Would You Trade Your House for a Tulip?

This is a popular cautionary tale used by economists that you may already have heard of. In the 17th-century Dutch Golden Age, tulips were considered a status symbol to a point where the prices surged to more than that of luxurious houses. This also led to what was arguably the world's first derivatives market.

Obviously, prices eventually crashed, which earned it the title of a "bubble," but it is illustrative in a sense that people associate value with all kinds of things. Most "valuables" are not inherently valuable and only get their reputation from enough people assigning value to them.

A more modern equivalent of this is Bitcoin. It is shocking to me that the market cap of BTC is about the same as the total value of USD bills in circulation—two point something trillion. Backed by no socioeconomic value creation, no inherent physical assets, and just by being driven by a community who sees value in it.

I don't want to argue about whether BTC is valuable. To the contrary, in fact, I think this reiterates my point about the value of these assets often being extrinsic in nature. The same applies to gold and silver, currencies, baseball cards, vintage cars, etc. If the value persists, it is an investment or luxury purchase. If it crashes, we call it a bubble in hindsight.

Diamonds: An Extrinsic Value Asset?

Hopefully, you see where I am going with this. There is so much talk about whether diamonds (natural or lab-grown) are investable products, or whether they really are rare or valuable. I think those are the wrong questions to ask. At the end of the day, it is a nice shiny rock. While it may have an impactful supply chain, it does not create any additional value for its users other than making them feel special.

The real question is: how do we lean into the story, create a community around it, and develop unique experiences surrounding it that enough people consider it valuable?

Value isn’t always about intrinsic properties. Sometimes, it’s about the narrative, the perception, and the emotional connection. The challenge is to cultivate that ecosystem where value is sustained by experience, identity, and a shared sense of belonging.

What’s your take? Do you believe that value should be intrinsic, or do you think extrinsic factors like perception and community are enough to sustain long-term worth?