In 2014, author Michael Lewis sat down with Steve Kroft on 60 Minutes and dropped a line that rattled both Wall Street professionals and everyday investors: “The United States stock market, the most iconic market in global capitalism, is rigged.” It was a provocative headline for his book, Flash Boys, but also a systemic revelation.
For decades, the image of the stock market was one of open outcry - traders in colored vests shouting over one another to find a fair price. But Lewis revealed that the "pit" had been replaced by black boxes in high-security data centers.
Critics argue that high-frequency trading (HFT) risks include unfair speed advantages, opaque trading behavior, and subtle forms of market manipulation that ordinary investors never see. The average investor is being "front-run" by algorithms before their finger even leaves the mouse button.
While the traditional stock market is increasingly built to favor those with millisecond advantages, alternative investments, from private credit to tangible real estate, offer a more transparent, stable, and equitable path for individual investors.
To understand how the market became tilted, you have to understand the geography of modern trading infrastructure. Lewis stated that high-frequency trading firms were spending hundreds of millions of dollars to lay dead-straight fiber-optic cables through mountains and under private land.
Why? To shave 3 milliseconds off the round-trip time between Chicago and New York. These speed advantages are often achieved through co-location in stock exchanges, explained simply: trading firms pay to place their servers as close as possible to exchange computers to reduce latency.
The real issue isn’t just speed. It’s what that speed allows trading firms to do. In the time it takes for your order to buy 1,000 shares of Microsoft to travel from your broker to the various exchanges, a high-frequency trading algorithm can "see" your intent.
It then races ahead of you, buys those shares on a different exchange, and sells them back to you at a fraction of a cent higher. While technically legal in many situations, critics consider this one of several market manipulation techniques made possible by modern algorithmic infrastructure.
On a single trade, this "tax" might only be a few pennies. Across billions of daily trades, those tiny price differences add up to billions of dollars. This quietly drains billions from 401(k)s and retirement funds, a "speed tax" levied on every person trying to save for the future.
Perhaps the most frustrating part of the Flash Boys revelation was that the exchanges - the NYSE and Nasdaq - were often in on it. They sell "co-location" services, allowing high-frequency trading firms to place their servers right next to the exchange’s engine. In this environment, the more you pay, the faster you trade.
Another controversial practice tied to this ecosystem is payment for order flow, where brokerage platforms route retail investor orders to large trading firms in exchange for compensation. The pros and cons of payment for order flow remain heavily debated, especially regarding whether retail investors truly receive the best possible trade execution.
For the retail investor, the stock market has become a source of immense psychological stress. We have entered an era of "Volatility as a Feature." Because the market is driven by algorithms responding to other algorithms, we see “flash crashes” - sudden market drops triggered by algorithmic trading loops, liquidity gaps, or cascading automated orders.
Understanding these stock market flash crash causes helps explain why markets can move violently even when nothing about the underlying companies has changed.
If the public market is a high-speed race on a rigged track, alternative investments represent a different game entirely. Assets like private credit, real estate, or Worthy bonds allow investors to level the playing field by opting out of the "speed race."
In the private markets, value is driven by real-world performance. Many investors see this as part of a broader shift toward tangible asset investment strategies, in which capital supports real businesses, properties, or infrastructure rather than short-term trading activity.
If you invest in a small business through private credit or participate in passive income through real estate crowdfunding, the value of that investment is tied to real performance rather than trading algorithms. This comparison between private credit vs stock market returns has become a common discussion among investors seeking steadier income streams outside public equities.
Transitioning to alternatives requires a mindset shift. We have been conditioned to believe that "investing" means watching a line go up and down on a screen. But for many people, it can start to feel less like investing and more like high-stakes speculation against a computer.
Success should be redefined as the steady accumulation of wealth. By moving capital into private markets, you aren't just protecting your principal from high-frequency trading "taxes", you are also creating a tangible community impact. You can see where your money goes - supporting a manufacturer in the Midwest or a housing project in your city - rather than feeding a digital ghost in a server farm.
Michael Lewis didn’t just write a bestselling book. He exposed a system that many investors suspected existed but couldn’t clearly see. The "Flash Boys" era proved that the public markets have evolved into a playground for the technologically elite.
However, the "rigged" nature of the stock market only matters if that is the only game you play. By diversifying into alternative investments, you reclaim control. You move away from a system of predatory speed and toward a system of fundamental value.
Is the stock market rigged for retail investors?
Many critics argue that the modern stock market favors large institutions and high-frequency trading firms over everyday investors. As highlighted in Flash Boys, high-speed trading systems can detect and react to orders in milliseconds, allowing algorithms to profit from tiny price differences before retail trades are completed. While these practices are often legal, they create the perception that the system is tilted toward firms with the fastest technology and deepest pockets
What is high-frequency trading (HFT)?
High-frequency trading (HFT) is a form of algorithmic trading that uses powerful computers and ultra-fast data connections to execute trades in fractions of a second. Firms sometimes place their servers directly inside exchange data centers (a practice known as co-location) to reduce latency and gain a speed advantage. This allows algorithms to react to market activity faster than human investors, raising concerns about fairness and market transparency.
Why are some investors turning to alternative investments instead of stocks?
As concerns about algorithm-driven markets grow, many investors are exploring alternative investments such as private credit, real estate, and private market opportunities. These investments are often tied to real-world assets and performance rather than rapid market fluctuations. Because they are typically less influenced by algorithmic trading, some investors view them as a more stable way to build wealth over time.
How can alternative investments help diversify a portfolio?
Alternative assets can help diversify a portfolio because many are less correlated with major stock indexes like the S&P 500. This means their performance may not move in the same direction as the stock market during periods of volatility. Investments in areas like private credit or real estate can potentially provide steady income streams and help stabilize long-term investment strategies.