Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
And I'm Joe whysent Thal.
Joe, do you remember the episode we did with Stuart Butterfield, the founder of Slack.
I do great episode Software Tech. I like when we have tech and software episodes that aren't about just like the markets, but like how technology actually.
Works, how it actually functions. Yes, all right, Well that's a good jumping off point because there was a moment in that episode where I think it was Stuart asked a very innocent question, which is he basically said he had no idea how banking worked before the advent of computers.
I'm glad he said that, because I have no idea either.
And when I you know, when I think about money, and by this point we all sort of know like, oh, like money is it is just a database entry? Right, Well that makes a lot of sense to me at a world of excel. But how do like databases work? How did money as a database creation work before databases?
Well, that's exactly it, because nowadays I think money is almost synonymous with an electronic database, Like that's basically what it is at this point. But of course, for hundreds and hundreds of years we did not have things like Excel spreadsheets, So how did banking and finance and trade actually work in those conditions?
Yeah, and like I just don't understand how like people traded stocks or people went into a bank and said I want to get my money or without like, how are they not just like always losing track of how much money people had? How are they always not just like forgetting oh you bought that stock, like it's on pen and paper like type, Like in my mind, they must have been losing track of stuff all the time.
Well, I think I said this in the Stewart episode, but there were a lot of bank failures, there were a lot of trading blow ups, so maybe they you know, maybe the lack of technology was Actually that's sad. But we do actually have the perfect guests to discuss this topic. We are going to be speaking with Anne Murphy. She is a professor of history and executive dean over at the University of Portsmouth. She just wrote a new book. It's called Virtuous Bankers, A Day in the Life of
the eighteenth century Bank of England. So the perfect person to talk about pre computerized banking. We're also going to be speaking. This is a double feature. We're going to be speaking with John Handel, postdoctoral fellow at the McIntyre School of Commerce at the University of Virginia. He's written a lot about trade and technology in the eighteen hundreds early nineteen hundreds, so we're going to take a journey through the history of finance.
I can't wait. I'm really excited about this. So I have so many questions.
All right, an in, John, thank you so much for coming on our thoughts.
Oh, thank you for inviting me. It's lovely to be here.
As they say in sports talk radio, longtime listener, first time caller, I was just so great to be here.
Nice.
So maybe I should start in sort of I'm going to attempt chronological order here, but why don't we start with you? And I mean, you know, the clue is in the tie of your book. What was it actually like a day in the life of the Bank of England in the seventeen hundreds.
So it was a very busy place. The time I'm writing about is the seventeen eighties, so it's just after the War of American Independence and the British are having a moment of real introspection about their finances and trying to figure out whether everything is working well, which is one of the reasons that the Bank of England kind of looks inward at itself at this time and really tries to figure out what it's doing and how it's doing it and whether it's doing it well or not.
But the bank at this time, it's a twenty four hour a day place. It opens at dawn, You've got customers kind of milling around from about nine o'clock onwards, and it's doing everything you would expect a bank to do, but without those Excel spreadsheets. You know, it's doing them all with ledgers and quill and ink. And it's my view that it does it well and it doesn't lose
its customers money. It has a pretty good grasp of where everybody is and whether there's money to trade, and how it does all this stuff.
You said it's twenty four hours, and you know, even like the FED, I don't think is twenty four hours, or at least some of its operations have a certain window or the closes or certain things don't happen on weekend. So were there certain aspects of banking that from a twenty four hour standpoint were more advanced I don't know, a few hundred years ago than there are today.
So it's not necessarily operating twenty four hours a day, so its standard business day is around about nine to five.
But because it can't just press an update button at the end of the day to make sure all of the accounts are updated for the start of the next working day, the process of updating accounts takes place in the evening, So from about four o'clock all the way through sometimes to kind of ten eleven o'clock in the evening, there are clerks updating the physical ledgers so that next day, when the brokers walk in or when those business owners who are there regularly walk in, their account is up
to date and they're ready to go for the new business day. But the other reason it's twenty four hours is because it's a vulnerable place. So it's at risk of fire, it's at risk of wyatt, it's at risk of people sort of wanting to break in, so it has night watchmen who are there and active throughout the night to make sure that the bank is safe.
