The HC Commodities Podcast

Episode: The Rise of Rich & The Founding of the Modern Trading House: Mark Crandall Part 1

Host: Paul Chapman, HC Group
Guest: Mark Crandall
Release Date: October 29, 2025

Episode Overview

This episode—the first of a two-part interview—dives into the origins of modern commodity trading through the career and insights of Mark Crandall. Once a young analyst at Morgan Stanley, Crandall became integral to the evolution of trading houses, joining Marc Rich & Co. during a period of dramatic industry transformation. The conversation traces Crandall's journey from traditional finance into pioneering physical and financial commodity markets, explores the birth and dominance of the trading house model, and details the complexities, relationships, and decision-making that shaped the industry giants of today.

Key Discussion Points & Insights

1. Mark Crandall’s Early Entry into Commodities

• Morgan Stanley Beginnings:

  • Crandall joined Morgan Stanley straight from college (1980), just before commodities trading became significant on Wall Street (01:43).
  • "I got out of college...and through a personal friend I got introduced to Morgan Stanley and they hired me as a young analyst in the strategic planning department." – Mark Crandall (01:44)
  • Assigned to initiate and develop Morgan Stanley’s commodities division, focusing initially on gold and silver, later expanding into oil as futures markets emerged.

• Decoding the Markets:

  • Morgan Stanley's commodities desk began by mimicking J. Aron (Goldman Sachs) and LME operations, soon seeing opportunities in oil as forward markets like Brent and WTI developed (03:50).
  • They quickly realized the potential in connecting physical and paper markets, which was pioneering at the time.

• Learning the Trade:

  • Commodities knowledge was scarce inside Morgan Stanley, leading to talent acquisition from oil companies (notably John Shapiro from Conoco, and a hire from Sun Trading) to bridge that gap (06:04).
  • The newly introduced WTI futures (NYMEX) required communication and trust-building with European refiners unaccustomed to these instruments.

2. Compensation and Culture Shift on Wall Street

• Trading Culture's Arrival:

  • Morgan Stanley was, at the time, a "white shoe," gentile, corporate finance-driven bank, slow to adopt trading culture compared to Goldman or Salomon Brothers (09:24).
  • The integration of trading desks—including currency and commodities—created internal culture shock.

• Compensation Evolution:

  • Early compensation did not differentiate commodities traders, but as profit potential grew, bonus culture blossomed, setting up future tensions and models seen later in physical trading houses.

3. Moving to Marc Rich & Co.: The Bridge from Wall Street to Physical

• Joining Marc Rich:

  • Crandall moved to Marc Rich via a family connection; his soon-to-be brother-in-law worked there and recognized Crandall’s unique financial perspective (12:47).
  • Rusty trading concepts—like contango and backwardation—were introduced to oil markets, which had previously lacked robust forward structures.

  “Some of the financial concepts which are completely routine now...things like contango and backwardation...in that era they didn't exist in oil markets because...there really wasn't one.” – Mark Crandall (14:17)

• Adoption of Analytics:

  • Crandall’s team built a primitive Black-Scholes-based options pricing model in Lotus 1-2-3 to price gold and silver, revealing that much of the market still ran on intuition (15:15).
  • The systematic use of pricing formulas and risk models was a radical innovation.

4. The Allure and Structure of Physical Trading

• Motivations to Leave Wall Street:

  • Despite a successful trajectory at Morgan Stanley, Crandall was attracted by the “exciting world of real oil,” which included exposure to global politics, human relationships, and on-the-ground logistics (17:34).
  • “There's humans involved, there's oil ministers, there's government policy, there's security concerns...all the things that have always lured people into the oil market.” – Mark Crandall (18:50)

• Early Skepticism about Financial Markets:

  • Both Morgan Stanley and Marc Rich knew financial trading would become important, but did not foresee its massive scale and impact on global trade (20:11).

5. The Marc Rich Legend

• Impact and Legacy:

  • Marc Rich & Co. fundamentally changed oil trading, unlocking opportunities by arbitraging between official selling prices and the true market rates, and exploiting the inefficiencies leftover from the oil price shocks of the 1970s (21:43).
  • “If you owned the capacity, the logistics or the contacts…solving problems in time, you know, location and form…became incredibly lucrative.” – Paul Chapman (24:10)
  • The rise enabled by geopolitical events and sharp, sometimes controversial, business practices.

• Gray Areas and Controversy:

  • The infamous "skullduggery"—activities like circumventing US sanctions or exploiting dual-market pricing—were not always illegal globally, even if frowned upon (and sometimes prosecuted) in certain jurisdictions (26:57).

