Bear Stearns, Ross Perot, Underground Minerals, And That Honus Wagner Baseball Card

My weekend reading, for those of you interested:

#1. The Fall of Bear Stearns— It already seems like a lifetime ago, but for those of you who want to turn back the clock and read about the collapse of Bear Stearns in real-time, check out this August 2008 piece from vanity fair. Here’s the kind of satire you can expect from the piece:

“At Phi Kappa Wall Street, most of the frat boys are instantly recognizable. There’s the big, backslapping Irishman, Merrill Lynch, the humorless grind, Goldman Sachs, and the straitlaced rich kid, Morgan Stanley. And then, off in the corner, wearing its beat-up leather jacket and nursing a cigarette, was the tough-guy loner, scrawny Bear Stearns, who disdained secret handshakes and towel snapping in favor of an extended middle finger toward pretty much everyone. Bear was bridge-and-tunnel and proud of it. Since the days when the Goldmans and Morgans cared mostly about hiring young men from the best families and schools, “the Bear,” as old-timers still call it, cared about one thing and one thing only: making money. Brooklyn, Queens, or Poughkeepsie; City College, Hofstra, or Ohio State; Jew or Gentile—it didn’t matter where you came from; if you could make money on the trading floor, Bear Stearns was the place for you. Its longtime chairman Alan “Ace” Greenberg even coined a name for his motley hires: P.S.D.’s, for poor, smart, and a deep desire to get rich.”

#2. The Ross Perot You Don’t Know— Stonewall Jackson. William Tecumseh Sherman. Robert E. Lee. George Patton. Douglas MacArthur. H. Ross Perot? When you look at the way Ross Perot ran his Texas empire back in the day, you would think he was a military general with a displaced soul that got stuck in corporate America. A passage worth sharing: “Perot’s EDS was a tight ship, captained by people as smart and tough as he. In accordance with a written dress code, his male employees wore dark suits, white shirts, and subdued facial hair. But beneath the corporate gloss was a strict, sometimes nasty meritocracy. Employees who won a critical bidding war with IBM received cash and stock bonuses “while they were still sweating,” as Perot put it. The less successful were expelled with equal speed.”

#3. Underground Minerals Sold From Houses—In the United States, there were two guiding principles throughout the 19th and 20th centuries that formed the bedrock of American law. In the arena of property, it was the notion that someone who bought a house owned it absolutely, including the air above his lawn and any minerals below it. With contract law, the guiding principle was that two competent adults have the authority to exchange goods, land, and services to which they voluntarily consent. Those rights have weakened considerably in recent decades—rise of eminent domain, subdivision covenants, the rise of “unconscionability doctrines” and so on in contract law, but the principles still remain very strong today.

With that in mind, we have a rising dilemma showing up in new subdivision construction: the builders have been including clauses that reserve for themselves the rights to dig up any minerals found in the ground and reap the profits for themselves. Obviously, this is a heck of an annoyance for people who presume that buying a house with acreage means that, well, they own the full acreage. You can imagine what it would be like buying a nice $400,000 home in Dallas to find that the construction gang that sold you the place is bringing some Valero and Marathon wells to cause a ruckus and collect the $25,000 checks from extracting the goo that is located ON YOUR PROPERTY.

My guess as to how this will get resolved in the long run? Although it will probably vary state by state, I’d bet the emerging rule would be something like this: anything that seems “sneaky” or “coerced” on the part of the contractors will get shut down. If you put it on page 38 of the contract that you’re waiving your mineral rights, that won’t cut it. Nor will it work if they mention it and you’re entirely deprived of a choice. So how could the develops get it into the contract? The surefire way is to make the term clear, and given the homeowners an effective choice. If the offer becomes, “You can buy this home for $400,000 and give up your mineral rights, or you can pay $450,000 for the house and retain your mineral rights.” The hard cases to figure out will be the ones where the buyer has semi-notice that the developer intends to retain rights on the land, and the developer contends that they sold the home at a lower price because they were reserving the rights for themselves. Cases in that blurry area will probably be, in the words of Robert Frost, “chances to decide which side has the better lawyer.”

#4. The History Of That Honus Wagner Baseball Card – For those of you curious as to how that early 1900s Honus Wagner baseball card ended up becoming the “Mona Lisa” of the card industry, this is a wonderfully detailed article that tells you of the card’s magical history. Essentially, you had two important forces working together: on one hand, Wagner was a legendary ballplayer (only Ty Cobb regularly hit for a higher batting average, although some people give the all-around nod to Wagner because they subtract points from Cobb for his malicious nature towards women and men, white people and minorities, Catholics and non-Catholics, and old, middle-aged, and young folks). Wagner had 3,420 hits, 252 triples, 733 stolen bases, oh, and a 0.328 batting average with a .391 on-base percentage. That’s nuts; over his twenty-year career, you’d see him find a way on base an average of twice per game. Unreal.

But the other element that makes this card so valuable is the scarcity principle; in either 1908 or 1909, he notified the American Tobacco company that he no longer wanted his image used on their trading cards. At first, American Tobacco did not comply with the wish, but then, after Wagner threatened litigation, they stopped circulating his card. Wagner’s heirs claim that he objected to the American Tobacco cards on principle, not wanting children to take up the puffing habit. Critics of this explanation, however, point out that Wagner himself smoked and chewed tobacco, and may have sent the cease-and-desist letter because American Tobacco refused to pay him enough fees for the right to use his image. Either way, the article is a great look into the blossoming value of this card.

It first sold for $50 in 1930, then $25,000 in 1985, then $110,000 in 1987, had hit the half-million mark during its rapid trading in the 1990s, and was worth $2.7 million as of 2007. It would be nice to have a couple dozen of those sitting in a shoebox in the attic.

Note: The video included above is an interesting take on the Honus Wagner card. The picture above looks really old-timey in a “gives off nursing home vibes” kind of way, but it’s actually an ESPN 30-by-30 production.