I have a really basic question, which is what are people doing at the bank of England in seventeen eighty. You mentioned customers sort of milling outside of the building. What are they waiting to actually do?
So one thing they're not doing so much is borrowing money from the bank. The bank's private lending is not very well advanced. They have their little bit of private lending early in the sixteen late sixteen hundreds, early seventeen hundreds, but it doesn't really take off. What a lot of people there are doing is discounting bills of exchange, so
they're borrowing money in that way and facilitating trade. Also in that way, they are managing notes, so they're coming to the bank to exchange ready money for banknotes, other banknotes, for Bank of England notes, or their banknotes that they have back to ready money again. And the note business is huge and occupies a lot of everybody's time. But they're also there to buy and sell government debt. So you could buy and sell government debt at the bank.
It's probably the main place where you could do that throughout most of the eighteenth century. So that's one of the things that they're there to do.
So I want to get more into the sort of like pen and paper and the actual physical operations.
But John, why do you come in talk to us.
A little bit about your area of focus and just sort of you're a little bit more on the trading and financial activities side. Let do you talk a little bit about your specific years in aero focus into sort of like finance and trading pre computers.
So my work is essentially the sequel to Anne's work. I pick up in the early eighteen hundreds around when her book on the Bank of England finishes and what's
happening I focus primarily in the London Stock Exchange. And what's happening in this period is a lot of the trading that had gone on during the seventeen hundreds went on in dispersed, often open locations, the lobby of the Bank of England, in alleyways, in coffee shops, in taverns even but beginning in the early eighteen hundreds, there's this move to enclose financial markets and make them their own, discreete spaces that would be governed by the association of
brokers who were met members of those exchanges. And so the London Stock Exchange adopts a new set of rules and begins to build its own premises, starting in eighteen oh one and essentially stops allowing members of the public, clients, investors, whomever to enter the exchange. The exchange becomes solely the province of brokers. But much like what Anne was saying, the London Stock Exchange is also a twenty four to
seven institution. It's not just the brokers who are there on the trading floor from eleven to four, but there are armies of clerks who are responsible for settling and clearing trades after hours. Because the London Stock Exchange is global and it's trading with markets in North America, in Australia and Asia. During the nineteenth century, members are there working at telegraph offices basically laid into the night as
late as eight or nine pm. And then one of the other things that's often overlooked is that there is a whole army of household servants basically live in servants who actually lived at the London Stock Exchange. They brought
their families. They were called waiters, but they were essentially the equivalent of porters, and they worked to guard the entrances of the exchange, deliver telegrams and letters to the brokers, keep the exchange clean and they lived there twenty four to seven for most of the nineteenth century, so the London Stock Exchange too, was a twenty four to seven institution with a very complex human ecosystem.
Tracy, do you think you know what I really want to say? I want a Netflix show that takes place in the lobby of.
The Bank of England.
I think like a big series of like over the years. I just like now, I really want their show to exist.
I think that would be perfect for like Sorkin treatment. Yes, all right, but actually this reminds me. I was having lunch just last week with a couple of traders who were active in the eighties and the nineties, and they were talking about board boys. So they used to have board boys who would write down trades on a blackboard or a whiteboard. I don't know, you know, who owes what to whom when there was active trading activity on
the floor. But this leads nicely into my next question, which is it sounds like a lot of the record keeping or the distribution of money, the movement of money was just being done by people in the seventeen hundreds and the eighteen hundreds as well.
That's absolutely right, and one of the things we don't really know is how those individual stockbrokers were keeping their ledgers. So if you look at images of the bank's lobby, the kind of brokers exchange, you don't see much evidence of people writing things down, So it probably looks like a lot of people were keeping a sense of what they were doing in their head until such time as they went and registered with the Bank of England's clerks.
