TL;DR: When investing, it’s easy to focus too much on the numbers, and not enough on the fundamentals – is what you’re buying something that will be increasingly useful and valued over time? Focus on that first, then make sure the numbers work.
One thing that can trip you up when you’re investing is getting too focused on the numbers, losing sight of the thing that matters most – utility and value. When we talk about creating wealth, what we’re really talking about is creating something people want. Something that creates utility for someone else. The numbers and the investment models are just an abstraction of the underlying utility and value – the underlying wealth. Any sort of model or analysis on paper is only as good as the assumptions that go into it. Those assumptions should be driven by a much more qualitative and intuitive view of utility and value. In short, is the thing you’re buying going to be more useful and valuable in the future?
You should use this approach with any investment you make. Instead of trying to ordain whether something will be worth more dollars in the future, focus on whether it will be more useful and valuable. If you can’t articulate why something will be more useful or more valuable in the future, then no amount of numbers on a spreadsheet will make it so.
First look for utility, then back it up with the numbers!