Jon Meyer

My talk at the Shortness Symposium at the Tate Modern went well. I had to restrict it to seven minutes long, which was a challenge!

I started by conducting a financial transaction with the audience. I had written a small program which displayed the market exchange rate between UK pounds and US dollars, fluctuating over time (I explained it was a simulated figure based on data from the last three months, replayed much faster). I asked for a volunteer in the audience who wanted to buy two dollars off of me, paying in pounds at the going exchange rate. A woman in the audience agreed. When she said "now" I wrote down the exchange rate. Then I observed that I didn't actually have any dollars on me. My next task was to find a source for her dollars. I asked for a volunteer in the audience who happened to have a couple of dollars they were prepared to sell at the going rate. Fortunately, Paul Miller (aka DJ Spooky) raised his hand (I knew Paul was present, and hoped he might volunteer, but it wasn't prearranged and I was a bit nervous at that point!) When I completed my purchase the exchange rate had fallen. The result was that I sold two dollars at one rate but purchased them a little later when the exchange rate had fallen a little - making myself a 3 pence profit.

Selling something you don't own and purchasing it later is a strategy in finance known as a "naked short". It is one of several Short selling practices.

A short is the opposite of a long. In a long investment, if you invest a pound in a company, the worst that happens is the company goes bust and you lose your pound. If the company does well, the most your pound can increase is limitless.

Shorts work the other way. If you short a pound, say the company plummets and has a bake sale - the best you can do is to obtain the thing you shorted for free - so the most you can make is a pound. But if you short a company and it suddenly has a surge, at the time you complete the short, you may end up owing a lot. In a short the amount you can owe is potentially limitless. Investors have been driven into bankruptcy by shorting. So shorting carries risk. In addition, shorting creates systemic risk - if too many traders short a company, it can drive the company value downwards, even into collapse, with knock-on consequences.

These risks perhaps explain the poor reputation of shorting. According to Wikipedia, the first trader to perform a short, in the 1600s, was also the first trader banned from the market. The 1929s crash was blamed on shorts. A regulation called the uptick rule was introduced to restrict shorts in 1929. (President Bush cancelled the uptick regulation).

In summary, shorting is a bet that something will decrease in value. It is associated with high risk.

What I find fascinating about finance is that, despite its cold logical instrumentality, it contains these moments of innovation, really models of thinking. The short is one such model - a counter-intuitive way to turn a loss into a profit. As an artist, I wonder how these models translate in art.

We can immediately say nearly all art is long. It is invested in its own value and importance. The assumption is that, over time, the value and importance of the artwork increase – How else will it end up in a museum? Which of course is the ultimate goal. Additionally, to survive, artists must sell work. Few artists can afford to see prices pushed down. How could an artist even leverage devaluation?

The short is the epitome of the antisocial. It is a bet against the system, the desire to see things go down. Put this way, we could say the logic of shorting is the logic of iconoclasm. It is the impulse to break things apart and create something new from the pieces. In 1919, the artist Kazimir Malevich talked about burning the museums, burning the Rubens, and creating new ideas from the ashes. So I want to suggest that the short is to finance what the Avante-garde is to art. It is the attempt to build something in the desert, to produce value through devaluation. It is this attempt which places shorting (or the Avante-garde) at the center as a destabilizing force.

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By Jon Meyer http://jon-meyer.blogspot.com/2009/06/shortness.html