Besides a cupcake, what’s a sure thing? Not much.
If you could be given one of these right now but couldn’t sell it for a year, which would you pick?
- Five shares of Facebook stock (a $527 value)
- Or $527 worth of gold?
Now think longer term. What if you couldn’t sell it for 25 years. What’s the safer bet:
- Facebook stock
- Oil or Oil Company Stock
This post isn’t an attempt to answer the above questions using equations. I just want to pause and logically explore what value means in a world that looks nothing like it did 20 years ago.
Finding Value in a New World
People love to invest in oil and gold. They’re considered commodities that have real-world value. For this reason, they’re considered to be less risky investments. Oil and gold have always been incredibly valuable for this reason. Except, they haven’t. Actually, 150 years ago oil wasn’t very valuable at all.
Gold has been valuable for longer than oil, but for most of human history it wasn’t valuable. Why? Gold’s not helpful. It’s a very soft metal. It can’t provide a frame for a building. It doesn’t make a very good spear. It doesn’t even make high quality tools.
You know what has been valuable for longer than oil and longer than gold? Social connections. A few million years ago we evolved into humans and for most of the time since then humanity lived in tribes, hunted together, cooked together, and depended on close-knit communities.
Social Connections Are Our Life’s Blood
It was only 7,000 years ago that a few tribes became the first to settle into villages with homes. It was only then that close tribal living situations started to separate and be replaced by family dwellings.
So from a historic view of value, I think Facebook is selling something that has a track record only beaten by food and shelter. Isolated family dwellings might have been a mis-step, as far as happiness goes. Modern societies like the U.S. have gone even further. Now grandparents don’t even live in the same house and adult siblings often live hours away from each other.
In Western countries, the physical distance between families and friends has done nothing but grow thanks to highways, trains, and airplanes. The value of reconnecting people dwarfs the value of oil when it comes to long term projections. It is chemically engrained in us. While the disappearance of oil tomorrow would throw the world into chaos, long term we can imagine a world without it. That cannot be said for social connections.
The Long Run
Internet companies are already worth a lot. Facebook is worth 300 billion. But Facebook connects people in just about every country where there’s internet. The value of using the internet to tear down the walls that isolate us deserves a huge chunk of GDP. It has long term staying power. It’s a stock I’d want to hold for a hundred years.
Oil is a staple of our modern world that no one can imagine living without. Except, thats not true. Lots of people are already helping build a future without oil. If humanity exists in 1,000 years, when they look back they’ll likely see that oil had a short history in being the primary fuel for transportation. Ultimately, the horse will have had a longer reign as the main means of transportation than the combustion engine car.
Germany now has so much solar and wind power that the gas and goal plants are barely ever running at full capacity anymore. Solar cells have dropped in price dramatically and have now become economically viable. Tesla and Toyota are already building and selling the electric cars of the future. It might take another hundred years, but oil will be on its way out soon enough.
Oil works in heavy, metal piston engines. Solar cells are light and getting cheaper by the month. Five billion people in the world are impoverished. As the world develops, what’s easier to implement and setup in often- remote parts of the world? Ever-cheaper solar panels or oil furnaces? Wind turbines or power plants? And what about globalization?
Last year I taught English in Thailand. There were more jobs than their were candidates. Bri and I have been teaching English online for four months and that’s steady. Now I’m teaching English in Spain. Point being, the rest of the world is learning English in a hurry. Why? So they can move away from where they were born to a place that offers higher paying work. In-steps Facebook, connecting families and friends.
When you look at the largest energy companies, their portfolios are all still 90%+ in traditional resources. Very few are aggressively buying into solar and wind. Then look at Facebook.
- Sharing pictures was clearly part of connecting. So how did they stay relevant? They bought Instagram.
- Simple, free messaging apps quickly became an integral part of people connecting internationally
- So they rolled out Facebook Messenger
- Then bought WhatsApp (side note: everyone in Spain uses WhatsApp on a daily basis)
- Virtual reality was pioneered by the company Oculus Rift. Clearly virtual spaces had to do with connecting with people, so Facebook bought it.
Facebook adapts to change better than any Energy company. They understand what they own and provide, and they’re smart enough to buy companies that help them do it better.
They also understand that there are more people on Earth who don’t have Internet than people who do. What are they doing with that knowledge? They’re trying to figure out how to get Internet to most of the world.
People aren’t going to stop connecting nor will they reduce the amount of connecting they do. Our siloed existences aren’t natural. Western societies are yearning to connect more, not less. An English speaking world means more travel and more distance between loved ones. Facebook is one of the most popular apps in developing countries. It helps families stay in touch as they spread to cities and go abroad to find work.
What’s a more timeless valuable? Owning stock in the platforms we use to connect, owning a purely aesthetic metal, or owning stock in a dying fuel?