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April 12, 1999

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Subject: Re: DSL vs. Cable Modems--Other Musings
Author: astacvi

I was going to think this through all weekend, then compose an epic post and wait for comments. But since dataSlave has again brought up the subject of valuation, I'd like to address it now and throw it to the wolves to chew over.

Many people are bothered by outrageous P/E's and market caps that seem insane for what, in many cases, seems to be little more than a website and a business model, eBay apparently being the current archetype. And they're right to be concerned about the issue; at some point in the future there may very well be a shakeout (or bubble-burst, in some opinions) which will drive share prices back down to more "reasonable" levels. And it's that word that is the crux of the matter. What is "reasonable"? Well, Webster's gives me a few definitions, including:

2 amenable to reason; just
4 a) not extreme, immoderate, or excessive
Many people use the word in sense 4, then assume that sense 2 is included, and attempt to reason out their position on the subject. In fact, that may not be possible. And to illustrate that, I'd like to pose a question that I'd like you all to think about, deeply, before posting thoughts you may have.

What is the price of real estate on Mars?

"In ways that we're all having difficulty defining, a new area of real estate is being explored and exploited right now."

Seriously. I mean it. In ways that we're all having difficulty defining, a new area of real estate is being explored and exploited right now. You and I, each of us, is inhabiting a new place which didn't exist before. We're staking out our little homesteads in the wilderness, visiting the outposts that have sprung up to supply us, dealing with the outlaws that have naturally come along with us, looking for gold (or selling picks and shovels), and in general supporting this Wild West analogy in extremis.

But I don't want to draw out that historical analogy any further. I want a new one which still addresses the current situation. Hence, my question. I want to know if anyone could even attempt to price an acre of Mars. One might start by attempting to estimate what it would cost to stake a claim. I figure a few hundred billion might get me, enough inflatable domes, and enough barbed wire to cordon off a good sized plot of the Red Planet. The barrier to your doing the same is steep, but doable, especially since I've shown the way.

Now, why would you? I don't know. Farming probably wouldn't be good, but maybe there's a ton of resources right underneath my feet that I could exploit directly, like precious metals or gems. Maybe Martian sand processed in a thin atmosphere makes the most transparent fiber-optic cable ever devised. Maybe their lost cities are waiting to be excavated to get the oxygen generators going again. Who knows? That's the risk all explorers take.

"We are literally creating new real estate every day. There are no theoretical limits to the area that it might encompass, though at some point there may be practical ones."

And that's my point. In an unexplored area, valuation is difficult, if not impossible. Don't get me wrong. I'm not discounting efforts to do so. But much thought has led me face-to-face with my own ignorance. I have to throw up my hands and employ the same circular logic that the market seems to be using - it's worth whatever the Greater Fool will pay for it.

We are literally creating new real estate every day. There are no theoretical limits to the area that it might encompass, though at some point there may be practical ones. If and when that happens, we may very well be forced to confront the fact that we've overvalued certain neighborhoods (like auctions and flea markets), but, by the same token, we may have undervalued others.

Reading back through this, I realize that I've made most of my points off-the-cuff that I would have wanted to anyway, and maybe going into the weekend with this was a better plan than posting at the beginning of the week, too. Think about it. Try to assign real numbers to something so nebulous. Let it consume you, to the point where you're wondering:

What is the price of real estate on Mars?