The Creation of a Financial Art Crisis

Transcription

The Creation
of a Financial
Art Crisis
INFINITY
is the
ENEMY
A Financial Art Crisis
by t.Rutt
A publication to accompany exhibitions at Brush
in New York City and Crane Arts in Philadelphia.
Copyright © 2014 by Foreverland Publications
Artist Statement
Prices are beautiful, but the modern financial landscape is grotesque.
INFINITY is the ENEMY is a creative effort by artist and entrepreneur t.Rutt to ask: Is physics harmful as it is
currently applied to financial markets?
t.Rutt argues that the imposition of laws from Newtonian physics into economics has deeply damaged the ability
of financial markets to express empirically healthy prices. The resulting form of financial anti-empiricism was,
first and foremost, caused by the Black Scholes Merton Model (BSM), which injected thermodynamics and the
strange notion of infinite time into financial price modeling. Every day, the BSM model affects the moment-tomoment pricing for over $750 trillion worth of financial assets. Through the boundary conditions it mandates and
the hedging behavior it induces, Black Scholes Merton colors and shapes the entire global financial landscape.
The foundation of the Black Scholes Merton Model mandates that the boundary condition for pricing financial
assets must use an assumption that “time equals infinity.” Or, as Paul Samuelson and Robert C. Merton
dictated in 1969, “T= ∞.” However, every day financial prices change within billionths of a second.
Consequently, the artist imagines that financial time constantly approaching 1/∞ (time 1/∞) is a more rigorous
view of the time within all financial prices. t.Rutt believes that this reality about the hyper-fluidity of financial
time liberates and empowers financial markets to discover greater truths about financial prices. The validity of
the BSM regime and all arbitrage pricing models is entirely dependent upon an accurate determination of where
financial time truly resides on the following continuum:
Like physicists who constantly ponder whether the arrow of time points outward or inward, t.Rutt calls for fresh
thought about the financial arrow of time and about which direction it points. t.Rutt implores financial markets
to turn away from those physics-based models like Black Scholes Merton that hope for Newtonian notions of
“equilibrium.” The beauty of financial markets lies in the hyper-short price equilibriums that they create and
re-calibrate every millisecond of every day. This form of “financial disentropy” (where the time between new
quantum equilibriums is always approaching 1/∞ ) sees Einstein’s notions of relativity as the true design of the
financial landscape. For healthier financial markets we must re-embrace our uniquely human compulsion to
seek and create disentropy. Only then will we empower ourselves and our markets to discover and create
the most truthful financial prices.
t.Rutt believes that we all know that financial time does not equal infinity. The artwork probes further into this
reality and demonstrates that the false arbitrage boundary created by BSM’s misuse of infinite time has grossly
overpriced financial assets, especially derivatives. t.Rutt estimates that the resulting “Infinity Tax” has wasted
between $14 trillion and $75 trillion since the dawn of the Black Scholes Merton era in 1973.
INFINITY is the ENEMY also explores the difference between scientific discovery and artistic discovery.
The artwork asks why human financial price discovery isn’t perhaps much more like the process of artistic
discovery than the process of scientific discovery. t.Rutt argues that human knowledge exists along a continuum
between Art and Science. Art is about the discovery and creation of physical things and experiences reliant
on human influence of both the creator and the observer. Science is about the discovery and explanation of
physical things and experiences, often devoid of human influence. The artwork poses fundamental questions
about where the “social science” of economics and finance belongs along this spectrum between Art and
Science. Are financial markets discovering prices that are lacking human interaction, or are financial markets
always being created by humans?
The artist’s name, t.Rutt, is a reference to Marcel Duchamp’s “R.Mutt” signature on his famous urinal, Fountain.
In 1917, Duchamp shocked the New York art world when this “artwork”, a urinal placed on its side, was
rejected from an art society’s exhibition that claimed no piece would be turned away. This rejection confirmed
Duchamp’s suspicion that certain elite gatekeepers of the art world were harmfully dictating what was and was
not considered to be “valid art”. With Duchamp’s audacious use of a urinal to confront the art establishment, he
is credited with having launched the modern art movement. Just like Fountain in 1917, t.Rutt’s artwork illustrates
context’s influence over content and urges viewers to consider the content of Newtonian physics in the context
of modern finance. Although economists are enraptured with physics, is it really possible for the “hard science”
of physics to be valid in the very human field of economics? And, like the question about where to put a urinal,
in the context of time does infinity belong in the numerator or the denominator?
INFINITY is the ENEMY also asks broader questions about infinity and how it can distort our ability to
understand our world and ourselves. If the magical allure of infinity overpowered the ability of famous
economists to think clearly, how might infinity be distorting our lives and how we see our world?
Is the likelihood that time is always infinitely short a wonderfully liberating insight that we should all embrace?
The artist and author studied at the London School of Economics and holds a graduate degree from
Princeton University.
Pricing Philosophy of t.Rutt
Two core principles drove the initial pricing of t.Rutt’s art.
Financial Rationale
t.Rutt’s art project, INFINITY is the ENEMY, claims to resolve a great and costly fallacy in financial theory.
t.Rutt asserts that, since 1973, the mistaken use of infinite time and Newtonian physics in financial markets
has inflated prices and wasted between $14 trillion and $75 trillion. t.Rutt’s artwork labels this overpricing as
the Infinity Tax. Economic theory asserts that those who identify and resolve economic inefficiencies are
compensated by earning a sliver of the amount of money that their innovation identifies and saves. If the entirety
of t.Rutt’s artwork sells for $150 million, this will represent less than .0012% of the $14 trillion+ that the art show
claims its insights will have saved the world economy. Wall Street firms regularly earn a 6% commission for their
innovative services, and often much more. A 6% commission on $14 trillion would be over $800 billion.
t.Rutt espouses the importance of price discovery, especially in financial markets. The discovery of prices for
the artwork is actually a part of the art show.
Artistic Rationale
According to t.Rutt, “It was the misuse and abuse of Science that ruined economics and it will be the misuse
and abuse of Art that helps save it.” During the launch of t.Rutt’s INFINITY is the ENEMY art show and book,
a Jeff Koons Balloon Dog sold for over $58 million and a Francis Bacon triptych sold for over $142 million.
It is not clear what sort of information these prices are communicating about the social or economic utility of
these artworks. However, these sales show that financial prices and art markets are truly fascinating human
creations. When t.Rutt’s artwork succeeds in de-complexifying the financial world, it will represent a historic
triumph of Art over Science.
The Flush-Ex
The Financial Crisis of 2008 deeply damaged public confidence in the prospect for lasting “scientific truths” in
the area of financial thinking. Like Duchamp’s frustration with the art world in 1917, t.Rutt became frustrated
with the over-concentration of power in the $750 trillion market for financial derivatives. This began in 1973
when several elite, intellectual gatekeepers of economic thought used audacious manipulations of laws from
physics to create complex models that still govern financial prices to this day. Although they brazenly ignored
all empirical evidence, these intellectuals used their form of economic scientism to control the financial
landscape and what was intellectually permitted to be considered “valid economics.”
t.Rutt created The Flush-Ex artwork exchange as an interactive example that healthy and fair mechanisms for
discovering prices are critical for the integrity of all markets, specifically the financial and art markets. t.Rutt
believes this is as true for equities, currencies, commodities, and bonds, as it is for Balloon Dogs, Marilyns,
Bacons, Picassos, and t.Rutt’s own Foreverland Fudge Flushers. By creating a healthy market for the Fudge
Flushers on The Flush-Ex, t.Rutt is artistically challenging the scientistic gatekeepers of modern financial
thought to consider the importance of unbiased price discovery in all human economic activity. The Flush-Ex
facilitates the trading of two classes of t.Rutt’s Foreverland Fudge Flushers: the Class A: Brandeds and the Class
B: Generics, and provides for the trading of Expirationless Options (XPOs™) on The Generics. (Please see
glossary for information about Expirationless Options.) The Brandeds have green pouches that are branded
with the names of t.Rutt’s “inaugural seat holders”. These writers, thinkers, artists, scientists, financiers, and
others could be helpful in resolving the intellectual problems caused by the incorrect use of infinity and physics
in financial markets.
