that I call him “Ralph.”
My parents did trust me in the way he described. I accompanied them on most of their buying trips to auctions and shows, and I regularly crawled around under tables, peered behind desks, turned furniture upside-down, rummaged through boxes of old books, went into attics and basements and barns with a flashlight, and so forth. Every once in a while I would spot something wonderful that everyone else, including my parents, had missed. That was partly because my parents had taught me extremely well – and partly because I was patient.
I think my youthful enthusiasm for the hunt and chase, the intellectual puzzle of connoisseurship, must have appealed to Ralph, a kindred spirit. I had no qualms about going down on my hands and knees in dust or dirt to distinguish fake from real, or about going through enormous piles of old papers in search of one document of historical importance, or about turning the bottom of a drawer back and forth in the sunlight for ten minutes until I could finally read a feather-faint pencil inscription that my intuition had told me could be the cabinetmaker’s signature.
I have no recollection of what price Ralph paid us, but I know my only motivation would have been to match the rabbit with its rightful owner at a price warranted by its quality. I would simply have said what I thought it was worth; if he was worthy of owning it, then he would accept the price – as he did. And he is right that my dad wasn’t using me as a kind of stooge; we often would set prices in this kind of informal discussion, right in front of the customers. Warren Buffett does something similar when he buys businesses: He asks the seller to name a price. If it’s acceptable, Mr. Buffett buys; if not, he politely declines to negotiate and walks away. While my father did like to haggle when he bought, he refused to haggle when he sold. It was as if, once he owned something rare and beautiful, it was beneath the object’s dignity for him to negotiate over it.1
1. I interviewed Ralph Esmerian briefly over the phone this week (December, 2016); he was released in March after serving four-and-a-half years in federal prison. He told me the price I gave him for the rabbit was $3,500 (or approximately $20,000 today, adjusted for inflation). “That came right out of your mouth,” he said. “You were staring at me. You didn’t look to either of your parents for approval. I had never seen anything like it, this little kid acting that way.”
The rabbit was one of four carousel figures my parents had bought for a total of $750, so we earned a good return, although that wasn’t the point. We had bought these magnificent sculptures – the others were two snorting, rearing horses and a cat with a fish in his mouth and his tail in the air – from the manager of the town dump in Salem, N.Y., who ran a junkyard down the road from the dump. They were propped against an exterior wall of his shed, exposed to the sun and rain and snow. We felt as if we had salvaged them from the brink of oblivion. When part of Ralph’s collection of American folk art was sold at Sotheby’s in 2014 to satisfy creditors in his bankruptcy, David Schorsch, a leading dealer in Woodbury, Conn., paid $106,250 for our carousel rabbit. David was kind enough to send an email letting me know that he had bought it on behalf of a private collector and that it would have “a wonderful home in a great collection of folk art.”
We were all fond of that rabbit, partly because of its spectacular vigor as a sculpture but also because of its radiant condition, still in all its original pigments and with most of its patina intact. You hardly needed to imagine it on a carousel to picture it leaping up and down; you could see the wooden muscles coiled to spring under the wooden fur, and the joy on its face as it prepared its wooden leap. I still remember sitting on it and imagining what it would be like to be a boy in the 1890s escaping to the carousel for a quick spin on this magnificent sculpture – which did evoke the rabbit in Alice in Wonderland, just as Ralph says.
Our adventure with the rabbit wasn’t unusual. In the 1970s – before the duopoly of Sotheby’s and Christie’s had grown to dominate the art world, before Antiques Roadshow became a public-television hit, and before Google put a universe of knowledge at everyone’s fingertips – the market for art and antiques was extraordinarily inefficient. Prices could be, and often were, out of whack by several orders of magnitude.
In financial markets, information asymmetry often favors the sellers; those who have held an investment have access to inside knowledge and may be far better informed than those who are interested in buying it. In the art and antiques business of the 1970s, however, that information asymmetry was inverted: Buyers could often know far more than the sellers.
I thus learned a lesson, as a child, that has never left me and that has stood me well when, as an adult, I sought to understand the financial markets:
Things are not what they seem: Much of what most people think is treasure is, in fact, trash. And much of what they think is trash is, in fact, treasure.
To tell the difference, art dealers and value investors alike must develop what the great investor Michael Steinhardt has called variant perception. You have to know much more than most of the other people in the market, and that knowledge becomes most valuable when it is at odds with the common perception of the other participants.
When I was a kid, that variant perception was based on vast amounts of study and preparation, along with stubborn – almost ornery – patience.
Realizing that rare books were chronically undervalued and easily overlooked, I spent a few days one summer, probably around the age of 13, going through our encyclopedia and writing down the dates when America’s greatest writers first published their works. Author by author, one to an index card, I listed all their major books by date (some, like Mark Twain, required more than one card). Then I memorized all the dates, flash-card style.
That way, I knew, I would be able to spot first editions almost instantaneously. In the 19th century, book publishers typically didn’t designate that a book was a first edition on the title or copyright page; but if you knew which year great books were published in, you could work your way through a crate full of dusty old volumes at remarkable speed. Knowing which ones didn’t matter enabled you to focus your attention on those that did.
I did the same thing with paintings in art-reference books and at museums, memorizing dates and styles and compositions until I could see a landscape or portrait from the other side of the room and instantly identify the artist and, within five or ten years, when it was painted.
Speed, in an inefficient market, is important. An enormous value can exist, because the market is inefficient; but it might not persist, because its very enormity may call the value to someone else’s attention. Whoever is first to appraise it correctly wins.
So my parents taught me to move through a display booth, a room, a house – even a lawn strewn with items for sale – at high intensity. You rake your eyes everywhere: from floor to ceiling, from one end of the area to the other. But you don’t look at one object at a time; that would take forever, and devil take the hindmost.
Instead, you train your eye to take in whole groups of objects at once: everything on this table, all the objects on that wall, that cluster of furniture, the entire contents of this cabinet. You are searching for the incongruous, the oddball, the thing that doesn’t belong there – the mahogany chair at the oak table, the silver porringer amid the modern dishware, the oil painting or watercolor tucked in among the photographs or prints or posters, the hand-woven rug alongside the rolls of synthetic carpeting. My parents also gave me prompt and unambiguous feedback – one of the keys to developing expert intuitions.
Only much later in life did I learn that similar training is the basis for many forms of pattern recognition by experts in a variety of fields.
As Herbert Simon, the great polymath and Nobel Laureate in economics, wrote:
The situation has provided a cue;
