Tokens, Power, Non-Jobs and Debasement: The case for strategic allocation to tokens

What You Need to Know

This essay considers the role of tokens and crypto assets as investments. However, rather than just address this question within the narrow confines of investment theory, we approach it via the broader social and political role of tokens. Their growing acceptance raises questions on how the nature of money is changing. This in turn has implications for politics, geopolitics and contemporary debates about the nature of work. The specific role of tokens in investment portfolios is linked to two separate features of the strategic investment outlook. First, developed economies find themselves with a level of public debt which, as a proportion of GDP, is unprecedented outside times of existential conflict. Second, significant growth in the need for real assets and greater liquidity will continue. Non-fiat currencies and tokenized assets form a part of the potential response to both of these phenomena.

We conclude this essay with a vision for investment management that ends the false dichotomy between public and private investments and subverts the asset class as a discrete unit for investment allocation. This is an important step in freeing strategic asset allocation from the silos imposed on it by the historical development of the investment industry. A world of lower real returns and less diversification between asset classes needs this tokenization as an engine to free up the methodology of asset allocation.

Additional Contributors: Robertas Stancikas, Harjaspreet Mand and Maureen Hughes

In this essay, we cover four key topics at the nexus of the changing role of money and what that change means:

• What is money and how is it changing?
• Public debt and the risk of currency debasement
• Tokens and their role in the changing nature of work
• The role of tokens in investment portfolios

These topics in turn span very different areas of study: philosophical, political, social and investing viewpoints are all at work. Above all of them are questions about the nature of power; we end this essay on the relationship between tokens and power’s changing nature. Rather than attempting to be comprehensive on each of these topics (which would require a book-length essay), we just focus on the aspects where a change is taking place that is a key part of contemporary debate, ultimately with a view on what this means for those tasked with making long-run investment decisions.

We start this essay with the broader political and social issues prompted by tokens and crypto assets, because this larger picture really frames the role of these assets—it would be missed if one started from a more blinkered focus only on investment. We then turn to the role of cryptocurrencies followed by tokens more broadly in investment portfolios. This is not just a case of a new technology emerging, but of its role being inextricably linked to the economic and political outlook at large.

The investment case for cryptocurrencies that we make is not about the technology per se, but instead the consequences of the levering up of economies via the growth of public debt and other mega forces that imply higher inflation. Likewise, the role of tokenized assets in portfolios is driven by investors’ need for real assets and concerns about liquidity. The sociopolitical role of crypto is part of the debate about the future of work and the relative power of the individual versus corporations and the state.