As a form of thanks, t.Rutt asks the inaugural seat holders to visit The Flush-Ex and claim their Branded Flusher
free of charge. t.Rutt offers to repurchase the recipient’s Fudge Flusher for $1,000. This is the “opening bid” for
The Brandeds and is central to t.Rutt’s commitment to begin empirically rigorous two-sided markets (i.e., bid/
ask). The recipient may decide to: 1) resell his or her Flusher and green pouch to t.Rutt for $1,000; 2) keep their
seat and personalized pouch; 3) list their Branded for resale on The Flush-Ex at a price higher than $1,000; or,
4) exchange their Branded Flusher for an Expirationless Option (XPOsTM) to buy a Generic Flusher for $50,000
(i.e., X=$50k). The inaugural seat holders have 30 days to claim their free Fudge Flusher. After 30 days,
all unclaimed Brandeds are free to trade on The Flush-Ex for an opening “ask” of $75,000.
t.Rutt’s Generics are unnamed, mostly white pouches that comment on the role of standardization and commoditization
in the trading of and price discovery for artistic and financial products. t.Rutt will create an initial market of $500
BID / $50,000 ASK for The Generics. As compensation for facilitating price discovery in the market for Fudge
Flushers, The Flush-Ex will collect a buyer’s and seller’s premium, each equal to 10% of the value of any trades.
The trading of the Foreverland Fudge Flushers illustrates the importance of scientifically un-biased price discovery
in financial markets and art markets. Are “one-off” products like The Brandeds worth more because they are
unique? Or, are the The Brandeds worth less because they are less liquid? Are the commoditized Generics
worth more because they are standardized and perhaps share a liquidity preference? Or, are The Generics
worth less because they lack the “star quality” of a Branded? For example, when it sold for $42 million in 2010,
was the Lichtenstein painting Ohhh...Alright... worth more because it had been owned by the film star and
artworld observer Steve Martin?
t.Rutt’s Foreverland Fudge Flusher
t.Rutt’s Inaugural Seat Holders
William Acquavella, John Authers, Louis Bacon, Ben Bernanke, Lloyd Blankfein, Alan Blinder, Henry Blodget,
Michael Bloomberg, John Bogle, Richard Branson, Warren Buffett, Mark Carney, Sean Carroll, CEO - Christie’s,
CEO - Sotheby’s, Dominique Cerutti, Gordon Cheung, Frank Close, Steven Cohen, Paula Cooper, Michael Corbat,
Dalai Lama, Ray Dalio, Paul Davies, Elizabeth Dee, Jeffrey Deitch, Emanuel Derman, David Deutsch, Jamie Dimon,
Brady Dougan, Mario Draghi, David Einhorn, Mohamed El-Erian, Eugene Fama, Bill Ford, Larry Gagosian,
Gabriel García-Márquez, Timothy Geithner, Phupinder Gill, Barbara Gladstone, Arne Glimcher, Marian Goodman,
James P. Gorman, Alan Greenspan, Robert Greifeld, Kenneth Griffin, Bill Gross, Terry Gross, Andrew Haldane,
Lars Peter Hansen, Joanne Hill, Damien Hirst, Alan Howard, Carl Icahn, Daniel Kahneman, Brad Katsuyama,
Henry Kaufman, John Kay, Seth Klarman, Jeff Koons, Bruce Kovner, Haruhiko Kuroda, Christine Lagarde,
Josh Lerner, Dominique Lévy, Michael Lewis, Daniel Loeb, Roger Lowenstein, James Mackintosh, William Margrabe,
Matthew Marks, Steve Martin, Mary Meeker, Rigoberta Menchú, Robert C. Merton, Robert Mnuchin, Brian Moynihan,
Elon Musk, Duncan Niederauer, Henry Paulson Jr., John Paulson, Ronald Perelman, Edmund Phelps, Pope Francis,
Ken Rogoff, Nouriel Roubini, Charles Saatchi, Sharon Salzberg, Robert Shiller, Jim Simons, Lee Smolin, George Soros,
Jeffrey Sprecher, Sylvester Stallone, Jeremy Stein, Tom Steyer, Lawrence Summers, Matt Taibbi, Nassim Taleb,
David Tepper, Gillian Tett, Robert Thurman, Edward T. Tilly, Krista Tippett, Lance Uggla, V-22, Paul Volcker,
James Owen Weatherall, Donald R. Wilson, Iwan Wirth, Martin Wolf, Janet Yellen, David Zwirner.
These marble tablets show t.Rutt’s original markup of the Feeble Footnotes of Modern Finance. These critiques
of papers by Paul Samuelson, Robert C. Merton, Myron Scholes, and Fischer Black, showcase the means
through which infinite time was injected into financial theory. If infinite time does not exist in financial prices,
then today’s most popular derivatives pricing models are profoundly wrong.
The Corrected Tablets of Modern Finance
Five honed marble tablets with stained pouches, wooden carrying & display case with plaque, two Infinity Tacks,
Meditations on Financial Infinity Mini-Tablet.
$1,000,000 (includes The Foreverland Guarantee)
Edition of 35.
YESTERDAY: The Beginning of Financial Truth is t.Rutt’s intervention on George Soros’s famous book The
Alchemy of Finance, which was first published in 1987. In the face of deep intransigence from the academic
community, George Soros, perhaps the most successful investor in history, has tried to confront the scientific
shortcomings of modern financial thought for nearly 30 years. With YESTERDAY, t.Rutt highlights how
intellectual innovation often takes decades to change things that eventually seem to have been wrong from
the very beginning. t.Rutt also believes that George Soros’s ideas of “reflexivity” and “prevailing bias” in
financial markets expressed a financial reality in harmony with t.Rutt’s notion of financial “disentropy.”
YESTERDAY: The Beginning of Financial Truth
Book with intervention, Infinity Tack, plaster pedestal.
$25,000 (includes The Foreverland Guarantee)
Edition of 10.
TODAY: The Physics of Wall Street is t.Rutt’s intervention on a book by James Weatherall. t.Rutt reimagines the
book’s subtitle as “A Brief Celebration of What Ruined Economics.” This intervention is a simple expression of
the powerful grip that hard science and mathematical complexity still have on financial markets. t.Rutt’s main
artistic mission is to confront the way hyper-complex scientism has distorted the accuracy and truthfulness of
the financial landscape since the advent of the Black Scholes Merton financial regime in 1973.
TODAY: The Physics of Wall Street
Edition of 10.
TOMORROW: The Wall Street of Physics is t.Rutt’s additional intervention on The Physics of Wall Street by
James Weatherall. t.Rutt’s intervention highlights how cross-pollination between intellectual disciplines can often
yield great progress, even in the most unexpected ways. t.Rutt asserts that the force of entropy that underpins
Newtonian physics is in no way present in financial markets. In contrast, t.Rutt found inspiration from the idea
that “disentropy” more accurately describes human social activity, especially as it is conveyed through financial
markets. t.Rutt seeks confirmation for the idea of disentropy in the words of the artist and thinker Vaclav Havel
who wrote:
Just as the constant increase of entropy is the basic law of the universe, so it is the basic law of life to be ever more highly structured and to struggle against entropy.
