Around the world, big financial companies
have spent huge amounts of money setting up private
high-frequency trading networks. Rather than use public data links,
they send stock market news flashing through the air
between towers like this. Actually, this tower was built for floodlights,
but it's the tallest thing for a long way around, so the trading companies paid to have their
antennas put on it. Getting financial news just a hundredth of
a second faster than your competitors can give an advantage to your company.
Or, rather, it can give an advantage to the computers
that make your company's decisions. Now, this could be an artifact of
our weird, 21st-century, hyper-capitalist technology race. Or it could be part of a tradition that goes
back to 18th-century France. It is warm here. The optical telegraph sounds a bit ridiculous, like one of those things you find in lists
of failed Victorian inventions, or something made up by some steampunk enthusiast. But for a few decades in the late 18th and
early 19th century, semaphore lines were the fastest way of getting
information between major cities. There would be a chain of towers, like this one, on hilltop after hilltop after hilltop,
each a few miles apart. An operator at the start of the line would
use gears and levers to move the semaphore arms into a position
to convey the start of a message. When they locked in, the next tower along
the line would copy them. When they'd locked in, the next tower would
copy that, and the first tower could start on the next
position in the sequence, and so on and so on,
all the way down the line. It wasn't lightspeed, but it was fast. Britain had a line for the Admiralty, from
London to Portsmouth. In Russia, Tsar Nicolas
had a line 750 miles long. And this system, here in France, was invented
by Claude Chappe, and at its peak, it had more than 500 stations
like this across 3,000 miles of France. And while it depended a bit on the weather
and the operators, on a good day a message could travel at
hundreds of kilometres an hour. There was just one problem for anyone who
wanted to use it for profit: these lines in France were for
official government use only. You could not pay to send
a message through them. But that didn't stop two French brothers
with a plan. Now, there are a lot of versions of this story
in the English-speaking world. It's been copied from author to author, from
article to article, retold and retold, until there are a lot of seemingly-reliable
English sources all with different details. So, I hired a French-speaking researcher, who went to the archives in the city of Tours
and translated the original documents. Here was how the first telecoms scam worked. The Paris stock exchange influenced every
other stock exchange in France. The faster you knew its movements, the more
money you could make elsewhere in the country. So François and Joseph Blanc, down in Bordeaux
in the south of France, hired someone up in Paris. I do like how classy French names
sound in English, by the way; those names translate as Frank and Joe White. But, anyway, François and Joseph Blanc hired
someone up in Paris. If there was a major movement of the
Paris Stock Exchange, that agent in Paris sent
parcels with coded messages to the telegraph operators in the
town of Tours, about half way down the telegraph line to
Bordeaux. Those were actually packages of clothes,
so they looked innocent, but the type and colour of the clothes told
those operators what the news was. And those telegraph operators had also been
bribed by the Blanc brothers. Now, there are 96 possible positions of those
two telegraph arms. So the semaphore operators weren't sending
individual letters or characters. Instead, each pair of two symbols in a row
meant a different word or phrase, and there were more than 8,000 possible phrases
written in a big codebook. And the code books were only held by
senior officials in the big towns. So if you were just somewhere in
the middle of France, like here, you were just looking at the previous tower
and copying it. You didn't know what you were sending. But there were a few arm positions
that everyone knew, and those were reserved for control signals, like 'please wait' or 'backspace, I messed
up the last position'. So now that the operators in Tours knew how
the stock market had moved, they added specific, deliberately wrong signals and sent those down the line to Bordeaux, then immediately they used the 'backspace'
signal to correct them. 'Whoops, sorry, just messed up there.' That wrong signal with the hidden message would
still go down the line, it just wouldn't show up
in the official transcripts. In Bordeaux, at the end of the line, the brothers paid another person to watch
the sempahore tower for the mistaken signal, which gave them the news
way ahead of anyone else. And they used that news to make a spectacular
amount of money. Now that does seem a bit overcomplicated, but the brothers couldn't use the telegraph to send the signal all the way from Paris
down to Bordeaux, because in Tours, half way down, there was a telegraph manager
who would check the signal, and decode it to make sure it still made sense. The mistake and correction
would be removed there. The scam worked for two years, until people
started to get really suspicious about their success. And one of the telegraph employees who had
been bribed confessed on his deathbed, either to ease his soul or to recruit a replacement. Everyone involved - everyone involved who
was still alive, at least - was arrested. The Blanc brothers were found guilty of bribery, and the telegraph operators were found guilty
of receiving bribes, but there wasn't actually any law about misusing
the telegraph system, so the brothers were just ordered to pay the
costs of the trial and nothing else. They got away with the money. And the French government, very soon after, approved new laws that not only banned private
signals on these lines, but banned the idea of private semaphore networks
altogether. You couldn't even build your own. These weren't lightspeed, high-frequency trading
network microwave towers. But even now, when it comes to the stock market,
time is money. The Blanc brothers were a good century and
a half ahead of their time. Thank you to Victoria Harrison who spent a
lot of time in the archives researching and translating sources; any errors
in retelling are mine and not hers. Pull down the description to see some of the
original documents that we worked from.
