I used to think that owning your own house is the pinnacle of financial achievement. For a significant part of my life, I was an owner, but lately, my opinion changed.
When the facts change, I change my mind – what do you do, sir?John Maynyard Keynes
So, what else can you do, if you’re not owning? In very few words: you get access to.
This “access to” is an umbrella term, covering a very large area. It may be “renting”, if you’re talking about real estate (or a place to live), it may be “balancing a portfolio”, if you’re talking about financial and digital assets, or “developing”, if we’re talking about skills that can give you an edge in the market.
In any way, you’re not relaying on a fixed, owned asset.
The New Normal
The world that we live in has at least 3 main characteristics that are game changers. These are: algorithm-based social opinions, financial dissolution and under-the-skin surveillance.
I already wrote about algorithmic emotions, but if you’re not familiar with my view, I basically think that a large part of what we consider “ethos” today, is driven by algorithms. It’s not post-factum, in the sense that we’re not developing a certain opinion or view on a certain topic after something happened for sure, it’s ex-factum, in the sense that the facts are secondary, what drives the opinion is the algorithm for attention and visibility. The more visible a certain piece of information is, the more “real” and integrated it tends to be, regardless of how much the actual facts are reflecting it. This hunt for visibility, driven by the attention economy, is largely algorithm based now.
Financial dissolution is about a significant decoupling between money and fundamentals. A black swan event, like the Covid-19 pandemic, showed us how easy it is to print money without any fundamentals behind, just to “get over it”. Money is now a function of “wants”, not of “fair exchange”. We want more money, because we want more money, period. Add to this the horizontal democratisation of money, with the rise of crypto currencies, when we have more and more parallel financial ecosystems, and you get a pretty accurate image of financial dissolution.
The last, but not least, is under-the-skin surveillance. Again, induced by the Covid-19 black swan event, this type of surveillance opens up an entirely new area, one that was private and opaque until now. Your medical data is now part of your public identity and can influence the quality of your life, by access to jobs only if you’re vaccinated, or simply by a new cast system, in which some of your basic rights (like traveling) are ignored or granted based on your public medical records.
So, how these are shaping the “owning” and “access to”?
Cost Of Ownership
First, and most important, is the cost of ownership. Owning an asset, any asset, comes with an attached cost. If it’s a house, it’s maintenance and repairs, if it’s money, is the cost of storage (banks / multi-sig wallets), etc.
In the current world, these costs tend to be unpredictable.
Algorithmic information can very rapidly change the sentiment in the markets, decoupled from fundamentals. In easier words, rumors are more powerful now, and your asset value is much easier influenced by it. Also, under-the-skin surveillance can greatly impact the value of your asset if a certain black swan event hits again. Like, for instance, if the number of cases in a certain country goes up (and that’s an information gathered because of under-the-skin surveillance), travel will be restricted, and if you own real estate there, your asset will suffer.
It’s cheaper, in terms of this cost of ownership, to have access to illiquid assets, by holding a grip on more liquid assets. It’s more profitable, and not only financially, to rent, than to own.
Speed Of Execution
Another difference between owning and having access to is the speed of execution. The overall instability and the weight of regulations are lowering the window in which a certain asset can be acquired / sold. In other words, transferring an asset must be quicker and more effective.
This context favors more liquid assets, those that you usually have access to, rather than illiquid assets, or those that you own and carry over with you.
Even if we’re not talking about traditional assets, like real estate, this still holds true. It’s better to have access to a range of skills, than to have a vertical specialization, that takes decades. Your job may change without warning, and you need to execute the transition to the new one quite fast.
Obsoletion Of Assets
This one is probably the most visible, although not the most pervasive. It may take a while until the markets will understand it.
Obsoletion of assets is driven both by the speed of execution mentioned above, and by a host of new types of assets (mostly digital) appearing and developing very fast. In the time window of just 15 years, which is a second in terms of human history, we went from the sub-prime credit crisis that plunged the world into the 2008 crisis, to the new DeFi billionaires created by something which is mathematically driven, and no one really owns (decentralized).
So, it’s way better to have a lose grip on your assets (just having access to, and not owning) because today’s million may worth cents in a year or two.
The opposite is also true, what is now worth cents, can skyrocket tomorrow, but that’s the topic for another article.