TOMORROW: The Wall Street of Physics
Edition of 10.
LEFT
The Castration of X - OUCH! symbolizes how the misuse and abuse of infinity by Paul Samuelson and Robert C.
Merton resulted in the reckless neutering of the strike price, X, in the pricing for perpetual warrants or
Expirationless Options (XPOs™). Since 1969, this evisceration of empirical reality has falsely disconfigured
the arbitrage boundary conditions for options pricing and all financial markets. This butchery contradicted
every piece of empirical evidence. Perhaps it was caused by a form of blind ambition or blind scientism that
over-powered the Financial Scientist’s Socratic Oath to “first, do no harm.” The Castration of X - OUCH!
expresses the intellectual grotesquery and empirical fallacies that infinity and physics can generate in the wrong hands.
The Castration of X – OUCH!
Chenille X, Gator knife, Infinity Tack, balloons.
Edition of 10.
RIGHT
The Master Re-Empowered is t.Rutt’s sculptural effort to reunite the strike price, X, with the congenital potency
that Samuelson and Merton robbed from it in The Castration of X - OUCH!. It was the misuse of infinite time that
neutered the strike price in the arbitrage boundary conditions for options pricing that Merton and Samuelson
fabricated in 1969. The Master Re-Empowered conveys the forceful truths that financial markets will quickly
discover and express once they are liberated from the price distortions caused by infinite time and the wrongful
use of Newtonian physics to prescribe financial prices.
The Master Re-Empowered
Chenille X, Infinity Tack, Truck Nutz.
Edition of 10.
t.Rutt’s intervention on the book Infinite Life by Robert Thurman posits that the mysteries of infinity are perhaps
best pursued in the realms of spirituality, religion, and creativity. Thurman’s title, Infinite Life: Awakening to Bliss
Within, seems to say that it is only through meaningful connection with the moments that make up our lives that
anything like infinite life can be possible. This contrasts with the way “infinite life” had been used by Paul
Samuelson and Robert Merton when they built the intellectual foundation for financial engineering on the
idea that financial prices contain infinite time. In contrast, t.Rutt believes that the financial market’s ability to
constantly regenerate infinitely short-lived prices ensures that financial markets achieve the constant
connectedness with the present moment that Thurman seems to describe in his book.
INFINITE LIFE?: Awakening to Financial Truth
Edition of 10.
Real Prices: The Power of Price Discovery is t.Rutt’s intervention on the book Real Happiness: The Power of
Meditation – a 28-Day Program by Sharon Salzberg. Like the practical suggestions in Salzberg’s book, t.Rutt
tries to convey the human reality that we can always improve the way we think about ourselves and our
environment, whether it is physical, emotional, spiritual, or financial. Salzberg’s belief that happiness can be
achieved through meditation mirrors t.Rutt’s belief that the healthiest financial markets must allow all financial
prices to breathe and find their empirical center without the scientific distortions of Newtonian physics.
t.Rutt’s reference to “a 28-millisecond program” highlights the financial reality that all financial prices change
so quickly that they are constantly centering themselves into balance with the broader financial universe.
REAL PRICES: The Power of Price Discovery– A 28-millisecond program
Edition of 10.
Rigor for Men conveys the irresistible grip that complex mathematics has achieved on male-dominated
intellectual fields such as economics and finance. Like Obsession by Calvin Klein, Rigor for Men shows how,
with the right formula, financial markets and financial thought leaders could be seduced and over-powered by
scientific concoctions like the Black Scholes Merton formula.
Rigor for Men
Glass bottle with t.Rutt treatment.
Edition of 10.
Bad Physics on Good Physics:
t.Rutt’s Teslas & t.Rutt’s Frunk Hoods
Bad Physics on Good Physics is a sculptural series that uses Tesla automobiles as an artistic comment about
the damage that the Black Scholes Merton financial model has caused throughout the global financial system.
It highlights how when physics is used properly it can help solve large physical problems like global warming.
Conversely, it shows how physics can be harmful when used incorrectly in the non-physical social sciences like
economics.
The Bad Physics on Good Physics sculptures are shrouded in the “bad physics” that the Black Scholes Merton
financial pricing regime has forced into financial markets since 1973. This misguided use of physics created an
explosion in markets for complex financial derivatives. The images of “bad physics” are taken from
The Corrected Tablets of Modern Finance, a sculpture that criticizes the original academic papers by Paul
Samuelson, Robert C. Merton, Fischer Black, and Myron Scholes. These papers make up the foundation
of modern financial pricing theory. t.Rutt’s corrections to these Nobel prize winning articles highlight how
“infinite time” was incorrectly and illogically used by those famous economists. The result has been a
great misrepresentation and costly distortion of how time really exists within financial markets.
In contrast, the series speaks to the “good physics” that the all-electric Tesla cars represent. In 2006, Tesla, in
an ambitious effort to change the automotive industry, unveiled the world’s first exclusively electric luxury car.
Tesla’s CEO, Elon Musk, took it a step further by announcing the company’s willingness to share its electric
battery technology with anyone in “good faith”. This will help create a global community whose focus is the
preservation of the environment. Bad Physics on Good Physics emphasizes the ideology of Musk, that providing
people with innovative ideas will allow them to correct large and seemingly intractable problems in the world that
we have created.
The design of t.Rutt’s Original Tesla blends images from The Corrected Tablets of Modern Finance with the color
palette of the iconic One Hundred Dollar Bill. It was t.Rutt’s Original Tesla which traveled to Art Basel Miami in
December 2013. In Miami, t.Rutt launched the campaign to topple the Black Scholes Merton Financial Regime
while asking broader questions about the utility of infinity in the pursuit of human knowledge. The artistic
exploration behind t.Rutt’s Original Tesla gave birth to t.Rutt’s Tesla Fleet, which represents eleven countries
that have large derivatives markets. t.Rutt also developed four “city designs” to commemorate the locations of
t.Rutt’s initial exhibitions: Miami, Philadelphia, London, and New York. The colorful, internationally themed fleet
of electrical art cars showcases the global reach of both physics theories and financial theories. t.Rutt’s website
provides a sleek “app” with which visitors can view and interact with the different Tesla designs from
t.Rutt’s Tesla Fleet.
Bad Physics on Good Physics, No.1: t.Rutt’s Original Tesla
Tesla Model S automobile, custom body treatment.
Bad Physics on Good Physics, No. 2: German version of t.Rutt’s Tesla Fleet
Tesla Model S automobile, custom body treatment.
Edition of 30 (buyer can choose from 15 design themes).
t.Rutt’s Frunk Hoods are full-sized, wall-hung replicas of the various hood designs from t.Rutt’s Tesla Fleet.
Because the all-electric Tesla Model S does not have a traditional engine, “frunk” is often used to describe
its empty “front trunk.” By placing the complex Black Scholes Merton formula on the Frunk Hoods, t.Rutt
expresses that just as there is nothing of substance under the hood of the Tesla, so too there is nothing of real
substance under the hood of the Black Scholes Merton financial regime. t.Rutt’s Frunk Hoods use international
images to show how the misuse of physics has exacerbated instability in financial markets on a global scale.
Bad Physics on Good Physics: t.Rutt’s Frunk Hoods
Metal template in Tesla hood outline, custom body treatment.
