Fundamental investing and a focus on value creation are concerned with long-term compounding. How moments are linked to each other. Sustainable actions with intentional consequences.
Price exists here and now. It moves in rapid response to supply and demand. A higher price attracts more people and resources to meet that demand. A higher price makes people who want that problem solved consider alternatives. Our decisions are all relative.
We have a limited basket to fill, and very different decisions to make. Price averages out our immediate decision making. We do not all pay what something is worth to us. We pay the same. Some get a good deal. Some think it is fair. Some will feel they need to explore options, or uncomfortable but still pay. Others will walk away.
That process communicates information about where resources “need” to go. A surface level information flow that does not have knowledge of all the behind-the-scenes complexity. Adam Smith’s invisible hand pulling on our tacit knowledge. The stuff we understand, or don’t understand, about our own worlds. That gets expressed through how we engage and what decisions we make. Revealed preference.
How are things connected?
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