The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders (3 page)

O
ver a leisurely lunch one July day a couple of years ago at a sidewalk bistro in Andurand’s hometown of Aix-en-Provence, the warm, bustling city near the Mediterranean coast in southern France, I asked him who was the best commodity trader in the world. “I’d like to say it’s me,” he said, with a small chuckle, then went back to cutting his food.

Medium-height and beefy at the time, with rimless glasses and short blond hair, Andurand was wearing his standard ensemble that day: linen shirt unbuttoned just enough to reveal a plug of chest hair, relaxed-fit jeans, and suede loafers. He’d spent the morning reminiscing about his youth in Aix and Réunion, the island off the coast of Madagascar where he’d lived for a few years, and the nuances of betting on oil prices for a living. He spoke fluent English in a thick French accent, making the occasional word incomprehensible to an American, and glanced at his ever-present BlackBerry every so often for word on a pending merger between several Dutch kickboxing businesses he’d recently bought. He was on hiatus from trading that summer and focused
his considerable energies instead on staging live fights that fall in Milan and Tokyo.

Andurand was at first glance the archetypical hedge-fund trader. He was nouveau riche in a loud way, the evidence including his wife (Russian, former model), his house (a 5,000-square-foot residence on one of West London’s most charming streets), and his cars (a specially designed $1.5 million Bugatti sports car for cruising around town and a sleek black Porsche Cayenne for family trips). He wintered in Thailand, at an island resort he had bought and was remodeling, invested in movies and real estate, and was summering in a ten-bedroom château in the south of France, even though it was only his immediate family and mother-in-law there. The year before our lunch in Aix, Elton John and the Bolshoi Ballet had performed at his St. Petersburg wedding, and he’d made a film to show back in London for those who couldn’t attend.

Despite his self-made hundreds of millions, however, Andurand was flaky in the extreme. He risked scads of money in the markets, but he couldn’t remember a doctor’s appointment without his wife’s help. Successfully scheduling a meeting with him required half a dozen e-mails, a couple of phone calls, a venue change, and a long wait. Sometimes I’d make a trip to London and he wouldn’t return my messages at all. He used these passive-aggressive tactics rather than simply saying he was unavailable, no doubt because he liked the publicity, and, ultimately, he did want to get together. But he also dreaded confrontation, which can be tough in a business where the phrase “he got his face ripped off” is about as common as “hello.” Rather than upbraiding an employee who was screwing up, he explained, he favored having a “nice chat” about whatever was going on.

He lacked introspection. He was often hard-pressed to explain why he was comfortable taking such large risks; asked what motivated a given trade, he’d shrug and say something like, “I read a lot” or “I just saw that the price action was weird.” Then he might turn the subject to kickboxing or home design. It was hard to tell whether he had never given the original question much thought, or if he was just intensely private. He seemed to have an uncanny knack for predicting the markets using a modicum of research combined with gut instinct. A decade in oil trading, which had provided him with an inside look at how banks and physical traders moved money and contracts around, had given him a feel for the cyclical nature of trading and what flashpoints in politics or the economy would trigger price changes in petroleum contracts. As long as he was up on the news and the predominant market theories at work, he could use his horse sense to bet on up or down moves pretty accurately.

This was possible in the oil market because the “fundamentals,” or verifiable data on supply and demand, that drove it were constantly buffeted by events that were entirely unpredictable. A trader like Andurand could study world statistics on which countries were producing oil and how much per year. He could also look at global demand figures, broken down by country or even region. But unlike a tech company that had certain fixed costs and certain booked sales, as well as identifiable costs for research and the development of new products, the world crude market could shoot higher at any moment because war broke out in a place like Nigeria or Libya. Demand in the U.S. could soften any month—even months or a year after crisis hit—because of the recession that was pinching consumer spending. Reading up on
the macroeconomic factors at play in the key oil-producing and oil-consuming nations gave a trader like Andurand a feel for what was possible. But in the end, trading crude involved much more guesswork than trading shares of Dell Computer.

Andurand had always been competitive. As a baby in Aix, he crawled out of his family’s ninth-floor apartment and up a wall on the balcony before his mother pulled him to safety. When he got his first bicycle with training wheels, he threw a fit until she removed them. He begged for fancy shoes and other
accoutrements
that his parents, who worked as a civil engineer for the French government and a teacher, could not afford. Despite having comfortable homes in Aix and in Réunion, his frequent grousing spurred a family joke: that he was Dugommeau, the hero of a popular French comic strip
Les Frustrés
, “The Frustrated.”

In elementary school, Andurand’s teachers suggested that he skip a grade, saying he had a genius-level intellect. His mother Danielle, obliged, but laughed at the idea nonetheless. “Those tests don’t mean anything,” she says. Even after the grade-jump, school bored her young son.

Swimming became his obsession. By the time Andurand was in high school in Aix, he was swimming twice a day, six days a week at the suburban
piscine
near his high school. At fifteen, he impressed his coaches with a record-breaking time in the 200-meter freestyle competition; it would become his signature event. By age sixteen, he was the second-fastest swimmer in that race on the continent and had earned a spot on France’s junior national team.

