One way of hiding this relentless force of nature is to create a more permanent abstraction in which we can deal. Instead of thinking of companies in terms of machines, labor and infrastructure, we think of them as shares on a stock exchange. Instead of thinking of Bitcoin as energy consuming bits of data residing on computer racks, we think of them as neat little abstractions. However, none of this changes the fact that the underlying assets are decaying and constantly in need of repair. It merely makes it less evident.
It would be a mistake to think of assets without any regard to this decay. Yet, this mistake is frequently made. When calculating our profits on an investment, monetary inflation is often overlooked. So are repairs, fees and taxes. For instance, when I sold my house in Norway in 2017, I could have made the claim that it had appreciated by a staggering 150% over the 12 year period that I owned it. However, when factoring in inflation, repair, fees and taxes, the actual appreciation was more like zero.
Of all the assets we can own, only precious metals undergo so little decay that it can be ignored, and it is for this reason that gold should be used as the yardstick of success when it comes to investments. It is only when we manage to beat gold that we can say that our efforts and risk taking have paid off.
In this respect, it's interesting to note that the stock market has under-performed gold so far this century. The house I sold in Norway came in equal to gold, only if I ignore repairs, taxes and fees. Had I not had the pleasure of living in the house, it would have been a loss. So far this century, it appears that Nidhogg is winning. Most things are running at a loss.
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