In the early 1990s, I started my first trading position as a junior gasoline trader covering New York Harbor (NYH), a northeast gasoline trading hub. My boss, Larry, was a crusty man from Arkansas with a good heart. I sat next to Randy, a seasoned senior gasoline trader, who mentored me. I was new to trading and needed help navigating through the cutthroat energy trading business. Early in my tenure, I was informed that my company would not trade with Company X (not their real company name) and the energy brokers did not show us their deals. Company X had been dishonest, so Larry and Randy did not want to repeat the experience.
Company X hired a new gasoline trader, Ted (not his real name), who previously worked for a large northeast refiner. Ted became unemployed after his company downsized. I suspected that Company X wanted to upgrade their image through Ted, who I liked. We went to lunch to discuss future business. Although Ted’s bosses were still the same people who owned the company when my company stopped trading with them, Ted requested that our companies make a fresh start. I discussed this with Larry and Randy and while they would not change their minds, said it was my decision.
I first bought a small volume of NYH tankage gasoline through Ted after spending time agreeing to all the contractual terms. The deal proceeded normally and both sides were satisfied. I did several additional small volume deals with Ted, and again, there were no issues. Ted and I communicated regularly, and we were on good terms. Company X was a minor gasoline provider for my company but if their price was competitive, I would do the trade.
I decided to buy a larger volume of gasoline from Ted delivered to NYH by a European gasoline cargo ship. The contractual terms were more complicated and carried higher weather, delivery window, and volume tolerance risks. The upside was that gasoline cargo prices were usually lower than other delivery sources. As the delivery date approached, Ted informed me that the gasoline cargo would be late due to a late loading. This force majeure event was one of the risks that concerned me and my company needed the gasoline. Prompt gasoline prices were higher due to shortages, and I knew that buying to fill the late cargo delivery would be very expensive.
I decided to use a broker to purchase a small quantity to keep my company from running out of gasoline inventory. I told the broker not to expose me as the buyer until the sale was complete. The broker told me that the volume was available, but at a high price. I reluctantly told the broker to get it done. The broker called back and told me that Company X had pulled their offer once they learned it was my company. Their gasoline cargo was in NYH and they lied to me. Company X was selling their cargo gasoline at “prompt” prices, then hoped to deliver gasoline to me later at lower prices. Larry, upon hearing what had happened, called Company X and after yelling every profanity at the owners, told them to deliver the gasoline now. Larry and Randy gave me the “I told you so look” and I never traded with Company X again. Ted soon found another job with a more reputable trading company.
I was a naïve young trader surrounded by a sea of trading sharks. Larry and Randy, through years of trading experience, understood that behind the “Ted’s” of this world, there were evil people. In Chapter 1, titled The Children of Light and the Children of Darkness, of Dr. Reinhold Niebuhr’s 1944 publication, The Children of Light and The Children of Darkness: A Vindication of Democracy and a Critique of its Traditional Defense (The University of Chicago Press, Chicago, IL, 2011), he stated the thesis of his book. “The preservation of a democratic civilization requires the wisdom of the serpent and the harmlessness of the dove. The children of light must be armed with the wisdom of the children of darkness but remain free from their malice. They must know the power of self-interest in human society without giving it moral justification. They must have this wisdom in order that they may beguile, deflect, harness and restrain self-interest, individual and collective, for the sake of the community.” (p. 40–41) My trading decisions with Company X lacked the wisdom of the children of darkness.
Niebuhr defined “the children of light … as those who seek to bring self-interest under the discipline of a more universal law and in harmony with a more universal good.” He believed that western democracy had been built “by foolish children of light. … It underestimated the power of self-interest, both individual and collective, in modern society. The children of light have not been as wise as the children of darkness. The children of darkness are evil because they know no law beyond the self. They are wise, though evil, because they understand the power of self-interest.” (p. 10)
How do the children of darkness operate? Niebuhr was writing his book during the height of World War II (1944) from the perspective of a German immigrant who understood the German people. “The children of darkness meanwhile skillfully set nation against nation. They were thereby enabled to despoil one nation after another, without every civilized nation coming to the defense of each. Moral cynicism had a provisional advantage over moral sentimentality. Its advantage lay not merely in its own lack of moral scruple but also in its shrewd assessment of the power of self-interest, individual and national, among the children of light, despite their moral protestations.” (p. 11–12) An example is Neville Chamberlain’s, the British Prime Minister and a child of light, meeting with Adolph Hiltler in 1938, a child of darkness. His declaration of “peace for our time” came shortly before the start of World War II in 1939. Winston Churchill became the new British Prime Minister and had the wisdom of a serpent. He understood the German evil of self-interest from his personal experiences during World Wat I.
Niebuhr was a theologian who understood the fall of Adam and the moral corruption of humankind. Only through God’s grace can humanity be saved. “There is no level of human moral or social achievement in which there is not some corruption of inordinate self-love.” (p. 17) Human pride transforms the “will-to-live … into the desire for power and glory. … The very possession of power and prestige always involves some encroachment upon the prestige and power of others.” (p. 20) I learned a valuable lesson during my gasoline trading assignment. My good friend Randy told me during my first day of NYH trading, “If you can survive New York Harbor gasoline trading, you can trade anywhere.”
I will next discuss Chapter 2, titled The Individual and the Community.