Edition of up to 3 per design.
ART BASEL, BRAZIL, CHINA, FRANCE, GERMANY, HONG KONG, INDIA, JAPAN, SINGAPORE, UAE, UK, USA
The Washings
The Washings are a series of art performances by t.Rutt.
As part of INFINITY is the ENEMY, t.Rutt drove the
Bad Physics on Good Physics Teslas around New York City,
Greenwich, CT, Mahwah, NJ, and other locales where the
infinitely short time frame in financial prices is actually
created and produced. At each stop t.Rutt would apply
Bad Physics Remover to the vehicles and diligently try
to wash-off and buff-out the images of bad financial physics that shrouded the good physical physics contained in
the Tesla automobile itself. t.Rutt believed that 60 days of
diligent physical effort could remove the bad financial physics from the cars. The Washings were a metaphor for t.Rutt’s
deeper belief that 60 days of diligent financial effort could
remove the fallacies and destabilizing distortions that the
bad financial physics of the Black Scholes Merton Regime
imposes on financial markets.
During The Washings, which were often videotaped, t.Rutt
would frequently sing songs from t.Rutt’s Greatest Hits such
as: Infinity, Infinity; Games Elites Play; Arbitrage Delight; and,
What Does Big Bob Say?
Arbitrage Delight
Games Elites Play
Lyrical rewrite by Bobby See & the Infinettes
(Sung to the tune of Afternoon Delight by the Starland Vocal Band)
Lyrical rewrite by Bobby See & the Infinettes
(Sung to Games People Play by the Alan Parsons Project)
Gonna find my baby, gonna hold her tight, gonna grab some arbitrage delight.
My motto’s always been that when the price ain’t right I can get in there and arb it, I can make it tight.
And prices look a little better in the light of day.
And the False Boundary’s always gonna be there anyway.
Where do we go from here now that infinite time has blown up?
And how do we find our price with no Nobels to lend us a hand?
Thinking of you’s workin’ up an appetite - looking forward to a little arbitrage delight.
Rubbing puts and calls together making sparks ignite and the thought of arbing you is getting so exciting.
Bad prices in flight - arbitrage delight.
Bad prices just aren’t right. Bad prices just aren’t right.
Buying companies for free with the False Boundary. Can’t overcome the Paradox Fiduciary.
A paradox or two can be such a bore. Just hide it in a footnote and keep spewing more - Hey!
It’s just a fancy French word that is arbitrage. And in most people’s hands it smells like bad fromage.
They’re really mostly spread trades held a bit too long and when they’re over-crowded they can go quite wrong - Hey!
I don’t want to live here no more. I don’t want to stay.
Ain’t gonna spend my infinite life quietly fading away.
Games elites play, you take it or you leave it.
The things that they say, honor bright.
If they promised you the moon and the arbs would you believe them?
Games elites play in the middle of the night.
Where do we go from here now that Black Scholes Merton has blown up?
And how do we think of time with no Nobels to lend us a hand?
I don’t want this BS no more. I don’t want to pray.
Ain’t gonna spend the rest of my dime in their church of clay.
Bad boundaries create such a big fat right tail. I wonder if that could have hurt the London Whale.
Bad boundary’s price distortions travel near and far. I wonder if they’re hiding in my trusty VaR - Hey!
The things that they say, honor bright.
If he promised you the moon and the arbs would you believe him?
Games Bobby played in broad daylight.
If dad can help obscure it, then what the Hell. We knew it would be years before the boundaries fell.
A little self-fulfillment can be such a rush, especially when white-washing with my big broad brush - Hey!
I don’t want false boundaries no more, I don’t wanna pay.
Ain’t gonna let Infinity Tax suck my profits away.
If I ever taught at Harvard I get Five Grand more. This is gonna be so easy it’ll be a bore.
But they want something useful, like “three years or more.” Can’t hide behind abstraction, now I’m not so sure - Hey!
Our motto’s always been that time is infinite. Empiricism? Rigor? Who gives a shite?
For some phony arbs we can look to them. Did I forget to mention LTCM? Hey!
Bad prices in flight – arbitrage delight.
Bad boundaries just aren’t right. Bad boundaries just aren’t right.
Bad boundaries are a fright!
The things that we say, honor bright.
If we promise you the moon and the arbs would you believe us?
Games we still play to make Black Scholes seem right.
This lumbar pillow stiffens and enrigors the spine as curious thinkers ponder whether financial time is
infinitely long or infinitely short. Were Samuelson and Merton correct when they mandated that TIME = ∞?
Or, is t.Rutt correct that financial time always approaches 1/∞?.
Financial Time = ?
Handmade pillow, No Infinity Tax button.
$25,000 (includes the Foreverland Guarantee)
Edition of 9.
Details of The Corrected Tablets of Modern Finance
Excerpts from the ebook INFINITY is the ENEMY by t.Rutt
available only at www.amazon.com
PREAMBLE
Prices are beautiful, but the modern financial landscape is grotesque.
Since 2008, humanity has struggled to overcome the worst financial crisis in nearly 100 years. In today’s
extraordinary financial times, many people fear that an even worse financial crisis is looming just around the
corner. As we try to heal the sick financial landscape that we have created, could an art show help stop the
abuses that caused today’s financial crisis? Artists are supposed to be creative people. But, in exposing the
roots of our current financial crisis, could an artist actually create the next financial crisis?
If an artist made it possible to see large errors that distort and destabilize our financial landscape, then the
answer to these questions must be yes. This art project and book does not deliberately seek to create a
financial crisis, but it does seek to unearth and foster financial truth. This will be disruptive. If this book and art
show succeeds in disproving the intellectual foundation of modern financial pricing theory, then the stability of
all global financial markets could be at risk. For some, this could be a disaster. For others, like hedge funds and
major banks, it could be a huge trading opportunity. Either way, the correction of endemic financial mistakes
seems to be the best hope for a more stable financial future.
The intellectual foundation of modern financial theory is contained in a pricing framework that was born in 1973.
It is called the Black Scholes Merton option-pricing model, or simply BSM. With its audacious use of the formula
for thermodynamics from physics to fabricate prices for human financial instruments, the Black Scholes Merton
model radically pushed the very human “social science” of economics in the dangerous direction of a non-human
“hard science.” Over the past 40 years, the hard scientific conceit of BSM has infiltrated virtually our entire financial
and economic landscape. The intellectual “physics envy” that drives BSM has also fueled a wildly successful
assault by mathematical economists and “financial engineers” to recast the entire discipline of economics.
This modern intellectual devotion to hyper-complex mathematical models has virtually destroyed the ability for
less mathematical economists to help maintain intellectual balance in the very human field of economics.
The aggressive, scientistic move by the economists Fischer Black, Myron Scholes, Robert C. Merton, and Paul
Samuelson should have raised fundamental questions about whether formulas from physics should ever be used
in human disciplines like economics. But, however dubious the logic of using physics in economics may be,
it is an indisputable fact that the titillating scientistic promise of BSM has prevailed. BSM underpins the entire
multi-trillion dollar global marketplace for the complex financial instruments known as derivatives. As many
financial insiders know, due to the arbitrage boundaries that BSM mandates and the hedging behavior it induces,
BSM constantly governs the pricing for over $750 trillion in financial derivatives instruments. The huge supply
and demand from the frenetic hedging activity that BSM creates is also the single greatest influence on prices in
the nearly $200 trillion market for the actual stocks, bonds, currencies, and commodities from which the much
larger derivatives market is created.
