Store of Value: End of the road for the Monalisa Effect

For long, currency and rare and peerless artifacts like the Monalisa painting were considered as a measure of wealth and store of value. Till recently when this was upended by unheard intangible assets like digital artwork, the 'first tweet auction' and of course the gravity and logic defying cryptocurrency. So how do we understand, store and discover value in the future? After listening to various experts, the honest answer is the same as how we are using masks and vaccines in dealing with the pandemic- we do not know for sure. So in absence of any known and proven framework we use our gut and commonsense as our best hedge against an uncertain future. Some of the mind boggling weak signals, discontinuities:

• In the past 6 months 40 percent of all dollars ever existing has been printed through Quantitative Easing and yet experts say that the US or the world is not on the throes of a currency hyperinflation. Not yet anyway. As long as China and emerging markets keep on buying the US bonds.
• Vignesh Sundaresan and Anand Venkateswaran bought digital artwork worth USD 69.30 million, much higher than most works of the celebrated European art masters which definitely does not fall in the category of anything which is 'rare'
• Gold prices are either stable or dropping by strange coincidence even while economies, commodities and companies have hardly recovered across the world
• Cryptocurrency exchange company coinbase has a pre-IPO implicit valuation of USD 68 Bn for a technology which has not yet fully evolved and/or accepted across the world by the governments
• Closer home, only two months into 2021, the Indian startup ecosystem has already added two new companies to the coveted $1 billion-valuation club. ... At least 12 more startups are expected to join the unicorn club in 2021, taking the total count of 50 from the current 38. Almost all of them are guzzling cash and are not making any profit.

In summary

• The earlier gauge a store of value and wealth defined by that which are tangible, rare, indestructible and sought after need modification
• The lens and criteria of valuation is changing rapidly; The concept of measuring value of an asset by anticipating its future stream of revenue is quickly becoming irrelevant and with it all logic based linear valuation tools like excel driven calculators which uses probabilities with coupon rate and discounting
• Valuation will be based on anticipating the vision of the future and the perceived usefulness of the concept, product or service that people will assign to it
• The dividing line between what is 'real and tangible' like cash flows, commodities, properties and gold versus what is still a 'promise' will tilt heavily towards the latter
• Volatility and swings will be the order of the day; so the old adage of diversification and not putting all your eggs in one basket
• Experimentation and curiosity will be the key; a chance of success post a string of tryouts and rapid prototyping