Five Minutes With Chip Dempsey
Five Minutes with Chip Dempsey
Chip Dempsey’s career has included stints as a futures trader and interbank FX dealer, senior vice president in charge of sales and strategy at CQG and SVP of sales, strategy and marketing at SunGard Futures Systems. Most recently, he was senior VP of The Clearing Corporation, which he helped to turn around after it was severed from the Chicago Board of Trade, thus losing its main customer. He is currently a consultant and “rainmaker” based out of Boulder. He is involved with a variety of exchange-related projects, for which he travels extensively. Most recently, he spent time in Africa, helping to set up commodity markets there. He spoke with MarketsWiki’s Sarah Rudolph during a brief stop in Chicago.
Q: You studied philosophy as well as economics in college. Has your philosophical bent manifested itself in your work?
A: I’m not sure I have a philosophical bent, but I do have a well-developed sense of indulging my curiosity and having fun. I think it was my curiosity that led to me to philosophy.
Q: How has this curiosity manifested itself in your career
A: My career has been exceptionally haphazard. Some people have a very definite idea of what they want their progression to be, but for me it’s been a matter of responding to something fun and challenging. I’ve done so many things, some out of necessity and some by choice. I never would have planned to work at a back-office firm, but a friend said, ‘We have to fire our entire sales organization and rebuild.’ I only had a year of sales experience at that time, but what a wonderful thing to tackle.
I wouldn’t have thought of going to a clearing house, but when Mike Dawley said ‘We could use your skill set and aggressiveness at The Clearing Corp.,’ I thought, what a cool opportunity to turn around a distressed asset. It had lost its only customer and had sort of been written off when I joined. It was a unique and valuable asset, but what do you do with it?
What was most needed was a clear strategic message. There were not many exchanges wandering around in search of a clearing house, but there was a tremendous over-the-counter (OTC) market with potential for a clearing value proposition. It took no genius to decide on OTC clearing.
The unexpected lesson for me was how to approach a demoralized organization. You’ve lost almost all your revenue and it’s not apparent where you’ll replace it. That was bad, but what was much worse was that Clearing Corp. employees would be standing at the train station and people would ask them, ‘What are you guys doing, what are you working on?’ Not having a good answer to that was doubly demoralizing. So of course we were losing good people. We brought in a strategic messaging guru named Rick Keating. He helped us reconnect with our history, our relevance, with the history of innovation and the idea that an independent clearing house had an important role to play in our industry. Being able to give a compelling story about where you’re going is fundamental. That was the turning point.
Q: What do you think about the current moves toward clearing credit default swaps?
A: I think credit default indices are terrifically well suited to clearing. Single name swaps are less obvious. A clearing house needs two things: a price history, so they can assess risk and volatility and set proper margins, and a liquid market in case someone defaults. Having those things on and off is not sufficient. There may be some single names that have a price history and permanent liquidity that make sense for clearing.
Q: You have been working on projects in Africa and have made several trips there recently. Can you talk about what you have been doing?
A: I designed a clearing architecture to address the problem of market fragmentation across 53 different African countries. That was a great experience and it brought me in touch with the enormous potential and importance Africa has for global food security and trade. [That led to] a project with UNCTAD. They have an Africa-Caribbean-Pacific project in which the EU has funded about 45-50 million Euros for building commodities marketing systems in these regions. That led me to writing a prospectus for an investment fund to capture some of what will be incredible efficiency gains and dramatic investment opportunities. Emerging markets like China and India have rapidly growing middle classes. The economic downturn has not changed that. The first thing a newly minted middle class person buys is a higher protein diet. It takes 10 pounds of grain to create a pound of beef. We’ve recently seen historic highs in commodities and lows in stocks (storage) and the advent of biofuel. Western agriculture is pretty efficient, so if you’re going to have big productivity gains you have to look at the unrealized potential of Africa and other emerging markets.
A side benefit is the effect it will have on poverty. The lack of price information and of alternative means of marketing your crop other than to the local middleman create huge risk to producers, because they have no information for managing that risk. So the farmer’s production is marginally profitable if at all. Without profit he can’t invest and improve his productivity. Exchanges disseminate important price information and enable farmers to make better marketing decisions. When people can see the price premium, they can decide whether to invest in a better seed. The low-hanging fruit for African agriculture is remarkable.
Q: On your LinkedIn profile, you call yourself a “rainmaker.” What does that mean and how do you get to be one?
A: A rainmaker is the guy who brings in the money. My story, for example, is that when I went to SunGard Futures Systems, they had renewed their clients’ contracts the previous year at which time they had raised rates 100 percent to 1000 percent. The customers were not feeling loved.
When I joined it was 90 days until the end of the year and no one knew how we would make our year. We’d have to do a deal that was three times bigger than our biggest ever, and our customers almost wouldn’t speak to us. No one had any idea how to make it work, including me. But being a rainmaker is not about having an answer - it’s about having different questions. I was going around introducing myself, and the clients were none too friendly. One client said, '…and another thing, we need the latest modules but we never know what’s coming and we can never budget for it.'
I went back to Bill Herder’s office and I said, 'This client has a weird complaint. Could we sell them an option on future development?' It turned out that was a good question, and less than 90 days later Bill and I figured it out and made our number. That’s rainmaking - just asking questions and listening for different things in a different way. There are hidden assets and opportunities in every company. But you need a fresh set of eyes to see them.
Q: Do you think you always had “rainmaker” skills or did you learn them along the way?
A: I think I process things differently and learn things differently from most people. A lot of people learn in a classroom setting, but that’s torture for me. I learn in experiences and relationships, and by making mistakes. There is a process I have, but a lot of it is intuitive. You can’t promise someone here’s what I’ll find, because who knows? Rainmakers find stuff.