The Value of Anything

A mistake I initially made is to assume that common sense in regards to the value of goods and services actually exists. While all manufacturers and providers fight tooth and nail to obfuscate the true worth of their wares, in a free competitive market it's very simple to deduce the true value of anything.

    First of all, the retail price usually is irrelevant to actual value (AV) of the good or service. Retail price can range anywhere from below AV (so it is sold at a loss) to several thousands of % above actual value. The definition of retail price is:

The maximum amount of money someone is willing to pay for this service or good.

For example, Volkswagen loses several millions on each sale of a Bugatti Veyron with the loss on each car being three times it's retail price. On the flipside fountain soft drinks like Coca Cola cost the restaurant (all costs included like labour, power etc.) somewhere between 5-10 cents per glass and they are sold for $2-3, a mouth watering 2000-6000% markup.

    Now it is important to realize that buying a Bugatti is certainly not a "smart move". Even though it costs $8m each to Volkswagen the AV of a 1000+hp luxury car is probably somewhere in the range of $80k. Similarly, buying soft drinks at 5cents a glass is not a smart move either, the AV of soft drinks is deep in the negatives for anyone smarter than a potato. You should be paid 20-40$ to test that poison for them.

    The real question then becomes, how do I estimate the AV of a service or good? While sometimes it will be very difficult to be very accurate (as I mentioned many details are kept secret to maximize profits) there is an easy way to reassess a running "maximum" for everything which will be detailed in a future post. Remember that the pragmatic way of looking at things will be very narrow, since in a cost-benefit analysis there is only one objective optimal. How wrong exactly is your perception of money and value? Let us consider what you can buy with $100 around the world:

  • 1.5L of above average bottled water (Bling H20), still worse than Vienna's free tap water.

  • 2 below-average tasting melons in fancy boxes (Yubari melons).

  • 200gr frozen Wagyu Beef sirloin steak (US)

  • 2kg fillet buffalo steak (US)

  • 30kg of fresh pork (US)

  • 1 month gym membership (New York).

  • 10 month gym membership (Thiruvananthapuram, India).

  • 0.5 pairs of jeans, 3 pairs of jeans, or 10 pairs of jeans of the same quality.

  • 1 month rent in (parts of) Yemen or India.

  • 1.6 days rent in Hamilton, Bermuda.

From this list you can pretty much guess some of the factors that come about into the retail price of things and how we can go about finding a pragmatic AV for everything. Coming soon.

- The Pragmatist