Originally published September 2021.
The value of a creation is only that which we give it.
Millions of people across our planet fervently believe in the righteousness of their beliefs. Different gods, belief systems, what is forbidden, what allowed, what is a sin and what is an aberration – so many differences, yet such a strong power of belief. Is everyone right, is everyone wrong or is there some semblance of truth in the beliefs of all?
Throughout the course of history, the absolute certainty of a future outcome has left many penniless and worse, seen families devastated by tragedy and the global economy reach an unforeseen nadir. In most cases, if people were isolated and given a set of circumstances, they would take a measured view and base a decision on the evidence at hand. In a situation where there are outside influences, people tend to be more easily thrown off course.
There have been a number of times where different societies across different ages were convinced the end of the world was nigh. Obviously, they’ve so far been wrong, however I accept (and indeed, confidently predict) that someone will undoubtably call it correctly at some stage in the next five billion years or so. This will be more a case of scientific judgement based on the hydrogen levels of the sun rather than because an earth-born individual proclaimed it to be so.
“The more esoteric investment opportunity beckons with its virtual flashing lights bombarding our brains with the terror of missing out”
We’ve experienced great financial melodramas play out and, because of the speed of communication now, we will see this on a far more frequent basis. The South Sea Bubble, the Mississippi Scheme, the Dutch Tulip tales all live long in the memory as a monument to the ‘greater fool’ theory. We’re in a period where there is circa $5.4t in personal savings accounts as a result of the pandemic and concurrent lack of opportunity to spend on travel, dining out, big-ticket item purchases, etc. People and businesses are looking for ‘different’ places to invest their funds. In some cases this is into environmentally sustainable investments and is to be applauded for many reasons. In other cases, the more esoteric investment opportunity beckons with its virtual flashing lights bombarding our brains with the terror of missing out.
Even the investment behemoths at Berkshire Hathaway rue the fact they didn’t take the opportunity to invest in Amazon and Google at an early stage. We’ve seen this FOMO, fear of missing out, result in some interesting movements in some relatively new, little known investment classes. The surge in crypto currencies may well be the next huge opportunity many are yet to embrace. The fact that an ‘asset’ can leap or fall by a third due to a tweet from an individual or a comment on a podcast is extraordinary and in most financial markets would be regulated. The sales of an NFT, non-fungible token, piece of art for $69.3m recently gave some people their first glimpse into a whole new world. The sale of Jack Dorsey’s first tweet ‘just setting up my twttr’ saw in excess of $2.9m exchange virtual hands.
“We have long since passed the point where the physical material costs indicate the relative value of an item”
The very notion of a greater fool – ie, the thought that there will be someone willing to pay more than I paid at some point in the future – is borne out across the history of art. In this sense, the word fool could easily be replaced by investor: recently the Picasso painting Woman Sitting Near a Window (Marie-Therese) sold for in excess of $100m when fees were included, the same painting having sold for $45m only eight years ago. Will the painting be worth $200m in 10 years’ time or will the market fall and the aforementioned $45m seem to be an ambitious price?
The challenge is that just because someone believes something to be true at a particular point in time does not mean it will remain true in the future. We have long since passed the point where the physical material costs indicate the relative value of an item. Anything that is created out of something else has value added by the creativity of the creator – whether that be an artist, architect, baker, builder and, of course, candlestick maker. Whether our views of the more ethereal investments will be seen as delusional or genius only time will tell.
The greater fool (or investor, depending on the situation) narrative still holds true. There may be a day when you are the person left holding, or not, the physical or virtual entity you wish to resell and find you are the greatest fool.
