Episode 9. Finding prices, making prices

What’s in a price? This episode sets out to answer that question, via Joseph Wright’s Experiment on a Bird in a Pump, the construction of the London interbank lending rate, and some ruminations on the nature of fact. As for why it matters, we visit 80’s London for a tale of greed, sausages and a salmon pink Bentley. This is the end of the first part of the podcast. Episodes will restart in September.


There’s a picture hanging in London’s National Gallery called An Experiment on a Bird in a Pump. Painted by Joseph Wright of Derby in 1768, it’s extraordinary. It shines. I try to creep up on it, so as to take its figures by surprise. They are not bothered about me, for they are watching the experiment. Near the centre of the canvass there is a glass jar. It contains a parakeet, whose life is being brought to a premature and unpleasant end by the extraction of air from the chamber. Light spills out of the painting, catching the faces of the onlookers in movement; you can’t quite see the source for it is obscured by what appears to be a brain in a jar of liquid. Two young men watch the experiment earnestly. A young couple to the left of the painting have little interest in the wretched bird. A man, an enthusiast, wild haired, wrapped in a red dressing gown and a shirt open at the neck, is pointing to the jar and declaiming to the watching boys. His right hand hovers above the brass mechanism and winding handle of the air pump, a precision instrument of its time, set in a heavy, carved, wooden frame. Two young girls are visibly upset by the suffering. One covers her eyes with her hand, while the other clutches her sister’s gown for support. Another man comforts the girls. He is speaking and pointing to the bird. You can imagine him saying: ‘Come now, this is science. Put away your childish sorrow and take heed of our remarkable demonstration.’ Another boy, his face a mixture of malice and sorrow is shutting up the birdcage hanging from the ceiling, while, to the far right of the picture an older man rests his chin on his walking stick and stares at the apparatus with an unfocused, pensive gaze. Stepping back from the painting one can see the trappings of wealth: the rich finery of the clothes, the polished wood furniture and expensive apparatus, the heavy fresco plasterwork of a doorway in the background. The moon shines pale through a large sash window. It is a country house spectacle. These details are hidden in the half-darkness, away from the extraordinary chiaroscuro Wright achieves with the lamplight.

Compare this to another of Wright’s masterpieces, the Alchemist in Search of the Philosopher’s Stone. Again, the canvas is lit by light emanating from a glass vessel and the light catches faces in movement. But the setting is utterly different. The light, much hotter and brighter than the gentle lamp of the country house, boils out of a glass vessel held on a tripod, its stem bound tightly into a metal pipe running into a peeling brickwork chimney. It illuminates a room that resembles a church with Gothic arches built with plain stone; in the background the moon shines this time through a mullioned Gothic window. A man kneels by the vessel. He is old, grey haired, with a thick long beard, dressed like a hermit. His gaze is directed at the ceiling, so that his face, illuminated from below appears in an attitude of prayer. He is surrounded by the junk of alchemy, pots, vases, scrolls and a globe. Behind him there is some kind of writing table and two surly faced boys are chatting and pointing at the kneeling man. The sole, incongruent trace of modernity is a clock shown clearly in the middle of the picture.

Wright may well have seen these paintings as reflections of the same activity, the advance of science and progress, literally illuminating and metaphorically enlightening. But his two very different visions of scientific activity not only record the birth of modern experimental science but also give us a metaphor that helps us understand the practice of finance. On the one hand we see the entrepreneur discovering prices through a solitary process of experimentation in the market, groping in the dark for the light of price efficiency; on the other the gentlemanly, public spectacle of experimentation with its accompanying materiality and sociality – instrumentation, expertise, and collective agreement about the outcome. To be crude, the first is an economic conception, the second a sociological one. And we can use this metaphor to help us answer a question that has been vexing us since the outset: what’s in a price, and why does it matter?

