By Adam Sarhan – CEO of 50 Park Investments & ChartYourTrade.com
One of the best ways to get ahead in life is to model yourself (and learn) from the most successful people in your field. In early November, 2018, I had the great honor and great fortune to interview Mr. Leo Melamed, a living legend and someone who has done more for the financial services industry than just about anyone alive today. Leo’s story is truly remarkable on multiple levels. His personal story is inspirational and his professional legacy is awe inspiring. In early November 2018, Leo was gracious enough to invite me to his office in Chicago and share his life story with me. For your review, here are five timeless life and market lessons that I learned from Leo.
First, a little about Leo. I want to begin by saying, he is one of the nicest, warmest, and smartest people I have ever met. I walked into his office and instantly felt like I have known Leo for my entire life and that he was a very close friend. I cannot possibly include everything he accomplished in this article so I recommend you google him and read his remarkable story for yourself. In the interest of time, here are some brief highlights from his remarkable life.
The Early Years:
The first major life and market lesson that jumped out at me was how Leo managed to turn his painful past into an empowering force that drives him to this day. At the tender age of seven, Leo’s family escaped the Nazis and left Bialystok Poland. Leo told me, “To escape from Europe, his family received a transit visa from Chiune Sugihara, one of the Righteous of the world”. Leo’s father, also a visionary, had the foresight to leave before the Polish border was closed. That decision literally saved his family’s life. Leo’s father, managed to take his family to Japan, then ultimately the United States. He did this through a series of prescient decisions that kept him one step ahead of the enemy. His gift was that he was able to see things that other people missed and that literally saved his family’s life. I can’t even begin to imagine what Leo went through at such a tender age.
From an early age, Leo was very focused and knew what he wanted to accomplish. When Leo was only nineteen, he entered law school (which speaks volumes in and of itself) and wanted to get a job at a law firm in the morning, since classes did not begin till 2 pm. Meyer, Leo’s friend, saw an ad in the paper for a “runner” with the perfect hours, 9-1 pm. Leo applied to Merrill Lynch, Pierce, Fenner & Smith, thinking that he was going to work at a law firm. Little did he know, what would happen next would literally change his entire life (and the financial world). Leo showed up for work as a runner at the “pits” in the Chicago Mercantile Exchange (CME), and instantly fell in love. Leo spent the next several years learning everything he could about the business while he completed Law School.
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Leo’s Best Trade
Leo worked his way up and eventually wanted to buy a membership which, at the time, cost $3,000. He asked his father to loan him the money. His father only had $5,000 in savings, but struck a deal with Leo, as long as he promised to finish law school and practice law. After graduation, for the next 6 years, Leo tried to be both a trader and a lawyer. Eventually he realized he could not be a successful trader unless he went full-time. He gave up a successful law career and became a full-time trader at the age of 33.
Founder Of Financial Futures
At the time, the CME was a small exchange that mainly traded eggs and butter and a few other agricultural products. The exchange was mainly controlled by a few people that did not want to embrace change. Because Leo was a lawyer, the other brokers nominated him to lead the charge to take control and modernize the exchange. Leo’s side won, and at a young age of 37, he became Chairman of the CME! When Leo took over, the first thing he did was lower the age requirement to become a member to 18, from 21 and allowed women to buy a membership. Before Leo took over, only males could become members and they had to be at least 21 years old. Leo, like his father, has the prescient ability to see the future different than everyone else and that served him very well.
Founder of Financial Futures:
In 1972, under his leadership, the CME created the International Monetary Market (IMM), the world’s first financial futures exchange, and launched currency futures. At first, Leo faced a lot of resistance, but that did not stop him. Milton Friedman loved Leo’s idea and created a feasibility study to support the concept. Leo took Milton’s paper to every major central banker in the world and that paper played a major role in helping them agree. In the years that followed, Leo led the CME and IMM in the creation of a number of financial products, including futures on U.S. Treasury bills in 1976, Eurodollars in 1981, and stock index futures in 1982. In 1992, yet again, Leo had the foresight to create Globex which was the first major electronic trading system in the world. Shortly thereafter, President Ronald Reagan gave Leo a license plate that says, “Globex” and it currently sits in Leo’s office on his Presidential Wall.
