Skip to main content

Did Aristotle Get the Point of this Story?

Aristotle, in his book on POLITICS, tells the following story about Thales, the Ionian philosopher portrayed above and best known for the theory that water is the essence of all matter.

"Thales, so the story goes, because of his poverty was taunted with the uselessness of philosophy; but from his knowledge of astronomy he had observed while it was still winter that there was going to be a large crop of olives, so he raised a small sum of money and paid round deposits for the whole of the olive-presses in Miletus and Chios, which he hired at a low rent as nobody was running him up; and when the season arrived, there was a sudden demand for a number of presses at the same time, and by letting them out on what terms he liked he realised a large sum of money, so proving that it is easy for philosophers to be rich if they choose, but this is not what they care about."

Fascinating story. Someone who apparently had the reputation of being what we would call today an 'absent minded professor' proved that he wasn't so absent minded at all, that his mind was sufficiently present to make a killing in olives. He simply chose to use most of his mental energy on other pursuits.

Skeptical 21st century (AD) types might ask: what does astronomy have to do with the size of the next season's crop of olives? In our own day at least we draw a sharp distinction between astronomy and meteorology, and forecasting several months' out in meteorology is a tricky business even now, it must have been pure guesswork in ancient Ionia! 

My own suspicion is that "astronomy" had nothing to do with what Thales was pulling off here, and Aristotle was simply confused.

Notice that Thales didn't buy a lot of olive presses. He paid a "small sum" to put "deposits" on the olive presses. That is, he bought an option on the presses, rather than buying them outright.

Thales figured out the value of leverage in investment. It sounds like he discovered that he could spend a sum of money sufficiently small that he could afford to lose it. If the olive harvest had been BAD that year, if there had been a low demand for presses, he could have walked away from his options. But ... he was on the winning side of his bet. The harvest was rich, there was a big demand for presses, so he exercised the option created by that earlier small deposit, thereafter owned the presses, and charged a high rate for their use.

Thereafter he may have put out the story that he had come to this plan via his study of astronomy, a cover story that continues to echo through the millennia due to Aristotle's reference.

It seems likely, a priori, that in subsequent seasons other bright entrepreneurs followed his lead. Imitation of his success would have inspired greater demand for olive press options ("deposit"), driving up the price, making this sort of thing riskier over time. But when Thales did it, nobody else had yet thought of this use of leverage, so "no one was running him up:" as Aristotle says.

Now: did Aristotle get the point? He seems to have regarded it as a story about the benefits of astronomy (which he saw as a branch of philosophy) in making money. But we ought to be thankful he preserved the details as well as he did, because they indicate its really a story about playing the odds and leveraging small sums of money.

Aristotle was far enough away from Thales in chronology that there must have been other links in the chain of transmission. Maybe some of them understood the point.


  1. This comment has been removed by a blog administrator.


Post a Comment

Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.

We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…

Hume's Cutlery

David Hume is renowned for two pieces of cutlery, the guillotine and the fork.

Hume's guillotine is the sharp cut he makes between "is" statements and "ought" statements, to make the point that the former never ground the latter.

His "fork" is the division between what later came to be called "analytic" and "synthetic" statements, with the ominous observation that any books containing statements that cannot be assigned to one or the other prong should be burnt.

Actually, I should acknowledge that there is some dispute as to how well or poorly the dichotomy Hume outlines really maps onto the analytic/synthetic dichotomy. Some writers maintain that Hume meant something quite different and has been hijacked. Personally, I've never seen the alleged difference however hard they've worked to point it out to me.

The guillotine makes for a more dramatic graphic than a mere fork, hence the bit of clip art above.

I'm curious whe…