Hello, and welcome to How to Build a Stock Exchange. My name is Philip Roscoe, and I teach and research at the University of St Andrews in Scotland. I am a sociologist interested in the world of finance and I want to build a stock exchange. Why? Because, when it comes to finance, what we have just isn’t good enough. To build something – to make something better – you need to understand how it works. Sometimes that means taking it to pieces, and that’s exactly what we’ll be doing in this podcast. I’ll be asking: what makes financial markets work? What is in a price, and why does it matter? How did finance become so important? And who invented unicorns?

We’ve covered a lot of ground in these last eight episodes, so let’s recap and try and pull some of the threads together. We’ve seen how stock exchanges developed through a mixture of historical happenstance, technological and economic innovation and political change. Exchanges are the central hubs of financial markets, and in my phrasing a synecdoche for them too. We saw how the birth of Chicago as a centre for agricultural trade, a phenomenon driven by advances in transport and communications, gave rise to The Board of Trade. Founded in 1848, that swiftly developed a market in agricultural derivatives. It was only later, as a result of commercial rivalry, that the legality of derivatives was settled in the Supreme Court and regulation caught up with the new market. The telegraph and ticker machine not only transformed the reach of the exchange but also bought regular time to the market and made possible new kinds of opportunity for profit, or indeed loss. We saw how London’s exchange grew from a commercial opportunity created by the government’s need to borrow from citizens to wage wars and its decision to make those borrowings liquid by recirculating them through the early joint-stock companies, notably the Bank of England and the East India Company. The wealthier jobbers, as the traders were known, purchased a building to house the dealing and charged their peers for access. There’s the beginning of the venerable London Stock Exchange; we can understand a great deal about how markets are shaped if we see them as venues where those at the top are continually stamping on the heads of those at the bottom. We took a detour to explore what stock exchanges could be doing, following hapless Sixtus and his efforts to set up a brokerage funding small companies. We then explored the social glue that binds stock exchanges together, the rules and rituals of the pre-digital London Stock Exchange, and how this was torn apart by the innovations of the 1980s: a global shift in political-economic contract from collective economic responsibility to individual self-help; the rise of new kinds of financial alchemy that turned the likes of you and me into subjects of financial interest; and the process of digitisation that provided the infrastructure to support this extraordinary expansion in the scale and scope of financial exchanges. As the stories have developed we have begun to understand that none of this was planned. Even the intellectual advocates of free market theory, who may claim to have made a meaningful contribution to the evolution of markets, began life as fringe figures until they were swept along by tide of global political-economic change and technological advance.


Think of those paintings again. The alchemist, pursuing his solitary work in the lab, happening by accident on the magical luminescence of phosphorus – by boiling urine, apparently – is roughly how finance thinks it works. Heroic traders, those shouting young men, the stuff of Tom Wolfe or Michael Lewis, or the desk trader taking a massive loss and casually puking in a bin before turning back to the screen – these are solitary figures pitting their wits against the market’s noise in pursuit of that distant, perfect price. (The sick in the bin anecdote comes from leading sociologist Donald MacKenzie, and I should say as always that full references are in the transcript on the podcast website)[2]. What about the other one? What is going on here, at least beyond the obvious, that a parakeet is coming to a miserable end in the name of progress. At the centre of the painting is an experiment, a public demonstration in which the laws of nature are temporarily suspended to effect a particular outcome. The experiment is structured and predictable. We know what will happen to the bird, and a demonstration proves a certain theory. It is a piece of theatre, combining the very latest in technology and knowledge to demonstrate a fact. That’s the theory, anyway. The truth is messier. Though it seems rudimentary to us, the air pump was cutting-edge in the mid-18th century; these pumps misbehaved, and in reality the outcome was not as predictable as all that. Ask any experimental scientist about the day-to-day practicalities of working in the laboratory and you will hear stories of knocked benches and malfunctioning equipment. The complex instruments of contemporary big science have personalities all of their own, and whole careers can be spent tending them. Experimental science is a messy, prolonged process; if not a country house entertainment, it’s a theatre of kinds, a spectacle of proof that’s ratified among learned professors at conferences and in the pages of academic journals.[3]

So it is with finance. It’s collective activity, the preserve if not of gentlefolk, certainly the well-educated, affluent, the social elite. It’s chaotic. Not everyone agrees on the outcome, and the process of testing and experimentation flows on as the markets follow the sun around the globe. Financiers, like scientists, debate: they meet in luxury hotels – the 21st-century equivalent of the country house – to settle the arguments, developing new kinds of practice and new ways of making money.

