On Experiential Goods

Experiences are isolated episodes in our past. They have beginnings and endings and are intangible, existing only in our memories. This can make them more enduring than the tangible goods, more inclusive and encompassing of our lives in general, and more pleasurable as perception filters out the discomforting, the inconvenient, and the imperfect. We don't focus on what preceded or followed it, or even what annoyed or bothered us during it, only savoring the selective pleasures of it. Often you don't realize how much you enjoy something until it's gone, yet its absence makes the heart grow fonder. It is what makes it an experience in the first place and we focus more on gain than the loss of it. Then the fondness grows through reminiscence while familiarity breeds contempt or at least the discount of neglect of our present surroundings.

Products fulfill ongoing needs extending over time and are usually replaced by newer, better products that displace those of older ones. Products form a part of the substance of our experiences, but experience encompasses much more whose cost is often only the time to appreciate it such as nature or people. Aren't the best things in life free? Is there anything better than free? Experience endures through memory as products are consumed and deteriorate. Yet, I can still recall the satisfaction and memories of an old jacket lovingly worn out after twenty five years, or the comfort of a well worn pair of shoes that endured for years. How difficult it is to anticipate these though. Sometimes newer isn't better, and products end up as losses over time, reminding us of the transitoriness of existence.

On Investment Singularities

The Gordon Dividend Discount Model establishes the price, P, of a stock based on dividends, D, at a required rate of return, r, that grow at rate g in perpetuity as P = D/(r-g). This has a singularity at r = g. While this may occur asymptotically or temporarily, it can never do so forever and always in a finite universe. There is always a finite number of people to bid for it, amount of money to buy it, or borrow against it. At most it would be potentially infinite with a trade off between those so wealthy they have no other outlet for their money and those for whom it is so much that the alternatives are as pleasant or even more so in case of boredom, and the impermanence of life and division between heirs or absence of them.

Consider too if our estimate of r-g were off by 1% or if when we wished to liquidate our investment it were off by 1% or if it drifted away by 1% over time. P would drop all the way from infinite to 100 D, so even if we thought we were getting a bargain, it could easily end up not being one. Our best estimate may be that of the next best alternative. Who would ever want to sell such an investment? Wouldn't the income flow ever be enough? If we were immortal, if our tastes never changed, if our investment never changed, perhaps not, but those are not that likely.