Leo currently serves as Chairman and CEO of Melamed & Associates, a global consulting group, and serves as a permanent adviser to the US National Futures Association. Leo has been an adviser to governments including the US CFTC. He is also on the Chinese International Advisory Council and was recently appointed adviser to Japan. Leo received the Order of the Rising Sun, Gold and Silver Star award from the Emperor of Japan, the equivalent of the US Medal of Honor. Aside from his books on markets, which have been translated in 5 languages, he also wrote a science fiction novel. He holds Doctor of Letters distinctions from the University of Illinois, Loyola University, DePaul University, the Tokyo based Waseda University, and a Doctor of Humane Letters from Sacred Heart University.
Life Lesson #1: Let Your Pain Empower You, Not Hinder You
Leo managed to turn his painful past into a powerful motivating force that fuels him to this day! In fact, if you dig deep, most successful people do this at some level, either consciously or unconsciously. On the other hand, unsuccessful people let their pain define them and usually get stuck playing the victim role or some other negative spiral. The same is true for trading, successful traders learn from their mistakes and cut their losses whenever possible. Typically, unsuccessful traders fall into the negative spiral of self-doubt and love playing the victim card. These unsuccessful traders love to blame the market, the economy, the President, or just about any other factor under the sun, except take responsibility for their trades and focus on building a positive spiral. A great life lesson here is that most unsuccessful people let their past hinder/define them while most successful people use their pain/past to empower them.
Life Lesson #2: Look At The Future & Innovate
The next very powerful lesson Leo taught me was to look forward, and innovate. Most successful people learn how to do this in some form or another while most unsuccessful people look backward and are stuck reliving their past. Anchoring is common cognitive bias that causes people to anchor past events and that distorts their ability to see current (and future) events clearly. This is a common cognitive bias that adversely affects traders in nearly all-time frames. Instead of looking back, Leo looks forward and innovates.
Life Lesson #3: Accept And Embrace Failure & Move On
The third big lesson I learned from Leo is to quickly embrace failure and move on. Leo knows there is nothing wrong with failing and has learned to embrace it and learn from it, instead of fearing it. Meanwhile, most unsuccessful people have an almost paralyzing fear of failure and try to avoid it at all costs. In my opinion, this is one of the biggest reasons why most people are not able to trade successfully. Why? Because it is counter-intuitive in nature and you have to adopt a new set of skills that are foreign to most people. Allow me to explain, most professions, outside of trading, allow people to succeed or at the very least succeed most of the time. If a Dentist wants to fill a cavity, she can succeed just about every single time. The same is true for an accountant, plumber, or dishwasher. But in markets, the exact opposite is true, most trades fail and learning how to deal with that reality is a difficult skill that needs to be acquired and is foreign to most people. Therefore, successful traders learn how to admit when they are wrong quickly, cut their losses frequently, and move on to to the next trade without looking back.
Life Lesson #4: Test Your Ideas In The Market
Leo also taught me the power of testing your ideas in the market before diving in. Leo gave the example of how a typical pharmaceutical company works. The average pharmaceutical company has to spend gobs of money in R&D testing new drugs before they find the one that works. The same is true for just about any new product launch, it is imperative to test your idea with other people to make sure the “market” reacts well to it before diving in. In markets, novice traders typically dive in head first without properly testing their ideas.
Life Lesson #5: Admit When You Are Wrong Quick & Take Action
The next big life lesson is to quickly admit when you are wrong and do something about it. This takes the third lesson above one step further, because it forces you to take action and do something about it. Successful people know that in life, and in markets, there is nothing wrong with making a mistake – as long as you learn from it and then do something about it. This way you do not repeat your mistakes in the future and take action to quickly fix the mistake once you realize that a mistake is made.
These are just a few life lessons that I learned from Leo that I hope you will find helpful.
CEO of 50 Park Investments & ChartYourTrade.com.
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