Case Study on Managing A Company

View the Town Hall Meeting At Barrick Gold

https://www.barrick.com/news/news-details/2018/town-hall-with-john-thornton/default.aspx

Q218-Town-Hall-Presentation

Q218-Town-Hall-Transcript

A very interesting presentation of how Barrick is planning its future.

CORRECTION

I have often mention gold as a “Store of Value.”   I never defined my terms.

I apologize.  A better explanation by Keith Weiner of www.monetary-metals.com

Store of Value Fallacy
And this leads us to make one final, if tangential point. We often hear people talk about gold as a “store of value”. If you have a tank, that is a store of water. A grain silo is a store of wheat. In both cases, what is being stored is a quantity of a commodity. In this sense, a vault is a store of gold.

However, economic value—as we see above—is whatever the bidder is willing to pay. Gold’s moneyness does not come from it commanding the same amount of wheat today as it did last year or 2000 years ago. In fact, its purchasing power of wheat is not fixed. Over the last ten years, pricedingold.com shows that wheat has ranged from about 0.9 grams gold per bushel to 3.6g. The highest price during this time is 4X the lowest.

One reason for gold’s moneyness is that we value the next ounce of gold—the marginal ounce—the same as the last one. Proof of this extraordinary claim is observed in the extraordinary fact that virtually all gold ever mined in 5,000 years of human history is still in human hands. Gold is not produced to be consumed, but to be held. And we keep on producing, regardless of how much has already been produced.

In other words, we measure the value of gold like we measure the value of all other things in the economy—in gold. Gold does not have constant purchasing power (perhaps we should use scare quotes “purchasing power”). It has a constant price. The price of gold is always 1. This is not expressing a tautology. It is expressing that gold has constant marginal utility.

Gold is the steel meter stick of measuring economic values. Even if we climb in elevation (quantity) the meter (ounce) does not shrink.

One response to “Case Study on Managing A Company

  1. “gold has constant marginal utility”

    I’m wondering whether or not this is actually true. I’m thinking it’d be more the case that the marginal utility of gold diminishes at a lower rate than other commodities.

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