Forbes senior writer Lambert delivers a history of the birth and evolution of Chicago’s swashbuckling futures market.
The buying and selling of futures contracts—agreements to receive at a future date a specific quality and quantity of a given commodity for a fixed price—had its origins elsewhere, but the practice took hold in post–Civil War Chicago, the prairie city built for trade. The Irish-dominated Board of Trade opened with a focus on grain; an early version of what became the Jewish-dominated Mercantile Exchange followed in 1874, specializing in butter and eggs. Hedgers used futures to minimize risk; speculators sought profits in the interstices of fluctuating prices. Their maneuvering served a useful purpose, marking the direction of prices based on the current market conditions, but from the beginning farmers and merchants saw the traders as “unscrupulous gamblers,” rogues staffing a “filching machine.” Over time the futures market would grow well beyond its humble origins, expanding from exclusively agricultural products—soybeans, corn, cattle and pork bellies—to more esoteric goods and articles like foreign currencies, stock options and carbon credits. Although Chicago’s now-merged and much-copied exchange handles billions of dollars, the whiff of disrepute persists. Lambert charts this market’s many colorful twists and turns, the scandals and the triumphs, and devotes loving attention to a parade of outrageous risk-takers. She follows the market’s migration from the brawling trading pits to the computer age, from its status as a mere stockyard adjunct to today’s stand-alone, glass-tower imperiousness. Although she provides lucid explanations of how the market works and how the various money-making strategies collide, the charm of her fast-paced, informal history comes from the book’s animating insight: “Finance is like biology: Everything is intertwined.” Drawing from interviews, newspaper clippings and various histories, the author demonstrates that geography, past-practice and, above all, individual personalities matter mightily in the shaping of markets. The futures market appears to have been invented to prove her thesis.
For the general reader, a full-blooded introduction to an arcane world.