In his 1904 book, The Theory of Business Enterprise, economist Thorstein Veblen lays out a fundamental conflict at the heart of industrial capitalism, that between the engineer and the “business man.” The engineer seeks rationality, order, maintenance, and incremental efficiency. The business man, by contrast, seeks profit and will gladly organize or disrupt the engineers’ machines in its pursuit. At stake in Veblen's analysis is not just economic exchange but the very configuration of society. “The machine process pervades the modern life and dominates it,” Veblen wrote. Through it, “the course of things is given mechanically, impersonally” (Veblen, pp. 306, 310). The machine, once unleashed, is irresistible.
For today's readers, Veblen's “mechanical” could easily be replaced with “digital,” a term which likewise conjures the relentless advance of software engineers and, with them, the pervasive impersonality of online shopping and “I hope this finds you well” emails. To Veblen and critics of digitization who follow his arguments, Juan Pablo Pardo-Guerra's Automating Finance offers a refreshing corrective. At the heart of Pardo-Guerra's book—a history of automation efforts in British and American securities markets from roughly the 1960s to the 2010s—is a conflict that would seem familiar to Veblen: between tradition-bound securities dealers and upstart digital technicians. Yet, as Pardo-Guerra emphasizes, the reconfiguration of finance around digital technology did not impersonalize markets; rather, by operating through existing networks and organizations, it layered new fields of social interaction and new participants into the social spaces of finance. There was nothing impersonal about it.
At its foundation, Automating Finance documents the adoption by British and American securities exchanges of data communications systems and electronic order books, which, as Pardo-Guerra explains, ushered in a steady revolution in how financial securities were traded. Within living memory (or, as Pardo-Guerra frames it, across the span of Madonna's musical career), finance transformed from physical trading floors, “a matter of bodies and voice,” to “silent and speedy electronic queues” (p. 3). The process was neither orderly nor purposeful. Contrary to existing literature, financial automation was not, Pardo-Guerra argues, the outcome of an insidious political project (neoliberalism: bad!) or a logical response to capitalist competition (neoliberalism: good!). “Financial automation was not entirely planned or designed,” Pardo-Guerra emphasizes, “it just sort of happened” (p. 4).
Automating Finance examines this contingent story over seven substantive chapters, the first five focusing on the London Stock Exchanges (LSE) and peripheral markets, and the final two examining automation efforts in the United States, primarily around the New York Stock Exchange (NYSE). The work's core purpose is to uncover the “infrastructures” of these securities markets—the ways institutions like the LSE built and maintained the basic mechanisms for securities transactions, from pencil-and-paper order books to sophisticated electronic data management and display systems. As such, the work focuses considerable attention on the gradual development of component systems, including those with the delightful acronyms CHARM, EPIC, TOPIC, and TALISMAN (and the less delightful CLOB and SLOB), which engineers agglomerated into functional trading and exchange platforms. Central to Pardo-Guerra's infrastructural approach is the idea that engineers soldered these systems together, making modern digital markets through an iterative, evolutionary process.
The engineers feature prominently, and in addition to conventional archival sources, Pardo-Guerra makes excellent use of forty-nine oral history interviews with technicians and other market builders. Indeed, engineers are the primary heroes in Automating Finance, but Pardo-Guerra draws substantial insights as often from unhatched, failed, and abandoned projects as from the systems that engineers successfully built. An economic sociologist, Pardo-Guerra is also deeply interested in the politics and ethics with which engineers and other market participants imbued their technical creations. American businessman Frederick Nymeyer's effort to merge neo-Calvinist ethics and Austrian economics into an automated order book stands out as one particularly interesting, if ultimately failed, example.
Pardo-Guerra develops the historical narrative of automation around three main themes, aimed primarily at economic sociologists and scholars of science and technology in society (STS). First, the book argues that the process of market automation runs deeper than the mere adoption of trading screens, instead incorporating less visible infrastructures—“devices, standards, and practices operating mostly in the background” (p. 10). “Infrastructures,” as he emphasizes throughout the book, “matter” (p. 301). They create paths and frictions that cause similar kinds of markets to develop—or, in this case, automate—differently. Second, markets are structured through organizations, and the work of creating and maintaining markets is largely performed by “the vast middle” of the organizational hierarchy (p. 4). Organizational leaders may provide vision and support, but the concrete shape that markets take depends on the tinkering and refining of midlevel personnel. Third, electronic markets do not eliminate social relationships or replace them with impersonal processes; rather, they transform what it means to be “related.” In the same way that digitization did not make securities “immaterial,” the elimination of trading floors did not make them “impersonal.”
As these themes suggest, Pardo-Guerra layers the history of financial technology with theoretical insights drawn from sociology, engaging particularly with Veblen, Max Weber, Karl Polanyi, Viviana Zelizer, and Neil Fligstein, as well as scholars in the social studies of finance, like Donald MacKenzie. Business historians will find Pardo-Guerra's themes compelling, too, though they may feel frustrated by the book's lack of engagement with their field. To be clear, Pardo-Guerra is a sociologist, and his main audience is sociologists and science and technology scholars. But Alfred Chandler also lurks in these pages, if not in the references. Pardo-Guerra describes the “visible hand of coercive authority” but does not engage The Visible Hand (p. 124). Nevertheless, business historians, especially those interested in automation, market structure, and financialization, will find much of value in Pardo-Guerra's work. Automating Finance makes a compelling case that finance is and will remain fundamentally material and personal, whatever form financial markets ultimately take.
