:14,600 --> 00:43:18,600 Speaker 3: John Handel. Follow our producers Carmen Rodriguez at Carmen Arman 783 00:43:18,760 --> 00:43:21,920 Speaker 3: and Dashel Bennett at Dashbot. And check out all of 784 00:43:21,960 --> 00:43:25,440 Speaker 3: our podcasts at Bloomberg under the handle at podcasts, and 785 00:43:25,600 --> 00:43:28,319 Speaker 3: for our odd loots content, go to Bloomberg dot com 786 00:43:28,360 --> 00:43:31,200 Speaker 3: slash od lots, where we have a blog, transcripts and 787 00:43:31,239 --> 00:43:34,759 Speaker 3: a newsletter. And check out our discord chat about all 788 00:43:34,800 --> 00:43:38,000 Speaker 3: these topics twenty four to seven with other listeners. Go 789 00:43:38,080 --> 00:43:41,640 Speaker 3: to discord dot gg slash od lots, and. 790 00:43:41,640 --> 00:43:46,720 Speaker 1: You should check out Bloomberg Originals on Apple TV, Samsung, Roku, 791 00:43:46,840 --> 00:43:49,560 Speaker 1: any of the other streaming platforms, and you can check 792 00:43:49,600 --> 00:43:53,400 Speaker 1: out at Bloomberg tv from ten pm Eastern. 793 00:43:53,840 --> 00:44:12,440 Speaker 3: Thanks for listening and thanks for watching it 794 00:44:20,840 --> 00:44:20,880 Speaker 5: In