The other really interesting thing is the Bank of England is operating a inscribed stock ledger system in which they can keep the only legally binding record of stock ownership. So individuals didn't have a receipt that they would take
away with them that would be legally binding. In fact, that the receipt that they were given was worthless, and thus they had to completely trust that the Bank of England could keep their ledgers straight and that could keep the sense of ownership within those ledgers, you know, completely trustworthy.
I'm so glad you brought that up, because I was going to go to this question of the receipt right Like we placed a trade online or do some transaction, usually these days will get like some email that comes from the financial entity might have some string of eleven numbers and letters or something that we don't really care about unless there's something that we need to go back and dispute whether something has happened.
But talk to us a little bit more.
If like there's just these one entities in the background and they're working overnight and they're humans and they're writing things down, possibly making mistakes. Maybe both of you could talk about this a little bit, like that role of trust and the institution and what happens if you know there's a dispute.
So it's trust, but with checks and balances. So when a transaction happens, there's a buyer and there's a seller, both the buyer and the seller are supposed to be there to sign off on the trade. So to one to sell and one to accept is also signed off by a clerk. There's a whole process of checking between
the stock transfer books and the stock ledgers. And also any individual could go into the Bank of England, either them or their representatives, and they could look at the stock ledgers to check that their account stood as they understood it. So there are trust happens, but there's with checks and balances also, So.
I would say in the nineteenth century again, this begins to change this process of how you've established trust in a financial market. So it's actually quite difficult to create something like a receipt for a stock transaction, especially if you were far away from London. So if you, for instance, lived in the provinces of England, you sent an order down by mail to your broker in London. Finding a broker would be its own problem. But let's say you find one, how do you know that he got you
a good market price. One of the big issues was that the rule for marking prices, for putting a price on the blackboard that would then be included in the daily price list, it was by agreement of the brokers doing the deal, so you had to actually agree with the person that you either bought or sold stock for
that you would mark the price. Officially, you could often not mark the price, so often the financial press calls the price list that the Lendon Stock Exchange produce a record of bad bargains, because it was essentially brokers who would be covering themselves if they got something outside of a market price for their client, they would rush to have it marked on the board so that it would show up in the newspapers or show up in a priceless the next day, and they could go back to
their client and say, oh, look, I got you the market price. It's here in the newspaper. It's here in the price list, even though for most of the people that were immediate in the market, that were in the vicinity of the market that day, it was oftentimes not actually the real price or the fair price that was predominant.
So this actually sounds like the ultimate opportunity for arbitrage, right because you have different sources of information operating at different latencies, really slow latencies where you know, someone is running from one location to the other local literally mailing yahiling broker in London, sending your servant to get the latest price of something. I mean, how did that feed into trading activity? Were there a lot of people trying to take advantage of that.
Yeah, So the nineteenth century sees the emergence of the first specialty arbitrage firms that are closing pricing gaps in dual listed securities between different markets. But then there was also just a lot of taking advantage of sort of slow retail orders that showed up in the market. So
one of the things that happened. There's a recent paper on this is that the introduction of something like the ticker tape, rather than making stock trading more efficient, it actually exacerbated irrational trend chasing in numbers because the ticker tape numbers that were sent out to investors far away were on a slight delay. It took some time to
even via a ticker tape send out numbers. But then, if you think about it, the order has to be routed back towards the initial exchange after you see a number on the ticker tape, and so oftentimes the people who are trading on ticker tape prices are smaller investors. They send their order back to their broker, and per the name of the show, the broker would not want
to place these small lots. They would wait until they had aggregated a number of orders from smaller investors that were trading off the ticker tape and only then go back into the stock exchange and place a larger block order. And so there were all of these complaints that the
prices on the ticker tape were never actually accurate. You could execute a price on a ticker tape, and so there was all of these issues with matching up the time and the latency of when information was produced, whether it was the priceless after the fact, whether it was the ticker tape during the day. It was very hard to get those two actually match what an accurate market
price was. So the firms that tended to do better were ones that use the telegraph and the telephone and were more professional arbitrage traders that took advantage of these prices again, rather than detail traders that had to rely on things like the price list or the ticker ty.