We can push the comparison further. Sociologists of science have argued that scientific facts are assembled in networks of instrumentation, of practice, of social relationships and institutional hierarchies. If you ask what’s in a fact, they will answer, ‘all of these things’. Facts are not lying around, partially invisible, waiting to be discovered but are assembled laboriously through the efforts of scientific specialists; they are fragile, held in place by those same efforts mechanisms, and political inasmuch as there is a politics to the production of science, as there is any institutional activity. This is not to say that facts are any less factual. If we are aware of the laborious rigour that surrounds their production we will take them all the more seriously: opinions and facts are not the same thing, precisely because of the very great difficulties involved in assembling facts. Bruno Latour, another great sociologist of science, has long urged climate change scientists to show their instrumentation, to make clear the price they must pay to be scientists. But after a while facts become naturalised, settled, domesticated. They are taken for granted, and the arduous circumstances of their production left behind. Such a process is necessary if science is ever to move forward or we would be forever reinventing our most basic findings. Facts become, Latour’s words, “black boxed”, often in instruments that simply make these earlier findings routine and invisible. It is only when things go wrong that we reopen and re-examine the content of these boxes.[4]

—-cash register—-[5]

So it is with prices. The price of your pension portfolio or mortgage is an obdurately real affair, and to understand that prices are made is not to somehow lessen their status. But prices, like facts, are assembled through demonstration, instrumentation, sociality and expertise. What then is in a price? Everything: the wires, screens, the telegraph or tickertape, the social rituals that bind exchanges together, the modes of calculation, the most innovative practices and knowledge of market participants, market regulation and vigorous lobbying, global political-economic shifts. All these things are rendered down into a vast collective agreement as to what something is worth. Rendered down and held in place for a day, a year, or a microsecond, before a new settlement emerges, and with it a new price. And it’s important to recognise the socio-material configurations of prices because we can start to see how changes in those social material arrangements can have an effect on prices, and in doing that to tell a story that is more subtle than the linear tale of technological improvement beloved of the financial economist.

Take LIBOR, for example. That’s the London Interbank Offered Rate, a daily calculation of the basic cost of borrowing money. Donald MacKenzie, who has researched it in detail, believes that LIBOR is interesting because it is so thoroughly black boxed, so completely regarded as a basic natural fact of the financial universe.[6]

Banks lend each other money all the time. This ‘interbank market’ is conducted through broker intermediaries, who deal with the bank clients. These are ‘voice brokers’, connected to their clients and their counterparties through complicated intercoms called voice boxes. “A bank’s dealer who wishes to place or to receive an interbank deposit,” writes MacKenzie, “will use his or her voicebox to tell a broker, who will then do one of three things: use his or her voicebox to try and find a counterparty; shout out the order to his or her colleagues; or ask a board boy (as they are still called) to write the order on one of the large whiteboards that surround the broker’s desks”.[7] A network of screens supplies current buy and sell prices for debt, and dealers are skilled at inferring the likely cost of borrowing across a range of risk and risk tolerance. So that’s how the market works. How then is LIBOR calculated? Well, in a highly routinized daily fixing, the LIBOR office asks the bankers how much money costs. Once a day, by 11:10am, representatives of 16 selected banks phone an office in the Docklands, passing on their best estimate of how much it would cost to borrow money. Sometimes, says MacKenzie, they forget and the office calls them. Their suggestions are sorted in order, the top and bottom quartiles ignored, and the mean of the second and third quartiles is published at 11:45am as the British bankers Association LIBOR. The process is is all very rule of thumb but it is also, as MacKenzie points out, sociologically robust. The banks’ inputs are made public and subject to scrutiny, while excluding the top and bottom quartiles makes wildcard or overly aggressive suggestions redundant. It would take a concerted effort to distort LIBOR, although a series of revelations in 2012 suggested that exactly such a thing had taken place, leading to a regulatory overhaul of the system, hefty fines, the resignation of a global banking CEO and the conviction of one trader.

