Speak with any finance expert and they’ll tell you the key to long-term wealth is asset accumulation.
This is for two reasons. First, assets earn you money while you sleep and, second, they usually appreciate the longer you hold on to them.
A house will be worth more in twenty years than it is today if past performance is anything to go by. Likewise, a bar of gold will be too.
Our finance expert should also tell you to invest in assets that pay you income, like a business, rental property or a dividend stock.
Owning an income-paying asset usually requires an upfront investment. To own a piece of a business you either need capital to buy into it or time and sweat equity to build it. Likewise, owning rental property requires either a large cash lump sum or a long-term mortgage.
In other words, acquiring physical assets requires time, effort and/or capital.
We’re in a period of accelerated change and are deeply entrenched in the digital revolution which started in the 1990s and has many decades more to play out.
We’re in the era of what MicroStrategy CEO, Michael Saylor, calls the “dematerialization of industries.” This is where individual products and entire industries are becoming digitised largely because of the iPhone.
Dematerialization is nothing new. The idea of buying a CD to listen to music or a DVD to watch a film seems ridiculous today. And, of course, no-one has sent a letter in decades.
Dematerialization is making intangible digital assets a new investing opportunity. The internet is creating new asset classes that perhaps can benefit everybody not just the wealthy.
The current bitcoin narrative is it is the digital version of gold. This is because both gold and bitcoin share similar intangible properties. Tangibly they couldn’t be further apart since gold is a lump of metal and bitcoin is lines of code. Intangibly they share qualities such as scarcity and fungibility which help to increase their value.
Michael Saylor believes bitcoin is a better asset than gold and has put his money where his mouth is. Earlier this year, MicroStrategy bought $425 million worth of bitcoin with its cash reserves. The reason being is that the cash was losing value each year – especially in the Covid era of quantitive easing – and bitcoin is proving to be an excellent store of wealth.
This meme video explains his reasons well.
Saylor obviously understands the long-term value of holding digital assets. MicroStrategy owns several premium domain names which the company has held for many years. Some of these include stategy.com, glory.com and speaker.com among others. Last year the company sold voice.com for a cool $30 million.
You don’t have to own a premium domain name to consider it an asset. For example, take my site’s URL. Given my name is the actual URL, chances are it will only have value to me and those who share the same name as me. Nevertheless, a digital asset it is.
It’s not just TLDs that have value also. Social media handles and names can go for thousands on the black market. Social networks such as Twitter does not permit the trading of its usernames but that doesn’t mean it doesn’t happen.
Domain names are one of the oldest digital assets and despite the increase of new domain extensions (.co, .biz etc) and country-level domains (.co.uk, .de etc) they continue to hold and increase their value today.
Blue checkmarks in social media are the ultimate status symbol. It signifies you’re important enough to be verified by the social network you’re on. Twitter, Instagram, Facebook and TikTok all provide blue checkmark verification to celebrities and VIPs to prove who they say they are.
Some verified accounts get certain privileges. As an example, Instagram allows blue checkmarks to do ‘swipe up’ in their stories but these extra features are only secondary to the prestige that comes with having a blue checkmark next to your name.
A blue checkmark is nothing but a few lines of code but they signal that the wearer is someone important. While the social networks don’t sell them there’s no doubt if you were to purchase one on the black market you would pay a substantial amount for it.
Digital assets that enhance one’s status like blue checkmarks were originally sought after only by young people with no material real world wealth. Now that the internet is integral to how we live our lives they are sought after by the rich, poor, young and old alike.
To learn more about social media and status read Eugene Wei’s brilliant long-form Status as a Service piece. It’s the best article on social media and psychology I’ve ever read.
Digital art is the next big bet according to Anthony Pompliano. He believes it will disrupt the $65 billion traditional art market.
“Similar to how Bitcoin is superior to gold in almost every way, digital art is superior to traditional art in almost every way also. A traditional piece of art is static and sits on a wall. There is no motion. The art does not change unless someone takes the art off the wall and hangs a different piece. Physical art is hard to move around the world, it can be easily damaged, and there is difficulty in proving what is authentic and what is not.
