Wednesday, July 6, 2011

All Humans Are Value Seekers

Kind of broad statement, but it’s simple and it’s true so think about that for a second: All humans are value seekers. For the last few years I’ve kind of been obsessed with the concept of value. Value can mean all sorts of things and doesn’t necessarily have to pertain to money. That being said value as it pertains to money can provide us good direction in defining exactly what value is. Whether we are buying a house for less than what it’s worth, or a stock, or jewelry or whatever, it’s obvious that value plays a big part in our lives.

Then why is it so hard to define what the value of something is exactly? In real estate, how are houses typically valued? Comparables. That’s because value is so elusive that we have to look at things outside of something in order to determine how much it’s actually worth. Kind of crazy when you think about it right? We’re determining how valuable something is not by looking at the thing itself, but by looking at other things. It almost sounds a little insane, but that’s the nature of value, there's an essence of relativity.

Humans by nature are value seekers, meaning that they are constantly in pursuit of things they perceive to be worth in excess of the price paid for them. Why does someone pay $250,000 for a Ferrari? Because the person perceives that the value of that Ferrari ̶ the prestige, the glamour, the stares of hatred from passerbys ̶ is all worth much more than $250,000 because if it wasn’t they’d go buy something else. How many times have you saw something you liked, found out the price of it and said “Nah, that’s not worth it”? That’s this value-seeking concept at work.

As social animals, we tend to gravitate towards people that we perceive to have high value. Unconsciously, the reason why we befriend someone or start a relationship with someone is because we perceive that the value we can extract from that person is worth well in excess of the value we must give to that person in return. When do relationships end? When people feel like they are giving more than they are getting back.

But the biggest takeaway about value is that even though value is real, it’s still only a perception. It’s a perception with justifications, but just a perception nonetheless. Think about how that can work to your advantage in your life or in your career. The value of anything is defined only by our perception of it. How can we guarantee success in business or our career? It’s simple: give more than you ask for in compensation. 

The concept of giving really comes full circle here sociologically, in the fact that a person’s true value is determined exclusively by how much they give versus how much they ask for in return. That’s why 50/50 is a losing proposition in any relationship or business deal, the result is net-zero ̶ no value.

It’s a crazy concept that I’m still wrapping my head around myself, but undeniable at the same time…

Value = Perceived Worth – Price Paid