Several well regarded financial observers and writers have decried the distortions and errors that “financial
physics” and BSM inflicts on the financial landscape. The famous investor and financial thinker George Soros
has regularly lamented the invasion of economics by “hard scientists” filled with physics envy. Nassim Taleb,
the famous author of The Black Swan, goes so far as to assert that Black Scholes Merton and its use of
physics in financial modelling is an intellectual fraud. Taleb even called for the Nobel Prize Committee to
rescind the Economics prize it bestowed on Myron Scholes and Robert C. Merton in 1997.
This book is a forceful attempt to take Taleb’s contempt for the Black Scholes Merton Regime to the next level.
This book and art project actually proves the intellectual fraudulence of the Black Scholes Merton Regime.
Moreover, this book and art project quantifies the multi-trillion dollar economic cost and waste that BSM has
created. Finally, this book proposes a simple way to eradicate the maladies and grotesqueries that BSM
constantly forces into our financial landscape.
In an effort to confront BSM’s misuse of science in economics, this book and artwork draw on many of the great
creative traditions such as: abstract expressionism, Dadaism, magical realism, academic magicalism, cubism,
and deabstractionism. With BSM and arbitrage pricing theory as raw material, this book and art project are a
creative effort to carve up, melt down, reshape, and cast the financial landscape into a new, more truthful and
more honest form. The beauty of our financial landscape can only emerge when its unique ability to express
human communication and human values is allowed to shine. Financial beauty requires living, breathing prices
that are unconstrained by the false scientistic distortions of Black Scholes Merton. Only without the cold dark
shadow of financial scientism will we ever be able to glimpse the simple beauty of our vast financial universe as
it truly exists.
The Coming Great Simplification of Finance
The massive complexity of today’s financial landscape is solely a human creation. The Great Financial Crisis
of 2008 was the direct result of breakdowns in markets for complex financial derivatives. Unless today’s
financial hyper-complexity is creating positive outcomes, perhaps we would benefit from something like a
“great simplification of finance.” Fortunately, just such a process of financial simplification is underway.
Most major banks are actively engaged in downsizing their madly complicated derivatives portfolios. This is a
good sign. Improved regulation of bank capital ratios under Basel III and U.S. Federal Reserve requirements is
also helping. However, at the core of most human activity, especially when it is deeply flawed, there often lies
a fundamentalist way of thinking or a group of entrenched elites that stifles the ability for real and lasting reform.
This book aims to overthrow today’s financial orthodoxy and confront the financial intellectual elites that
created it. This book seeks to reform the engrained behaviors and collective mindset that perpetuates
today’s overpowering financial complexity. With better financial regulation, self-simplification by the banking
industry, and the elimination of shoddy pricing models that distort our financial landscape, perhaps we can
actually achieve a lasting and useful financial evolution. Many of us sense and know that this is necessary
and desirable. With diligent effort and a new open-mindedness, perhaps we can actually achieve the
“great simplification of finance.”
PREFACE TO THE NEW YORK ART BOOK EDITION
As creative people, as entrepreneurs, and as human beings, we are lucky if there comes a time in our lives
when we get to either fight for something that we believe in, or choose to move on. This book and art project,
INFINITY is the ENEMY, is my attempt to do both.
In this book and art project, you will see Nobel prize-winning economic theories printed onto elegant Tesla
automobiles and onto equally elegant toilet seats from Walmart. You will see Schumpy, the huge puppy dog,
dressed as a financial revolutionary. You will see a massive, overstuffed bra (size 57-J) emblazoned with golden
infinity nips. You will see beautiful milky-white marble tablets enticing you to confront the financial status quo.
And, you will see me standing naked before the statue of John Harvard challenging Harvard’s faculty to rise up
and defend the most powerful, the most mistaken, and the most damaging financial model in the history of
economics, the Black Scholes Merton Model. The Black Scholes Merton Model rules the pricing of over
$750 trillion of financial derivatives securities. BSM is often blamed for creating the massive complexity of
today’s financial system and for perpetuating the financial instability that derivatives force upon our financial
landscape every day.
If you think that Nobel laureates in economics are sacred cows and that their theories shouldn’t be
aggressively challenged, then this may not be the book for you. If you believe that Wall Street and global
financial markets are currently operating in good health and with strong integrity, then this may not be the book
for you. If you believe that the battle to repair the financial landscape can be won with hugs and kisses, then this
book is not for you. And, if you do not understand that all entrepreneurs (especially the greats like Elon Musk,
Richard Branson, and Steve Jobs) must engage in a constant, unrelenting attack on the status quo and its
protectors, then this book is definitely not for you.
But, if you learned something about your own humanity when Rocky Balboa endured 15 rounds with Apollo
Creed, then you may like this book. If you share Michael Lewis’s outrage about Wall Street and the way
technology and financial complexity help an elite few, then this may be the book for you. And, if you believe
in the power of art to create social change, then please read this book.
This book is aggressive, sometimes crude, and always unrelenting in its attack on the foundation of modern
financial theory as contained in the Black Scholes Merton Financial Regime (BSM). The grotesquely complex
$750 trillion financial landscape that BSM has created is so huge in its reach and so insidious in its power that
it can only ever be overturned with aggressive confrontation and relentless focus on the fallacies that prop it up.
This book uses art, art criticism, and financial intellectual criticism to attack the BSM Regime. While the artwork
is witty, fun, and far-reaching, the style of this book may be raw, unpolished, and mission-focused.
This New York Art Book Edition of INFINITY is the ENEMY is the second of three editions. It contains much of
the hard punching and painful contractions that birthed the emotional Miami Art Book Edition in January 2014.
When the first edition landed on the steamy shores of Miami, perhaps it was screaming in pain about how
difficult it was to finally express into the world something that had been carried inside for too long. But, now
that my creation is out in the world, the new task is both to nurture it and to begin a healing process of my own.
This requires compassion. It also requires the intellectual and emotional stamina to protect the newborn book
and artwork until they can live on their own. Now that we are separate, I must help this book and artwork find
its place in the world. And, I must help myself find my place in a world where I am newly independent.
The Miami Art Book Edition made a clear and passionate expression of the entrepreneurial hurt that was incurred
by me and my former company, Economic Inventions LLC, as a result of poor scholarship by the academics
Josh Lerner (Harvard Business School) and Adam Jaffee (Brandeis University). In 2004, they co-wrote the
book Innovation and Its Discontents, which directly attacked critical patents that were at the foundation of our
company. Their unfounded and careless criticism of our patents cast a dark cloud over our effort to promote
innovations that would simplify financial markets. In 2012, with great financial loss to everyone involved,
Economic Inventions LLC was liquidated. In Chapter 8, this book still sets the record straight by aggressively
deconstructing Jaffee and Lerner’s woefully weak scholarship. However, the more inflammatory comments that I
had in the opening of the Miami Edition are now gone. The hurt has been replaced with the dark humor and the
absurdity that their book created for me and my colleagues. An apology from Jaffee and Lerner would be nice,
but I am moving on.
I remain baffled that, in 1969, Paul Samuelson and Robert C. Merton succeeded in building the entire edifice
for modern financial engineering on the intellectual quicksand of “self-fulfilling prophecy.” This is covered in
Chapters 4 and 5. The concept of “self-fulfilling prophecy” was first vilified in 1949 by the famous sociologist
Robert King Merton, who was the father of the economist Robert C. Merton. The senior Merton insisted that
the use of “self-fulfilling prophecy” was anathema to rigorous scholarship. He went so far as to claim that in the
social sciences, “self-fulfilling prophecy perpetuates a reign of error.” I invite all readers to decide for themselves
about the validity of the self-fulfilling maneuvers that Paul Samuelson and Robert C. Merton used in 1969 when
fabricating their options pricing boundaries that still rule nearly $750 trillion worth of financial markets.
