To be specific, the items referenced here are anything not mined or harvested, not to be consumed, and not traditional securities such as stocks or bonds. They are of limited supply and are meant to be around for a while. These are what are commonly referred to as collectibles.

When asked what determines the value of such items, the answer most people give is “supply and demand”. While true, this is overly simplistic. To get a better answer, the terms “supply” and “demand” as they apply to these assets, should be examined further.

First, we begin with supply. Assets in this class are of limited initial supply. One commonality of such assets is some form of attrition, so supply can be expressed as limited and slowly decreasing. While this is important, the demand side must be addressed.

The demand aspect is far more fascinating, as the world is full of rare and unique items, sometimes quite appealing on the surface, which are of little value. What then does determine demand? To justify some extraordinary demand and accompanying price, people often throw around terms such as notable, iconic, or talented when referring to an item or to who created it. This is actually more a justification than a reason. The universe provides no absolute empirical way to measure talent or greatness. In reality the reason is primarily mathematical. There is a sort of algorithm that actually determines demand. Once this is understood many things come into focus.