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Let's say you own a magic box that produces 15 potatoes a day, automatically. You use these to help feed your family, and sometimes you sell the extra potatoes

Let's say you own a magic box that produces 15 potatoes a day, automatically. You use these to help feed your family, and sometimes you sell the extra potatoes you don't want to eat, or give them away to friends. One day the box starts working a little bit less- it only produces 12 potatoes a day. What happened to your wealth?

imtringued 4y ago
You keep assuming the box is worth the same and then suddenly one day you try to eat 15 potatoes and suddenly realize that the wealth you thought was there actually wasn't.
salawat 4y ago
Are the fewer potatoes larger? More nutritious? I get where you're trying to go, but it falls flat on its face as soon as you say it produces 15 potatoes a day. You're conflating creation of assets with a ballpark estimation of what someone might pay for a thing. It's like they say with collectibles. That 15000 dollar comic book is worth squat til you find the buyer willing to pay $15000 for it.
- danielmarkbruce 4y ago
  Not conflating, it's a good example. The asset is the magic box, not the potatoes. The magic box is worth less when it's producing less. It's not like collectibles. Productive assets have value no matter what someone wants to pay for it. That's why gold and crypto are so stupid - it's greater fool theory. Old Warren Buffett covers this well here: https://hollandadvisors.co.uk/wp-content/uploads/2021/03/buffett-on-why-productive-assets-win.pdf https://hollandadvisors.co.uk/wp-content/uploads/2021/03/buf...
danielmarkbruce 4y ago
Wealth went down, but you've only given one example. Asset prices can change in response to asset values changing(like your example), estimates of asset values changing, liquidity problems, and risk preference changes. And it can feed on itself. In some of those cases real wealth is lost, in others, it's just people throwing around different bids and offers.

imtringued 4y ago

You keep assuming the box is worth the same and then suddenly one day you try to eat 15 potatoes and suddenly realize that the wealth you thought was there actually wasn't.

salawat 4y ago

Are the fewer potatoes larger? More nutritious? I get where you're trying to go, but it falls flat on its face as soon as you say it produces 15 potatoes a day. You're conflating creation of assets with a ballpark estimation of what someone might pay for a thing. It's like they say with collectibles. That 15000 dollar comic book is worth squat til you find the buyer willing to pay $15000 for it.

danielmarkbruce 4y ago
Not conflating, it's a good example. The asset is the magic box, not the potatoes. The magic box is worth less when it's producing less. It's not like collectibles. Productive assets have value no matter what someone wants to pay for it. That's why gold and crypto are so stupid - it's greater fool theory. Old Warren Buffett covers this well here: https://hollandadvisors.co.uk/wp-content/uploads/2021/03/buffett-on-why-productive-assets-win.pdf https://hollandadvisors.co.uk/wp-content/uploads/2021/03/buf...

danielmarkbruce 4y ago

Wealth went down, but you've only given one example. Asset prices can change in response to asset values changing(like your example), estimates of asset values changing, liquidity problems, and risk preference changes. And it can feed on itself. In some of those cases real wealth is lost, in others, it's just people throwing around different bids and offers.