With inflation making history daily, this article I stumbled upon shares a glimpse of the ‘scientific’ process of determining an asset’s fair value.
The article has it that the famous jeweller Charles Lewis Tiffany knew John Pierpont Morgan (JPMorgan) had a liking for necktie pins. Tiffany found a diamond one, particularly uncommon and exquisite. As was the custom then, before 1900, he sent the pin through a messenger with a note: “Dear Mr. Morgan, knowing how much you appreciate necktie pins, I’m sending you this rare and exquisite piece for your consideration. Due to its rarity, the price is US$ 5,000. If you choose to accept it, please send a cheque for US$5,000; if you choose not to accept it, send the pin back.”
The next day, Morgan’s messenger arrived at Tiffany’s with the pin and a note that read: “Dear Mr. Tiffany, the pin is magnificent. However, US$5,000 is a little over the top. So, enclosed is a cheque for US$4,000. If you accept it, please send back the pin. If not, return the cheque.”
Tiffany looked at the cheque for several minutes. It was a lot of money. However, he was sure the pin was worth the US$5,000 he had asked for. Finally, he told the messenger: “You can return the cheque to Mr. Morgan. My price is firm.” And thus, the messenger took the cheque back and left the pin. Tiffany unwrapped the box to get the pin out. Upon opening the box, he didn’t find the pin. He found a cheque for US$5,000 from Morgan and a note with just one sentence: Just checking the price.
How scientific and precise.
The crude oil price slips, but it does not impact the price we pay at the gas stations. I wonder whether the ‘scientific’ process is still making history.
Stay tuned for more.