Life in the Pits: Anthropology Meets Economics

There is a new book out called Out of the Pits: Traders and Technology From Chicago to London. It is by Caitlin Zaloom, an assistant professor of social and cultural analysis at New York University. Below are some exerpts from an article she wrote in The Chronicle of Higher Education. Maybe you have heard of or seen the trading pits of commodities exchanges (like in the Eddie Murray/Dan Ackroyd movie "Trading Places"). The traders are buying and selling commodities like gold and wheat by yelling out their orders and offers to the other traders. But things are changing and becoming more computerized. Here are the exerpts from Zaloom's article:

"At work on the trading floor, I soon learned that a fundamental transformation was, indeed, taking place. The trading pits of Chicago were quickly being dismantled by the electronic technologies that connected traders at computer terminals around the world to a central server, swapping the raucous action of the pits for the quiet hum of online circuits. Geertz's example (Clifford Geertz was a famous anthropologist who looked at economic life) inspired me to assess what social changes facilitated such an important shift in the way money circulated around the globe, even as advocates championed the power of network connectivity and low costs of electronic trading.

The most significant transformations concerned the kind of people and the types of skills that do well in online markets. For generations, Chicago's trading fathers helped their sons into the business, and neighbors who shared fences provided entry-level jobs, like clerking, to each others' kids. (In fact, such family connections eased my own way onto the Chicago floor, providing the kind of object lesson in the culture of the trading pits that only fieldwork could offer.) Once in the pit, traders proved their mettle by being quick, loud, and brash. Each trader had to wrest his living from his competitors on the steps of the trading pit, reading a market in the voices, hands, and faces of his rivals.

The shriveling of the pits, once muscled by erstwhile Big Ten linebackers, had opened a niche for Ivy League engineers, M.B.A.'s, and math geeks, who quickly found a place in the Chicago futures markets. On a recent visit to Chicago, I met with the director of a trading firm — one located far up in a tower away from the trading floor — who gave me a blunt assessment of the social foundation of derivatives markets. "It's getting really Revenge of the Nerds around here," he reported. The unmediated physical competition that had created famously efficient markets for 150 years no longer seemed sufficient.

The talents of the traders must match the kinds of technologies with which they work. Instead of bodies, voices, and well-known personalities, traders now confront changing numbers on a "dealing" screen. This simple display creates an image of the market seemingly separate from the people who make it up, and which appears to exist beyond the cities in which they work. Training on the football field is less important now than hours and days spent in front of video games. Stamina is no longer displayed in a crowded pit but in the ability to resist the eye-glazing glare of the computer screen. In the shift from the trading pit to the computer, a new kind of trader emerges, one who can shape complex mathematical models, observe the market, make cool judgments, and take dispassionate action; in other words, a trader who can embody the value of efficiency that we associate with the market itself."