Dinosaur Derivatives and Other Trades

1 What is Value?Dinosaur Derivatives

“A man who knows the price of everything and the value of nothing.”

—Definition of a cynic, by Oscar Wilde (1854–1900)

I want to begin our travels with a tale told to me some years ago by a close friend. To maintain the anonymity of my friend I shall just call him Karl. Karl's strange story relates to an auction he once attended at a very elite auction house (which shall also remain unnamed) in a relatively unknown street in downtown Manhattan. The auction occurred at a time of great financial uncertainty. And Karl, as it happened, had never previously attended an auction at this establishment.

The auction was held in a beautiful room furnished with a variety of antiques. The ambience was stately grandeur—oak paneling throughout, some fine Colonial-style windows and a preciously carved cornice. Most striking, in Karl's view, was a long painting in a rich gold frame that occupied one wall. It was an oil painting, in mock Renaissance style, showing a scene depicting … a herd of dinosaurs. They were of many types—a large group of scaled Stegosaurs drinking water from a small lake; or a lone Diplodocus in the background, its long neck stretched to reach the branches of a prehistoric palm tree. In the distance, at the top of the canvas was a Pterodactyl ...