What Can “FlashBoys” Teach Us About Credit and Collections?

Michael Lewis’s latest bestseller ‘Flash Boys, A Wall Street Revolt’ is a non-fiction tale of Wall Street intrigue, unfairness, and salvation.  The story itself has nothing to do with credit and collections, and yet it highlights the traits that make some people great at managing credit risk or successful debt collection when things go wrong.

The New York Times has an excellent summary of the story.  Well worth the 10 minute read if you have any interest and aren’t reading the book.  The ‘hero’, Brad Katsuyama, saw something from his stock trading desk that just didn’t make sense.  He knew it was important and he knew it was costing his company money.  Instead of just ignoring the issue, he decided to do the extra work to figure out what was really going on and how to respond once this was determined.

 Read this blog to find out what credit professionals  can learn from, “Flash Boys, A Wall Street Revolt”Credit Managers should find this story line familiar.  How often have you looked at a company’s credit request package and just felt that something wasn’t right?  Presumably you requested additional information, did additional research and analysis, and eventually either got past your concern or realized there was a legitimate issue.  Either way, you made a better decision for your company, by approving a good customer or limiting risk with a company that had issues.

Great commercial debt collectors also often have to do the same, especially on large or disputed claims.  Most of the time we need to figure out the real reason for the delinquency before it can be solved. That often requires many questions, probes, and analysis to go along with lots of listening.  Being able to identify the tidbits of information that can lead to the unraveling of the ‘story’ and getting to the truth is a critical skill.  Once we know what is really going on, the best path to getting paid generally is pretty clear.  This approach leads to a much higher success rate than just insisting on getting paid or filing suit.

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In Katsuyama’s case, he was able to uncover and then explain to many titans of Wall Street that there was a hidden ‘tax’ of perhaps more than $100 million per trading day (e.g. $25 billion annually) going to a handful of traders and brokers who had legal inside access and knowledge.  The rest of us paid the price.  Fortunately, this story has a happy ending, as Katsuyama and his associates established a new stock exchange, IEX, that opened about 6 months ago.  It treats all investors fairly and already has captured a significant volume of transactions

So whether you are a stock trader, a credit manager, or a commercial debt collector – good things come from good observations, the resulting analysis, and the appropriate action.



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