Thales, the philosopher who became rich

Thales was a successful businessman who managed to accumulate a great fortune. How did he do it?

Thales of Miletus was one of the first philosophers and mathematicians in history. He is considered the founder of the Ionian school of philosophy, which sought to explain the origin and nature of the universe through rational and natural principles.

Thales, the philosopher who became rich

But in addition to his intellectual contributions, Thales was also a successful businessman who managed to accumulate a great fortune. How did he do it?

Press monopoly

According to tradition, Thales predicted a solar eclipse that occurred in the year 585 BC, which gave him fame and prestige among his contemporaries. Taking advantage of his reputation, Thales decided to prove that philosophers could be rich if they wanted to. To do this, he used his astronomical knowledge to anticipate a good harvest of olives in the following year. So he rented out all the oil presses available in and around Miletus, paying a low price in advance. When harvest time came, Thales had a monopoly on the presses and was able to charge a high price for their use, thus making a large profit.

Purchase of vacant land

Another version of the story says that Thales bought all the vacant land in Miletus, where he planted olive trees, and then sold the oil at a high price. In any case, Thales proved that he could get rich with his intelligence and his ability to seize opportunities. However, he was not interested in money or luxury, but devoted himself to research and teaching philosophy. Thus, Thales became an example of wisdom and virtue for subsequent generations.

Options and futures

Tales was one of the first investors to use derivatives. Renting all the available oil presses in and around Miletus, paying a low price in advance, was a futures contract. There are many derivatives, but the simplest are options and futures.

A simple example of options and futures is the following: suppose a farmer has a crop of wheat that he is going to sell on the market in six months. The farmer wants to make sure that he will receive a good price for his produce, but he does not know how the market will evolve in that period. For this reason, he decides to contract a futures contract with a company that guarantees to buy his wheat at a fixed price on the agreed date. In this way, the farmer eliminates the risk of the wheat price going down and losing money.

On the other hand, suppose an investor believes that the price of wheat is going to rise in the next six months and wants to take advantage of that opportunity. The investor can buy a call option on wheat, which gives him the right, but not the obligation, to buy the wheat at a specified price at a future date. If the price of wheat rises, the investor can exercise the option on it and make a profit. If the price of wheat falls, the investor can let his option expire and only lose the premium he paid for it.

Options and futures contracts are derivative financial instruments that allow economic agents to hedge against market risks or speculate on their movements.