This week my reading seems to have converged on a single theme again - the value of assets. Whether it is Bitcoin, the US dollar, News, SPACs, Silicon Valley private companies with huge valuations, or something else, asset values dominate.
Assets are interesting. Some are tangible; some are theoretical; some represent the present value of the future; some are treated as property; others like value stores.
Bitcoin is now, as I write, valued at $51,752. A few weeks ago, it was valued at less than half that. Rana Foroohar
, writing in The Financial Times,
writes - in my leading article - that:
“The rise in popularity of highly volatile cryptocurrencies such as bitcoin could simply be seen as a speculative sign of this US Federal Reserve-enabled froth. But it might better be interpreted as an early signal of a new world order in which the US and the dollar will play a less important role.”
The new world order in question has been coming for a long time. It is driven by an inevitability - the decline of great nations. There has never been an empire that did not decline. The reason? Capitalism. Like Covid 19, Capitalism is brutal when it comes to punishing the old. Those who allow their infrastructure to age and fail to invest in their economies’ rebirth are destined to be out-competed by newer entrants with modern techniques for extraction, production, and distribution. The USA had its peak after World War Two. China, India, Indonesia, Brazil, Africa (especially Nigeria) are at the start of their growth. Roughly where the USA was in the 1920s. The world order reflects the past, with the US dollar as the currency of trade and reserves. But that cannot last.
A second trend compounds this built-in obsolescence. Technology has globalized everything, and money is next on the list. If America’s changing world role did not already challenge the dollar, it would be challenged by the rise of digital money and digital stores of value.
Most commentators expect Bitcoin to double from here and rapidly. I suspect they are right. I do not own Bitcoin myself, but I do own shares in GBTC, a proxy for Bitcoin. They are up 316% as of today since I bought them. The dollar has been flat to down in the same time period.
So assets are important. The other discussions this week focus on the value of news. Google has agreed to pay News Corp for its news; Facebook has refused and is now blocking news in Australia, where new laws do not allow it to show news without payment. I fear News Corp and Google are on the wrong side of history here. Facebook’s approach - to show the value it delivers to news organizations in Australia (roughly AU$400 m in 2020) is different:
“In fact, and as we have made clear to the Australian government for many months, the value exchange between Facebook and publishers runs in favor of the publishers — which is the reverse of what the legislation would require the arbitrator to assume. Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million. For Facebook, the business gain from news is minimal. News makes up less than 4% of the content people see in their News Feed…[This legislation] seeks to penalise Facebook for content it didn’t take or ask for.”
Ben Thompson takes the Google and FaceBook approaches apart in the article included below.
My take, beyond the above, is that assets reflect their real value to people. It is rare for the value of an asset to diverge far from that. America is in decline, as is the “news”. SPACs are valuable because of their prospects, as is Clubhouse. And UI Path, this week’s asset of the week, or as we call it “Startup of the Week”, delivers 222,000% gain for its early investors because it built a massive business, very fast, using artificial intelligence in place of humans to perform repetitive enterprise tasks.
Understanding assets is key to understanding the future and how it differs from the past.