So in the late seventeen hundreds, I guess it was a somewhat different environment. There was less i think obvious room for arbitrage, but there were a few people who dominated in the market and therefore the number of transactions that they could command gave them a pretty good return
on the investment of their time. So they're spending a lot of time in the Bank of England's lobby, in various different coffeehouses, they're picking up business with a lot of people, and therefore, you know, sort of having a
lot of turnover. There's not enough i think movement very often for arbitrage to be particularly easy for them, but their dominance in the market certainly gives them a real kind of command of information, a real command of the market as a whole, and just that sort of turnover definitely yields them profits. The other thing they're really picking up profits from is the initial issues from the government. So what the government is doing is issuing to trusted
contractors and prominent businessmans. So they're getting that initial issue at very easy prices, which they're then selling into all much wider markets, so that there's a there's a real profit to be had there, and the government's very conscious of that expense, but really up until the early nineteenth century can't figure out how to do that and how to make that operation work better.
It's so interesting once again, like all of these things that are like what's the term in the US for like the bevy or like the ten banks that get to bid on the treasury primary deal the primary dealers, all of these things, the.
New issue premium, there's new.
Issue premium exactly the same.
And then the idea of like the ticker tape exacerbating trend following is opposed to making the market more efficient, like all these things, just like we talk about all the time. They come up over and over, and you know, since both of you talked about this and the need for twenty four to seven trade or transaction reconciliation.
So the market or the.
Banking day closes at some time and then all the clerks get to work and make sure all the books are settled. Can you talk a little bit more about what happened overnight, maybe both of you and starting for in terms of are we talking about handwriting down pieces of paper, erasing pens like, can you talk a little bit more about what the overnight clerks and all these different institutions did overnight to get ready for the next day.
Sure, So the Bank of England's records actually preserve this in a great amount of detail, so we kind of know precisely what they're doing. So there are books that are worked in the banking hall and so the environment where most of the customers would be, and there are books that are worked in the accounts department as well.
So the evening clerks they're kind of taking the books that are worked in the banking hall and they are transferring those records against customers accounts so that the customer's accounts are updated. Not only are they transferring them, but
they're also checking them. So it goes through a process of making sure that the books that are worked in the banking hall are adding up in the same way as the books that have worked in the account's department, and then the customer's ledgers are adding up in the same way as the books that are worked in the account's department. Then somebody else checks it. The other thing that they're doing is making sure that they're really regular
customers are kept on a separate account. So they would work up particular accounts for certain customers because they knew that they would be in early the next morning, and they knew that they would come and trade very often, so they knew that those accounts had to be updated early, and they really needed to make sure that the custom that they understood where those customers accounts sat. Protection of
the records is another thing that's really interesting. We can go on to talk about that as well, if that would be interesting.
Yeah, Actually, what are you interesting to talk about that? You mentioned the fire aspect. I imagine that if it all caught on fire be absolutely disastrous for everyone to be able to like, so talk a little bit about that aspect.
Just preserving the physical records.
So the bank is doing a variety of things to make sure that it's not at risk of fire. It's really worried about fire throughout most of its existence, through the sort of eighteenth century and into the nineteenth century, so it's a really aggressive landlord. It kind of does a slum clearance operation, particularly to create a fire break around its buildings. It sort of pushes out resident population.