Please take time to analyze this. It seems clear to me that all financial markets continue to labor under the
wasteful distortions of the “reign of error” that the Black Scholes Merton opinion injected into our financial
landscape over 40 years ago.
Examining the consequences of “injecting” something into a new and disconcerting context is very much a part
of this project. In 1917, when Marcel Duchamp injected a porcelain urinal into the art landscape, he marked a
moment in time when a stale art world was challenged to reconsider its most fundamental beliefs about what
constituted art. He named this artwork Fountain and signed it with the name R.Mutt. Duchamp’s brazen and
cynical move spawned and still spawns vast amounts of artwork that many conventional art viewers cannot
bring themselves to accept as valid and legitimate art.
In 1973, when the Black Scholes Merton Model injected physics into economics, BSM created a movement that
has exploded into today’s wildly complex financial system that is nearly impossible for anyone to understand.
In 2013, the brightest minds at J.P. Morgan Chase did not understand the $6 billion loss that their London Whale
was cooking up for their bank with complex derivatives. Today, virtually every major bank CEO lives in fear of
the tangled web of financial risks that lurks within their banks’ madly complicated derivatives portfolios. Like the
audacity of Duchamp’s urinal, Black Scholes Merton’s brazen injection of physics into economics spawned vast
amounts of hyper-complex financial derivatives that many do not accept as valid and legitimate financial creations.
It was Warren Buffet himself who referred to complex financial derivatives as “financial weapons of
mass destruction.”
Would art be better off if Duchamp had not forced the alien mysteries of his urinal into our art world? Would
financial markets be better off if Black Scholes Merton had not forced the alien complexities of physics into
our financial world?
Of course, the analogy between art history and financial history has limits. Art is art, and all art is a human
creation. While art can help us understand ourselves and our world, art does not claim to describe strict
laws about our world. Physics is a natural science, and all natural sciences are not a human creation.
Natural sciences try to discover and explain the laws and rules that we can expect from our natural world.
Some thoughtful physicists like Lee Smolin even question whether there are many hard and fast laws in
physics either.
So, what is economics? Economics is often called a “social science.” Along the continuum of human
knowledge, economics exists somewhere between “The Arts” on one end, and “The Sciences” on the
other end. But, like art, all economic relationships and all financial prices are human creations. No economic
laws pre-exist in the physical world waiting to be discovered by scientists. This is why the use of physics in
financial theory is so profoundly wrong. It is only through our social interaction in markets that we are ever
able to discover and constantly refresh the prices and economic relationships that only humans can create.
This is why prices are beautiful.
So when BSM injected physics into the social science of economics, how did it change the content of
economics? And, how did the imposition of physics into financial markets change the context and functioning
of financial markets? If Duchamp’s use of a urinal can be valid artwork, can BSM’s use of the heat-transfer
equation from physics be valid economics?
Black Scholes Merton is Degenerate Science
This book attempts to show how the reign of error imposed by the Black Scholes Merton Regime perpetuates
a form of financial scientism that is unhealthy, untruthful, and damaging to intellectual and human progress.
The BSM Reign of Error is rooted in a false science similar to those deployed by many of the most destructive
regimes that have plagued and damaged the human world. This book and art project seeks to hold BSM’s
top brass accountable for the financial and economic orthodoxy they preach. Every day, through the
hyper-complexity of financial derivatives markets that BSM has wrought, BSM imposes the costs and
instability of its false financial scientism on us all.
The discipline of economics has been under the spell of scientism since at least the 1970s. But in reality,
economics must belong somewhere along the continuum of human knowledge between the Arts and
the Sciences. It should be clear then that this book and artwork is an attempt to use the power of art to pull
economics back toward the center. This book and artwork uses the Arts to launch an artistic and creative
tug-of-war to wrest economics out of the clutches of the hard scientism that has, for over 40 years,
suppressed the ability of financial economics to communicate real, empirically valid human knowledge.
It should be clear that this book and artwork also seek to express and understand the process of adolescence.
This was an important insight along the way. In 1973, the discipline of modern economics was very much in
its own adolescence. Economics was in a vulnerable and developmental state when the financial physicists
of the Black Scholes Merton Regime started pushing and injecting the alien substance of physics into the
body of economic thought. After the social pain of the late 1960s and the economic insecurity of the 1970s
oil crisis, perhaps economics’ low self-esteem sparked an identity crisis about its ability to thrive as a social
science. Perhaps the allure of the “hard drug” of “hard science” became just too irresistible. It is not too late
to shake the false and damaging addiction that economics has to physics, but first we must admit that it is an
intolerable and costly problem.
This book is also about the need to embrace the eternal youth of economics. As a discipline, economics will
never be accurately described by some sort of eternal laws like those that may exist in physics. The beauty of
economics can only lie in its own process of constant discovery and evolution, just like the exhilarating process
of price discovery expressed by a healthy financial marketplace. This may also be why the artwork I’ve created
may express a large dose of adolescent longing as well. Perhaps I am asking financial economics to look back
and rediscover all that it lost about its true self when BSM created its addiction to physics those 40 long years ago.
So, it should be clear that I have made my peace with what I am attempting to do with this book and art project.
I am trying to marshal the power of artwork and literary tools to effectively destroy the legitimacy of the Black
Scholes Merton Financial Regime that underpins all global financial markets. I choose to do this because BSM
is profoundly wrong. As the quote from Michael Lewis in Chapter 2 shows, many smart financial thinkers have
concluded that Black Scholes Merton “isn’t just wrong, it is very wrong.” The legs and footing of BSM have
been weak and wobbly for years. This intellectual weakness of BSM partly explains the confounding problems
in our global financial system. When a model like BSM governs the pricing for over $750 trillion in financial
derivatives instruments, its users and followers must be able to fight for its legitimacy. If they fail to defend BSM,
then they should “throw in the towel” and allow truthful human interaction in financial markets to begin correcting
the problems they have created.
and pick apart my opponents’ moves. In Chapters 6 and 7, I reach for the power of the crowd and the reality
that we must all fight together. Then, in Chapter 8, I gain new strength by remembering the harsh treatment I’ve
endured and how it fuels my desire to win. Chapter 9 re-examines the importance of the fight and introduces a
new technique. And finally, Chapter 10 is a pounding, all-out attempt to “go for the ribs.”
In this book, it is quickly apparent that my primary intellectual opponent in the fight for financial truth is the Nobel
prize-winning economist Robert C. Merton from Boston. He enters the ring as the polished, decorated, and
well-heeled titleholder. He sits regally atop the fragile empire of financial complexity that he created. The Nobel
Champ Merton sparred for years in the intellectual training camps of Harvard University and the Massachusetts
Institute of Technology. He is time-tested, proud, and confident about his scientific power. He has the financial
and academic establishments in his corner. He is the intellectual Goliath, master of the Cambridge Coliseum,
with the sort of genetics and scientific honing that should make him unbeatable.
I am a battle-fatigued entrepreneur and artist from Philadelphia. I enter the ring with unconventional training and
strange intellectual skills. Where my opponent fights fast and deceptively, I punch hard and deep. He goes for
the head. I go for the body. Except for a graduate degree from Princeton University and a small posse of artists,
my corner is empty. Against Merton’s Goliath, I am the wily but confident David fighting in the basements of
Manhattan and the rubble of North Philly. I am a longshot with only one stone left in my pouch, and against the
Mighty Merton I shouldn’t have a hope in Hell.
