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The Risk Of Investing In Numbers

May 01, 2021 8:01 AM ETAmazon.com, Inc. (AMZN)13 Comments
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First it was cryptocurrencies. Then it was non-fungible digital tokens (NFTs). I am here to introduce the biggest new investment concept of all time. In fact, the concept is so simple and straightforward, you'll be stunned to ponder why nobody has ever thought of it before now:  INVESTING IN NUMBERS. 

I don't mean investing in a number of shares. I don't mean investing in a number of dollars or Euros. I don't mean investing in a number of ANYTHING. What I mean is investing in the underlying number itself.

Let me give you a practical example. Today, you've probably used the number 3 at least a few times already. Maybe you dialed up your best friend on the telephone? Maybe you looked at your brokerage statement and noticed that your net worth contains the number 3 somewhere? Maybe you've been typing the number 3 on your keyboard simply because you like the way that number looks. If so, then you are like everyone else on this planet in the sense that you have used the number 3. 

The fundamental premise behind property ownership of any sort is that using is not the same thing as owning

Ever since the first humans started using numbers, we've all basically been relegated to the position of "renters." Although we use numbers in our day-to-day lives, how often has anyone ever asked the obvious question of "who owns this number, anyway?" If you've ever struggled to find an answer, then there is only one logical conclusion to reach: as of yet, nobody has taken the initiative to claim ownership over that number. Suddenly, as if you've just been struck by lightning, you ask yourself "if nobody owns this number yet.... why shouldn't I just..... take it?" You cast a furtive glance around you and quickly realize that NOBODY is there to stop you. And once you take that number for your very own, NOBODY is there to contest your unrivaled ownership (or at least, nobody can successfully contest your ownership).  

That's exactly how I became the owner of the number 3. Like any early pioneer, I saw an unblemished, valuable piece of unclaimed property shining and glinting on the abandoned prairie, and I just planted my flag and said "I claim this number as my own." True, others can (and sometimes do) use the number 3 as often as they like. But the difference between me and all of them is that they are "renters" who merely use the number 3. By contrast, it is I who owns the number 3, which means I can use it, sell it, gift it to others, and conveniently track it on a 24 hours using any number of apps that I keep on my IPhone. Anyone who has tried to take the number 3 away from me in the past has only met with failure. Conclusion? My property rights in the number 3 are either undisputable, not successfully disputable, or both.

The Case For Investing In Numbers

As a form of property, numbers comprise an ideal investment opportunity for multiple reasons:

(1) Every number is unique. Unlike fiat currencies that governments can just print willy-nilly or a supply of Bitcoins that can be mined and disgorged onto the marketplace through energy-inefficient computer gimmicks, there will only ever be one number 3. In fact, it is not even theoretically possible for anyone to ever issue more than one number 3 - which is a form of guaranteed limited supply.

(2) Every number is fungible. For example, it is trivially simple to exchange a number 3 for a number 1 plus a number 2. You might even say that numbers are infinitely fungible, combining the very best attributes of a cryptocurrency and an NFT into just one elegant asset. 

(3) Unlike cryptocurrency, numbers all have intrinsic, practical value. Take my case of owning the number 3. You cannot properly do math without the number 3. Not only that, the number 3 is required for financial transactions.  For example, it is meaningless to say that you own 3 shares of Amazon (AMZN) stock unless you can use the number 3.  

(4)  Numbers are durable. Numbers don't break easily. Numbers don't grow stale over time. Numbers don't melt (unless you smoke something that makes numbers melt).

(5) You can forge a number onto a check, but you cannot possibly forge the actual number itself

(6) Numbers are secure. You can hack a computer. You can hack a brokerage or bank account. You CANNOT theoretically hack a number.  

(7) Numbers trade readily and conveniently across countless digital platforms. Take my example with Amazon (AMZN). As you see, the stock closed at $3,467.42 this past Friday.

In other words, a buyer and a seller exchanged (1) a share of Amazon (AMZN) and (2) currency in dollars as a form of "wrapper" around the underlying exchange of the number 3 (along with the numbers 4,6,7 and 2). 

