So trading is a very funny game. Usually people walk away from a trade happy, and think they almost suckered the other person.
I once traded a queen-size mattress for a digital video camera. I was stoked because this mattress was just taking up space in our garage. When the other person arrived at my house to make the trade, I noticed she was rushing to get the mattress into their jeep. She briefly explained the video camera, but then zipped away. While she was loading the mattress, I made sure everything worked on the camera, and I was a little confused why she jetted off so quickly like the camera was about to self-destruct or something.
I fiddled around with the camera, and nothing was wrong. Everything worked properly. Later that night I called the lady just to ask why she seemed to rush off. She said, “I didn’t want you to change your mind.” I didn’t understand. She said, “I needed a mattress so much and had no use for the camera, I couldn’t understand why you wanted the camera and would give up such a highly valued mattress. I felt like I ripped you off.” I explained that I was perfectly happy with the camera, and that we had more use for the camera than the mattress. We laughed because we both thought we ripped the other person off.
It’s funny to think that other people may have completely different values than what we have. It’s even more difficult to understand that what we value may be completely opposite of what another person values.
I love economics. So I’ve tried to come up with my own personal “Value” equation.
Individual Value = (Utility + Sentimental Value)/opportunity cost.
Utility is very on the person. An electron microscope may have little or no value to me because I don’t know how to use it, but it may be worth billions to someone who does.
Sentimental Value is very difficult to quantify, but the higher the sentimental value, the higher the value to that individual. There’s a story (not sure if it’s a folklore) that an orphan became a very successful businessman. One day he drove past a garage sale, and say a familiar teddy bear. It was the teddy bear he had as an orphan child that he took from foster home to foster home. This was his comfort during all those years, but he lost it one day. He was floored. He was so happy to have found it that he offered his Rolls Royce in trade for the teddy bear. Sure, we’d all love to be the guy having the garage sale, yet we can all understand the value of sentimental value in trading something of little value (Rolls Royce because money isn’t an issue), for something of such high value.
Opportunity Cost. You may be able to use that Electron Microscope to win a Pulitzer Prize, and it may have been your deceased father’s microscope, but if you had to give up something so valuable in the trade, it still may not be worth it to do it. Only you can judge this.
