Understanding the value of things

Interesting questions, interesting responses:

• £50 today or £60 in a month?
• £350 in 12 months or £360 pounds in 13 months?

It’s interesting what our response to some questions are.

• You have a ticket to the theatre which cost £20 and a £20 note in your pocket. When you get to the theatre you have lost the ticket. Do you buy another ticket?
• You have two £20 notes in your pocket. When you get tot the theatre you have lost one of the £20 notes. Do you buy a ticket to the theatre?

Your first reaction to these questions and your considered response might be significantly different. The problem with estimating the value is that we use very strange (complex) logic.

I spend a lot of time helping people to change there business by bringing extra value to the way that they do things. These changes normally involve IT, because that’s my area of expertise, but not always. Understanding and agreeing what the value of any particular activity is can be quite a stressful exercise, particularly when it comes to the decision to spend money.

The values that people place on things has always fascinated and frustrated me. Surprisingly few decisions are based cold hard economics. The value is often much more subjective, or so it appears to me. Perhaps I’m just not seeing the complicated value judgement that they are making. Perhaps my value judgement is missing important elements.

I don’t have any answers here, I’m just making an observation, but I’m not the only one that sees the paradox. Dan Gilbert does a much better job of explaining than I do.

http://static.videoegg.com/ted2/flash/loader.swf

If you ever want to extend your thinking TED is a really good place to start.