It pushes out all the old wooden buildings. It makes duplicates of a lot of its accounts and sends them out of the bank every night to the house of one of its directors, so that they know that if records are lost by fire, there is a duplicate sitting out in another office. They have kind of technological solutions, so they have wheeled trucks in which they put the most important ledgers so that they can wheel them out overnight. They keep their own fire engines and they train the
watchmen to operate those fire engines. And from the seventeen sixties or so, they create a kind of archive building. They call it a library, and they attempt to fireproof that library by lining the building with copper, so that you know there's a really elaborate set of protection against attack and fire.
Yeah, I remember when I was living in London, actually working at Bloomberg way back in the day. I used to walk past the Bank of England building every day on my way to work, and it's just this enormous, imposing building with these famously thick walls. Was that for fire prof or was that for fear of theft?
So probably not so much for fear of theft, but it was for fear of unrest and rioting mobs in eighteenth century London would very often, even if they weren't interested in attacking a building, they would sort of they would go into the building and sort of pull things apart, particularly buildings that hadn't lit their windows. So you know, putting lights in your window indicated to the mob that you were you were supportive of whatever they were protesting against,
or what they were they were rioting against. If you didn't put lights in your windows then then your your property was at risk. So one of the things that the Bank does very early on is has these sort of windowless walls at the ground floor level so it doesn't have to they don't have to light its windows. But also it protects itself against that that possibility of people sort of coming in through the windows or breaking
the windows the other thing it does. So there's a church next door to the bank, which during the Gordon Riots in seventeen eighty, the rioters try to get into the bank through the church. So almost the next day the Bank of England's directors take the decision that the church has to go, and they eventually managed to buy
up the church and they buy out the churchyard. But if you ever go into the Bank of England today, you'll see one of the first things you see as you walk through the door is that there's a nice garden which the governor's office looks out onto this garden. That garden is the graveyard of the old Saint Christophila Stock's church, So when the governor is looking out onto his garden, he's actually looking out onto a graveyard.
John, why did you come in and talk to us about the overnight clerks and the trade reconciliation and how it advanced at the point of your research.
Yeah, So in the nineteenth century, the brokers start to be more organized than they were in Anne's period. In her period, it's mostly the clerks at the Bank of England doing the lion's share of work on behalf of most of the rest of the system. But by the nineteenth century, individual firms, brokerage firms have developed a pretty advanced system of bookkeeping and again an army of clerks. There's probably at least five clerks for every one broker.
I would say that would maybe a high estimate, but there's quite a few. So just to give a quick instance here, sure is there would be one clerk who would be responsible for checking the bargains every day, so he would get a series of slips or tickets from the principal broker about all of the deals that had
been done. This clerk would record them in a day book and then go back over and check with the counterparties the next day, the next morning before the open, just to make sure that they were on the same page about having executed a deal the night before. The second aspect of this is that settlements, the actual exchange of cash or checks for securities, whether they're bonds or stocks, only happened every two weeks at the London Stock Exchange. Yes, yes,
we can talk about settlement time. It was very complicated in the nineteenth century because different exchanges had wildly different
settlement procedures and settlement times. The New York Stock Exchange settled overnight, so it was t minus zero, while London settled every two weeks, and this gave London brokers a lot more opportunity to balance out their books to operate with less capital, whereas a lot of firms that were operating in London and New York would have to have pretty large margin accounts parked in New York just to meet any obligations that would come up in overnight settlement,
which was again not the case in London. Settlement in London tended to be viewed as much easier. And what would happen is at the end of the two weeks, you would have hundreds of clerics cram into the basement of the London Stock Exchange, it was the settlement room, and they would concile all of the transactions that had
happened the previous two weeks. Often what happened is that they would pass around a ticket, so someone would write the name of a primary security like Union Pacific, and they would pass around the ticket and you would write how many shares you either bought or sold of Union Pacific and at what price over those two weeks, and it would get passed around until everyone had written their transaction on the ticket, and then it would be essentially
translated into a balance sheet and netted out so that there only needed to be one payment of differences and shares if things had just been sort of like shuffled back and forth on the books without actually netting out, if that makes sense. So that was how they dealt with this very cumbersome, large process of settlement was by slowly recreating all of these individual transactions that took place on the floor once every two weeks.
