Np. Usually of course, you look at a corporate assets table and there’s zero possibility of confusion as to whether its 1000x smaller or larger, so this doesnt normally come up. But with crypto you got to check 😂
Jane Austen was wonderfully up front about financial matters. Judith Kranz, in contrast, was all about the brand names which is why people still read Austen but not Kranz.
It's also been hilarious seeing the anti-fractional reserve nuts melt down. Crypto was supposed to be their Fed-free goldbug fantasy. Now they're learning why the Fed and FDIC exist.
You are confusing Cefi and Defi, and assuming they are the same because they use “cryptos”. Defi doesn’t need the FED at all because fractional reserves on Defi are highly transparent and voluntary, and in general not used at all.
They exist because the Wild West bankers of former times needed someone to bail them out when they got too greedy, made imprudent lending decisions and got overleveraged. Wherever wealth is at stake there will be attempts at corruption and the crypto debacle provides a fabulous window into how the gold based monetary system was corrupted.
It seems to me — as someone who knows nothing about anything — that the imaginary nature of much of the world’s wealth should terrify us. It’s a house of cards, built by and for a tiny subset of the human population, that could come crashing down in the slightest ill wind, with horrifying consequences for the rest of us. And that should outrage us.
Yeah. I've thought this since learning a bit about the system many years ago. Most days I just clap my hands and say "I believe in fairies and money" and try to think about something else.
So thinking one of the reasons people go ballistic over the idea of a wealth tax is just this very problem. It may be a very tiny tax, say 1/10th of a percent, but your 'billion dollar company' because Noah brought 1 share for $1 now means you owe $1M!
But if you did have this, I wonder if it might cap the creation of bubbles? If large 'wealth hoards' that are produced by pricing assets to market (even though the assets are thinly traded) have to produce a token amount of cash each year to pay a wealth tax, does this force finance to stay more connected to the real economy?
But to your point below, wouldn't someone just leverage this wealth to pay the tax with a loan and let the wealth grow?
It seems to me that the benefits of inflating paper value of assets would still outweigh the taxation, unless the taxation is a fairly high amount, and then that could cause other problems with this supposed "real" economy and "productive" wealth.
In SBF's case, the real asset to paper valuation ratio was discussed here is ~1:3000. How would a .1% wealth tax slow this down? So now it's 1:2997 after some additional levering of the "fake" wealth to pay the tax? Even if you had to pay a 20% interest rate on that loan, is it not worth it? Am I missing something?
The real solution is jail. The real, federal, "pound me in the @$$" version.
So let's say my company has a billion shares and Noah buys a share for $1 because he thinks my company's market value is $1B. A .1% wealth tax means I have to come up with $1M.
I could sell a million shares and if the market holds the price at $1, I have the money to pay the tax. I could also borrow $1M, but then someone will have to lend it too me assuming my shares are worth $1 each....(or will stay close enough to that figure to get paid back one way or the other).
But ultimately the best way for me to handle this is to have a business that generates actual revenue, even a tiny bit, to pay the cash. Then I'm not selling off my shares, I'm not piling on loans.
"In SBF's case, the real asset to paper valuation ratio was discussed here is ~1:3000. How would a .1% wealth tax slow this down?"
It may not have, although if he had stolen most of this money then taxpayers would have 'gotten a cut'. I think, though, a lot of these crypto bubbles are built upon multiple 'castles in the sky' (to use Keynes's phrase) and people actually cashing out tends to drag them down.
Even if it didn't stop SBF, I think it's a good model for these things from the beginning to handle at least a small amount of 'cashing out'.
Let's say there's a wealth tax and I hate you or your business. I pay $500 for a single share, report it to the feds, and boom - bankruptcy-forcing tax bill for you!
Just one of many of the challenges of actually doing this.
My business is a publically traded company where I own 999,999,999 shares and you own 1? I just have to sell a few hundred shares a day and the market price of trades will quickly collapse down from $500.
If it doesn't and stays at $500 per share then I'm the richest man ever to walk the earth with nearly half a trillion dollars of wealth. I could pay any wealth tax imposed by selling a trivial portion of my stock....although more likely I have a healthy and thriving business generating massive profits.
No, the government would insist on standing by the massive valuation and imposing the massive tax, while the rest of society would use a realistic valuation that makes leveraging shares to pay the tax impossible.
