Culture Markets : Investing in What You Know

There are some important axioms around effective investing. Wisdom like “only invest what you’re willing to lose” or “make decisions based on logic rather than emotion” are incredibly useful approaches. There’s a lot of advice out there, but the most notable for us is the concept of investing in what you know.

Investing in what you know is about having a true understanding of the market dynamics surrounding a specific asset. Every investment bears risk so the more you know about the impactful factors, especially those that have a disproportionate effect on the price, the better positioned you are to make consistent returns on your investment.

Previously we touched on the unfair reputation given to alternative assets. The label “alternative” implies inferiority or the second option. In reality, many alternative asset classes yield exceptional and stable returns compared to the S&P 500. If you look even closer, the assets defining the “culture market” have become robust investment vehicles. It’s due to a lack understanding of how cultural markets work that keeps traditional investors mislabelling alternative assets.

The chart below shows how both sneakers and collectables outperform the S&P 500. On average, an investor who purchased the top 10 selling Jordan 4’s would have seen a $2000 USD gain over the previous 17 months.

Fig1. StockX Next Gen Investment Report (2020)

Xsauce is focused on a subset of alternative assets, called cultural assets. Cultural assets derive their value from a shared meaning system within a specific community. Cultural assets also require domain-specific knowledge in order to appreciate their value. The beauty of these type of assets is that the balance sheets, free cash flow nor other business metrics aren’t responsible for driving the price up or down. The value comes from an actual transfer of meaning from the creator/designer to the wearer /collector. There is a cultural dialogue that must occur for value to garnered. It may not be a perfect market, but unlike stocks or bonds, culture rewards creativity and pushing the boundaries.

Another pressing variable to consider is inflation. According to Statista, the global average rate of inflation is about ~3.2% YOY. This effectively means you will lose ~3.2% of your buying power if your money is tucked under the mattress or at your local bank. Rising inflation makes choosing not to invest a life-altering decision.

Global Inflation Rate 2016–*2026

Fig2 : Statista Global Inflation Rate 2016–2026 (*denotes a prediction)

We’re not financial advisors nor are we offering financial advice, but we see the term “safe” misconstrued all the time. Referring back to Fig.1, there are certainly traditionally *safer investment options outside of the comparisons shown. The “safeness” is also relative to your market knowledge and what your financial goals. According to Forbes, since 1928, the S&P 500 has lost 10% or more of its value once every 19 months. This is further evidence that knowledge and timing are what matter most. We’ve seen friends burned by so-called “safer” options because they didn’t fully understand market cycles.

So why synthetic assets over traditional assets?

The team at Xsauce has always had an eye for what moves culture but no real way to translate that into a viable financial strategy. Sure, we could have chosen to be collectors, but that requires dedicated storage and a permanent dwelling. Instead we’re nomadic and take an antifragile approach to life. We wanted to invest in assets which benefit from creative chaos, assets that flourish under pressure and evolve to suit the conditions. That is the definition of cultural assets and the utility of the Xchange.

With the tokenization of cultural assets, you can now translate your knowledge of culture into income streams where ever we are in the world. The options are now endless…

“When I had no money, I still had sauce” — Gucci Mane

Conclusion.

Sound investing requires sound research. You’re at an even better advantage if you understand how the market works and have some prior experience. You may have seen the hype around celebrity-endorsed NFTs and alt-coins promising 1000x returns. With each of these investments, volatility is a part of the equation. The promise of huge gains and monster APYs may sound appealing, but the rapid demise of these projects and protocols is something to take note of. Like we said, do your own research and for the sake of humanity, check your sources.

We’re building Xsauce to provide a more equitable opportunity for people like us. For people who are obsessed with what drives culture forward and want to translate their knowledge into a livelihood.

Culture is ours.

#PeopleofCulture

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