The Value of Anything
About a decade ago, when I was still on Facebook and we used to have heated, but civil discussions about interesting things (as opposed to the effluent that flows from Facebook these days), some friends and I got into an interesting discussion about the value of companies, products, services, whatever.
I proposed a thought experiment: What if tomorrow morning, we woke up to a world without ___________.
Fill in the blank and imagine the consequences.
For example: If tomorrow morning we woke up and Microsoft products disappeared off the face of the Earth while we slept, the entire world would likely descend into chaos. So many things we do, from banking to medical exams to security to air traffic control, you name it, rely on Microsoft software. I would argue the world would collapse.
On the other hand – Facebook. If we woke up tomorrow and Facebook was gone, we would say “Hmmm. That’s weird.” We might text a few friends, talk to a few others, read a couple of news stories about how Facebook ceased to exist, and then we would all go about our lives as if nothing happened.
You would think based on the above example, that the most valuable companies/products in the world are also the most useful and/or widely used. And you would be correct. Except not really.
The most valuable publicly traded company in the world is Apple, with a market capitalization [total value of all shares of stock x the price of the stock] of $2.7 trillion.
Microsoft is right up there at $2.2 trillion. But I would argue that Microsoft is a more important company to the world than Apple. We NEED Microsoft. But we LOVE Apple products.
Which is where marketing and branding and, in accounting parlance, “good will” come into play in the determination of value.
There are many companies whose products are of questionable usefulness, but still have high value due to brand equity (Coke, Disney). Other organizations are virtually indispensable, but not particularly loved or are even hated (the Internal Revenue Service, insurance companies.)
Just for fun (because I live a sad life where doing this counts as fun), I created a matrix on which I plotted a few random companies/organizations/products based on nothing more than my own gut feeling. ZERO actual research went into this. It is my opinion only. Entirely subjective. From an academic/statistical point of few, this chart has the equivalent qualitative and quantitative value of a pony in a nuclear submarine.
But, I put it out here for you to think about: what is valuable to you? You might be surprised after giving it some thought. Interestingly (to me, anyway) I couldn’t think of anything for the upper right corner – something that that is absolutely adored and utterly indispensable. Apple came closest.
I also created a formula for calculating value:
Where V = Value
p = passion
u = usefulness
t = time
So, by this formula the more we love something and the more useful it is, the more valuable it is IF we love and use it over time. (In truth, this formula is deeply flawed for a variety of reasons, but since I don’t have to “show my work” to anyone, what do I care. Plug numbers in and see if it works for you.)
That is why Apple ranks so high and Sears so low. It also explains why the pet rock (look it up, people under 50) is in the upper left of the chart: it was all the rage, but it was absolutely useless and the fad lasted for about five minutes.
Value is a constantly moving target, whether it is the always-changing price of a stock, or the more imprecise choice and passion of an individual or group toward an object or entity. Diamonds and gold are among the most valuable things in the world. One is simply carbon that knows someone, the other is (to paraphrase Warren Buffett) something we pay a lot of money to dig out of the ground only to store it in a vault. I would argue that an iPhone or a lifetime subscription to the New York Times is a much more valuable way to propose marriage, but I can tell you from experience, that dog won’t hunt. Go diamond or go home.
Now, pass me a bag of Doritos, a can of Crisco and roll of Saran Wrap. I’m going to make the worst Tik Tok video ever.