There's a lot of good substance around this article, but there's a fair bit of ivory tower going on as well. Noah can't actually create a billion dollar company from thin air because no one will buy more of his 1B shares for $1/apiece. Generally speaking, no one else can either. What happened with FTX was FRAUD - a lot of lying performed skillfully enough to get people to fall for it.
A wealth tax has a number of massive flaws, one of which being that there's no agreed-upon way to value things that aren't actually being transacted. The potential for abuse is huge.
You focus this article on cryptocurrency, but the valuations of ownership of businesses have a tether to reality that cryptocurrency does not - namely, share of profits. If an asset throws off $1M/year in cash, it is reasonable to value that asset at many millions (say, $20M). I certainly wouldn't say that being paid $1M/year ad infinitum is worthless; would you?
And yet, if the basis for that $20M valuation is the $1M/year profit, and you "wealth tax" the business at $1M/year, you've just driven its value to zero.
It might help societal unrest if wealthy people have motivation to mark their assets down instead of up. Even if it’s not real either way, it’ll make non-millionaires feel better.
Wealthy people with public investments don't get to choose how they mark them, other people do it for them. For private assets you can see that already in some edge cases like private equity managers often undermark their portfolio companies to avoid having to disappoint LPs when they sell.
I hope this is over of Noah’s free articles because there’s a few ppl I would like to share this with so I can stop having to try and answer some of these questions (thinking of you in particular dad) just because I studied economics in high school
The famous Michael Lewis story about Icelandic bankers remains apposite: Suppose you have a dog, and I have a cat. We agree that you will sell me your dog, in exchange for an IOU for $1B. Then I sell you my cat for $1B, and accept cancellation of the debt as payment. Now we are no longer pet owners. We are banks, each with $1B in capital.
I still have Beanie Babies in a box in the basement from when the kids were little. I was thinking of posting them as collateral for some crypto on FTX but SBF screwed up my plan to become rich.
On your last point about how rich people really are...how does all of this relate to the super-rich tendency to take out loans at absurd low interest rates to live on vs regular income?
Good question. Basically this is people taking on leverage. It depends on creditors' willingness to lend to them, and they have to pay it back. It's done for the purposes of minimizing taxation (because the unsold assets may compound at a higher rate than the interest on the loan). But remember that rich people tend to spend only a small portion of their income every year, to say nothing of their total net worth.
The super-rich will likely be fine if their wealth is based on something that actually exists. However, a lot of brokerage firms have been setting this up for not super-rich people and it will be interesting to see how that plays out over the next year or so with asset prices dropping and interest rates climbing. I assume there is the possibility of some of them getting margin calls over the next year or so if their asset base was risky.
ZIRP allowed a lot of things to happen because it went on for so long that it became normal and a standard way of doing business. Those of us who came of age in the 70s and 80s always knew in the back of our heads that there were "alternative scenarios" to ZIRP.
Btw is there any hard data on what interest rates billionnaires pay on loans collateralized against stock? Are they actually absurdly low? I only know of data on rich people caught in tight situations (eg divorce) taking out loans from hedge funds backed by their art or real estate and the rates on these is far from cheap - low to midteens rates even in last few years' free money environment. I know this because i looked at related investment opportunities and the data is not public. I would assume Musk or Bezos pay lower rates but not convinced they are actually as low as people think. Still probably beats selling the stock and paying tax most of the time (not in 2021 though! Selling stock to pay taxes at end of year would ve been optimal move!), but probably not a free lunch.
Thanks. I may be missing point here but is that relevant to rates banks would lend to billionnaires? Surely option expiry horizons is way way shorter and that duration diffenrential would drive most of the added risk / spread requirement? Also SPX being an index is way less risky than lending vs single stock
I'm mostly agreeing with you that the rates billionaires are getting are good but not THAT low
Box spread financing should be seen as a kind of lower limit on the rates they would be getting. It is used for institutional financing and is pretty close to a risk free rate. With the additional bonus that you can usually fill a box trade in minutes to get very fast financing.
So billionaires would be paying an additional spread on top for terms longer than 2-5 years or for using less liquid assets for collateral.
