July 24, 2015

Thalesian Awareness

2500 years ago (624-547 BC), there lived Thales, in the Greek city of Miletus. Thales was a Greek Mathematician and Philosopher, who was often ridiculed and teased by his own people because of his penury. His humble existence was often questioned as his philosophy did not make him rich or bring him any wealth. Much of Thales's writings do not exist and we know of his existence purely due to Aristotle.

But Thales was a keen observer and thinker. Using his knowledge of Astronomy, Cosmology, Geography and Mathematics, he predicted a good harvest of Olives in the year ahead. To extract the oil from the Olives, one needed the Olive Presses. Thales stuck a deal with the oil-press owners(both in Miletus and also neighboring towns) to rent all their inventory of oil-presses in the future by paying them a nominal amount upfront, in return for the confirmed rental of the oil-presses at a discount. The olive-press owners silently laughed at the inherent naivety of Thales. It was a bumper harvest indeed, and by controlling all the oil-presses, Thales could effectively control the starting point of the olive oil production (a sheer monopoly) and became very rich.

Thales was probably the first Hedge Fund Manager who taught us Leverage and Forward Contracts, in the due course creating probably the first Monopoly for himself. Thales was the first to give us a financial derivative instrument - 'Futures' and 'Options'. He purchased the rights, but not the obligation to use the oil-presses. He would have lost the option-premium alone had the harvest been dismal.

Thales thus proved to the World that Decision Analysis and Systematic Reasoning when properly understood and applied, does indeed bring wealth; underscoring the Corporate Mantra that Knowledge when used can also bring profits. While crafting strategies, it is not always necessary that we restrict ourselves to the tried and tested models and frameworks. The much cliched 'thinking outside the box' is very much needed; and also keeps the grey matter engaged in the due course.

Thales observed his environment (context) with great detail and predicted with accuracy. He saw through things and extracted meanings that set him apart from his contemporaries. He was constantly watching and gathering insights that led him to his intellectual successes. He is said to have discovered Ursa Minor (Little Dipper) as a tool of navigation. He also theorized that the Earth is round, and not flat; along with many other fetes.

Thales's Analytic Thought Process coupled with Wisdom as a Profession made him one of the Seven Wise Men of the Ancient World.
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