It is obvious that without my number 3, none of this transaction would have even been possible, and all financial markets around the planet would more or less implode instantly. The practical value of my number 3 is well beyond any dispute - which explains why it is not mere speculative frenzy that has driven the value of my number 3 so much higher since I became the owner. 

Creating a Diversified Portfolio of Numbers

Numbers make for an ideal hedge to a diversified portfolio of stocks, real estate, bonds, commodities, and other assets. Like any portfolio, the more numbers you have, the more diversified your portfolio becomes. That said, it may be possible that some numbers are intrinsically more valuable than others.

Let me walk you through an example. 

Last night, our friends Ray and Marcia hosted a lovely dinner party in Cascais for one of our mutual friends, Isaline, who recently celebrated a birthday. Ray, and our friends Pascal and René, are all avid investors and I have to admit that I felt a bit like I was boasting when I told them about my recent acquisition of the number 3. Ray and Pascal may have seemed a bit skeptical at first, but they became more convinced of my investment thesis once I walked them through the benefits of cutting out the middleman by investing directly in numbers as opposed to investing indirectly through more conventional assets (like stocks or bonds) that are merely denominated by numbers. In fact, Ray excitedly announced that he planned to purchase the number 2 for himself (which met with instant approval and admiration by myself, Pascal and René).

But I'm afraid to say that Ray's enthusiasm for his brand new shiny number 2 was short-lived, once I pointed out that my number 3 is... well.... bigger than the number 2. 

As we stood in a tight circle nursing our glasses of chilled Sauternes and nibbling on liver pate, I could sense that the mood was starting to darken so I quickly hastened to add "well, of course the value of number does not, per se, correspond to the size of the number. Rather, the value of numbers lies in their utility."

Ray seemed to perk up a bit at that thought, so I continued (as eruditely as possible) to explain: 

"For example, any physicist will tell you how nettlesome it is to contend with the number infinity. An entire branch of quantum mechanics dedicates itself entirely to the process of "renormalizing" physics equations - the explicit goal of which is to actually ELIMINATE the number infinity whenever it pops up in an equation. In other words, even though infinity is a larger number than (let's say) 2, it does not follow that infinity is a better number. In many respects, quite the opposite." 

Obviously that reasoning comforted our host very much and in retrospect, I probably should have just let it go at that. However, as some of my friends know only too well, I do have a tendency to continue speaking long past the bounds of everyday prudence. Instead, I found myself pondering out loud whether the most utilitarian numbers of all might be zero and 1. My reasoning: computers can't function without zeros and 1s. 

It was Pascal was the first to ask "I wonder who owns zero?" 

The room became eerily silent. Then I noticed Ray cast a furtive glance towards his office where I know he keeps a computer. 

 "I'm just going to go and check on something for a moment......"

That's when the shoving started. Pascal was already tapping feverishly on his smartphone in a desperate attempt to grab the number zero before anyone else could, but René smacked the phone from his hand and sent it clattering across the tile floor. Ray, meanwhile, was almost halfway across the room in a mad sprint to get to his computer to buy the number zero before either Rene or myself could seize that prized number for our very own. It's astonishing how quickly an 82-year-old man can move when motivated by an investment as promising as an investment in the number zero. And it's equally astonishing how much force they can deliver with a right hook to your jaw when you try to intercept and tackle them before they reach their keyboard. I must admit, I thought I was in pretty good shape before last night. 

Eventually, the wives managed to break up the Donnybrook that broke out amongst the husbands before dinner, and Ray, René, Pascal, and myself were subsequently all seated far apart from one another at the dinner table. At some point, somebody kicked my shin under the table, and Ray threw a french fry at Pascal when his wife wasn't paying attention, but otherwise, the balance of the dinner experience was (more or less) uneventful. 

I cannot say for sure who ended up owning the number zero, but for the sake of the reader, I would suggest starting your portfolio of numbers with a less controversial set of figures. Perhaps 103932371, as an example?

That way at least, you'll certainly end up with far fewer black and blue marks. 

Analyst's Disclosure: I am/we are long AMZN.

Bidding on the number 3 starts now.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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