This simple calculation, routine and forgotten by 11.46am each morning, serves as the basis for a whole superstructure of additional financial transactions: according to Wikipedia, some $350 trillion of derivatives are indexed to the number. “The importance of the calculation,” writes MacKenzie, “is reflected in the arrangements if a terrorist incident or other event disrupt the office in which I witnessed it. Nearby, a similarly equipped office building is kept in constant readiness; dedicated lines have been laid into the homes of those responsible for the calculation; a permanently staffed backup site, over 250 km away, can also calculate LIBOR.” Although LIBOR is thoroughly black boxed, the circumstances of its production rendered invisible, those circumstances remain important enough to demand not one but two replacement facilities for the case of emergency.

LIBOR is a price, and it contains the state of all information about the demand and supply of global credit. Let’s think of it through the analogy provided by those pictures. It is talked about – and used – as if it had been discovered by experiment, a natural artefact surfaced by the curiosity of financial man. This is – metaphorically speaking – the alchemist kneeling before his boiling pot. And this view, I think, explains the outrage directed at the participants in the rigging scandal; a sense that some kind of epistemological wrong had been perpetrated, that the natural order of things had been interfered with. When MacKenzie explains its construction, however, we can see that the process is more like the public spectacle of the bird and the air pump. It draws in the material architectures of credit brokers with their voice boxes and whiteboards; the judgement of expert traders as to what they might be able to borrow and at what price; regular calculative practices kept clean by the daylight of transparency and the threat of reputational damage; and at the highest level, a sharp politics of inclusion and exclusion determining who is able to contribute to the fixing and who is not. It is a messy process, contested and unsettled. Rival standards come and go, scandals break out. It is also exclusive, secretive, and hidden: financial facts, like any others, remain the domain of those expert and qualified enough to deal with them. In recent years citizen participation in science has been very much in the agenda: perhaps we should have citizen finance too.


It seems that some prices are better than others. But how can we tell? I’d like to finish with a cautionary tale, to show the kind of things that happen when we forget to check the instrumentation properly. It shows something else about prices – how they act as pivots through which forces of politics and contestation might flow, from richer to poorer, better placed and better informed to less so, insider to outsider. The most outside of outsiders are, in the words of one character in Scorsese’s Wolf of Wall Street, ‘Schmucks, mostly. Schmucks and postmen. There’s always postmen’.

In the early 1980s the British public became aware of a stockbroker-dealer, with the reassuringly classy moniker Harvard Securities. Harvard was run by a celebrity stockbroker named Tom Wilmot, who became a household name in 1985 after publishing a bestselling introductory guide to the UK’s over the counter markets. The OTC markets, not dissimilar to those occupied by Jordan Belfort, the Wolf of Wall Street himself, were Harvard’s hunting ground. According to the book, Harvard acted in ‘dual-capacity’, dealing in what Wilmot happily described as ‘speculative share issues’. Harvard Securities not only sold stock to the newly propertied Sids of the mid 1980s but also made the market in those stocks, benefitting from whatever spreads it happened to charge. It was better informed, better capitalised, and better staffed than those who purchased its shares; yet Harvard itself was opaque, and the spectacle of public proof very much absent from its dealings.

