Posts Tagged ‘supplyTechnology’
What The Heck Is An Asset?
When you go into a store to buy anything, the rational person will always compare the quality of the object against the price of the object versus any alternative products or markets.
When you buy a home, the property is characterized by descriptions for “quality” (construction, neighborhood, schools) and a series of ”quantities” (number of bedrooms, square footage, price)
When you cross the road, you look both directions in order to assess the quantity and the quality of the traffic that may or may not kill you. Are the traffic slow moving pedestrians or are they fast moving trucks?
When a bank makes a loan, they “quantify” all of your valuable things like your home, cars, 401K, and personal income and they use the credit score to measure the quality of your finances (debts, credit pulls, past history, bankruptcies, etc).
Supply and demand cannot, absolutely cannot, be determined by any other means other than by measurements of quantity and quality.
In fact, economics is the science of incentives where the fundamental graph is the supply and demand curve. Both supply and demand behave according to inputs of quality and quantity, specifically price and availability. Supply and demand for anything absolutely cannot be determined by any other means than by coordinates of quantity and quality.
Investors manage risk.
Risk is an asset, if it weren’t, insurance companies would not exist. There are three things that an investor must know in order to manage risk. 1. They MUST be able to identify their exposure to peril. 2. They MUST be able to estimate the probability that the peril will or will not impact them. 3. They MUST be able to determine the cost of the consequences in the event that the peril happens.
Again, within the definition of risk – to which ALL INVESTMENT RESPOND, are the characteristics of an asset; what is the quantity (1) and (3) and what is the quality (2) of the peril. If the investor does not CLEARLY SEE these three positions, they will not invest. Period.
This is what drives successful markets and what kills unsuccessful markets.
To ignore the fact that all rational human behavior, intentions, decisions, reactions, conversations, relationships, education, ideology and every other state of human consciousness in a market, corporation, community, family, or social network ARE NOT characterized in the form of a quantity and a quality, is frankly, ignorant to ones market, irresponsible to one’s community, and incompetent to one’s profession.
Yet so many people do not see themselves as an asset. Maybe someone should give people permission.
