tldr;
1. The Body belongs under the Asset side of the BS, due to its ability for value creation in the PL.
2. The Body is an antifragile capex because even though it depreciates over time, its convex response to stressors contributes to increase its book value.
3. The Body is granted at 0 initial cost and never granted again, therefore there is not only an ethical but a utilitarian argument to maximize value creation.
Preface
I scarcely remember my first exposure to finance. It was during a Masters course in micro-economics, specifically game theory, by a Japanese professor whose esoteric articulation could barely capture my simple attention span while I daydreamed about how Trump was going to Build That Wall with Mexican cash (still bullish on that, #KAG2020).
One thing, however, that the professor eloquently said which would stay with me for ages was this: Finance is not about money. Rather, finance is the calculation of the risk-return profile of a particular investment decision over the plane of time. Money, in all its various forms and asset classes, is merely the vehicle in which that decision is executed.
Fast forward a few months later, I’ve found myself on the buyside, at first in real estate private equity and now in venture capital, having a taste of what the professor’s words mean on a day-to-day basis. In many ways, wrestling with this very real and down-to-earth mode of thought has broadly re-shaped my perspectives with respect to not merely carrying out investment duties in my profession, but thinking about investments in more profound terms of everyday life decisions - everyday existence, which until had been personally informed by philosophies and critical theory from continental Europe.
This series will therefore be largely a nascent attempt to recapitulate upon late-romantic/early-modern existential concepts via their application within the unabashedly pragmatic and utilitarian framework of finance. It will also be a test of my personal ability to simplify issues, and keep them fun - which is the most herculean task at hand. So let us proceed.
Introduction: Body as Asset
We begin our investigations using the framework of the Balance Sheet (BS) from the 3 financial statements. The BS is snapshot of the corporate entity’s total Assets (LH), Liabilities and Equities (both RH), and this investigation fundamentally argues that such a framework can equally apply to understanding existential entities, humans such as you and me. For the intents and purposes of this series, Assets, Liabilities and Equities shall correspond to the concepts of the Body, Soul and Will respectively. Here we shall focus first on putting forth the case of the Body to be allocated under Assets.
Why is the Body considered an Asset? Simply put, an asset can be understood as that which we own that has the ability to create value, and which also has intrinsic value. An example of an asset is a factory: owning a factory allows me to create value (I can generate revenue from selling rubber gloves I produce), and it also has intrinsic value (pretty expensive, actually, considering the land, property and equipment involved). In this respect, the body fulfills both conditions. Through the utilization of my body, I am able to manifest my thoughts and ideas into reality, or the empirical world, thereby creating value through my empirically observable decision-making. Also, the body, as a constituent of cells, nerves, tissues and bones that allow me to make empirical decisions in the first place, holds intrinsic value in the first place.
Capex and Antifragility
In the aforementioned respects, both the body and the factory are characteristically similar, in their behavior as assets. They are also very similar sub-categorically as capex, or capital expenditure, a specific item under assets. Why? Capex refers to an asset that tangibly exists in the physical realm, and therefore includes items such as factories, laptops, cars, and coffee machines. This is as opposed to other non-tangible assets such as intellectual property, trademarks, branding etc. A necessary consequence then is that a capex item, over time, loses its intrinsic or book value, as do all physical items. Books become yellow, metal gets rusty, wires get loose. And human bodies get frailer as we age as well.
However, the body is not merely a simple capex - the fascinating thing is that it is antifragile. The term antifragility, as introduced by Taleb, can be understood as having "a convex response to a stressor or source of harm (for some range of variation), leading to a positive sensitivity to increase in volatility”. Antifragile is neither fragile, nor is it resilient. Perhaps we can expound with examples. An example of fragility is glass - where glass immediately breaks upon a slight force applied. An example of resilience is metal - where a metal resists breaking despite a heavy force applied; however, with an extremely heavy force, it will still break. In this sense fragility and resilience are not opposites but merely different points on a spectrum. An example of antifragility, then, is muscle - it has many micro-tears when regular force is applied in the form of weightlifting, but do it constantly - from days, months and years - and it builds back to be even stronger and capable of lifting far heavier than before. Our body is a unique capex because of this antifragility - and as a result, providing constant stressors to our body will make it build back stronger, thereby increasing its intrinsic value even against the natural depreciation of aging.
Initial Cost 0, and Never Again
Having establishing the body as a antifragile capex, the most wondrous aspect, as will be a recurring theme for subsequent parts of this series, is that it has been provided at 0 initial cost - and that it will never be given again. There was nothing we could have done or not have done to have been bestowed with what we now know as the Body - it simply and necessarily accompanied our existence. In this respect, the argument for taking care of one’s body - physical health, mental health, overall wellness - need not necessarily be a pure moral one, but transforms slightly into a utilitarian matter. Being healthy, or in fact exercising to get stronger, is necessary not only to hedge against the depreciation of aging, but to constantly add intrinsic value that allows us to create even further value, all at a 0 initial cost, so precious an item we could not have deserved, and will never have another chance at obtaining it again.
Conclusion
Stop scrolling through your IG feed - go hit the gym and eat healthy starting now. We’ve only got one shot at this with this antifragile capex - it’s probably our best asset to produce further value for ourselves and the world. What are you waiting for?