Good Derivatives: A Story of Financial and Environmental Innovation

Preface

The path of least resistance and least trouble is a mental rut already made. It requires troublesome work to undertake the alternation of old beliefs.

—John Dewey

I've always loved stories. It really doesn't matter whether I'm listening to other people's stories or telling my own. The best are always personal. This is my story. It's an economist's tale, but it isn't dismal. It's a story about invention and innovation. It's about high hopes and determination. It's about the exhilaration of initiating change. It's also about dealing with frustration and failure. Both, after all, are inevitable in any saga on transformation. This is also a story about the spirit of Chicago, a true American city that embraced innovation and was the stage for much of my work. It is a story that spans five decades of inventive activity and institutional building in the commodity markets that saw Chicago's LaSalle Street transform from a grain trading hub to a pioneer in financial and environmental markets. I decided to commit this fuller story to paper on June 26, 2009.

That night at 6:15 P.M., my wife, Ellen, and I attended a formal banquet hosted by Ernst & Young at the Hilton in Chicago, honoring “Entrepreneurs of the Year” in the Upper Midwest. As we sat in the hotel bar just prior to entering the ballroom for the event, Ellen's cell phone rang. It was our daughter, Penya. Ellen listened, then turned to me with a big smile and loudly said, “It passed!”

What Ellen was referring to was the ...