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Macroeconomics and Microstates

The views in this piece exclusively reflect the opinions and experiences of KangarooJackNicholson, and do not reflect other staff writers, nor the Earth2 team. It should also be noted that KJN holds tiles in multiple nations and is involved in marketplace purchasing and selling.

There have been a number of trends to take hold of the Earth2 Community since I joined in December (by which point I had already missed a few). There was the United States buying wave that occurred in December through mid-January. There was the Class One buying spree in which every Class One offered by Earth2 directly was purchased, leaving Class One exclusively in the marketplace and HODL profiles. Most recently, some users have been targeting small island nations and microstates. For simplicity, we will refer to this as the Small Nation strategy.

Before we fully dive into this concept, I am sure some members of the community are yelling “We knew about Gibraltar/Monaco/Holy See a long time ago”. You’re absolutely right, and many of you have already been beneficiaries of this foresight. I consider those three to be particularly extreme, and actually the catalyst for the larger philosophy we’re going to address. I will refer to these as the First Wave.

The philosophy behind the Small Nation strategy is straightforward. Small nations that still have remaining tiles, such as Tuvalu, San Marino and Liechtenstein (Second Wave) have a relatively small supply of tiles to begin with, compared to large nations like Russia or China. In a traditional supply & demand model, logic would dictate that the dwindling supply of San Marino tiles would increase demand, and the marketplace does indicate some success with this model. For example, San Marino and Liechtenstein have zero Class One properties listed below market value, a rarity in general, made even more impressive by the pre-UAE buyers market we are experiencing. Many are looking to offload tiles, yet these nations are holding strong for sellers, at least of Class One tiles.

On the other hand, some with Class Two in San Marino are now selling at tremendous discount, sometimes at an overall loss. At the time of this writing, many Class Two properties are listed for up to 50% off of marketplace value, indicating that the more recent purchasers are getting cold feet, unlike the long term Class One holders. Why are we seeing this, and what does it mean for the overall strategy?

It is the opinion of the idiot writing this piece that many were blown away by sales of Holy See tiles, as well as Monaco and Gibraltar (land specific) tiles, and thought the same was plausible elsewhere. However, Holy See is smaller than 0.5 square kilometers, and Monaco is just over two square kilometers. San Marino, on the other hand, is 61 square kilometers. That is significantly more money to completely purchase a nation. In addition, the price continued to go up, and eventually became prohibitive compared to other nations. At the time of this writing, new San Marino tiles cost $1.14, while there are many other nations selling at less than half that price.

Lastly, as we know, no two pieces of land are the same, and no two nations are the same. Holy See carries a religious and cultural weight to it that many other nations do not. Monaco’s proximity to France and high income reputation change the appeal of the purchase for prospective buyers. Other small nations do not necessarily carry the combination of traits that have made Monaco and Holy See tiles so profitable for early investors.

So, for those who may have invested in the Second Wave of small nations, what’s next? Were we wrong? In the interest of transparency, I have 20 Class One tiles that I purchased in January, but have purchased another 343 Class Two San Marino tiles in the last few weeks. I did this initially because of the scarcity of tiles there, and later made purchases that I simply thought were too great of a discount to pass up. I do not think we were wrong, but some of us were perhaps naïve about the explosive potential of Second Wave small nations compared to the First Wave.

I do think you’ll see nations like Tuvalu and San Marino get increasingly full as the cheapest nations on earth continue to be purchased. Sure, San Marino may be cost prohibitive at $1.14 compared to other nations, especially with $0.10 UAE tiles on the horizon for some of us. As tiles in cheaper nations are bought up, and those prices increase, Second Wave small nations will increase in appeal again. For now, I will align myself with team HODL, and reassess my second Wave investments in three weeks. I think we will be happy with these investments in the long run, but some of us may need to recalibrate expectations if they were based on the marketplace successes of First Wave small nations.

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