Literary Alchemy

I was making love* to the wife** last night when I suddenly experienced an epiphany regarding the true worth of my novel A Half Life of One. By the time I rolled off onto my back I had completely figured out how the book is going to make me a fortune. Well, I'm a quick thinker - which is what makes me a great entrepreneur, as well as a lousy lover.

As I lay there in the half-darkness, red-faced and panting, my excitement mounted and my nerve-ends started quivering..

At that moment my wife opened her eyes. "Oh, I'm so sorry, darling," she mumbled drowsily, "I thought you had finished."

I ignored her. All I could think about was the new-found wealth that had so unexpectedly come within my grasp.

Here's how it is going to work. You will recall that - having failed to find a traditional publisher - I intend to publish and distribute 100 copies of A Half Life of One for free. Or rather, they'll be free at the point of use. This little exercise in artistic generosity is actually going to cost me around £100. Except that it isn't any more.

All because of the scarcity value of the novel. In strictly limiting the print run to 100 I have inadvertently put a value on the book. As all economists know, when a commodity is in short or limited supply it automatically becomes valuable (think of the price of oil going up as supply fails to keep pace with demand). So, even if as a work of art A Half Life is worthless (a statement which in itself is highly contentious), as a commodity it has value simply because of its scarcity.

Of course the real challenge is how to convert this nominal value into actual money. The kind you can spend in Monte Carlo or Biarritz. It turns out that the answer is simpler than you might expect. What I'm going to do to unlock this hidden value it to set up an Online Exchange allowing owners of A Half Life to trade their copies, both amongst themselves, and to envious outside collectors. This exchange will replicate the activities undertaken by shareholders on the London Stock Exchange or on Wall Street, or the DAX, with real-time prices, online screens, broker recommendations etc. The internet makes this possible.

So how will these activities make me money? Simple. I'll take a small commission every time the book changes hands. As a result, suddenly I've created value where none existed before. That's what business is all about. Clever, huh?

But, I hear you say, there are only a hundred copies of A Half Life in existence. If every copy is bought and sold once a year on average (and many people will obviously be reluctant to part with this literary masterpiece) that would amount to one hundred trades a year at most. At around 5% of the selling price the commission on these 100 trades will hardly keep me in Armani suits.

That's true. But here comes the really clever bit. As well as the primary trading platform I intend to set up a Derivatives Exchange. Out in the world of Big Finance, derivatives are where the serious money is made. You don't know what a derivative is? It's simple. Basically, it is the right - but not the obligation - to buy or sell a commodity even though you don't actually own it. Derivatives, or options as they are more commonly called, come in two basic varieties - puts and calls. If you think the value of your copy of A Half Life is going to go up in the next few months you would buy a call. If, on the other hand, you think it is going to go down (it could happen: if I signed a major publishing deal with a mainstream publisher for example) you would buy a put. Indeed, you could execute what's called a straddle and buy both. Then you would make money whether A Half Life went up or down in value, which is amazing, but true. Although you wouldn't if volatility was low and the price stayed the same. Follow me? Don't worry if you don't understand. Most people who play the markets don't know what they're doing either.

The point is, even though there will be only one hundred copies of A Half Life of One in existence there will be thousands of investors buying and selling millions of puts and calls every day even though they'll never own the book, let alone read it. The same thing happens with coffee or oil or pork bellies. No one expects a hundred pork bellies to be delivered in a van to their back door just because they've bought options in this commodity believing the price is going to fall next month.

As I said, you don't have to understand the mechanics of this - although it's exactly the same model employed on the Chicago Mercantile Exchange where pork bellies really are traded. The point is, in all of these financial powerhouses the derivatives markets dwarf the main stock exchanges which trade the commodities upon which derivatives are based. It may sound like Alice in Wonderland but believe me fortunes are made and lost every day in these markets.

So, even though there's only 100 copies of A Half Life in existences we can write thousands of different options, forward contracts and swap agreements based on these few, precious copies. That's called leverage. And because I'll own the exchange on which these transactions will take place I'll take a tiny commission every time a trade occurs. I've done some simple calculations based on moderate volatility and I reckon I should make around half a million pounds profit in the first year, increasing exponentially as interest in the book grows with the passing years.

Gee. The idea is so beautiful I love it. And to think it might not have happened if the book had been accepted and published by a regular publisher. Such an occurrence would have completely destroyed the rarity value upon which my future wealth depends.

In other words, becoming a successful, best-selling, published author would have ended up costing me a fortune. Guys, entirely thanks to my wife's amorous nature, I've had one hell of a lucky escape.

*A euphemism

**So that no-one reaches the wrong conclusion should read "my wife".