Good Deal, Bad Deal?

Every literate American is familiar with the story of how the Indians sold Manhattan Island for $24. It has been told and retold ad nauseam by otherwise rational writers who never tire of celebrating it as the most advantageous (or disastrous, as the case might be) real estate deal in history. Come on folks, get serious!

To begin with, land deals have been made for thousands of years and there has ever been people who were ignorant of the true value of what they bought or sold. This is not to say that the judgment of latter-day observers, equipped with the benefit of hindsight, is necessarily valid.

When Peter Minuit in 1626 bought the roughly 14,000 acres that constitute Manhattan for $24 worth of axes and trinkets, that was probably all that the place was worth at that time. The anonymous Indian chief who sold the island did better than millions of his race who got nothing for their land. Also, it is irrational to compare the value of real estate in the skyscraper-studded metropolis of our time with the prices for wilderness prevailing in 1626. Had the Indian invested his $24 at 7.5 percent per annum, his heirs could buy the island back, pay off the national debt, and still be the richest people on the face of the earth. It is also true that a good deal, just like beauty, is in the eye of the beholder, and what is worth good money to one person may not be worth a tinker’s dam to another.

History, is full of some spectacular I will refrain from calling them good or bad land deals. It all started with Adam who lost, I may as well call it sold, the Garden of Eden for an apple worth twenty cents in today’s supermarket. Unfortunately, the Bible fails to give an acreage figure for that place, and so the relative merit of the transaction can not be evaluated. Also unspecified is the extent of Isaac’s real estate, which was attached to the birthright that his first-born son Esau sold to his brother Jacob for a bowl of lentil soup. Although Esau knew, or should have known, what he was selling, he didn’t value it enough to extract a higher price.

More ignorant of the true magnitude of the deal was a fellow named Sors Hariezon, a gold prospector of Witwatersrand in the Transvaal. In November of 1886 Sors sold the claim he had on the farm of Gert Oosterhuizen for $20. In the 100 years since, the mines on and adjacent to Sor’s claim produced in excess of 30 million ounces of gold per year, two thirds of the western world’s supply.

Land sales or purchases by governments are made from geopolitical considerations and have little if anything to do with business acumen. But I can’t resist the temptation to comment on the real estate purchases the United States has made from France, Mexico and Russia. One rarely stops to think that none of these countries had paid a dime for the land, and that hanging on to it would have been a tremendous burden to their national treasuries. The $15,000,000 paid for the Louisiana Purchase strikes me as a waste of money. I am convinced that by impolitely pointing out a few facts we could have obtained the land for one dollar and other considerations. Spain was so eager to get rid of the place that they traded it to Napoleon for Tuscany (which they never got), and France ruled Louisiana for all of 20 days (from Nov. 30 to Dec. 20, 1803) even though on paper they had it for 14 months.

A little closer to home, in 1858 Guadalupe Miranda sold his 1/2 interest in the Maxwell grant to Lucien B. Maxwell for $2,745ù about a penny for every six acresùwhich was almost exactly what the Indian chief had received for Manhattan Island 232 years earlier. Over the next 10 years Maxwell acquired all outstanding rights in the 1.7- million-acre grant from all the heirs of the Beaubien family for a total of less than$50,000 about 3 cents an acre. He sold in 1870 for $1,350,000. Just as had happened in Manhattan, with proper promotion, the price was going up, even though Maxwell had help from Congress, thanks to the stupid practice of confirming land grants prior to surveying them and determining their size.

Padre Thomas Aquinas Hayes did even better. In 1879 he purchased the Ramon Vigil grant (31,210 acres at Bandelier, New Mexico) for $4,000. Ramon Vigil, the seller of the land, had bought the phony grant for only $20 and a few sheep and oxen in the early 1850s and probably thought that he had made a good profit. But within a month Hayes sold it for four times that figure, only to purchase it later for the same amount. This little ploy allowed him to jack up the price and he was able to sell the grant again in 1884 for $100,000 a profit of 2,400 percent in five years. Not only did the good padre walk away with this record profit (for land grants in New Mexico), but he also left the new owners with two expensive lawsuits involving the grant, causing them to lose their pants on the deal.

History is silent on the use to which the Indian put the tools and trinkets he bartered for Manhattan Island. Almost certainly he did not grasp the European concept of buying and selling the land beneath our feet. This consideration alone should prevent us from calling the transaction a sale. Presumably, he needed a sharp axe more than whatever it was he thought he was selling. Good deal? Bad deal?