making money part i: art history

hi, welcome to jesse's column, where a 3rd year economics undergraduate teaches you alternative ways to make money. isn't that great? they say picking stocks is an art. well, i say, art is art.

now i've been toying around with the idea for a while that instead of taking more classes in finance (oh god, i have to pick up martingale theory to price something using a method that is outdated? get out of here!) the best course i could take is probably art history, maybe at st martin's college of the arts, as an outside option.

look, i know nothing about art (all the more reason to take the course). but in the back of my mind theory predicts that the art history market is a good one to dip into for long-term and boom time investments, and being able to bullshit and waffle about your latest kandinsky is kinda like telling people why this stock is going to go up. of course, stocks are the present discounted value of future profits, so it's based on something real right (although truth be told, you're the residual claimant anyway). if you go wrong buying a piece of art, you get to hang it in your living room and enjoy the present discounted value of enjoying art which your art history course has taught you (though really, art is really pretty and i don't need a course to tell me that don't i?) but if i bought rothko's light red on black, for example, i better like red and black and count on enough people saying, omfg rothko, i'll pay xxx gazillion for it.

on a more serious note, art appears to be a riskier investment (and it also a less liquid market. are the two linked?) so your average save for retirement fund probably won't buy into it. but i'm inspired by the example of david swensen,, manager of Yale's endowment fund. A hedge fund guy once came down to my school and he was the only tangible thing I could latch on to the whole presentation. YOU PAY A PREMIUM FOR LIQUIDITY. (although it seemed his portfolio still has an equity bias). he was buying chunks of timber forest in siberia, you know, that kind of thing. (of course mere mortals can't do that). index funds were probably a good idea but i don't know if people have caught on to that.

but art, now art's interesting. i promise to do a proper analysis with numbers but i think the art history market has jumped massively during the past few years (and well, over the long term as well). of course, there's a survivorship bias (e.g. artists which were excessively hyped up and are now worth nothing are not on the market anymore), but that exists for companies too. it is definitely less liquid because the market is smaller on both the supply and demand side, and many paintings go on auction, which allows you to extract a sizeable "seller's surplus" from the buyer. it is possible, if you're a good collector, to buy cheap and sell high... the collection of paintings by egon schiele, gustav klimt etc at the leopoldau museum was collected by a young austrian doctor from 1950 onwards, and fabio capello also used his excess cash to buy paintings by kandinsky to line his walls... nobody is talking about van goghs here.

some problems: a. cost... to buy durable classics it may be necessary for some considerable financial outlay. and then you could do something like poke it with a scissors.
b. liquidity problems, as above
c. higher volatility, due to small market, low liquidity, and art's status as a luxury good making it highly income, wealth and expectations-elastic. so it should go wildly up during a boom and down during a bust
d. it's also a more irrational market... but precisely... this works in your favour... opportunity for arbitrage... but could you really take your painting down and sell it when the price is right? so i guess you would be less emotional if you knew less about art, or weren't so biased towards certain artists... it's interesting how trade in consumption assets is that much harder to value rationally, and i guess why people stick with financial assets... although you can still show some biases towards the stocks you initially picked. it's the same thing with first-time homebuyers, my dad tells me, there's the fear and the premium to stay at the best place that you like much more than any other. and why property in a sense is also not entirely a rational market.

all for d. higher returns. i guarantee you. and you can hang the kandinsky on your wall and call it an investment. reading prospectuses replaced with visits to the gallery and museum (which i know is torture for some).

on a side note, you could probably do the same with comic books and baseball cards. stocks and shares? they're sooooo 1990.


into thy hands i commend my spirit


the man who could see fire

unfortunately, the very first memory i have of vincent van gogh is that soppy song by don mclean. hearing that song, you think of silver, black, and colours generally not found in van gogh paintings. that is what happens when overeager music teachers (and art teachers) start impressing upon you at a young age that "vincent van gogh" = "starry starry night" and "belgian coal miners"

it was a bright and sunny day today, which suddenly reminded me of van gogh while i was walking by the thames with my sister. thankfully, i will always be reminded of van gogh now as the man who could see fire. i don't think my memory is particularly right on this one, but i remember being at the van gogh museum in amsterdam and there being some explanations why yellow was used so much, and i started to think that he started to think of everything in fire and yellow, and it was driving him insane. and michelle also commented how depressing it must be to be so helpless and see all this colour and how it sucked so much to be so dependent (and such a burden to his brother) that he went ahead and offed himself.