So John, you know we were talking about the actual design of the Bank of England. Talk to us about the design of the London Stock Exchange, because of course, you know that was also a building that was built for a specific purpose.
Sort of.
So one of the financial journalists in the early nineteen hundreds calls the London Stock Exchange a monument to the Middle Ages in the middle of the city.
I love how people were like complaining about infrastructure even back then.
Right, this is from the Middle Ages and the London Stock Exchange is opposed to, say, the Bank of England was very There's a sociologist, one Pablo Pardo Guera, who calls it opportunistic bricklage, which is it was just sort of thrown together based on what they needed at a particular moment, and so it becomes this sort of strange agglomeration of buildings. For most of the eighteen hundreds, it's just one wooden building, but they slowly add other buildings
around to it. It's not until the eighteen eighties that they finally enclose it. It's marbled and it's like actually looks like something more real and steady, and has one continuous trading floor that doesn't happen till quite late in the nineteenth century. The one part that is quite consciously designed, however, is the settlement room in the basement and its connection
to the big safe room that they have. So one of the problems with settlements in the eighteen hundreds and the seventeen hundreds in Ann's period is that if you were walking around to settle up your deals, you had to carry a lot of especially if you were a stockbroker that was doing a large amount of business, you had to carry a lot of share certificates, a lot of cash, and money with you, and it was very easy to lose it in the traffic of city life,
let alone the bustle of an extremely crowded stock exchange. So what the London Stock Exchange did was that they connected their settlement room where deals were actually netted and cleared and settled out, and right next door in the basement they had a safe room where brokers could rent essentially small lockers and safes and store their securities money in the basement so that they didn't have to transport
it out in the street of the city. The one complication to this was that one of these waiters, these living servants that I talked about earlier, one of them was in charge of the safe room, and it was very common for them. This happened on a couple of occasions. It was a very cool room, and so they would show their friends the safe room. And these are lower class guys who would sneak their friends in after hours at the London Stock Exchange and show them the safe rooms,
show them all the cool aspects of the building. And this really irked the brokers, and so there was a lot of tension between these sort of lower class workers who were responsible for maintaining a lot of the exchange's critical infrastructure, and the brokers who depended on, you know, safely storing their securities money in the exchange.
So we've been talking a lot about how finance used to operate in the seventeen hundreds eighteen hundreds, and we've been mostly focusing on how it was supposed to work. Were there any famous or interesting examples of things going wrong? So, you know, a ledger gets lost, or a certificate that's supposed to go from one place to another doesn't show up, settlement doesn't work, any examples.
So one of my favorite stories is the story of Francis Fonton, and he's a very ordinary clerk in the late eighteenth century, but sooner or later his marriage seems to break down and he finds himself a lady friend who has Antiinomian tendencies. So the Antiinomians believed that they were saved by grace, so it didn't really matter how
they behaved because they were saved anyway. So that this lady convinced Francis that they could sin all day, and they could sin all night as long as they rose early in the morning and went to the chapel run by a kind of itinerant preacher who is a friend of this lady. So Francis clearly enjoys this opportunity, but his new lifestyle costs him quite a bit of money.
So he uses his position as a transfer clerk in the Bank of England to transfer shares from people he knows who are dead to himself, and so he makes a fair bit of money out of that, until, of course, inevitably he gets caught. And the Bank of England at this point is exacting the ultimate penalty from its clerks who it catches transgressing in this way. So poor old Francis Fontan is condemned to death and is hung for
his crimes. And there were several other incidents like this, and the Bank of England, no matter how well the clerk had behaved up until that point, it always extracts the ultimate penalty, so it always seeks the death penalty against them as an example to the others.
Penalties for financial crimes in general were really more severe back then, weren't they.
