I like aphorisms. When you dwell on them the best ones make you think about all sorts of ideas. The vague ones can inspire critical thinking. Plus they are short. Some are twee but even the tired ones are tired because they’ve held some element of truth for so long. I collected and devised many of mine own in a small book a few years ago. Now, I am dwelling again on investment type aphorisms as applied to life.
I have:
Every stock has a price. Not every stock has value.
Oscar Wilde wrote: (In Lady Windemere’s Fan via Lord Darlington):
a cynic was ‘a man who knows the price of everything and the value of nothing.‘ :
Warren Buffet wrote:
Price is what you pay. Value is what you get
Philip Fisher:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.”
The price part seems obvious. There is a listed price for assets or products and you pay that and receive the item or share.
The value part fits on two ideas. One idea is “intrinsic value”. In an investing context, the idea is that price and value are not always equivalent. There are times when the price you pay is less than the value you receive (a bargain), and other times when the price is much more than the value. Investors looks for opportunities where they believe the intrinsic value of a stock (what you get) is greater than its current market price (what you pay).
This idea is applicable in life beyond investing. You pay a high price for a luxury item, but if it doesn't bring you proportional happiness or utility. Conversely, some experiences or items might be low or free in price but offer enormous value in terms of enjoyment, knowledge, or emotional well-being. This can be particularly true for experiences where there is evidence the memory value of experiences is high.
Applying this to life events
**Understanding the value, not just the price**: In life, we often mistake the price of something for its value. Price is what you pay, while value is what you get. For instance, spending time with loved ones, cultivating deep relationships, maintaining good health, or investing in personal growth may not have a monetary price tag attached, but their value is immense. Conversely, some things might be expensive but bring little lasting happiness or fulfillment, proving not to be valuable in the long run.
**Looking beyond the surface**: Just as the stock price doesn't tell the whole story about a company's value, people's outward appearances or the immediate impressions they make don't fully represent their value. This can apply to judging people based on their looks, wealth, or social status, instead of their character, actions, or potential. Make informed decisions. In life there is importance in making decisions based on thorough understanding, not just superficial appearances.
**Long-term versus short-term perspective**: In the stock market, some traders might focus on short-term price movements, while overlooking the long-term fundamental value. Similarly, in life, it's easy to get caught up in immediate pleasures, distractions, or short-term gains, while losing sight of long-term goals, values, or the bigger picture of what truly matters.
**Don't follow the crowd**: The stock market can be influenced by herd mentality, where people buy or sell based on what others are doing, without considering the intrinsic value of the investment. Similarly, in life, it can be tempting to follow trends, or do what others are doing, without considering whether it's truly valuable or suitable for you. It's important to think independently and make decisions based on your own values and circumstances.
Caveats to note:
While the advice in the aphorism is generally sound, there are a few caveats and critiques to consider.
1. **Subjectivity of Value**: The aphorism implies that there's an objective, underlying value to things (or people, or life experiences) that one should understand. However, value is often subjective and can vary greatly from one person to another based on their personal tastes, needs, values, or circumstances. What's valuable to one person might not be valuable to another. Therefore, it's important to understand that each person has to determine what's valuable to them based on their own criteria.
2. **Practical Constraints**: While it's ideal to make decisions based on a deep understanding of their underlying value, this is not always practical or possible. Gathering and analyzing all the relevant information to fully understand the value of something can take a lot of time and effort, which might not be feasible in all situations. Sometimes, one has to make decisions based on limited information or time constraints.
3. **The Role of Emotion**: The aphorism suggests a rational, analytical approach to making decisions, which is certainly important. However, emotions also play a significant role in our decisions and can't be ignored. Sometimes, something might not seem valuable based on a rational analysis, but it brings emotional satisfaction or aligns with one's passions, which can make it valuable in a different sense.
4. **Changing Value over Time**: The value of things can change over time as circumstances change, new information becomes available, or people grow and evolve. Therefore, even if one understands the value of something at a given moment, this understanding might not remain accurate in the future.
5. **Risk and Uncertainty**: Even with a deep understanding of the underlying value of something, there's always a degree of risk and uncertainty involved in decisions, whether in investing or in life. There are always factors that are out of one's control or unpredictable events that can occur. Therefore, even the best-informed decisions can lead to unexpected outcomes.