Why We Should Pay Attention When People Spend Millions on Old Motorcycles
People are spending millions at auctions of old motorcycles. (Yes, they're called "antiques" but that just means old, doesn't it?) Now, combine this with the sale the other day of a bottle of old Macallan Scotch for over $600,000 and you've got something that should grab our attention.
Okay, so now it's got our attention, but what does it mean? Why would people spend this kind of money on old stuff? Well, for one thing, it's not because they're going to drink the old $600,000 bottles of Scotch and drive drunk on their super-expensive old motorcycle - at least I don't think they will. So it must be that there's some special perceived value in these items going for so much at auction these days. Indeed, these latest examples of outrageous prices for items at auction follow on previous reports of hundreds of millions paid for paintings at recent auctions.
All these items share one thing in common: they're real physical things. You can touch them. Using a more formal term, they're "tangible" assets. Compare such tangible assets to the typically "intangible" assets that many of us count when we add up our wealth - stuff like our bank accounts, brokerage accounts. Note as well that people who can afford to spend such incredible money on paintings, motorcycles and Scotch are rich. So what we wind up with is that many rich people are spending fortunes on tangible items.
But to understand exactly what's going on, we need to sharpen our thinking and use our language more accurately. It's not that they're spending their money on these items in the same way that you would spend your money on dining or a special vacation. When you talk about "spending" in that sense, you're really talking about spending your dollars to obtain an item or an experience that gets used up right away. The meal is eaten; the vacation, once you enjoy it, is gone: poof!
What these rich people are doing, on the other hand, is better understood not as "spending" but as "exchanging." They are exchanging their dollars for something else that won't be consumed - eaten, imbibed, enjoyed, or otherwise.
Okay, so they're not spending money on these tangible assets to consume them; rather, they're exchanging their dollars for these tangible assets because they perceive these assets not as consumable items, but rather as some sort form of investment. The next question to answer is, "Do the prices we're seeing tell us that they believe that these real or tangible items will increase in value at a more dramatic rate than the typical intangible assets most of us hold as our investments?" The answer is maybe.
It may be the case that such tangible items will increase at a faster clip than bank accounts, stocks, bonds, etc. But we also can logically conclude that rich folks believe that such tangible assets will retain, i.e., hold, their value compared with their intangible assets. In fact, it's not uncommon for people of means, especially those who understand money and value, to focus first on retaining what they have rather than on the gain they might get upon investing their money.
Either way - to retain or to gain - tangible (aka real) assets, even motorcycles, certainly command the attention of people with lots of money
Okay, so now it's got our attention, but what does it mean? Why would people spend this kind of money on old stuff? Well, for one thing, it's not because they're going to drink the old $600,000 bottles of Scotch and drive drunk on their super-expensive old motorcycle - at least I don't think they will. So it must be that there's some special perceived value in these items going for so much at auction these days. Indeed, these latest examples of outrageous prices for items at auction follow on previous reports of hundreds of millions paid for paintings at recent auctions.
All these items share one thing in common: they're real physical things. You can touch them. Using a more formal term, they're "tangible" assets. Compare such tangible assets to the typically "intangible" assets that many of us count when we add up our wealth - stuff like our bank accounts, brokerage accounts. Note as well that people who can afford to spend such incredible money on paintings, motorcycles and Scotch are rich. So what we wind up with is that many rich people are spending fortunes on tangible items.
But to understand exactly what's going on, we need to sharpen our thinking and use our language more accurately. It's not that they're spending their money on these items in the same way that you would spend your money on dining or a special vacation. When you talk about "spending" in that sense, you're really talking about spending your dollars to obtain an item or an experience that gets used up right away. The meal is eaten; the vacation, once you enjoy it, is gone: poof!
What these rich people are doing, on the other hand, is better understood not as "spending" but as "exchanging." They are exchanging their dollars for something else that won't be consumed - eaten, imbibed, enjoyed, or otherwise.
Okay, so they're not spending money on these tangible assets to consume them; rather, they're exchanging their dollars for these tangible assets because they perceive these assets not as consumable items, but rather as some sort form of investment. The next question to answer is, "Do the prices we're seeing tell us that they believe that these real or tangible items will increase in value at a more dramatic rate than the typical intangible assets most of us hold as our investments?" The answer is maybe.
It may be the case that such tangible items will increase at a faster clip than bank accounts, stocks, bonds, etc. But we also can logically conclude that rich folks believe that such tangible assets will retain, i.e., hold, their value compared with their intangible assets. In fact, it's not uncommon for people of means, especially those who understand money and value, to focus first on retaining what they have rather than on the gain they might get upon investing their money.
Either way - to retain or to gain - tangible (aka real) assets, even motorcycles, certainly command the attention of people with lots of money
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