The King of Oil: The Secret Lives of Marc Rich

efficient trading community possible. King Edward I of England expelled the Jews in 1290, and the French monarchs Philip IV and Charles VI chased them from fourteenth-century France. The mass murder of Jews reached a high point with the pogroms in Germany and Central Europe between 1347 and 1353 at a time when the Black Death was raging across the Continent. Sephardic Jews were forced to leave Spain in 1492. By the onset of the modern era, the Jewish Diaspora was greater than that of any other people. The scatteredJews had a trading tradition that was second to none and sufficient confidence to enable trade over large distances and periods of time. It was a society that succeeded in continually renewing itself from within. Its members had known each other for eons, enjoyed family and religious ties, and shared the same values and work ethic. This degree of social control created a sense of loyalty and trust that a business deal would be conducted honestly and reliably.
    Any economic network is largely dependent on trust if it is to function well. As economists put it, a high degree of trust lowers the costs of transactions and compensates for a lack of information. According to the American philosopher Francis Fukuyama, trust is a key prerequisite for prosperity. 1 It will become apparent in chapter 7 that trust was to be one of Rich’s secrets to success.
    When Rich joined the company in 1954, Philipp Brothers still essentially consisted of a tightly knit group of German-Jewish immigrants. The names of the major players who were active in the company provided an indication of their heritage: Ludwig Jesselson, Adolfo Blum, and Henry Rothschild. They were all pioneers of economic globalization who helped write trading history. These men became mentors to Rich, whose family was known in trading circles and whose father came from the tragedy that was Germany—just as they did. He had the best teachers in the business. Most important, Rich had the strength of will and the patience to listen, observe, and learn.
The First Trade
     
    The mailroom may have initially appeared to be a dull place, but an ambitious, clever trainee was able to pick up a lot about trading there. Telex messages containing fascinating information arrived from all over the world. Who’s buying? Who’s selling? From where to where? At what price? What’s the margin? It was a crash course in pricing strategies. One metal trader from Rich’s early years at Philipp Brothers recalls that he “was just an amazingly fast student. You’d teach him something, andhe’d learn it the first time—no questions asked.” 2 Accustomed as the traders were to long working hours and weekends full of overtime, they were struck by the young man’s talent and commitment. The word was soon out that Rich was a hard worker, a reputation not easily acquired in such circles. “I was working hard and long hours,” remembers Rich, who only had one thing on his mind at that point: to get out of the mail-room and start trading. “My bosses took notice and gave me more challenging work. The real learning came after the mailroom, in the traffic.”
    After a few months in the mailroom, the traffic department was the second stage for all apprentices in the learning-by-doing system at Philipp Brothers. Rich recalls how he started off by shadowing the traffic manager. He was later sent to the docks by himself to supervise the goods being unloaded, inspect the weight and quality, and check the invoices. He finally began to handle the trading transactions. “I handled shipments of merchandise and metals, covered insurance, and arranged for payments with letters of credit,” recalls Rich.
    So Rich learned how to become a commodities trader from the ground up. After two years he became a junior trader, and Henry Rothschild soon took him under his wing. Rothschild, who was not a member of the banking family, was born in Bochum, Germany, entered the commodities business when he was sixteen, and had previously done business with Marc Rich’s father. He is described as a shy, taciturn, and quick-thinking analyst. The master and apprentice were kindred spirits when it came to their similar ways of thinking.
    Rothschild was an extremely demanding boss who was responsible for the South American market at Philipp Brothers and for developing the firm’s expanding network in Europe. He increasingly delegated the day-to-day business to Rich, who effectively became his assistant.