Sunday, November 06, 2011

Aristotle's Philosophical Conceit

Aristotle wrote many years ago an anecdote that many erudite people take as gospel, that the thoughtful sages could be rich if they really wanted to. Here he recounts the story of Thales of Melitus (ie, the primordial philosopher 624-546 BC):
he knew by his skill in the stars while it was yet winter that there would be a great harvest of olives in the coming year; so, having a little money, he gave deposits for the use of all the olive-presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest-time came, and many were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a quantity of money.

Now, this is total bull because the stars don't predict weather. Reading chicken entrails and the like was popular back then and they had lots of other wacky beliefs, but the idea that they traded on them and prospered is clearly a self-serving lie. Today, we have active mutual fund managers who claim to outperform indices even though this has never been the case, so I guess every age has its own myths.


J said...

Thales discovered a statistical regularity - that olive plants follow a two - four years cycle of low and high yields. The olive oil industry was new in those times and Thales, a quant, noticed first this cycle and bet his money on it. The story he told about reading the stars was to confuse the regulators and potential rivals.

Tel said...

Sure thing thoughtful sages can get rich. Just follow these simple suggestions:

Ben said...

Thales discovered cornering the market, and the guff about the weather was a smokescreen.

It will only work once because thereafter it will either be outlawed or other press users will book well in advance.