Streetwise — Chapter 9: Innovation

1. 1. The necessity of breaking into a saturated market drove financial innovation at J. Aron, leading to products like quantos and contingent options.
2. 2. Mark Winkelman's move to desktop PCs at J. Aron forced Goldman Sachs to upgrade from mainframes, enabling dynamic price tracking and holistic risk management.
3. 3. Young outsiders like Tim O'Neill, Armen, and the author focused on the upside of deregulation, while older traders saw only objections.
4. 4. Goldman investment bankers feared J. Aron would wreck their hard-won client relationships, leading to internal conflict over forex business.
5. 5. J. Aron's expansion into non-dollar bonds and currency swaps created a Thucydides Trap within Goldman, leading to accusations of thuggish behavior.
6. 6. J. Aron created Universal Commercial Paper (UCP) denominated in foreign currencies, allowing asset managers to hold currency as a distinct asset.
7. 7. Gary Cohn's aluminum cash-and-carry trade during the Soviet collapse earned hundreds of millions in profit, despite physical storage challenges.
8. 8. Commodities have an implied yield from contango or backwardation, making them an accretive asset class, contrary to traditional belief.
9. 9. The Goldman Sachs Commodities Index (GSCI) enabled passive long-only commodity investment, weighted by trading volume and capturing roll yield.
10. 10. J. Aron's innovations in currency and commodities drew Goldman deeper into global enterprise and proprietary trading, transforming the firm.