Yeah, And there's some really interesting work, particularly by a scholar called Carl Wennelund, who really equates that sort of the gallows as monetary policy in eighteenth century Britain that Britain is a commercial nation, and a commercial nation needs to be able to trust paper and trust the integrity of paper, and therefore the death penalty becomes part of that process of protecting the integrity of paper and making sure that fraud is limited.
And John, what about in the eighteen hundreds.
Oh man, there are a ton I could choose from, I'll choose I'll stay with two on this theme of
the waiters. So one of the main points that I think is important to understand is that as financial markets became more complicated and larger, as things like the telegraph and the ticker tape were introduced to financial markets, this actually made the brokers the principles more dependent on an army of secondary laborers to execute trades profitably and quickly, whether it was telegraph operators, whether it was their clerks, whether it was telegraph messenger boys or waiters who delivered
the messages. And so the London Stock Exchange is this really massive place. By the end of the nineteenth century, there are twenty five hundred member brokers and that's not including any of their clerks. So it was very hard to keep track of where messages needed to be delivered
into whom often. One of the ways that this was organized was there would be waiters stationed at the different doors at the London Stock Exchange, and if you entered in exited one door each day, you sort of had your waiter who knew you, who knew your schedule, who knew where he could find you if he needed to
get you a message. But oftentimes there was one. There was one order that was sent and a messenger boy ran, ran it to the wrong door, delivered it to the wrong waiter, and the waiter looked at the message and said, I don't know this guy, he's not here, and sent it back and the broker never got his order for days after the fact, and then dragged this waiter in front of the managers of the London Stock Exchange and complained that he should have just directed it to another door.
But again, there were twenty five hundred brokers in the exchange, and so they let the waiter off the hook because they excused his ignorance of this random broker who operated on the other side of the exchange.
They didn't send him to the gallows.
No, they did not it was very nice. The only other thing I'd add to this as well is that there was still a prevalence for these These waiters needed to have a lot of dependence in order to do their job well. So one of the waiters was always responsible for going and collecting the mail from the General Post Office early in the morning and then making sure it was distributed to brokers in a timely manner before the market opened, so that they could place any orders
they'd received in the mail. One of the waiters tended to abuse this privilege and he was gone for long periods of time. He claimed that he was delayed at the Dead Letter Office, where they would ask for the names of letters that hadn't been delayed or delivered at the Stock Exchange, but really he was out drinking and visiting pubs, and he finally gets caught when they find him passed out in the London Stock Exchange's bathroom with letters spewn everywhere.
So, and you know you talked about the scene at the Bank of England with the bustling lobby and the clerks in twenty four to seven, can you talk a little bit more about like was that scene replicated at other banks? Around the country, whether it was private banks or regional banks, and how much was that sort of like ai is that seen at the Bank of England reflective of what other banks were like at that time.
So the Bank of England has a monopoly at this time, so and it deliberately seeks this monopoly in order to keep other banks small. So banks in London are allowed to have no more than six partners, so you know, they are very small, very discrete, very discrete, an elite set of customers. Very often. You get many more provincial banks emerging from the seventeen eighties onwards, but often they're quite small as well, and relatively unstable because they're very
reliant on the regional economy. And if the regional economy becomes problematic in some way or goes into recession, then the banks are immediately affected. So you get a lot of growth of banks and then a decline of banks. You do see banks represented in the banker's lobby though, and you do see a lot of their work being done there, but they are they're not a huge force to be reckoned with. So the Bank of England is dominant throughout this period, and it exercises that dominance as
far as I can see. Also, the Bank of England's clerks are not taking their skills out to other banking environments, so they come into the Bank of England and they pretty much stay there until they die.
So let me ask a big picture question now, which is you know, we started this discussion talking about the episode we did with Stuart Butterfield that was a conversation largely about technological revolution, the introduction of artificial intelligence and what it might mean for technology in particular. But as both of you look in the past, through your work at previous technological developments or revolutions in the world of finance and banking, what can history tell us about these
sort of developmental arcs. What should our takeaway be as we look at how things worked in the seventeen hundreds and eighteen hundreds to how they might work in the future.