The firm had been founded in 1973 by a Canadian named Mortie Glickman; Wilmot, who knew a dodgy name when he saw one, refers to him in the book as Mr M.J. Glickman. It later emerged that Mortie Glickman had what journalists call a ‘colourful background’. Working with a man named Irving Kott, he had set up a broker named Forget in Montréal. It made a living employing high-pressure telephone sales to push stocks in dodgy Canadian companies onto European investors; much of the work was done through a Frankfurt-based operation, also set up by Kott and Glickman. The recipe was simple and involved buying a stake in the firm at a very low price and selling it on to investors at an inflated one. Forget was suspended by the Quebec Securities Commission in March 1973 and promptly went bust. Eventually, the Canadian authorities prosecuted Kott – but not Glickman – for fraud. He was convicted of issuing a false prospectus for shares sold through the Frankfurt firm. In other words, the shares he sold had slipped from real (but worthless) to imaginary (and still worthless). He had crossed a legal line, not that this would have made much practical difference to anyone who bought stocks from Forget.

Wilmot worked with Glickman as directors of Harvard Securities from 1975 until the latter stepped down in 1985. We might speculate that he learned his tricks during that first decade. ‘Tom was the biggest rogue of the lot,’ says one old Exchange hand, ‘and while Tom was dealing instructions to his dealers were, ‘Don’t buy anything, you are only a seller’’. Of course, a market with no buyers would look suspiciously quiet. Indeed, it wouldn’t be a market at all. But the ingenious Wilmot had a solution to this. In his book, he boasts that Harvard securities was taking the lead in making information on the over-the-counter market more widely available, paying the Evening Standard and Daily Telegraph – among others – to carry lists of stock prices. These ‘prices’ were, allegedly, not actual prices resulting from stock trades, but indicative ‘basis prices’ made – made up – by his own office. ‘Just to convince people it was all right,’ says the jobber, ‘he would put out his list of stocks, not many of them, 20 or 30 and he would move them up 1p a day, down 1p a day. And then he would move them 2p a day…People thought that it was all right but in fact they had bought a load of rubbish.’

In the early days Harvard Securities sold lines of American stock that could not be disposed of at home due to the SEC rules, then moved in the late 1970s to promoting its own offerings. It was busy during the boom years of the 1980s and bought a succession of companies to the markets. Some of these, notably Hard Rock Cafe and Park Hall Leisure, moved on to the main markets and became household names. The press reported that Harvard gained 20,000 new investors through the BT flotation in 1984, and Harvard claimed to already have 45,000 names in his database by that time. In a perfect echo of Jordan Belfort’s tactics, inexperienced investors who had made safe gains on a reputable issue – whether government stock or a famous leisure name like Hard Rock Cafe – then became the targets of aggressive telephone sales that exploited goodwill from the initial successful dealings. At the peak of the boom, turnover reached £200 million.


Wilmot bought a salmon-pink turbocharged Bentley. His investors didn’t do so well. Many of the companies Harvard introduced simply went bust. Wilmot shrugged this off. ‘From the onset,’ he said, ‘we have told clients that for every 10 companies in which they invest, two or three would fail in business within a two-year to three-year period; three or four would perform reasonably well; while three or four should perform spectacularly.’ These are numbers that might appeal to angel investors, wealthy, sophisticated business folk who know exactly what they are doing, the kind of odds quoted by Sixtus. The investors Wilmot targeted were not those who could stand risks like this – and the real risks turned out to be far, far higher.

Wilmot’s book was published in 1985, and made him into a minor celebrity among the investing public. He was a larger-than-life character. A big man, some 17 stone by accounts, he ran through staff quickly. At one point he was changing secretaries once a week: a colleague, quoted in The Times, remarked acidly that Wilmot ‘likes them to be pretty, to be a hostess and to do instantaneous work – it’s a difficult job’. He moved into an eight bedroom house, a 1930s affair designed by Bauhaus architect Walter Gropius. And anyone who had seen Wilmot arriving at the offices in his spanking new pink limousine might have called the height of the boom, but once again he had an answer: the man who always told investors to be wary of a company if its chairman drove a Rolls simply pointed out that his machine was a Bentley.

