Creaking infrastructure

When we make investments, part of the returns will need to be ploughed back into maintaining the asset so that it continues to operate well and bring returns. For stocks, that happens internally within corporations so that any returns you get are already net of those operations & maintenance type expenditure. For a property, things are a bit more complex since you do have to fork out some money in order to upkeep it, and that subtracts from the rental income you make.

When it comes to assets that do not yield financial benefits but things like convenience, efficiency and all, then things gets more complex. Because the cost of maintenance is explicit but the benefits from it would be less obvious. One example would be just washing a car. There’s little utility to washing the car other than the impression you give to others about you as a person; though of course, that could also be part of the reason you first got a car and that is an important benefit stream you want to be able to secure from your asset. Then you’d do the washing regularly.

From here you realise that your willingness to upkeep the asset really should depend on the stream of benefits you’re trying to derive from the asset. And these all should be worked out a bit more upfront when we are making the decision to first make the investment. Or perhaps the exact costs won’t be available but we should at least be aware of them.

Our lives consists of a lot of infrastructure investments; the relationships we have, the education we decide to take on, and these all takes maintenance. The choices that we have made do set the boundaries and constraints on choices we are going to make in the future. And therefore, it is important that the ability to upkeep those investments are considered before even starting.