Future present value

The value of an asset largely depends on how much income it is able to generate in the future. This is often referred to as the future present value. So the value of a skill or degree is promotional to the income it can generate in the future.


There are two key metrics that determine the future present value. The first is the growth rate. If your business is able to generate future cash flows at a high growth rate then the business is indeed valuable. The second metric is how long the asset is able to survive. So a business that lasts decades will generally be quite valuable. This means it can endure through different cycles of hardship. A good career will last a lifetime and will generate a lot of income for its bearer. 

The valuation of an asset depends on the future and not the past. The future present value attempts to evaluate the future potential of an asset. This could also mean that irrespective of your past your future potential could be quite high. This will of course depend on your willingness to persistently grow your skills and competencies for a long period of time.

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