Interview conducted and condensed by Jeff Bailey
You’re known as the father of financial futures, which have led to the explosive growth of commodity exchanges in Chicago beyond agricultural products. Lately you’ve been working on trading schemes for water rights that would price and allocate supply. What’s the concern?
I taught at Berkeley and watched [California] divert water from the north to the south. I’m worried there will be a similar taking in the Midwest. If you’ve got the votes, people might take a straw and just suck water out of the Great Lakes. It’s the great American barbecue: If the food and drinks are free, why not just stuff your face?
You developed a carbon-trading system aimed at curbing greenhouse gases and sold it last year for nearly $600 million to a U.S. financial exchange. Curious minds want to know: How does a guy like you reinvest your roughly $100 million in proceeds [from a nearly 17 percent stake] during this volatile time for stocks and bonds?
I’m very conservative. It’s time to be in very, very careful investments—municipal bonds, short-term [U.S. Treasury obligations], cash. Be diversified. I don’t think this is the time to be running out of a foxhole and attacking a division of tanks.
The carbon-trading market is building elsewhere but is going nowhere in the United States without a government cap on emissions. Obama wanted one, but he’s been hampered in part by the GOP, which largely claims that man-made global warming is a myth. These same Republicans love free markets, and you’re among their heroes. Any way you can get the Rick Perrys to cease with the BS?
We will have to do it at the grass-roots level. Washington is broken. What happened at the debt ceiling debate was what happened at the carbon debate. California is the potential key. It has led other things. That’s a way to sway people who are against change. We will witness a carbon cap-and-trade market in China before [seeing it in] the U.S.
If we had a hard cap on carbon here, how would life change? Airline flights a lot more expensive?
You would hardly notice it. You would have efficiencies you never thought of. You’d create more jobs than you can imagine. Inventiveness consistently bails us out.
You’re originally from New York. Yet you’ve adopted Chicago as your home. Why?
This is pound for pound the best city in the world. Museums are world-class. Lakefront parks are world-class. So are the universities. People are friendly and welcoming. It has whatever one would want.
I see you give to the Art Institute. Greenbacks or actual art?
Both. Gene Siskel was a friend, so my wife and I helped to establish the film center. We give art. Mostly photography.
Chicago has been a generous home to the futures exchanges, with Dan Rostenkowski inserting special tax breaks into federal bills years back and the state and local governments giving more. Now the Merc’s parent, CME, is threatening to pull up stakes, demanding still more breaks. Seems it’s behaving like an ingrate, no?
I don’t think CME will leave Chicago. They have to make some demands—they have a fiduciary responsibility. They’re a publicly traded company. It’s a family affair. This is like your kids fighting.
Photograph: Bob StefkoEdit Module