Value, it seems, has a preferred shape.
A recent study in applied economics analysed more than 1,300 Picasso paintings and found vertical works fetched up to 40 per cent more than horizontal ones, even when subject and period were identical. Indeed, as Panmure Liberum’s Joachim Klement noted, “even landscape pictures fetch lower prices when they are in – well – landscape format”. Why this is the case is uncertain, but subtle biases – for example, upright forms are easier to display and may seem “more right” – are likely to be at play.
Stock markets are more efficient than art auctions, but not perfectly so. Analysts often extend the same vertical logic to AI firms, where estimates of value keep shifting as new narratives take form.
Tesla, which reported earnings on Wednesday, was worth $700 billion (€603 billion) in April. Today, despite falling earnings estimates, it’s worth $1.4 trillion. Various rationalisations abound, but the basic reality is Tesla’s valuation reflects the shape of its story as much as its earnings.
Take Morgan Stanley’s Adam Jonas and his defence of Elon Musk’s potential $1 trillion pay deal. Yes, “a trillion bucks is a big number”, but it’s “rather modest compared to the size of the market opportunity”. Musk “has long been thinking on a planetary/species level” and is uniquely placed to link “the digital/AI world and the physical/atomic world”.
Indeed.
Despite the spreadsheets, finance still runs on story and belief. Investors sometimes pay up for what looks visionary, not just what adds up.
Picasso would have understood: the verticals always fetch more.