In 1984 Harvard Securities raised £2.1 million through a public offering, valuing the company at nearly £5 million, and listing its shares on its own market. The money was, he claimed, intended to develop the firm’s market-making activities and create a war chest for investing in early-stage firms that were not quite ready for the over-the-counter but with promising prospects. Forget’s business model suggested that, in practice, the cash would be used for buying ‘founder’ shares at an early stage that could then be resold to investors at a huge profit. The offer had the side-effect of making Tom Wilmot, who owned 37% of the firm, a paper millionaire – a very secure one too, as his salesmen controlled the price of that paper.

But wealth isn’t everything. I’ve made clear throughout these episodes that finance is a club, a gated community, and Wilmot wanted to be on the inside. Perhaps he wanted respectability, or perhaps he cynically understood that the validity of his prices depended greatly upon his membership of class of experts allowed to construct such things. It doesn’t really matter.

In 1986, Harvard announced its intention to apply for Stock Exchange membership. Soon, however, the over-the-counter practitioners committee, of which Harvard Securities was a prominent member, suggested that the licensed dealers would do better to launch their own regulated exchange. ‘It is not’, said Wilmot, ‘in the interests of the industry for the Stock Exchange to control the OTC’. These plans seemed to come to nothing. Then, in April 1987, Mortie Glickman sold the remainder of his stake to David Wickins, a reputable businessman and founder of British Car Auction Group, in return for a £1 million investment. This deal fuelled speculation that Wilmot would step back from the company and that Wickins would become the new chairman; Wickins hoped to end the practice of cold calling customers and instead re-brand the firm as a specialist corporate financier focused on growing companies. But these talks broke down in August 1987. At the same time, the London Stock Exchange refused to accept Harvard Securities as a member and effectively blackballed Wilmot. Shut out by the financial establishment, Wilmot tried and failed to find a buyer for his own stake in the firm.

—– Thunder —–[8]

In the last few episodes I’ve discussed the changes that overtook finance throughout the 1980s. They took place, of course, against a backdrop of a roaring bull market with stock prices heading steadily towards the sky. But markets can go down as well as up, and in October 1987 they did just that. The warning signs came from New York. Shares began to slide on Wednesday 14 October. On Thursday the slippage worsened. Overpriced shares were knocked by fears of interest rate increases and it is widely thought that computers programmed to trade at certain levels – for example, if the market falls by a certain amount – exacerbated the fall by causing a self-reinforcing feedback loop of selling and collapsing prices.

When Wall Street sneezes, the saying goes, the rest of the world catches a cold, and one might have expected panic in London on Friday. But nothing happened. During Thursday night, while New York’s traders had been piling on the sell orders, the south-east of England had been hit by the most savage storm in a century. Eighteen people died as walls collapsed and trees were uprooted, falling through buildings and onto cars. The hurricane shredded power lines and blocked railways, wrecking the capital’s infrastructure. London’s financial markets never opened that Friday morning. Many could not get to work, and those who did found power cuts and darkened screens. The Stock Exchange did manage to get its screens running by lunchtime, showing a rudimentary service, but there was hardly anyone in the office to deal. Those that did were busy short-selling insurance companies as quickly as they could, or picking up stock in the young and hungry do-it-yourself retailer B&Q which announced that sales of chainsaws and wheelbarrows were healthy and that its stores would be open all weekend. Those who did make it into the office left as soon as they could, and the half-hearted trading session finished at roughly two o’clock in the afternoon, just before the American markets opened.

So London, for once, was not paying much attention to the goings-on at Wall Street. On the other side of the Atlantic, things were not good at all. Friday 16 October was a bleak day for the American stock exchange: three hundred and forty-three million shares changed hands, more volume than any day previously, and the Dow Jones index fell by 4.6%. Traders were worried about interest rates and the long-term economic output; more and more, they were just plain worried, for this had been the worst week that Wall Street had ever seen. Then came the weekend, a queasy quiet before Monday’s market opening.

