Life beyond the pit
How oil trader Tom Gordon found a second act to his career after computers replaced floor traders at the New York Mercantile Exchange. Produced as part of an FT Health at Work special report
Presented and produced by Aimee Keane. Music courtesy of Dave Depper, Podington Bear, Pure Grease and Peter Sandberg
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I realise that my appearance and my size-- I mean, I'm 6' 4", 240 pounds, people listen to me when I walk in a room. Right or wrong, you know who I am.
Hey, everyone, welcome to Alpha Chat, the business and economics podcast from the Financial Times. I'm Amy Kean. This is a special edition of Alpha Chat in which we bring you the story of second acts and new beginnings in the age of automation. It's part of an FT special report on health at work.
That voice you heard at the top of the show, that belongs to Tom Gordon. He spent 25 years as a successful commodities floor trader in the testosterone fueled pits of the New York Mercantile Exchange, eventually becoming the Vice Chairman of the Board. But when electronic trading upended the way he knew how to trade on the floor, he left it all and became a social worker, specialising in substance abuse and recovery.
I sit down there and all 240 pounds of me, I get tears in my eyes, and they say, that's why you get to do what you do.
Tom's life today is a far cry from where it all began, nearly 40 years ago on a school trip to Wall Street. He was 19.
And I was feeling pretty good about myself, so I put on a corduroy suit, and I said, oh, I'm going to go look for a job, and I brought resumes. So, here, I'm like this country kid, corduroy suit, it's May, really not the proper type of attire. Saw there was this big, black building and I said, oh, it says Merrill Lynch, I've seen that name on a commercial.
So he goes in, asks for the employment department, and rides the elevator up the building. And I had my resume and I went to hand it at the desk, and I said, well, I'd like an interview. And they says, well, that's not the way we do it. And I said, but I would really liked to talk to somebody. And I really wanted to talk to somebody, like, hey, I'm here, I've got something worth looking at.
Tom would soon be thrown into the deep end of the frenetic world of commodities pit trading.
It was quite the sexy place to be.
He was a quick study and an enterprising young guy, adapting to the ebb and flow of the market, two traits that would come in handy many years down the line. At 22, Tom was a trader on the floor of the New York Mercantile Exchange. It was 1983, and NYMEX, as it was known, had just introduced crude oil on the floor. This was the contract that would put the exchange at the centre of the global energy market for the next two decades or so.
The trading floor was an interesting environment. It was a bit locker room. You had locker room humour. It was predominantly male. And it would not be uncommon to be standing next to somebody who had dropped out of high school and somebody who went to the Wharton School of Business.
It was loud, it was crowded, it was frenetic, there was the sound of people making and losing lots of money.
That's FT Markets reporter, Greg Meyer.
One former floor trader described it to me as a cross between Goldman Sachs and a maximum security prison, a pretty wild place to work.
I think people called it the 13th grade--
And that's the voice of Cindee Rifkin. She joined NYMEX as a floor clerk when she was 19.
--because a lot of people didn't go to college. There was fights. There were lots of fights and then, maybe, they would take it outside even though we weren't supposed to. There were definitely people yell at each other in their face, I mean, like, in the face, and then a few minutes later, they were like hanging out and chatting.
Tom and Cindee became friends outside of the pit much later in life, but she remembers him from the floor.
So I remember being in the crude oil pit where he traded and he would make fun of my height. You know. He'd make fun of my shoes, that they were so small, or my feet were so small.
You could say I was a little bit of a social misfit, which would be correct. My forte was not the human relationships. I researched like a madman.
For most of his career, Tom was one of the independent floor traders that didn't work for a big brokerage firm. He wore a badge that read TGR as in tiger, and from 10 o'clock in the morning until 3 o'clock in the afternoon, Tom and hundreds of his fellow floor traders would pack into the circular pit on the NYMEX floor, barking buy and sell bids that effectively set the global price of a barrel of oil.
It's always one of those things where words kind of fail. Because when it was busy similar to like athletes would talk about, going to a zone, I would go into a zone and time and space took on a different dimension. It would be really difficult. I mean, it was frenetic. You know, during some of this crises that we saw, the Gulf War, the spike hike that took the market to heights we never would have expected, $130, $140 a barrel. The frenzy behind it was so adrenaline filled in the bits of information that one would digest is, to me, now that I think about it, that I'm a little older, removed from it, it's almost unfathomable. It was extremely exciting.
You might think of traders in the pit as the finance industry's version of hard physical labour. Floor traders, like those in the manufacturing jobs, they would soon become victim to the electrification and automation that continues to sweep industries and disrupt the way a lot of work is done.
With some of the misconceptions that people had with floor trading is they thought it can never be replicated on a computer or a trading screen or that there could ever be anything that could handle the amount of volume. I think we had a myopic idea of our importance.