I have friends in the $10-50 million net worth range and they in turn have friends up to the $20-30 billion net worth range. While they've never disclosed exact numbers on their private financing, my conversations with them about box trade financing leads me to believe they aren't getting substantially better rates than that in most scenarios.
ah ok as a lower limit yeah makes sense. only reason to go lower is as i mention below if banks do the loans as a favor to curry other favors (which would probably be securities fraud if that motivates these public company officers to do worse deals with same banks at these companies) rather than trying to make money on them.
replying to myself here but couple additional thoughts on how Musk/Bezos borrowing against their stock differs from the type of loans with credit card level interest rates that I've seen: what I saw had similarly low LTVs (teens to mid 20s), but amount of borrowing was smaller - tens of millions to maybe a couple hundred mil (should mean higher rate), the collateral base tended to be more illiquid (as i said art / RE, in one case stake in their own hedge fund, that type of stuff) (should mean higher rate), and harder to value ( higher rate as lender needs to do bespoke DD before lending and that increases deal costs and reduces number of parties willing to look at opportunity). Also at least in some of the cases the borrower was in an emergency situation which required execution speed/certainty and reduced their negotiation leverage. Lastly lending to Musk/Bezos I could see banks giving them a concessionary rate to curry favor so they can do more business elsewhere with them (like financing the Twitter deal har har). So if I had to take a wild guess I wouldn't be surprised if rates they paid were in the high single digit range say 7-9%. Maybe a bit more now if they were floating rate. But this is a pure guess I have zero actual data points. If they were borrowing at 3-4% or less that would be a scandal indeed and people would be right to be angry, but not sure that is actually the case.
I have been so glad to have read your June post about how wealth vanishes. It has helped me understand this absurd Bahamian soap opera. I see that SBF told Kelsey Piper that regulations and controls don't actually do any good even for mainstream banking and assets. It would be great if you'd tell me that's not true, or at least not entirely true.
Glass-Stegal Act made banking boring for 60 years until it was repealed. A full-blown financial meltdown occurred in less than 10 years after repeal, SBF actually meant that regulators get in the way of being able to create financial meltdowns.
However, I am opposed to regulating crypto because it is effectively designed to not need it. However, in its native form it is difficult to convert to actual cash so the trouble happens in those intermediary exchanges like FTX. There are even derivatives of crypto assets now because it is apparently not volatile or ephemeral enough in its native form to satisfy Wall Street traders. Regulation of any sort would give it a patina of respectability which would start to integrate it into the financial system where it could crush the financial system similar to CDO Squared. Let people trade it like art, fine wine, or Swiss watches which are isolated from the real world. It is truly a "greater fool" asset.
There are enough laws about outright fraud, so people like SBF can go to jail just for that.
A similar issue occurs, but in reverse in a way, for carried interest. If the day after a fund was raised, a hedge fund tried to sell its carried 20% interest, what would it sell for? Very little, especially to a 3rd party. In fact, it could sell it to a new entity for a dollar if it wished. This ability to value or transfer the carried interest at a very low book value is what leads to the great tax benefit.
Carried interest vehicles are set up even BEFORE a vehicle is raised. That's what makes it plausible to claim vis a vis IRS that basis value is almost nil (hey fundraising may fail altogether, not to mention investments may not work out). But obviously for established high quality investors the chance of raising money and making money on the investments is very high, which makes carry such a good deal. Entities like Dyal will in fact pay billions partly for carry participation in future yet unraisec vehicles.
In the absence of capital markets, wealth is still a claim on something: the profits of a business, the services provided by a house, the interest on a bond etc. In the case of Bitcoin, it's something like "an input to a hash function that produces a suitably low output", or, with NFTs, "a piece of code giving a unique link to a picture of a monkey". The value of these claims is uncertain, but it can generally be specified in principle. Bitcoin is the easy case - the value is zero. NFTs might be worth something if people are silly enough which they probably are.
Wealth is a claim on something...but only if the person you are trading with accepts what you think of as "wealth" in return for whatever they have. It completely depends on the human perception of what is valuable. If someone is prepared to swap cash or heroin for bitcoin then it has value
It’s $659,000 I believe (he has a later tweet). Still a long way off $2.2bn!
Ah, thanks for noticing that!
Np. Usually of course, you look at a corporate assets table and there’s zero possibility of confusion as to whether its 1000x smaller or larger, so this doesnt normally come up. But with crypto you got to check 😂
The Jane Austen manner of describing wealth as x amount per year is much simpler.
Jane Austen was wonderfully up front about financial matters. Judith Kranz, in contrast, was all about the brand names which is why people still read Austen but not Kranz.
Ah, Jane Austen was right about so much.
It's also been hilarious seeing the anti-fractional reserve nuts melt down. Crypto was supposed to be their Fed-free goldbug fantasy. Now they're learning why the Fed and FDIC exist.
You are confusing Cefi and Defi, and assuming they are the same because they use “cryptos”. Defi doesn’t need the FED at all because fractional reserves on Defi are highly transparent and voluntary, and in general not used at all.