I think my big takeaway is that most technological revolutions never really replace human labor, They just transform the relationships
of it. So what I mean by that again I mentioned like the introduction of something like the telegraph or the ticker tape didn't actually replace a lot of the functions of people in the stock Exchange, the paper price list was still a really important check that was sent out to investors at the end of each day, and it created this influx of new laborers into financial markets
to help operate the telegraph and the ticker tape. And then you see this sort of similar thing happen in the twentieth century with the move to automated systems as well. Even though the waiters of the London Stock Exchange are essentially put out of business by the automation of stock trading,
you no longer need these guys to deliver messages. In a world of computers and telephones, you get an influx of compute your coders and electrical engineers into exchanges in the nineteen sixties through the eighties to begin implementing technological systems. So the relationship between human work and technology shifts around.
It ends up the crucial locus of that changes, but there's always a human element that emerges, and there is critical human labor in maintaining and implementing these technological systems whenever.
They are Indeed, so Joe, you know, I love Financial history episodes. That was like the ultimate Finance History episodes.
It was so much in there that I really liked, and.
All these light bulbs go off about like, Okay, what is the connection between like T plus two and the fact that like they had T minus one, well they had T minus one, and like people think like why do we have two plus zero? And as John explained, like well you have to keep more money and there's like a financial inefficiency aspect of that, like all of the every time we talk finance history, like all of these things like just suddenly make more.
Sense, right. And also it feels like we often talk about things and we think the restraints are technological, h well, why don't we settle things faster? But so often they're actually about you know, preferences, habits, incentives that people have built up over time, and not the actual underlying technology.
Yeah.
And you know, even like we talked about like we framed this as like before computers, but we remember, like both of us like remember floor trading, right, yes, and that seems crazy and I wonder how that worked and why would they weren't losing? How could you trust that
person you were talking to? Like even that sort of like blows in my mind, and you know, it's interesting, I've never really thought about this before but I remember reading in history about how like the death penalty was often applied.
And finally, oh yeah, and it kind of makes sense, like.
Not to be an apologist for you know, hanging clerks.
Hanging white collar criminals in the seven gen.
You know, hanging in the seventeen hundreds. But like, okay, like this is like that you have to have some sort of like you know, this is everyone trust the Bank of England.
Well this is right, and this right, Yeah.
AD's whole point is that like so much of what the Bank of England does is mixed in with Britain's reputation trust as an empire, trust in the financial system, and like ultimately all that political power is built on that foundation.
Right, And so you could imagine if you have like any sort of like lenients and you're a little slipping and you know, too many pages lost or too and you could see how easy it was. Also the part about architecture and clearing the space around the Bank of England so that no fires could come in. Yeah, duplicates like sending someone home with records, you know, again, like they do the same thing today with like storing things in multiple data centers.
So yeah, Also the dead letter office. That's fascinating.
Nothing ever changes.
All right, Well, we could go on, but shall we leave it there?
Let's leave it there?
All right? This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart. Follow our guests on Twitter. Professor Ann Murphy, She's at eighteenth c Underscore Finance, John Handel, He's at John Handel. Follow our producers Carmen Rodriguez at Carmen Arman and Dashel Bennett at Dashbot. And check out all of our podcasts at Bloomberg under the handle at podcasts, and for our odd loots content, go to Bloomberg dot com slash od lots, where we have a blog, transcripts and
a newsletter. And check out our discord chat about all these topics twenty four to seven with other listeners. Go to discord dot gg slash od lots, and.
You should check out Bloomberg Originals on Apple TV, Samsung, Roku, any of the other streaming platforms, and you can check out at Bloomberg tv from ten pm Eastern.
Thanks for listening and thanks for watching it
In