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

Why nobody has been able to replicate Warren Buffett's success

I'm currently reading Snowball, and I wanted to address the issue as to why nobody has been able to replicate Warren Buffet's success as an investor.

Diana Sonis at UnitConnect pegged it right on the money in her blog (here) as to why nobody has been able to duplicate it: patience. Wall Street is the cross between a mosh pit and a cash register, and its very easy to get caught up in the whirlwind. CNBC doesn't help it with all that Fast Money stuff either. I feel like Pete Najarian sometimes wishes to go back to his heydey as a Minnesota Viking, and sack Rick Santelli: entertaining yes, but insightful, no.

Warren nailed it when he said that the equities market is a voting machine in the short term but a weighing machine in the long term. Common sense would dictate "do as Warren does," but as we know, common sense is not so common.

In fact, our very nature as human beings often prevents us from replicating another outlier's success. Being essentially animal by nature, human beings have a tendency to "herd." There is no shame in this, its actually a defense mechanism. Herding is evolutionary psychology's learned defense that in primitive times, there is safety in large numbers. And it makes perfect sense: if the edge of your herd is attacked and you're in the middle of the pack, you'll probably survive.

Unfortunately, our evolutionary computers are as outdated as Vic-20's. We find ourselves in new world circumstances, using practically prehistoric evolutionary mechanisms to survive. The truth we must face is that our evolutionary development as humans will never be able to catch up to the speed of the information age, because as it whole it takes millions of years to make a change. Quite contrasting to the speed of a stock ticker on the bottom of a TV screen, which can change in seconds.

Which leads us to reframe our initial question. Is it possible to replicate Warren Buffet's success? Without a doubt, yes. However, to do so requires a rebelliousness that contrasts to the standard activity of the Wall Street herd.

And as we see in Snowball, Warren's personality growing up almost lends itself to this certain rebelliousness. He was always different, awkward, and sometimes even annoying. He said himself he felt he never fit in socially, convention just fit him awkwardly. We see this anti-herd personality in Graham as well, which is probably a major reason why Warren looked up to him so much. Here was a man, much like himself, who is quirky and yet, successful by his own means...and is revered for it!

So if you do wish to produce fruitful gains in your portfolio as bountiful as Warren has, it will take a conscious effort to switch off that social calibration. The more socially calibrated you are, the more conscious effort it will take on your part.

The Root Of All Genius

Malcolm Gladwell said is his book Outliers that genius is the passionate love that a person has for a particular activity, that through their efforts and permutatations, inevitably tranforms the activity itself for all those who follow. He makes a point in an interview with Robert Krulwich of NPR that people are always quick to regard genius as a result of immense talent. Gladwell says that though talent is an integral part of genius, it is by no means the end-all, be-all of genius. I would like to take this even further to say that natural born talent is not necessary at all. After all, Elvis Presley at first was told by a record station owner to stick to truck driving because his musical talent was awful.

I would like to give a glimpse into the root of all genius and say that the very element of genius itself seems to always come in the form of being a substitution for love and intimacy. Examples include Michael Jackson, Mozart, and Beethoven just to name a few. If you look at the childlife of these geniuses, they were constantly either beaten or neglected by their parents, which had a profound effect on their psychology. They substituted the love of an activity for the love they needed to express to a human being. Their expression through their chosen activity resulted in a conditioned response of feelings of love and intimacy that they lacked from others.

A troubled homelife isn't always the case, this love and intimacy substitution can come from something such as not fitting in with other kids or being an outcast. This lack of social calibration causes outward displays of love to be rejected and thus not returned.

The basic need of a human being to feel accepted and loved is vital to our social nature. When it is rejected, people often turn to a form of mental masturbation, a form of self-pleasure by engaging in an activity. This constant engagement in the activity serves as an outlet for these repressed feelings and inevitably produces feelings of love as a conditioned response.

The greatest modern day example of this would be Lady Gaga. In interviews, she always said when she was younger she always felt like a freak and didn't fit in with other kids in high school. Therefore, as a result of social rejection, she turned to music as an outlet which became the activity that produced a conditioned response of feelings of love and intimacy for her.

But being social creatures, what purpose does 'genius' ability serve? Does this mean in tribal days, those who didn't fit in were cast out of society and left to die in the wilderness? Or could it be that genius serves a societal function after all?

I think that 'genius' is an evolutionary response to social awkwardness. If we place ourselves in the position of a socially awkward person in a tribe of twelve people approximately 20,000 years ago, our inability to socialize could inevitably have lead to us not being able to find a mate. Because we are unable to gain the social value of being accepted into a group, finding a mate would be inexplicably hard because if someone within the tribe were to mate with us, they too would be outcasted.

Therefore, as a survival mechanism the brain uses love/intimacy substitution within a specific activity in order for that person to get their needed feelings of love/intimacy. In the process of this, the person becomes well practiced and masterful within that activity, which thus translates into a huge amount of social value because of their usefulness and thus possible acceptance from the tribe.

I think it'd be safe to say that Lady Gaga doesn't feel so outcasted anymore...