They exist because the Wild West bankers of former times needed someone to bail them out when they got too greedy, made imprudent lending decisions and got overleveraged. Wherever wealth is at stake there will be attempts at corruption and the crypto debacle provides a fabulous window into how the gold based monetary system was corrupted.
It seems to me — as someone who knows nothing about anything — that the imaginary nature of much of the world’s wealth should terrify us. It’s a house of cards, built by and for a tiny subset of the human population, that could come crashing down in the slightest ill wind, with horrifying consequences for the rest of us. And that should outrage us.
Yeah. I've thought this since learning a bit about the system many years ago. Most days I just clap my hands and say "I believe in fairies and money" and try to think about something else.
I have the same gut reaction because I want some stuff to have inherent value.
But once you get past biology-driven necessities, value has almost always been based on individual and collective perception.
That being said, the crypto stuff definitely seems like speculation that is untethered from reality.
So thinking one of the reasons people go ballistic over the idea of a wealth tax is just this very problem. It may be a very tiny tax, say 1/10th of a percent, but your 'billion dollar company' because Noah brought 1 share for $1 now means you owe $1M!
But if you did have this, I wonder if it might cap the creation of bubbles? If large 'wealth hoards' that are produced by pricing assets to market (even though the assets are thinly traded) have to produce a token amount of cash each year to pay a wealth tax, does this force finance to stay more connected to the real economy?
Yep. That's one reason I like the wealth tax idea even though it doesn't raise much revenue.
But to your point below, wouldn't someone just leverage this wealth to pay the tax with a loan and let the wealth grow?
It seems to me that the benefits of inflating paper value of assets would still outweigh the taxation, unless the taxation is a fairly high amount, and then that could cause other problems with this supposed "real" economy and "productive" wealth.
In SBF's case, the real asset to paper valuation ratio was discussed here is ~1:3000. How would a .1% wealth tax slow this down? So now it's 1:2997 after some additional levering of the "fake" wealth to pay the tax? Even if you had to pay a 20% interest rate on that loan, is it not worth it? Am I missing something?
The real solution is jail. The real, federal, "pound me in the @$$" version.
So let's say my company has a billion shares and Noah buys a share for $1 because he thinks my company's market value is $1B. A .1% wealth tax means I have to come up with $1M.
I could sell a million shares and if the market holds the price at $1, I have the money to pay the tax. I could also borrow $1M, but then someone will have to lend it too me assuming my shares are worth $1 each....(or will stay close enough to that figure to get paid back one way or the other).
But ultimately the best way for me to handle this is to have a business that generates actual revenue, even a tiny bit, to pay the cash. Then I'm not selling off my shares, I'm not piling on loans.
"In SBF's case, the real asset to paper valuation ratio was discussed here is ~1:3000. How would a .1% wealth tax slow this down?"
It may not have, although if he had stolen most of this money then taxpayers would have 'gotten a cut'. I think, though, a lot of these crypto bubbles are built upon multiple 'castles in the sky' (to use Keynes's phrase) and people actually cashing out tends to drag them down.
Even if it didn't stop SBF, I think it's a good model for these things from the beginning to handle at least a small amount of 'cashing out'.
Let's say there's a wealth tax and I hate you or your business. I pay $500 for a single share, report it to the feds, and boom - bankruptcy-forcing tax bill for you!
Just one of many of the challenges of actually doing this.
My business is a publically traded company where I own 999,999,999 shares and you own 1? I just have to sell a few hundred shares a day and the market price of trades will quickly collapse down from $500.
If it doesn't and stays at $500 per share then I'm the richest man ever to walk the earth with nearly half a trillion dollars of wealth. I could pay any wealth tax imposed by selling a trivial portion of my stock....although more likely I have a healthy and thriving business generating massive profits.
No, the government would insist on standing by the massive valuation and imposing the massive tax, while the rest of society would use a realistic valuation that makes leveraging shares to pay the tax impossible.
There's a lot of good substance around this article, but there's a fair bit of ivory tower going on as well. Noah can't actually create a billion dollar company from thin air because no one will buy more of his 1B shares for $1/apiece. Generally speaking, no one else can either. What happened with FTX was FRAUD - a lot of lying performed skillfully enough to get people to fall for it.
A wealth tax has a number of massive flaws, one of which being that there's no agreed-upon way to value things that aren't actually being transacted. The potential for abuse is huge.
