2014-03-27 – My law school securities professor told a story about an executive who bought six rare cans of sardines for $15,000. The executive’s son, curious about the purchase, took one of the cans to have it for lunch. The son opened the can and was overcome by the smell that was released. Despite the smell, the son was determined to taste the sardines. Just a tiny lick. It was the worst thing imaginable.

The son went to his father to confess his sin, but to tell him that he was defrauded. “Father,” he said, “you were cheated! Those sardines are worse than inedible! You should demand your money back.”

The father laughed. “Son,” he said, “those are not eating-sardines, they are trading-sardines.”

Sardines are not the only things that are traded at prices that are totally unrelated to value.

Sotheby’s is auctioning off a Stradivarius viola. The viola is expected to bring in bids of $45 million. This makes no sense to me.

A quick search on the internet finds a top price of $2,600 for a viola. I imagine you can find them for higher. But these prices are such a far-cry from $45 million. I’m sure the Stradivarius is better than the $2,600 viola, but I have a really hard time seeing it as 1,730,769 percent better.

So what is driving a price like this? It’s the prospect of selling it next time for even more. This is a trader’s game and has nothing to do with art.

A number of years ago, US copyright laws were changed to lengthen the period that a copyright is good for. Now, the vast majority of copyrights for writing or music or art are valueless from the moment the work is launched into the world. There was no reason to lengthen the period of a copyright for these works.

A small number of works do make it. Generally, the artist is paid a little, and the company that buys the rights gains big time if the work becomes a hit. Then the rights are sold from company to company and the price is bid up and up.

And the artist gets none of that. (Except in the rare case of superstars who have the power to negotiate better deals.)

The work doesn’t get better and better. The work is the work. It gets neither better nor worse.

But it doesn’t even matter. The sardines were terrible.