You know, in an age when communication was largely through telephone and through telex and means like that, having the floor was a way to bring together those lines into one place where people could transact. But being on the floor also gave a trader an advantage over other people in the market which is why seats on the floor sold for lots of money. Basically, it give you privileged vantage on flows of money, on supply and demand, for barrels of oil, in the market. You could see that ahead of others and you could trade ahead of others.
Electronic trade was first introduced overnight only--
--because the exchange was owned by the seat holders. It was owned by the people who had seats on the pit. So they had zero economic incentive to create an alternate pool of the liquidity that could divert volumes away from their business.
--but that didn't last for long.
Then NYMEX competed with the International Petroleum Exchange in London, the IPE. The IPE was acquired by the Intercontinental Continental Exchange, which happens to be based in Atlanta, Georgia, which very quickly converted it into an all electronic exchange. And so NYMEX was forced to react and allow side by side trading on electronic screens.
The technology that allowed for that side by side trading was developed by another rival, the Chicago Mercantile Exchange, or CME, as it was known. It was called Globex.
It happened so fast.
And Globex is an immediate threat to the floor traders. This is 2006. Greg has reported that by June 2007, electronic trades rose from 17% to 70% of NYMEX volumes.
People quit. I mean, I stopped trading. You had the people that were market makers. What came about was this whole new force of people who are electronic market makers. Where, I saw it coming. I could see it was coming. And it was fine with me. Because I knew that after trading the way I traded, the volume of trades and the demand that it took on me, I had said I'll do this for 25 years, and I have to be done.
It was hard because some of the last years were some of the best ones I've ever had. When we saw the handwriting was on the wall, I was enrolled to go back to school. I was planning my exit as it was.
Tom had long planned to go to university and get his bachelor's degree. So when electronic trading ended his prowess in the pits, he started the process of enrolling at a local college in Manhattan.
What was I going to do with my life now that my career as a floor trader was-- on the floor, didn't exist. In the niche of-- even though there was a physical trading floor, my niche was long gone. And the idea in my next career or following through with finance or something similar just didn't appeal to me so much. It wasn't so much that I felt guilty, but I wanted to give back in some way.
But his friends and former colleagues from the floor had other plans for him. As electronic trading started to eat into the volumes handled on the floor, NYMEX executives were also preparing for an initial public offering on the New York Stock Exchange. For NYMEX members like Tom, who owned seats or the right to trade on the floor--
There was a lot of money at play here.
And soon after Tom left to go back to school, the other independent traders encouraged him to return and run for a spot on the NYMEX board.
Here with these floor traders, and their brokerage firms, and so on and so forth, and they didn't feel like they had any representation.
Once on the board, he joined a committee tasked with helping the floor traders through the transition to electronic trading. But he soon found himself in over his head.
My concern was about the people on the trading floor and how we could best help them to adapt. And that all the decisions were made to their benefit. One of the big decisions we made, and even though I was either Chairman or Vice Chairman of the committee, and didn't understand because I was so naive, is when we did transition to electronic trading, is we were given wireless technology and laptops to trade on the floor. What they didn't tell us is that the latency, which means the delay, sometimes would be close to a minute. Sometimes the screens were just absolutely locked out.
In trading terms, a minute could mean thousands of dollars or more in losses.
That's where I got my clock cleaned.
People were ill prepared to transition themselves. Not everybody, you know, had the wherewithal or whatever to try and go from a new career and start up from the bottom. And that's really hard. I've heard some terrible life stories of people who have died prematurely from addiction and alcoholism.
And people have gotten into tremendous financial difficulties and going bankrupt. And, for many of the people, really, it broke their lives. It really broke their lives and their spirit. You know, you hear of people working in schools as janitors. Here these guys were making at least the six digit figure salary.
It was like death. Really.
That's Cindee again. She's talking about the mood on the floor as electronic trading slowly pushed out the floor traders.
It was like-- it became very skeleton there. Even as people started to leave, you can still see the people that died out, literally. There were people that became bus drivers, there are people that work in delis, there are people that work at restaurants, there are people that own restaurants.
There are people that have tried other businesses and that continued to take risks and figure it out. And there are people that went to work for other people and now are working much longer hours. Downsized. You know, sold off things. I think a couple of people killed themselves. I think one guy robbed a bank. I think that people died of heart attacks, alcoholism, drug addiction. Again, I think that happens.
I became a yoga meditation teacher teaching self awareness. And Tom, who climbed the ranks of the board to Vice Chairman, he walked away from the NYMEX for good in 2008 after the exchange was acquired by the CME.
Much of Tom's story up until this point may sound like a familiar narrative. A lot of men and women in their mid-career, whether in financial services or manufacturing or other sectors, they might find themselves pushed out of work as algorithms and computer science majors start doing the work quicker, cheaper, and, in many cases, across time zones. But it's the second act of Tom's career where things take an interesting turn. Settling into life outside of the exchange proved tough for Tom. He had just come off months of negotiating the merger with the CME, and it was 2008.