You focus this article on cryptocurrency, but the valuations of ownership of businesses have a tether to reality that cryptocurrency does not - namely, share of profits. If an asset throws off $1M/year in cash, it is reasonable to value that asset at many millions (say, $20M). I certainly wouldn't say that being paid $1M/year ad infinitum is worthless; would you?
And yet, if the basis for that $20M valuation is the $1M/year profit, and you "wealth tax" the business at $1M/year, you've just driven its value to zero.
It might help societal unrest if wealthy people have motivation to mark their assets down instead of up. Even if it’s not real either way, it’ll make non-millionaires feel better.
Wealthy people with public investments don't get to choose how they mark them, other people do it for them. For private assets you can see that already in some edge cases like private equity managers often undermark their portfolio companies to avoid having to disappoint LPs when they sell.
I hope this is over of Noah’s free articles because there’s a few ppl I would like to share this with so I can stop having to try and answer some of these questions (thinking of you in particular dad) just because I studied economics in high school
Awww, thanks. Yep, it's free, there's no little lock symbol next to the title! :-)
Ahh cool, I just wasn’t sure if that lock only showed on articles on pay only articles from substacks you weren’t subscribed too
The famous Michael Lewis story about Icelandic bankers remains apposite: Suppose you have a dog, and I have a cat. We agree that you will sell me your dog, in exchange for an IOU for $1B. Then I sell you my cat for $1B, and accept cancellation of the debt as payment. Now we are no longer pet owners. We are banks, each with $1B in capital.
I still have Beanie Babies in a box in the basement from when the kids were little. I was thinking of posting them as collateral for some crypto on FTX but SBF screwed up my plan to become rich.
I like the story, but can’t help wondering what happens to the pets. Who owns what?
On your last point about how rich people really are...how does all of this relate to the super-rich tendency to take out loans at absurd low interest rates to live on vs regular income?
Good question. Basically this is people taking on leverage. It depends on creditors' willingness to lend to them, and they have to pay it back. It's done for the purposes of minimizing taxation (because the unsold assets may compound at a higher rate than the interest on the loan). But remember that rich people tend to spend only a small portion of their income every year, to say nothing of their total net worth.
Certainly. Just an interesting juxtaposition because of the sheer fungibility of their wealth
The super-rich will likely be fine if their wealth is based on something that actually exists. However, a lot of brokerage firms have been setting this up for not super-rich people and it will be interesting to see how that plays out over the next year or so with asset prices dropping and interest rates climbing. I assume there is the possibility of some of them getting margin calls over the next year or so if their asset base was risky.
ZIRP allowed a lot of things to happen because it went on for so long that it became normal and a standard way of doing business. Those of us who came of age in the 70s and 80s always knew in the back of our heads that there were "alternative scenarios" to ZIRP.
Btw is there any hard data on what interest rates billionnaires pay on loans collateralized against stock? Are they actually absurdly low? I only know of data on rich people caught in tight situations (eg divorce) taking out loans from hedge funds backed by their art or real estate and the rates on these is far from cheap - low to midteens rates even in last few years' free money environment. I know this because i looked at related investment opportunities and the data is not public. I would assume Musk or Bezos pay lower rates but not convinced they are actually as low as people think. Still probably beats selling the stock and paying tax most of the time (not in 2021 though! Selling stock to pay taxes at end of year would ve been optimal move!), but probably not a free lunch.
You can look at the rates of SPX box spread financing, which is basically the cheapest rates out there.
https://www.boxtrades.com/
This is a website someone put together that shows recent trades on box spreads, with data pulled from their broker.
Thanks. I may be missing point here but is that relevant to rates banks would lend to billionnaires? Surely option expiry horizons is way way shorter and that duration diffenrential would drive most of the added risk / spread requirement? Also SPX being an index is way less risky than lending vs single stock
I'm mostly agreeing with you that the rates billionaires are getting are good but not THAT low
Box spread financing should be seen as a kind of lower limit on the rates they would be getting. It is used for institutional financing and is pretty close to a risk free rate. With the additional bonus that you can usually fill a box trade in minutes to get very fast financing.
So billionaires would be paying an additional spread on top for terms longer than 2-5 years or for using less liquid assets for collateral.
