This passage is an excerpt from an article that originally appeared in Bloomberg Personal Finance Magazine, December 1999 by Adam Smith.

12 MINDS THAT MADE THE MARKET

BY ADAM SMITH

Selecting the "best of" anything - books, movies, presidents - has to be subjective. Reviewing the past 100 years to cull a list of people who have been most influential on how we invest today makes the job even more complex, because what is most influential in one era, another era may supersede or even reverse. One tends to choose the highly visible on any such list, but the overlooked people would make for an equally interesting discussion. If I asked you who had the most influence on American life - just to use an extreme example - you might well say John Locke, Thomas Jefferson, or James Madison, but overlook the contribution of Thomas Crapper, whose water closet relieved us of chamber pots.

More recently, we have seen Jeffrey Bezos and Jerry Yang become multibillionaire business heroes, but there is no statue of Rick Boucher in front of the headquarters of Amazon.com or Yahoo! In 1992, Congressman Boucher added a brief amendment to the National Science Foundation Act, which allowed the Internet, created by the government, to be used for commerce. Without Boucher, we'd have no trillion-dollar Internet sector.

I met most of the dozen people profiled here as guests on Adam Smith's Money World, so their presence remains vivid to me. I can still hear them speaking. In 5 years, or 10, there will be a different list. The level of a person's influence depends on the place you sit, and the date you do your thinking. We are all prisoners of our own experience.

In praise of those who've had the greatest influence on how we invest today...

Benjamin Graham - The Dean of Investing
Warren Buffet - Patience at the Plate
Philip Fisher - The Gospel of Growth Stocks
John Templeton - Venturing Abroad
John Bogle - The Power of Indexing
Leo Melamed - The Trillion-Dollar Genie
Peter Lynch - The Icon of Backyard Investing
Harry Markowitz & William Sharpe - Nobel-Winning Quants
George Soros - The Ultimate Macro Investor
Charles Merrill & Charles Schwab - Taking it to the Masses

LEO MELAMED
THE TRILLION-DOLLAR GENIE

When the Chicago Mercantile Exchange began the trading of currency contracts in May 1972, its chairman, Leo Melamed, hoped it would save the exchange, which was in serious trouble. Wall Street barely noticed. What did a bunch of pork-belly traders know about currencies? But Melamed's innovation had an enormous impact. The genie he released girdles the globe. From currency contracts, the Merc went to T-bill contracts, and then to the S&P 500 contract, whose dollar volume today exceeds that of the NYSE. The ease of buying and selling S&P contracts itself changed money management. Would you rather have a T-bill or the market?

You could change your mind instantly and easily hedge a portfolio. The introduction of the S&P contract in 1982 coincided with the beginning of the long bull run, and may have given the market an extra thrust. It also made Chicago more of a financial rival to New York City. Critics said the Mere had commodified stocks. "I don't accept the pejorative connotation," Melamed said. "It's certainly more efficient, and the idea that index contracts are speculative has been put to rest." But the revolution created by the market in derivatives and indices might never have happened except for a problem in onions.

The Chicago Merc has been Melamed's passion since the first day he saw the trading pit as a runner for Merrill Lynch. Melamed came to Chicago by a circuitous route. Born in Bialystok, Poland, to parents who were teachers, Melarned had to learn six different languages in two years as the family was swept up first by the Nazis in the early days of World War II, and then by the Russians. The family got a visa in Lithuania from the consul Chiune Sugihara, the "Japanese Schindler," who is credited with saving some 6,000 Jews by granting them visas to Japan. The Melamed's trekked across Siberia to Japan, and left for Chicago just before Pearl Harbor. "My training was very practical," Melamed says. "I saw the Polish zloty, the Lithuanian lit, the mark, the yen, and finally the dollar - but the real value was what the currency would buy, not what a government said. In Europe, the black market was the real market." Before Melamed graduated from law school, he borrowed $3,000 for a seat on the Merc and began trading while he practiced law. In 1967, he elected to the board. He became chairman in 1969.

"I was the candidate of the reform crowd," Melamed said. "The old crowd had played so many squeezes on onions that the government banned onion trading. I instituted a rule book, with rules enforced. And we had to diversify. We tried scrap steel, shrimp, and potatoes, with little success. Meanwhile, I was reading everything by Milton Friedman, who said fixed exchange rates were over, Bretton Woods was finished. I took the first currency contract to him, and he said, 'Wonderful! Do it!' and his feasibility study made him the godfather to the project."

Melamed set up trading of S&P contracts as the International Monetary Market, within the Merc, so that traders in financial contracts wouldn't rub elbows with the pork-belly traders. When the British opened their futures exchange in 1980, Melamed was an adviser, and London was followed by Paris, Frankfurt, Sydney, and the rest of the world. Anticipating the electronic globalization of markets, Melamed worked with Reuters to set up Globex, the electronic trading of futures.

Today the nominal value of financial contracts is $667 billion a day, and the trading of contracts is part of the world financial infrastructure. "Who wants to trade onions anyway?" he said.

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