Silly trade shop politics/structure. Is this the norm?
Been in the physical commodities business (energy) for 5 - 7 years now. I have made good money in my career, and intend to stay. However, I only tend to see positive things on here about the commodities business, and not some of the downsides.
Now, with my experiences, maybe it's just because I've worked at small and/or disorganized places.
Here's what I'm finding, and it's been consistent across a few trade shops I've worked at.
- Some aspects can mirror a pyramid scheme. IE, it's multiple traders earning profits, and flowing this upwards. Usually each layer above gets to skim some % off of this. This isn't necessarily unique, it's how most businesses work. But the problem can become:
- Every trade shop tries to empire build, even small ones. The idea of continuing to add more traders and commercial people, and the profits just continue to grow. But when places try to grow:
- Most of this business is necessarily scaleable, or repeatable. Especially with a small trade shop, where a lot of it is relationship based, or sometimes trying to get in between a transaction, etc
- Not as related to the other 3, but I find some aspects of the workplace culture can be pretty dumb. It's still very much a 'butts in seats' mentality in most places, and in particular, the coaching/guidance at my place is always just "travel more" or "drink with clients more." And both of those have tremendous value, but it's not the only thing.
Part of my specific frustration, especially as a younger person, is that your role could change often, or even if you're doing a good job, a "senior" trader could always be hired above you.
Based on the WSO Dataset, your observations about the physical commodities trading sector, particularly in smaller or disorganized shops, resonate with several discussions and insights shared by industry professionals. Here are some key points that align with your experiences:
Pyramid Structure in Profits: It's common in the trading world for profits to flow upwards, with each layer taking a percentage. This structure is not unique to trading but is prevalent across many businesses. The critical aspect to consider here is how transparent and fair the distribution is perceived within the organization.
Empire Building: The ambition to continuously add more traders and commercial staff in hopes of linearly scaling profits is a widespread strategy, even among smaller trade shops. However, as you've noted, the scalability of this business model is limited, especially when success hinges on personal relationships and niche market opportunities.
Scalability Challenges: The physical commodities business, particularly in smaller setups, often relies heavily on relationships and unique market positions. This inherently limits scalability and repeatability, as each transaction and opportunity can be quite distinct.
Workplace Culture: The 'butts in seats' mentality and an overemphasis on traditional methods of client engagement, such as extensive travel and socializing, are indeed prevalent in many trading environments. While these activities are valuable, they are not the sole drivers of success, and a more nuanced approach to coaching and development is often necessary.
Role Volatility and Hierarchical Dynamics: For younger professionals in the sector, the frequent changes in roles and the possibility of being superseded by more senior hires can be a source of frustration and uncertainty. This dynamic underscores the importance of clear career progression paths and transparent performance evaluation criteria.
Your experiences highlight some of the challenges and realities of working in the physical commodities trading sector, especially outside of the larger, more structured firms. While these issues are not universal, they are not uncommon and are important considerations for anyone looking to build a career in this field.
Sources: can someone give me insight on the culture at a physical trading house (vitol, trafigura, mercuria), Is this a physical commodity shop or was I mislead by management?, David and Goliath: The Boutique and The Bulge Bracket, Bad team culture: A vent
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