I have friends in the $10-50 million net worth range and they in turn have friends up to the $20-30 billion net worth range. While they've never disclosed exact numbers on their private financing, my conversations with them about box trade financing leads me to believe they aren't getting substantially better rates than that in most scenarios.
ah ok as a lower limit yeah makes sense. only reason to go lower is as i mention below if banks do the loans as a favor to curry other favors (which would probably be securities fraud if that motivates these public company officers to do worse deals with same banks at these companies) rather than trying to make money on them.
replying to myself here but couple additional thoughts on how Musk/Bezos borrowing against their stock differs from the type of loans with credit card level interest rates that I've seen: what I saw had similarly low LTVs (teens to mid 20s), but amount of borrowing was smaller - tens of millions to maybe a couple hundred mil (should mean higher rate), the collateral base tended to be more illiquid (as i said art / RE, in one case stake in their own hedge fund, that type of stuff) (should mean higher rate), and harder to value ( higher rate as lender needs to do bespoke DD before lending and that increases deal costs and reduces number of parties willing to look at opportunity). Also at least in some of the cases the borrower was in an emergency situation which required execution speed/certainty and reduced their negotiation leverage. Lastly lending to Musk/Bezos I could see banks giving them a concessionary rate to curry favor so they can do more business elsewhere with them (like financing the Twitter deal har har). So if I had to take a wild guess I wouldn't be surprised if rates they paid were in the high single digit range say 7-9%. Maybe a bit more now if they were floating rate. But this is a pure guess I have zero actual data points. If they were borrowing at 3-4% or less that would be a scandal indeed and people would be right to be angry, but not sure that is actually the case.
I would be interested in your take on whether Harberger taxation of the sort advocated by Glen Weyl would fix this.
Harberger taxation looks like an attempt to reinvent the wheel that already exists: namely, the market.
Congrats on the outstanding article! So true, concise and enlightening! This is critical thinking at its best! thank you!
"Oh! OHHH! It went to ZE-RO! Yoooooooooh!"
https://youtu.be/PmCUEHyvrMo?t=7
I have been so glad to have read your June post about how wealth vanishes. It has helped me understand this absurd Bahamian soap opera. I see that SBF told Kelsey Piper that regulations and controls don't actually do any good even for mainstream banking and assets. It would be great if you'd tell me that's not true, or at least not entirely true.
Glass-Stegal Act made banking boring for 60 years until it was repealed. A full-blown financial meltdown occurred in less than 10 years after repeal, SBF actually meant that regulators get in the way of being able to create financial meltdowns.
However, I am opposed to regulating crypto because it is effectively designed to not need it. However, in its native form it is difficult to convert to actual cash so the trouble happens in those intermediary exchanges like FTX. There are even derivatives of crypto assets now because it is apparently not volatile or ephemeral enough in its native form to satisfy Wall Street traders. Regulation of any sort would give it a patina of respectability which would start to integrate it into the financial system where it could crush the financial system similar to CDO Squared. Let people trade it like art, fine wine, or Swiss watches which are isolated from the real world. It is truly a "greater fool" asset.
There are enough laws about outright fraud, so people like SBF can go to jail just for that.
Double-like for the Dr Manhattan meme.
Excellent article.
A similar issue occurs, but in reverse in a way, for carried interest. If the day after a fund was raised, a hedge fund tried to sell its carried 20% interest, what would it sell for? Very little, especially to a 3rd party. In fact, it could sell it to a new entity for a dollar if it wished. This ability to value or transfer the carried interest at a very low book value is what leads to the great tax benefit.
Carried interest vehicles are set up even BEFORE a vehicle is raised. That's what makes it plausible to claim vis a vis IRS that basis value is almost nil (hey fundraising may fail altogether, not to mention investments may not work out). But obviously for established high quality investors the chance of raising money and making money on the investments is very high, which makes carry such a good deal. Entities like Dyal will in fact pay billions partly for carry participation in future yet unraisec vehicles.
In the absence of capital markets, wealth is still a claim on something: the profits of a business, the services provided by a house, the interest on a bond etc. In the case of Bitcoin, it's something like "an input to a hash function that produces a suitably low output", or, with NFTs, "a piece of code giving a unique link to a picture of a monkey". The value of these claims is uncertain, but it can generally be specified in principle. Bitcoin is the easy case - the value is zero. NFTs might be worth something if people are silly enough which they probably are.
Mark-to-model might say these things are worthless, but tweak the assumptions and suddenly they're worth billions.
As a Twitter meme said, Bitcoin is a solved sudoku you can trade for heroin. :)
Wealth is a claim on something...but only if the person you are trading with accepts what you think of as "wealth" in return for whatever they have. It completely depends on the human perception of what is valuable. If someone is prepared to swap cash or heroin for bitcoin then it has value