London opened before New York. Traders, shaken by Friday’s events, both meteorological and financial, tried to pre-empt heavy selling by marking prices down even before the market had opened. To no avail. Phones rang and rang, traders panicked and computer screens struggled. The London Stock Exchange was obliged to post a ‘fast market notice’ on its price screens to show that screen prices might be wildly different from those actually available from a broker; the fundamental basis of screen-based dealing, that the screen’s prices would be honoured, had been smashed by the sheer volume of sales. During the course of the day London lost twelve percent of its value, roughly fifty billion pounds worth of assets evaporating in a few hours. Newspapers used the words bloodbath, panic, meltdown, and even Armageddon. Black Monday, 19 October 1987, smashed the record for the previous largest single-day fall. Panic spread. The Australian Stock Exchange lost twenty percent of its value in the first few minutes of trading and the Tokyo exchange fell 11 percent. It was a catastrophic day. It wasn’t just the professional traders who were burned, but also the legions of newly-minted private investors. In Oxford Street, the Debenhams department store contained a small investors’ boutique run by the fledgling private client broker The Share Centre. The Guardian newspaper records a crowd of individuals seeking to rescue some value from their ruined portfolios, and a total inability to transact in the market: ‘“Just do the deals,” said Share Centre manager, Jackie Mitchell, a former filing clerk. “Can’t do the bloody deals, and they won’t answer the phone,” came the voice down the intercom.’[9]

There’s something else in prices: emotion. Sometimes greed and sometimes fear. There is a huge literature of behavioural finance exploring such things, but I don’t want to spend much time on it partly because others have, and partly because I think it misses the real story.[10] Stock markets are remarkably robust, anchored in all these years of history and practice, all these organisational architectures. Black Monday and the weeks following it did not destroy the markets; John Jenkins and his crew may have lost £10 million on Monday as they struggled with computers that couldn’t keep up with changing prices (the material again!) but they were trading again on Tuesday and Wednesday, nimble, surefooted, making money. Prices keep on being made, even if those making them don’t care for the direction of travel.

Harvard Securities, on the other hand, was not sociologically robust. Investors suddenly began asking for their money back, and when it became clear that the broker who had sold shares was unwilling to buy them again they wrote to the DTI and complained. Harvard laid off staff and in February 1988 reported a loss of £2.5 million for the first quarter. Its auditors qualified the accounts: it wasn’t clear, with the Financial Services Act looming, whether the business could continue in any form if it couldn’t secure regulatory oversight. In the summer of 1987, a formal motion was raised in the House of Commons by the Labour MP for Workington, one Dale Campbell-Saviours, advising investors to pull out of Harvard Securities. Campbell-Saviours was emerging as an unlikely champion of those investors who had been sold stock by the firm. He prodded the DTI to investigate and asked the shadow secretary for industry – a little known politician named Tony Blair – to take up the cause. Wilmot dismissed these allegations, saying that investors who had made a profit did not write to the DTI. Though there was an embarrassment of riches as far as potential misdemeanour was concerned, investigators focused on a film distributor called VTC; the dealers had sold on £132,000 of stock by promising buyers exciting figures and a significant increase in profitability – while VTC itself was supplying accounts predicting a £1.1 million loss. Campbell-Saviours also noted to the House that Harvard’s salesmen had been instructed to avoid repurchasing stock in distressed companies. It later emerged that dealers earned double commission for selling over-the-counter stocks to investors but had their commission docked should they repurchase any from a client who wish to sell.

In September 1988 Harvard Securities shut its doors, and an estimated £20 million of investors’ money disappeared.  It had failed to gain recognition from any of the five potential regulators. Approximately 3000 investors had written to the DTI; many had been sold Harvard’s own stock and lost their money here too as the firm finished with final year losses of £7 million. Those who did try to liquidate their holdings its final few days found that the market-maker was unwilling to repurchase stock; Harvard told investors that it had moved to trading on a matched basis and of course there were no buyers to be seen.