  "There were things that the major trading houses did that were, for example, against the law in the United States, but not against the law anyplace else, and may not even have been a bad thing to have done, but they did them anyway." – Mark Crandall (26:57)

• Marc Rich as a Leader:

  • Despite media infamy—e.g., Giuliani’s legal pursuit—Crandall describes Rich as reserved, loyal, and a master recruiter/leader, not necessarily as a market savant (29:34).
  • "His distinguishing characteristic was he was a great recruiter of people and leader of people." – Mark Crandall (31:12)
  • Success at Marc Rich reflected not just sharp trades, but the ability to form and maintain global relationships and manage teams.

6. The Concentrated Power of Relationships in Physical Trading

• Teamwork vs. Lone Wolves:

  • Unlike Wall Street, where individual traders could claim direct ownership of profits, physical trading was inherently collaborative, involving a network of relationships with producers, governments, shipowners, and others (33:37).
  • "You needed a personal relationship there...Suddenly you're talking about three or four or five people that need to be involved to execute that trade...You can't just pick up the phone and buy it." – Mark Crandall (35:32)

• Barrier to Entry and Moats:

  • Building these trustworthy, global teams took time—making it extremely hard for new entrants, contributing to the dominance of giants like Glencore and Trafigura (37:31).

7. The Evolution of Compensation Models in Trading Houses

• Why the Wall Street Percentage Model Didn't Work:

  • Physical trading firms recognized collective effort and teamwork, using pooled bonus systems rather than individual percentage-based compensation, reflecting the collaborative nature of the business (39:20).

  "It is one of the all important things." – Mark Crandall on compensation structures (39:56)

• Role of Management:

  • Top leaders were responsible for balancing and distributing collective rewards in a nuanced fashion, key to maintaining unity.

8. Marc Rich’s Leadership Team and the Birth of Trafigura & Glencore

• Generational Change and Ownership:

  • As original partners left, Rich’s ownership became more concentrated, leading to internal tension about future leadership and ownership structures (43:27).
  • By the early ‘90s, key lieutenants (Billy Stratharter, Claude Dauphin, Danny Dreyfus, Manny Weiss) emerged as the true operational heads, setting the stage for the split that would give rise to Glencore and Trafigura (47:38).

• Structural Disputes:

  • Tensions rose as Rich, increasingly isolated and less involved in day-to-day management, brought in external advisors and lawyers, leading to leadership departures and the eventual restructuring of the business (52:16).

Notable Quotes & Moments (with Timestamps)

• “I got out of college...and through a personal friend I got introduced to Morgan Stanley and they hired me as a young analyst in the strategic planning department.”
  – Mark Crandall (01:44)

• “Some of the financial concepts which are completely routine now...things like contango and backwardation...in that era they didn't exist in oil markets...”
  – Mark Crandall (14:17)

• “We took the original Black Scholes paper and copied the formulas...into 1, 2, 3 and built a really primitive options pricing model.”
  – Mark Crandall (15:15)

• "There's humans involved, there's oil ministers, there's government policy, there's security concerns...all the things that have always lured people into the oil market."
  – Mark Crandall (18:50)

• “If you owned the capacity, the logistics or the contacts…the capacity to get that oil from those doing hard things in hard places...suddenly became incredibly lucrative.”
  – Paul Chapman (24:10)

• "There were things that the major trading houses did that were, for example, against the law in the United States, but not against the law anyplace else, and may not even have been a bad thing to have done, but they did them anyway."
  – Mark Crandall (26:57)

• "His distinguishing characteristic was he was a great recruiter of people and leader of people."
  – Mark Crandall (31:12)

• “You needed a personal relationship...Suddenly you're talking about three or four or five people that need to be involved to execute that trade...You can't just pick up the phone and buy it.”
  – Mark Crandall (35:32)

• “It is one of the all important things.”
  – Mark Crandall on the importance of compensation structure (39:56)

Important Timestamps

• 01:43 – Crandall’s entry into Morgan Stanley and early commodities market development
• 06:04 – Hiring industry veterans to bridge physical and financial markets
• 14:17 – Explanation of contango and backwardation in oil
• 15:15 – Building Black-Scholes options model in Lotus 1-2-3
• 18:50 – Why Crandall left Morgan Stanley for Marc Rich
• 26:57 – On ‘skullduggery’ and regulatory arbitrage in early trading
• 31:12 – Marc Rich’s real talent: recruiting and leading people
• 35:32 – Necessity of teamwork and trusting relationships in physical trading
• 39:56 – Compensation as a central management concern
• 43:27 – Changes in Marc Rich & Co. ownership structure and leadership
• 47:38 – Key lieutenants and the structure that ultimately split into Glencore, Trafigura

Flow & Tone

The conversation is rich in first-hand industry detail, with Crandall’s storytelling alternating between dry humor, historical analysis, and candid reflection. The tone is candid, occasionally self-effacing, and always insightful about both the personalities and mechanics that built the commodities trading empires.

To Be Continued

The episode concludes at the point of company schism, teeing up part two: an in-depth exploration of the post-Rich trading house landscape, the continuing dominance of giants like Glencore and Trafigura, and the evolving future of commodities trading.