Lehman Brothers would file for bankruptcy weeks after his departure. Where was he supposed to go next? He tried to tinker with electronic trading from home. He even worked for a medical device company a stint. And the transition also took a toll on his personal life. His first marriage ended not long after he left NYMEX. He's back to being a bachelor this time in his 50s. But, by 2011, he got that degree.
I had completed it. So I thought I was done. This was it. And I had talked to a friend of mine who is in the counselling field, about becoming a CASAC, a Certified Alcohol and Substance Abuse Counsellor. It was back to the original idea of being of help. I knew from being involved in the exchange politics that I had a gift of being able to discern certain things. And I sat down with her, and I said, I think I want to be a CASAC. What do you think?
And this is only about five days after he finished school.
And I was toast. Let me-- you know, I couldn't rub two words together. She said, you know, if you're going to do that, I think that what would be better for you is you should get your master's in social work. And I cursed her out. I was like, there's no way. That's never going to happen. I am so done. I am absolutely so done with school. I've done it. I've conquered the beast. And just a few days after the conversation, I still don't know if-- I can't explain it-- I started looking at graduate schools.
Shortly thereafter, he was enrolled in classes at New York University's School of Social Work.
I learned so much. Here I was a guy from Wall Street, you know, what they call in social work school, is the mythic white male. You know. We were the source of a lot of prejudice, and oppression, abuse. And I didn't realise that at the time when I was showing up naively to this school. I realise that my appearance and my size-- I mean, I'm 6' 4", 240 pounds. People listen to me when I walk in a room. Right or wrong, you know who I am.
And in school, it was-- I would sit in a classroom, often, with all women. Here I was, a heterosexual, white, old male. I mean, the uncle creeper, or we to don't know what to do with this guy. But all of these things were a levelling of pride, which have given me a new sense of things. I spent the better part of my first month or two of my intern hours in a file room. In a hot, windowless, bed fluorescent lit file room. It was like being sent to the cornfields.
I have even immersed myself financially in certain ways to live quite simply, and make choices I haven't made in 35 years. I live rather parsimoniously now and think about choices between things that were not in the range of before, where they were 5, 6, and 7 digits, whereas sometimes I'm thinking between it's $1 and $10. I drive a Subaru. I mean, I could do otherwise. You know.
I'm so amazed by what he-- and what he's done to go back to school, because I haven't done that. I don't have any education. So it's like I'd have to start from beginning. But if you want it, and he did it. I mean, yeah, you know, other people had more money and they had more blessings, but it takes a lot to move through what he moved through and to get to where he is.
And so today, Tom counsels young men and women dealing with addiction in a clinic in upstate New York.
Totally contrary to almost all schools of thought, I lead a women's domestic violence group. These girls are younger than my daughter. And the richness of what I am able to be a part of is beyond words. I sit down there and, all 240 pounds of me, I get tears in my eyes. And they say, that's why you get to do what you do. There's rarely a school social worker or so many women's groups would ever say that makes sense.
Now, Tom and I have met several times this year, and in each conversation, he's eager to reflect on why he does what he does. It's not hard to hear a bit of hesitation in his voice, a bit of resistance to starting a new career in his 50s.
It's fascinating. You know, it's turned my world upside down. My boss God bless him. He's young enough to be my son. How does he manage this? How does he manage me? Rarely a week goes by where I don't go home from work right now and there's this little kid inside of me that says, F this, what am I doing? I'm passionate about what I do. But for me, retiring and going to some warm place, there's an attractiveness to it, but I couldn't do it.
Retiring and going to a warm place. It's the kind of thing a lot of guys Tom's age who have had similar careers would probably prefer. I had this vision-- it's funny how things come to you. You know, these little stories, like a parable or-- and I saw myself. I get the heaven and, whoever it is, St. Peter's there, he's doing his checklist, and he's saying oh, you know, you do, oh, look at this.
Two handicap in golf. Sweet! And then he flips on this TV and he shows me what could have been. And that choked me up, that I could have taken my gifts-- and as I look at it soberly, is it really all about me? You know, is it really about me?
So if you think about that teenager who marched into the Merrill Lynch building almost 40 years ago looking for a job, you couldn't have predicted the way technology would upend his career, nor could he have understood the kind of personal reinvention that would come with it. But in his second act, Thomas found himself immersed in the kind of work that, at least so far, can't be done by an algorithm or a robot.
These are people's lives that I'm blessed to have come my way. And they entrust me with their heartache. And I don't know why people tell me things. I don't know why. I mean, I'm not a small guy. I can be a little gruff. I hear these stories almost weekly of young kids and they're overdosing. If this is the world we left behind, then I want to do my part. Will I make a difference? I don't know, but I'm going to give it a shot. I'm going to give it a shot.
This podcast was produced as part of an FT special report on health at work. You can read more at ft.com/health-work. Special thanks to Tom Gordon and to Cindee Rifkin for taking the time to speak with me and for sharing their experiences with us, and to the FT's Greg Meyer for being a fount of information on the inner workings of the New York Mercantile Exchange. We'll be back on Friday with a regular episode of Alpha Chat.