Through those interminable laps in the pool, a longer-term objective drove him: to compete in the Olympics. He wanted to test himself against some of the top athletes in the world.

The 1996 summer Olympic Games in Atlanta were a few years away, and his pace was a little short of the mark, but he thought there was time to improve. He enrolled at the National Institute for Applied Science, or Institut National des Sciences Appliquées, in Toulouse, a much larger city in southwestern France near the Pyrénées, where he could train with a superior university swim team while working toward a five-year engineering degree. But almost immediately after arriving, his performance slowed significantly. The pool in Toulouse was shorter than its counterpart in Aix, and the more frequent flip-turns hurt his performance. What had once been his lean athlete’s diet also suffered. Instead of eating six thousand calories a day of the low-fat protein and vegetables his mother had always made, he was suddenly piling on pounds from ice cream and pizza binges.

He also spent five hours a day in relative solitude at the pool, where the other guys were standoffish. “In Aix, I was the number one swimmer,” Andurand says. “In Toulouse I was one of the group, not one of the very best.”

He had hit a mental block. Extra workouts weren’t helping, so instead of pushing his body so hard, he relaxed and caught up on lost sleep. His times began to get better, just enough to make a difference. After riding him for weeks, his coach, who had at one point asked if he had used performance-enhancing drugs to speed his times in Aix, backed off. But Andurand’s times still weren’t what he’d hoped. Atlanta felt like an impossible goal. He could get a bit better, he figured, but he would never be good enough to make an Olympic final. Genetically speaking, he just wasn’t built for it.

It was a harsh revelation, and Andurand had no idea how to fill
the gap in his life. “He was quite depressed,” remembers his mother. “He couldn’t imagine a life without passion.”

He avoided drugs and alcohol because he didn’t like the idea of losing control. He’d observed some of his teammates getting loaded in Toulouse, and found the spectacle terribly sad. But he needed an outlet somewhere.

He was focusing on applied mathematics, the science of solving complex, real-world problems through quantitative means. It was lots of computer programming, lots of modeling, and ultimately only a handful of people in the world could even comprehend the stuff. Andurand imagined himself in five or ten years wearing bottle-cap nerd glasses and toiling in some dull
banlieue
as an engineer for a large corporation. He’d be surrounded by other men, never travel, meet no women, and make a hopelessly middle-class living.

He would have to think of something else.

Andurand spent the next several years going through the motions of school, trying to forge a plan. He considered his interests: sports, film. There was no obvious career in either. It would be so nice to have financial freedom, he thought. What about getting a job in the City of London or on Wall Street?

He began studying financial books. The Internet had limited content at the time, but he trolled what was there for ideas. Sales and trading seemed interesting, he thought, tapping into both market psychology and quantitative skills.

Ten years after the movie
Wall Street
had turned the trading industry into heroes and villains, and still in the early stages of a
stock-market boom that was popularized by wildly lucrative technology-company initial public offerings, or IPOs, in the U.S., financial services didn’t get much attention at a French engineering school like INSA. There was also a cultural bias against the rich. Andurand’s father, Claude, a lifelong civil servant, liked to quote Balzac’s famous line about how behind every great fortune lay a great crime. Andurand’s professors considered trading to be a low calling too. Every time he raised the notion of working in banking or finance with them, they arched their eyebrows as if they thought he was crazy.

“They thought I was selling my soul to the devil,” Andurand says.

In 1999 Andurand transferred to Paris, to the École des Hautes Études Commerciales de Paris, or HEC Paris, to get a master’s degree in international finance.

He also began looking for an entry-level opening at a major bank. He had his heart set on an internship at Goldman Sachs. Not only did it have the most prestige, but the people he met during his interviews were the most welcoming—an ironic first impression coming from what was probably the most cutthroat firm on Wall Street.

Early in 2000, Andurand got an e-mail from Isabelle Ealet, the firm’s managing director in charge of commodities. Ealet had reviewed his résumé and liked what she saw. She suggested they meet in Paris.

Sitting in the lobby of the palatial Plaza Athénée, one of Paris’s most posh hotels, Ealet ordered tea. “What makes you want to do trading?” she asked, pleasantly, in French.

“It’s what drives the world,” Andurand said, as if he were able to make grand statements about how the financial system worked without ever having worked in it. “If you understand the flows of money, you understand what’s going on in the world.

“I like the game aspect of it,” he added, explaining his theory about how trading successfully was a combination of knowing politics, emotion, and math. “Money gives you the score, so it’s easy to be measured.”

“Why would you be good at it?”

“I have the drive, and I have the competitive spirit, from athletics.”

He sensed that Ealet understood him. She, too, had grown up in Provence, and had come a long way from her early environs and the socialist culture. Now she was a wealthy, accomplished trader at an internationally known investment bank.

Ealet, in fact, was an anomaly in her profession, an assertive female executive who had traded physical commodities—crude for the
French oil and gas company Total—and was an experienced manager too. In 1992, when a rising Goldman partner named Gary Cohn had relocated to London, she had helped him sort out who was who in the City’s commodities circles. He, in turn, became one of her mentors at the firm.