derivative

“Derivative” has a bunch of meanings.

If you’re an artist and your work is derivative, it’s basically a cheap imitation of some older, better piece of art. If you’re a mathematician, a derivative tells you how a function (a very fancy math problem) will change if you feed different numbers into it.

If you’re an investor, a derivative is a bet.

It’s not quite like betting on a roulette wheel or on a roll of the dice. When you gamble with cards or wheels or dice, you can calculate your exact odds of winning the bet. You can’t do the same for derivatives because there are too many things you don’t know about the game.

I don’t know for sure, but I suspect people might think differently about the wealth-creating class if, instead of saying, “I am going to invest your money in derivatives markets,” people said, “I am going to bet your money on what I think the price of corn will be six months from now.”