it works, because when i did go to vienna and i saw some of his paintings i started seeing the fire everywhere, in the swirls... and how miserable it must have been to see fire.
i felt reasonably good today, because there's some semblance of flow to my research proposal, and i like how it goes from a small, tractable empirical research question to larger questions which i don't have the chutzpah or skills to tackle yet, but i will once you give me the money and space on your course.

but what i can't shake off (or why this entire endeavour depresses me) is that i can't help thinking it's work for nothing... sure, you're supposed to enjoy reading papers and thinking and i would love to say the entire experience is edifying in itself but it's not! it gives you mild moments of joy when you're making progress, but still after it's done and it looks nice to myself i can't help thinking, will it look nice to the selector? will this be good enough to get me into graduate school? because that's what matters in the end, and that's what i'm doing it for, right? you almost think that the incentives in a research career are to come up with things your supervisor likes. err professor poincaré, it's true, you're right, there must be an ether somewhere and there just must be something wrong with our instrumentation. my proposal is to make a better instrument to detect the ether... can i join your lab? i CANNOT deal with such insecurity, or i feel i can't. it's killing me... it was easier just to want less... but i'm halfway there, aren't i?

it must be so comforting to work for money. every day brings some validation that what you do is useful for someone somewhere. hell, even if it isn't, money sure is useful to me. still, part of me recalls a quote, a pastiche of william easterly's book and amartya sen's review of it. we have a system which delivers medicines to rich people most of the time. we don't have a system (yet) which delivers medicines for under a dollar to people living under the poverty line. but we want a system too where j.k. rowling delivers fantasy teen wizards to young people who want to read them everywhere (and sen is quick to point out, that she wrote the books while on welfare and an arts grant, so it's not just the market!)

it's just the sheer terror, of putting something out there which people may or may not like... i don't know how people do it. and having your income and esteem depend on it. it blocks me, personally, i'll take it way too seriously, and that's why the extent of my contributions will probably only be to journals or student publications. maybe that's why many people start out as journalists first, to be paid for writing something in demand.

and so you're supposed to say, this entire experience has been good and wholesome. but while i was doing it, i was missing out the opportunity to apply to xxx other pwnage finance courses to try to further my career, or i had to miss out on schoolwork, and if it doesn't work and i all end up with an edifying experience there's nothing in there to pimp my cv. that's how it works innit? i'd have a story to tell though, but they'd occupy only a few trips to the bar before getting old anyway.

resourcefulness and resilience is meant to get you back up there... i'm pretty lucky, i have stuff to fall back on. i look around my life and i look at the papers and i see credit constraints, norms, a zillion things keeping most people moving where they want to be... if you were more realistic, you'd have to think... but someone's got to be the peon anyway?

but i guess when i do fail and become a wage slave (noooo, never! capital rules in capitalism. selling labour is serfdom!), i will be able to look up at men of ideas and say with a glint in my eye that i can respect them because i know how hard it was (although if their ideas are bullshit and they talk a tad too much you start to think if it's effortless for them and they were just born doing it). sometimes i think that's what dissertations are for, and i still can't believe that our school doesn't mandate one. but i think they realize that they can't think of enough research topics nor have the time for 200 eager economics students (who can't be arsed cause they've got a job with their predicted 1sts or 2:1's anyway). the research is going to be empirical trivia (except for a few brilliant people, maybe), or an extension of a professor's work, but i still see some value in that, after all, it's meant to be exposure... if everyone were able to be original, there wouldn't be any value in that isn't there?

although part of me thinks that originality isn't a characteristic of a person per se... ideas are original, but there's nothing deterministic predicting if a person will produce path-breaking research. a lot of guts to throw up ideas and the intelligence and application needed to correct them or produce more daft ones at an alarming rate until one of them is right (and in the meantime, having the right mix of self-deprecation and self-confidence to deal with evil colleagues). being around the right people and having great conversations. being in the right lab. noticing that some really useful mold is growing in your petri dish and it's not just an irritation. i guess they all play a part.

einstein's the poster-boy, because he never did go to MIT/Harvard/Princeton, but he thought up relativity in a Berne patent office. that was then and now is now though. i would like to see how i could get something published in Econometrica without the necessary credentials. (to be fair, i don't have the necessary skill thus far anyway.)


