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Money Stuff: Twenty Percent of a Picture of a Dog

Let’s say you have a thing that generates cash flows of $1 million a year. A business, a rental building, a pile of credit card receivables, whatever. Let’s say you can capitalize those cash flows at 5%. So the thing is worth $20 million. You want some more money now. You slice the thing into shares and sell some of them. You sell 20% of the thing, maybe. That 20% of the thing comes with cash flows of $200,000 a year and is worth about $4 million. This is all standard stuff; this is the main move in finance. Sometimes it is called “securitization,” though that is almost too fancy a title. If you have a business and sell 20% of it, that’s just called “stock.”

Now let’s say you have bought a picture of a dog online for $4 million. The picture of the dog carries no cash flows and no real exclusive rights — it is just a digital picture of a dog, anyone can copy it and use it and look at it to their heart’s content. But, you see, you have an exclusive pointer to the dog picture on some blockchain. And it’s funny to “own” this picture of a dog on the blockchain. And you made a lot of money investing in crypto and it feels sort of fake anyway. Why not blow $4 million on a picture of a dog, who cares, easy come easy go.