Sunday, April 11, 2010

Aristotle & The Story of Thales

"Aristotle described the story of Thales, a poor philosopher from Miletus who developed a 'financial device, which involves a principle of universal application.' Thales used his skill in forecasting and predicted that the olive harvest would be exceptionally good the next autumn. Confident in his prediction, he made agreements with local olive-press owners to deposit his money with them to guarantee him exclusive use of their olive presses when the harvest was ready. Thales successfully negotiated low prices because the harvest was in the future and no one knew whether the harvest would be plentiful or poor and because the olive-press owners were willing to hedge against the possibility of a poor yield. When the harvest-time came, and many presses were wanted all at once and of a sudden, he let them out at any rate he pleased, and made a large quantity of money."
Source: Wikipedia

Now you understand today's financial markets.

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