By Chris Corbin
I’ve noticed an increasing trend in what I call “Water is the Next Gold” articles. On some level, I couldn’t agree more – hence, my career choice. Although, as someone actively engaged in the western water market, I can easily name 8 reasons why water is not the next gold.
1. Gold is simple. Water is complex. Surface water vs. groundwater, simultaneous and interdependent use, just scratch the surface of this complex resource. The only constant with water is change.
2. Gold is safe. Water rights come with inherent risk, due to the uncertain validity of the invested asset.
3. Gold markets don’t include adjudication. Water markets include adjudication.
4. Gold markets have low transactions costs. Water markets have high transaction costs. Water transactions are plagued by third party effects and the tragedy of the anticommons.
5. Gold has many buyer and many sellers. This is not yet the case in the water market, but the supply and demand of water in the West makes this a strong possibility in the future.
6. Gold markets are efficient. Regulatory bottlenecks challenge the efficiency of water transactions.
7. Gold has clearly defined prices. Water lacks clearly defined prices. For example, tell me how much water is worth.
8. The gold market isn’t polarized. Some people believe water should never be traded. Even though I disagree with these people, their opinion still exists.
With that said, I strongly believe investing in Western water rights is a wonderful idea, it’s just not the next gold.
Chris Corbin is the founder of Lotic LLC — a water rights marketing and management company, and a PERC Enviropreneur Institute alum. He blogs at Living in Actively Moving Water.