“Digital art is the next evolution of art. Each piece can incorporate complex movement and motion into the art. A single screen on a wall can periodically cycle through different pieces of art at the predetermined direction of the homeowner or art collector. The digital art can be sent to anyone in the world with a few clicks of a button, it is immune from damage, and authenticity and provenance is transparently available for anyone to verify. Quite literally, digital art has significant advantages over traditional art in the same way that digital news has advantages over physical newspapers.”The Innovators Dinner. A commissioned piece of digital art and no this is not the original
In a world where media can be replicated an infinite amount of times, digital art aims to retain its scarcity and originality (and thus value) by having the original signed using a blockchain. This means anyone can replicate a piece of digital art but only one person can sign and verify the original.
You could say this shares similarities to a painting. There are thousands of Mona Lisas on the walls of people’s homes around the world but there is only one original which resides in the Louvre.
People have been able to invest in the stock market for hundreds of years. In the early days however it was reserved only for royalty and wealthy aristocrats. Over time, and thanks to technology, stock investing became accessible to more people and classes.
That said, until recently stock market investing was still only accessible to people with a certain standard of wealth, but thanks to the internet and new investing apps anyone in the world can own a small piece of a company.
As I wrote in this article on social media’s growing influence on the financial markets, “A 19-year-old in Europe can invest in Tesla by buying a fraction of a Tesla stock. All within seconds and from the comfort of her home even though Tesla is a US company listed on a US exchange.
“What’s more, most of these apps don’t charge a fee to buy and sell stocks so our budding investor can buy as little as £1’s worth without having to pay a charge.
“She can then brag to her friends about which ‘super brand’ stocks she owns such as Nike, Visa, Apple, Amazon and now Tesla, all for as much or as little investment she can afford.”
While stocks are not a new asset innovation, the digitisation of them is which is creating a new kind of retail investor. Stocks (like bitcoin) are highly liquid assets meaning they can easily be converted into cash, unlike other assets like property, art or gold.
Having an audience’s attention is a valuable asset to have if you want to sell to them, convey a message or influence them to take action on something.
Social media has allowed anyone to build an audience (and thus garner attention) in ways that just weren’t possible before. Social media has essentially democratised celebrity, meaning anyone with a unique skill, perspective or charisma can get attention.
Of course, the human desire for attention is making people say more and do more outlandish things in social media. This illustrates how powerful an asset like people’s attention is.
Additionally, the Brave browser is monetising attention by allowing users to earn their crypto token, BAT, by viewing adverts. Brave is intercepting the transaction between the advertiser and media company to give the people being advertised to a share of the profits because they’ve given it their attention.
Marketers often refer content such as an article, video or audio as a “content asset” but what does that mean?
I mentioned earlier an asset in the truest sense of the word is usually something that has value, increases in value and/or provides regular valuable returns. Most content today does not fit that criteria given there’s a graveyard full of countless articles, tweets and videos that have never seen the light of day.
A content asset is something which provides ongoing value. If it’s a video perhaps it has recurring views. If it’s an article maybe it generates constant search traffic. Maybe both of these content assets include affiliate links which earn passive income when people make a purchase.
It could be a content asset that provides indirect value too. Like a book or a series of articles that earns you commission, consulting work and speaking gigs.
The book Perennial Seller by Ryan Holiday is about this very subject. He advises to make work that not only stands the test of time but grows in value over time also.
The biggest gains of a burgeoning technology are often achieved by those who have the vision, foresight and the uncanny knack of seeing into the future.
Those who saw the potential of bitcoin in the early days and had the conviction to continue to hold it during huge drawdowns or indeed massive gains are the ones who are benefitting the most financially today.
Those who see the potential of a new asset class like digital art and acquire it before the market has caught on will benefit the most in future. I don’t see digital art taking off but I’ve been wrong about technology many times in the past that I’m willing to keep an open mind.
Keeping an open mind is necessary because, as technology continues to advance, we’ll see the introduction of new kinds of asset classes that perhaps we can’t conceptualise today. The key to profiting from these future digital assets is keeping an open mind, spotting the trends before the masses and investing early.