—–market traders—–[11]

Wilmot moved on. You can’t keep a good man down, and City gossip columns gleefully followed the progress of his new firm, a sausage company. The pink Bentley doubled as the firm’s van, sausages heaped on the back seat and a refrigerator jammed in the boot. When deliveries were too far away Wilmot delegated driving to his chauffeur, who also seemed to act as personal assistant, fielding calls from journalists. Perhaps this doubling up was a sign of straightened times. If so, it was the only one and Wilmot was soon abroad and embroiled in a lengthy dispute with the taxman. Wilmot’s son Christopher even joined the sausage business, leaving one commentator to speculate that he might learn some bad habits from his father. The commentator showed some prescience: In August 2011 Wilmot and his two sons were jailed for a total of 19 years for operating a ‘boiler room’ scam on an enormous scale.[12] This enterprise was more of the same as far as Wilmot’s prior history was concerned, just bigger. The scammers controlled 16 offices stretching across Europe – Christopher ran the IT operation from Slovakia, for example – and during five years of operation they relieved members of the public of some £27 million, £14 million of which was never seen again.

So what can we say about all this? Prices matter, and some are obviously better than others. But they’re not better because they are more right, a more accurate reflection of some externally existing financial reality. They are better because they are better made, more carefully crafted, because the artisan who shapes them cares about their production. Harvard Securities shows what happens when we take our eye of this process. It’s a crass example, but when we come to the global credit crisis we will find the same problem underpinned it. Those who made prices gave up caring whether they were good or bad and we citizen scientists failed to apprehend this. The Queen famously asked the economists why no one saw the crash coming. They blustered about probabilities and distributions, but the real answer is somewhat different: they were simply not sociological enough.

I’m Philip Roscoe, and you’ve been listening to How to Build a Stock Exchange. If you’ve enjoyed this episode, please share it. If you’d like to get in touch and join the conversation, you can find me on Twitter @philip_roscoe or email me on philiproscoe@outlook.com. I’ve come to the end of this section of the podcast and I’ve said pretty much everything I can about the materials of the market. I’ll be taking a break over the Summer. Who knew podcasting would be such hard work? But join me again in September, when we’ll continue in our quest to find out how to build a stock exchange.


[1] Sound recording from freesound.org https://freesound.org/people/Robinhood76/sounds/95759/

[2] Donald MacKenzie and Juan Pablo Pardo-Guerra, “Insurgent Capitalism: Island, Bricolage and the Re-Making of Finance,” Economy and Society 43, no. 2 (2014).

[3] There is a huge literature here, but see, for example Karin Knorr Cetina, Epistemic Cultures (Cambridge, Massachusetts: Harvard University Press, 1999); Bruno Latour, Pandora’s Hope (Cambridge, Massachusetts: Harvard University Press, 1999); ———, Facing Gaia: Eight Lectures on the New Climatic Regime (John Wiley & Sons, 2017); Andrew Pickering, ed. Science as Practice and Culture (Chicago: University of Chicago Press, 1992).

[4] Bruno Latour, Reassembling the Social: An Introduction to Actor-Network-Theory (New Edition), Clarendon Lectures in Management Studies (Oxford: Oxford University Press, 2007).

[5] Sound recording from freesound.org https://freesound.org/people/kiddpark/sounds/201159/

[6] The following relies on MacKenzie’s account, see especially Material Markets: How Economic Agents Are Constructed (Oxford: Oxford University Press, 2009).

[7] Ibid., 80.

[8] Sound recording from freesound.org https://freesound.org/people/BlueDelta/sounds/446753/

[9] The Guardian, October 21, 1987. ‘Darkening clouds as the little yuppies go to market’, Edward Vulliamy

[10] An excellent introduction is George A Akerlov and RJ Shiller, Animal Spirits (Princeton and Oxford: Princeton University Press, 2009).

[11] Sound recording from freesond.org https://freesound.org/people/deleted_user_1116756/sounds/74460/

[12] A boiler room is simply an operation pressure selling worthless or imaginary stock to private investors, and for some reason they are often based in southern Spain.

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