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Aristotle: Did The Father Of Logic Know The Inventor Of Options Contracts?

Aristotle is one of the most famous philosophers in history. He spoke on many topics. In particular, his work titled Politics has 8 chapters that cover different facets of society. These include reflections on the thoughts of other philosophers, regimes, political theory, citizenry, constitutions, family, and education.

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Options contracts as we know them today were mentioned concerning a mathematician and philosopher named Thales. Today we consider him one of the first Greek Philosophers. Thales lived during the late 600s to mid 500s BC in a city in Greece named Miletus. This was a major city at the time, one of the greatest and wealthiest cities in Greece.

It should be noted that there are older cases of contracts similar to options. An example elsewhere in our blog comes from the Babylonian king Hammurabi. In his famous Code, he outlined rules for farmers. These rules were a lot like modern-day put options. However, this case with Thales mirrors the modern method much closer.

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Aristotle’s Writings About Thales

The story related in Politics explains that Thales was wise but not very wealthy. His city, Miletus, produced olives as one of its important crops. In one particular winter, Thales foresaw that the olive crop was likely to be large during the next harvest. He decided to use a portion of his meager wealth to buy the right to hire olive presses for next autumn. Thales made a cash deposit to the owners of the presses and waited.

By the time the harvest came, Thales was proven correct. The production of olives from the fields was far above normal levels. This meant that all Thales had to do was exercise his right to lease the presses, and in turn, lease them out to others at a substantial premium. He made a fortune for his correct prediction in under a year.

In carrying out this plan, Thales had essentially become the inventor of the Options Contract. This expanded his legacy beyond philosophy and into finance, legitimizing himself and the value of philosophers. Aristotle went so far as to hold this incident up as proof that philosophers could easily attain riches if they chose to put their efforts in that direction.

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