On land, scarce assets and long-term value

Structuring non-fungible value into equal units, unless done with a clear investment thesis and incentive structure, can create distortions and “race to the bottom” dynamics.

Traditional valuation frameworks often fail to account for the long-term economic value of natural assets, contributing to negative externalities and Prisoner’s Dilemma dynamics such as pollution. Each actor has an incentive to externalize costs, even though everyone is worse off if all do the same.

Natural resources represent economic value, infrastructure and ecosystem integrity. The quality of soils, water and forests can be measured. We are only beginning to discuss how to account for that at larger, systemic scale.

From 1990 to 2024, the annualized total return for farmland in the US was 10.11%. For the S&P 500 over the same time period, it was 10.5%.

The above doesn’t account for differences in risk and volatility, which are generally lower for land.

I see an open space for longer-term investment theses around land assets, which sit at the foundational layer of verticals such as agriculture, infrastructure and real estate.

I also see space to differentiate between paths that maximize yield vs. value appreciation, especially because those are often in conflict with each other. The strategies that improve short-term yields can be very different from those that enhance long-term asset value.

If you focus on long-term asset value, the quality of your land assets matters. Soil diversity and the robustness of water systems become factors to improve. Beyond that, you have to take into account a wide range of variables that will affect value in the long run - from geopolitics to weather patterns.

In a world that is repricing risk and re-evaluating resilience, the question isn’t whether you have a thesis on land. It’s what that thesis is, and why.