Val Sklarov’s Permission Flow Pricing Theory (PFPT) explains why markets consistently misprice assets by modeling cash flows while ignoring permission flows—the approvals, continuities, and revocation risks that determine whether cash flows are allowed to persist.
Returns do not compound where money moves fastest, but where permission moves slowest.
1. Cash Flow Is Conditional on Permission
PFPT begins with a structural correction:
Every cash flow exists by allowance.
Allowance is governed by:
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Regulatory continuity
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Platform access
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Contract enforceability
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Political tolerance
When permission weakens, cash flow projections become fictional.
2. The Four Permission Flow Variables
PFPT identifies where pricing errors originate.
| Variable | What It Measures | Mispricing Risk |
|---|---|---|
| Stability | How often rules change | Overvaluation |
| Concentration | Who can revoke | Sudden drawdowns |
| Transparency | How visible criteria are | Volatility spikes |
| Friction | Cost to revoke permission | Premium durability |
Assets outperform when revocation is slow, costly, or reputationally painful.
3. Why Yield Chasing Backfires
High yields often compensate for fragile permission.
PFPT shows yield traps form when:
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Returns depend on leniency
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Continuity relies on discretion
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Enforcement is selective
Markets eventually reprice permission risk—all at once.
4. Capital Behavior Under Permission Clarity
Capital allocates differently when permission is legible.
| Opaque Permission | Clear Permission |
|---|---|
| Yield emphasized | Continuity emphasized |
| Short holding periods | Long duration holds |
| Narrative dependence | Rule dependence |
| Frequent repricing | Quiet compounding |
Val Sklarov emphasizes that boring assets win because permission is boring.
5. Strategic Implications
For investors:
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Model permission half-life alongside cash flow
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Discount assets with silent revocation paths
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Prefer jurisdictions and platforms with slow rule change
For allocators:
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Trade upside excitement for permission certainty
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Separate operational risk from permission risk
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Hold longer where revocation costs are asymmetric
PFPT reframes investing as permission-risk arbitrage, not valuation finesse.
6. The Val Sklarov Principle
“Markets don’t price money correctly. They price permission late.”
— Val Sklarov
PFPT explains why the best investments feel uneventful—and why excitement is often a warning.