This book, INFINITY is the ENEMY, will continue to evolve. However, all artwork remains in its original form.
The expressionism in the edits on The Corrected Tablets is, as they say, “set in stone.” This New York Art Book
Edition is an ebook that will be followed later by the super-sized, hardcover Philadelphia Art Book Edition of
INFINITY is the ENEMY. Just as the most practical insights about democracy came from Philadelphia, so too
will the Philadelphia Edition contain useful insights about how to simplify and improve financial markets. Future
chapters will include: Tier 1 Bank Recaps Made Easy; New Tools for Central Bank Maneuvers (aka: A Painless
Way to Print & Unprint Money); and, The Free Lunch That Can Save Europe and Recapitalize the World.
The launch of this New York Edition coincides with the run of the art show INFINITY is the ENEMY at Brush
Salon in Manhattan and the t.Rutt exhibit at Red Dot Art Fair in Miami. It also coincides with the 60-day XPO
Infinity Challenge described in Chapter 9. With any luck, the forthcoming Philadelphia Edition will truly embody
the concept of brotherly love. Just as Rocky and Apollo became respectful friends, it would be nice to see the
aggressive competition I seek with Robert Merton evolve into something more.
In Chapter 7, I label and quantify “The Infinity Tax,” which the fallacies in the Black Scholes Merton Regime have
imposed on markets for 40 years. I estimate that The Infinity Tax that BSM constantly injects into derivatives
prices has cost investors between $14 trillion and $75 trillion. Such unnecessary waste from the BSM Infinity
Tax provides ample incentive for us all to push for the defeat of the Black Scholes Merton Regime.
Thank you for taking the time to consider the ideas in this book. Thanks also for attending this bout. It may get
ugly and it may feel uncomfortable. However, while this project is clearly the culmination of my own personal
intellectual mission, I would likely not have undertaken it without a deep personal belief that its consequences
are important for us all.
From a creative perspective, I have imagined this book as a 10-round boxing match. The book has 10 chapters
and the tempo and sparring techniques within them varies. In the first 5 rounds, I use art to aggressively dissect
t.Rutt
Philadelphia, December 2014
The Batsman introduces t.Rutt’s idea that sports are a great way for both players and spectators to experience
the momentary thrill and sense of connectedness that occur when time is approaching 1/∞. The bat hitting the
ball creates a sensation of both rational immediacy and universal connectedness. To make contact with the ball
the cricket batter must make split-second adjustments as he tries to discover the path through time and space
that will bring the bat to the ball. As the bat hits the ball, the batsman momentarily connects his energy with that
of the bowler, the fielders, and the entire crowd. The Batsman includes t.Rutt’s TIME and VOLATILITY buttons
and is hung on the wall with an Infinity Tack. These three elements form the “financial trinity,” the mysteries of
which t.Rutt believes should be immediately apparent to most students of modern finance.
The Batsman
Cricket bat and gloves, Time and Volatility buttons, Infinity Tack.
Edition of 10.
Schumpy is named after Joseph Schumpeter, the famous economist who coined the idea of
“creative destruction.” Schumpy is t.Rutt’s revolutionary companion. Every morning for breakfast,
Schumpy eats the status quo, which is symbolized by the vampire squid at his feet. When battling
against entrenched academics, who do you want in your fox hole? Schumpy is the kind of force that
every entrepreneur needs at his or her side when fighting their non-stop insurgency against the purveyors
and protectors of the status quo.
Schumpy
Jumbo plush puppy in revolutionary costume, four Infinity Tacks, Vampire Squid.
Edition of 15.
The Infinity Wall references the way false paradigms can block important breakthroughs in human knowledge.
In this case, The Infinity Wall represents the way that the misuse of infinite time created false and destructive
boundary conditions for the pricing of derivatives. Like the quick collapse of the Berlin Wall, t.Rutt feels that liberated financial markets would quickly break down the fallacies created by the infinite time and false boundaries
used by the Black Scholes Merton financial regime.
The Infinity Wall - Philadelphia
Reclaimed glazed brick, mortar, spray paint. 16’ x 6’ x 3’.
The Kenyan Weavings use a practical form to help span the continuum of belief. Would the deeply religious
person use it to pray? Would the secular spiritualist hang it on the wall? Would the atheist give it to his dog
or wipe her feet on it? To encourage the broad-minded academic contemplation of financial infinity, The Kenyan
Weavings use the colors of top universities such as Harvard, Yale, Princeton, MIT, Stanford, University of
Pennsylvania, University of Chicago and even Georgia Tech and Dickinson College. By way of an artistic
performance called The 60-Day Challenge, t.Rutt offers competing prizes to academics and others who
best prove that financial time is either infinitely long or infinitely short.
The Kenyan Weavings – Assorted Alma Mater Colors
Hand woven in Kenya, two Infinity Tacks.
Edition of 15 White on Crimson.
Edition of 15 Crimson on White.
Edition of 15 Orange on Black.
Edition of 15 White on Blue.
Edition of 15 Cardinal on Grey.
Edition of 15 Cardinal on White.
Edition of 15 White on Cardinal.
Edition of 15 Red on Blue.
Edition of 15 White on Gold.
The Enforcer highlights the tension between those innovators who challenge the status quo and those
purveyors and protectors who aggressively defend it. Should we seek to enforce and promote strict
interpretations of what is “true”? Or, should we seek to enforce and promote systems and processes that
are flexible enough to allow for the discovery of new ideas and new perspectives about what is useful?
This question about “utility” is fundamental to the discipline of economics. Ever since the Great Depression
of 1929, a primary mission of the U.S. Securities and Exchange Commission has been to create and enforce
mechanisms that ensure accurate and fair price discovery in U.S. financial markets. No financial price is ever
“true” and virtually all financial prices change thousands of times per day. t.Rutt believed that the lack of
scientific rigor behind the Black Scholes Merton model distorted and impeded the ability of markets to discover
healthy financial prices. t.Rutt asks the scientific community to analyze the foundations of Black Scholes
Merton. Only through the enforcement of scientific standards of rigor on the Black Scholes Merton pricing
regime could all financial market participants regain confidence that fair and accurate financial price discovery
was being safely enforced.
The Enforcer
Leather police holster, Infinity Tacks, No Infinity Tax button.
The Wrong Mother represents how, since 1973, the assumption of infinite time that underpins the pricing framework for modern derivatives markets has forced financial markets to feed from the tits of the wrong mother. This
piece shows how the oversized allure of infinity can induce irrational and erratic behavior, especially in men.
t.Rutt emphasizes that financial markets can never mature and behave more responsibly until derivatives markets are allowed to embrace their true mother. The flat-lined and informationally barren upper boundary that
Robert Merton erroneously created with infinite time is the wrong mother for derivatives pricing. The true mother
for all derivatives prices is embodied in the curvaceous and informationally fertile price curves that can only be
found in markets for Expirationless Options (XPOs™).
The Wrong Mother
Large bra (57-J) , winter jackets, two Infinity Tacks, embroidery.
Edition of 6 (bra and stuffing will vary).
Excitable Technicolor Boys conveys t.Rutt’s belief that important innovations are often blocked by the fraternity
behavior of those who benefit from the status quo. t.Rutt further believes that the arcane Greek symbols and
complex math that dominates derivatives markets and financial engineering create a fraternity-like exclusivity.
This perpetuates an intellectual impenetrability that impedes the more fluid social interactions necessary for
truthful financial marketplaces.
