WEBVTT
Kind: captions
Language: en

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Around the world, big financial companies
have spent huge amounts of money

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setting up private
high-frequency trading networks.

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Rather than use public data links,
they send stock market news

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flashing through the air
between towers like this.

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Actually, this tower was built for floodlights,
but it's the tallest thing for a long way around,

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so the trading companies paid to have their
antennas put on it.

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Getting financial news just a hundredth of
a second faster than your competitors

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can give an advantage to your company.
Or, rather,

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it can give an advantage to the computers
that make your company's decisions.

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Now, this could be an artifact of
our weird, 21st-century,

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hyper-capitalist technology race.

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Or it could be part of a tradition that goes
back to 18th-century France.

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It is warm here.

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The optical telegraph sounds a bit ridiculous,

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like one of those things you find in lists
of failed Victorian inventions,

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or something made up by some steampunk enthusiast.

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But for a few decades in the late 18th and
early 19th century,

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semaphore lines were the fastest way of getting
information between major cities.

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There would be a chain of towers, like this one,

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on hilltop after hilltop after hilltop,
each a few miles apart.

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An operator at the start of the line would
use gears and levers

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to move the semaphore arms into a position
to convey the start of a message.

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When they locked in, the next tower along
the line would copy them.

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When they'd locked in, the next tower would
copy that,

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and the first tower could start on the next
position in the sequence,

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and so on and so on,
all the way down the line.

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It wasn't lightspeed, but it was fast.

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Britain had a line for the Admiralty, from
London to Portsmouth.

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In Russia, Tsar Nicolas
had a line 750 miles long.

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And this system, here in France, was invented
by Claude Chappe,

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and at its peak, it had more than 500 stations
like this

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across 3,000 miles of France.

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And while it depended a bit on the weather
and the operators,

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on a good day a message could travel at
hundreds of kilometres an hour.

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There was just one problem for anyone who
wanted to use it for profit:

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these lines in France were for
official government use only.

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You could not pay to send
a message through them.

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But that didn't stop two French brothers
with a plan.

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Now, there are a lot of versions of this story
in the English-speaking world.

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It's been copied from author to author, from
article to article, retold and retold,

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until there are a lot of seemingly-reliable
English sources all with different details.

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So, I hired a French-speaking researcher,

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who went to the archives in the city of Tours
and translated the original documents.

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Here was how the first telecoms scam worked.

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The Paris stock exchange influenced every
other stock exchange in France.

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The faster you knew its movements, the more
money you could make elsewhere in the country.

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So François and Joseph Blanc, down in Bordeaux
in the south of France, hired someone up in Paris.

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I do like how classy French names
sound in English, by the way;

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those names translate as Frank and Joe White.

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But, anyway, François and Joseph Blanc hired
someone up in Paris.

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If there was a major movement of the
Paris Stock Exchange,

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that agent in Paris sent
parcels with coded messages

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to the telegraph operators in the
town of Tours,

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about half way down the telegraph line to
Bordeaux.

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Those were actually packages of clothes,
so they looked innocent,

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but the type and colour of the clothes told
those operators what the news was.

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And those telegraph operators had also been
bribed by the Blanc brothers.

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Now, there are 96 possible positions of those
two telegraph arms.

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So the semaphore operators weren't sending
individual letters or characters.

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Instead, each pair of two symbols in a row
meant a different word or phrase,

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and there were more than 8,000 possible phrases
written in a big codebook.

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And the code books were only held by
senior officials in the big towns.

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So if you were just somewhere in
the middle of France, like here,

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you were just looking at the previous tower
and copying it.

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You didn't know what you were sending.

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But there were a few arm positions
that everyone knew,

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and those were reserved for control signals,

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like 'please wait' or 'backspace, I messed
up the last position'.

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So now that the operators in Tours knew how
the stock market had moved,

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they added specific, deliberately wrong signals

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and sent those down the line to Bordeaux,

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then immediately they used the 'backspace'
signal to correct them.

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'Whoops, sorry, just messed up there.'

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That wrong signal with the hidden message would
still go down the line,

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it just wouldn't show up
in the official transcripts.

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In Bordeaux, at the end of the line,

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the brothers paid another person to watch
the sempahore tower for the mistaken signal,

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which gave them the news
way ahead of anyone else.

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And they used that news to make a spectacular
amount of money.

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Now that does seem a bit overcomplicated,

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but the brothers couldn't use the telegraph

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to send the signal all the way from Paris
down to Bordeaux,

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because in Tours, half way down,

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there was a telegraph manager
who would check the signal,

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and decode it to make sure it still made sense.

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The mistake and correction
would be removed there.

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The scam worked for two years, until people
started to get really suspicious about their success.

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And one of the telegraph employees who had
been bribed confessed on his deathbed,

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either to ease his soul or to recruit a replacement.

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Everyone involved - everyone involved who
was still alive, at least - was arrested.

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The Blanc brothers were found guilty of bribery,

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and the telegraph operators were found guilty
of receiving bribes,

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but there wasn't actually any law about misusing
the telegraph system,

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so the brothers were just ordered to pay the
costs of the trial and nothing else.

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They got away with the money.

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And the French government, very soon after,

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approved new laws that not only banned private
signals on these lines,

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but banned the idea of private semaphore networks
altogether.

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You couldn't even build your own.

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These weren't lightspeed, high-frequency trading
network microwave towers.

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But even now, when it comes to the stock market,
time is money.

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The Blanc brothers were a good century and
a half ahead of their time.

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Thank you to Victoria Harrison who spent a
lot of time in the archives

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researching and translating sources; any errors
in retelling are mine and not hers.

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Pull down the description to see some of the
original documents that we worked from.