"that's why i don't trust political parties. i'd run a spiritual democracy based on love, but i don't know who'd do the admin. i love quizzes"

- russell brand
while doing up the application to columbia, i was reading up faculty publications and interests yeah... yeah everyone knows about jeff sachs, and my opinion on that is closer to (see easterly below)

right, so i've read papers by sala-i-martin before, and now it turns out he is president of barcelona football club... i hope this does not impinge on my ability to take him seriously as an economist, now that i've seen him with a cigar with frank rijkaard holding the european cup... what the...

i hope it still is a proper school.

See here


Easterly's view on aid policy: No Big Plan

A reason(for me), to study development economics at NYU.

the sorry state of modern economics

Axel Leijonhufvud (he's considered one of the "elders" in economics mentioned in the article) has an insightful article on the mess modern economics is in. It's tough reading at first, because of the parody, but it's basically about how micro theory and macro theory don't gel, and how economics has become obsessed with model making. well, quantum theory and relativity have yet to gel, as far as i know.

Useful warning, and one can only hope not to get up by approaching things in this dismal state of affairs. A few economists I know have managed not to do this, Acemoglu being really readable and willing to go over to "the other side" once in while.


mechanism design

economists/game theorists are so sexist!


But to be fair, no one is really suggesting everyone should get married that way, any more so than male ends of computer cables are superior because they have pointy ends. they are simply representative names for agents, even though, notice that 'male' is assigned to the initiator and the algorithm that ultimately disfavours women (they get the lowest ranked feasible guy on their list). it's stable, but the woman certainly doesn't get her best man!

a variation is currently used as the mechanism design to assign medical students internships.


there's always a time at night this term when i feel especially lonely. it's when i take out something to do which doesn't require my full concentration, which allows my mind to wander. yet, i have to sit there and get it done. it could be making notes on a journal article for class, or completing my literature review and trying to look for data. i am convinced that good research needs talking to do. bad ideas need to be thrown out... and it's always this time of night that the people disappear. BLOG LORH.

i stay in london, so i know it's not the same kind of city as paris or vienna, and it's never going to be quintessentially european. some love the place, others think it's another big city. it doesn't fit together beautifully like venice does, but it's just so dynamic and nice to walk around in at night. black cabs, red buses, and the place with the most memories for me is the south bank walk, particularly the trees which are decked in blue and white bulbs. i've always loved the thames, and i'm glad i moved back to the south side within walking distance of the river.

the lse orchestra is not the best in the world, but there's something about sitting in amongst them in a small church that makes it really nice, you can observe what the conductor, cellist is doing etc...

lsetangents.blogspot.com , progressing pretty nicely.


i watched martin scorcese's goodfellas once again. i couldn't get it once, when i thought it was a highly amusing take on gangsters. but scorcese once said he waited a lifetime for the book the film was based on, and now i think i know what he meant. he needs the life again.

The hardest thing was to leave the life.

I love the life.

We were treated like movie stars
with muscle. We had it all.

Our wives, mothers, kids,
everybody rode along.

I had bags filled with jewelry
stashed in the kitchen.

I had a bowl of coke next to the bed.

Anything I wanted was a phone call away.
Free cars. Keys to a dozen
hideouts all over the city.
I'd bet grand over a weekend...
...then blow the winnings in a week
or go to sharks to pay the bookies.

Didn't matter.

It didn't mean anything. When I
was broke I would go rob some more.
We ran everything.
We paid off cops. We paid off lawyers.
We paid off judges.
Everybody had their hands out.
That's the hardest part.
Today everything is different.
There's no action. I have to
wait around like everyone else.
Can't even get decent food.
After I got here I ordered
spaghetti with marinara sauce...
...and I got egg noodles with ketchup.
I'm an average nobody.
I get to live the rest of
my life like a schnook.