Excitable Technicolor Boys
Frat Pack of Monster U. Characters with Infinity Tacks on signed t.Rutt shelf.
Edition of 6.
Glossary of New Terms
Throughout t.Rutt’s artwork, Infinity Tacks are used in
different ways. The Infinity Tacks invite us to guard against
the brazen tossing of objects, symbols, and intellectual
assumptions between vastly different disciplines or
landscapes. When Marcel Duchamp plucked a urinal from
the wall and tossed it onto a gallery floor he changed the
art landscape forever. When Black Scholes Merton grabbed
the tenets of Newtonian physics from the hard sciences and
threw them into the soft science of economics it radically
altered the financial landscape for decades. Seemingly like
Duchamp, t.Rutt believes that “context creates content”,
and vice versa. If we ignore the implications of where we
choose to throw things, we do so at our own peril.
As tools for hanging artwork, t.Rutt’s Infinity Tacks also
highlight the need to understand the assumptions from
which powerful financial theories are hanging. Once the
distortions of infinite time assumptions in Black Scholes
Merton were removed, t.Rutt believes that BSM’s
legitimacy would quickly fall to the floor. Throughout, t.Rutt
is encouraging us to put infinity in a more manageable and
less overwhelming location as we pursue knowledge.
This effort to move the infinity symbol from “above to below”
also reflects the mathematical journey from the numerator
to the denominator that t.Rutt sought for the infinity symbol.
t.Rutt believes that 1/∞ was the best possible expression of
how humans really experience time and how we reflect time
in financial prices.
The Little Tacker
Black sheer pouch, two Infinity Tacks, No Infinity Tax button.
$1,000
Academic Magicalism – Academic magicalism is the scientific cousin of the literary genre magical realism.
It is an artistic technique used by academic scientists to avoid the frustrations of holding oneself to the rigorous
standards that one demands of others. Academic magicalism is most common in “soft science” disciplines like
economics where “physics envy” often impairs judgment and compromises intellectual integrity.
De-Abstractionism – The use of art to bring tangibility back to a subject that has been overly and harmfully
abstracted.
Decomplexification – The removal of complexity where it is harmful, unnatural or false. Decomplexification
differs from simplification. Simplification simplifies something that was perceived by humans to be complex.
Decomplexification returns something to its natural, simpler state after a period during which it had been
erroneously complexified by humans.
Delinearization – Linear interpretations of history or the future are often terribly wrong and can lead to large
and costly mistakes. This is the case with financial modeling today where discounted cash flow methods create
distortions, especially over long time frames. Such linear distortions in finance are especially damaging and false
over an infinite time frame. With the cyclical notion of “disentropy” and the view that financial time is infinitely
short, t.Rutt’s artwork seeks to delinearize both financial modeling and the modern linear view of the human
experience.
Disentropy – The process or state of constantly re-organizing and reimagining what lies before us.
Disentropy is both the opposite of and a complement to entropy. In the human realm, entropy and disentropy
have a dialiectical relationship which can be seen as the constant cyclical flow of:
Entropy ==> Disentropy ==> Entropy ==> Disentropy . . . .
This is how humans engage with and seek to understand time. Related quote:
Just as the constant increase of entropy is the basic law of the universe, so it is the basic law of life to be ever more highly structured and to struggle against entropy. – Vaclav Havel
Disinfinite – In the realm of unbounded quantities, disinfinite differs from and is more practical than infinite.
Infinite quantities are unquantifiable, undiscoverable, and non-existent. Disinfinite quantities are unknown,
but are quantifiable, discoverable and existent, and often very small.
Empiricide – The killing of empirical evidence in the name of science. Empiricide is the enemy of science.
Related quote:
If the facts don’t fit the theory, change the facts. – Albert Einstein
Expirationless Option (XPO™) - Most financial assets like equities, currencies, commodities and the yield
curve have no expiration. They are “expirationless” and this is reflected in how we price them. Financial derivatives
like call options and put options are most often derived from the prices for expirationless assets. But the
traditionally expiring nature of options creates an impulse to price them over a fixed, linear time frame.
Markets for Expirationless Options that combine the “expirationless” time quality of the underlying asset with
the diverse qualities of options would unlock clues about the true nature of financial time. Does expirationless
mean “infinite?’ Or does expirationless mean “timeless?” Only through the trading of Expirationless Options
can financial markets establish rigorous price relationships between derivatives markets and cash markets.
Financial Trinity - A TIME button, a VOLATILITY button, and an Infinity Tack comprise t.Rutt’s “financial trinity.”
In the Black Scholes Merton world of options pricing, the variables for time and volatility have a very similar
impact on prices. But, any input for volatility is always time-dependent. In fact, the use of infinite time overpowers
every variable in the Black Scholes Merton Model. So, when the variable for time is set equal to infinity, how
should the input for volatility be treated? The Financial Trinity emphasizes the need for consistency and balance
in mathematical and scientific endeavors, especially when they are attempted in social fields like economics.
Infinity Tax – An embedded tax in financial prices created by the mistaken use of infinite time in the creation of
arbitrage pricing boundaries. Since the advent of the Black Scholes Merton Financial Regime in 1973, the Infinity
Tax results from improper and over-inflated hedge ratios for financial derivative instruments. The Infinity Tax has
been variously estimated to have over-priced derivative instruments by between $15 trillion and $75 trillion.
Price Discovery – Financial price discovery existed before the invasion of Newtonian physics into financial
economics in 1973. When complex models prescribe price parameters such as arbitrage boundaries they
impede healthy price discovery. First and foremost, price discovery embraces the importance of communication
between buyers and sellers in financial markets. The primary importance of price discovery must be
re-embraced and reinserted into financial markets. In fact, price discovery is a primary goal of the U. S.
Securities and Exchange Commission.
Rational Immediacy – Through an unrivaled use of high speed technology, modern traders create a human form
of disentropy that is beautifully expressed in healthy financial markets. Every millisecond of the day financial
markets create a form of “macro-connectedness” and “micro-centeredness” for financial prices. Through such
constantly refreshed price equilibriums, financial markets compulsively bring rational immediacy into financial
prices. Rational immediacy does not conflict with long-term planning or longer investment time horizons.
Rational immediacy simply articulates that it is only through our constant connection with the present and our
daily decisions to either reaffirm or change our view about the future that anything like the “long-run” is even
possible. For more, see “The Long-Run is Dead. Long live the Long-Run!” in the ebook INFINITY is the ENEMY.
Volatility-Doping – Volatility-doping is the systemic overuse of the financial substance known as volatility. This
was caused by the wildly profitable volatility-trafficking that the Black Scholes Merton Regime brought to Wall
Street and global financial markets. Volatility-doping is ubiquitous and it can be misused as either a stimulant or
a depressant. Its effects and distortions can be seen during periods of low volatility and periods of high
volatility. Volatility-doping can only be overcome after a truthful and rigorous understanding of financial time
is used to bring better balance to the financial landscape.
For more information please visit: infinityistheenemy.com
For questions about artwork: [email protected]
For questions about content & the ebook: [email protected]
The full ebook is available on Amazon.com or infinityistheenemy.com
This publication was sponsored by: Arb Tech LLC Your ally to survive and thrive in the post-Black Scholes Merton world.
Photo Credit: John Carlano
Cover image courtesy of Gordon Cheung.
Original painting: “Colliderscape 13” 2005. 29 in. x 59 in.
After years of confusion, deception, and pain, we have finally
entered the Duchampian moment for modern economics.

The Creation of a Financial Art Crisis

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