Extract from Cavemen with Smartphones: how evolution shaped history and finance – Part 4, Chapter 4 Economic Moats: an everyman’s guide to becoming a robber baron
…Putting aside the ethical considerations for a moment, you could calculate it in a couple of ways:
- Base elements, meaning the monetary value that you would get if you somehow were to separate someone to their base atomic components and then sum it all together. It’s about $1 for everything minus your skin, and around $3.50 for your tanned hide which we’ll, somewhat dodgily, attempt to sell as cowhide. Under that assessment model you’re barely worth as much as an overpriced coffee at around $4.50 as of 2010 [36].
- Organs and other genetic information, depending on whom you ask you could be looking at anywhere from $10,000 to a couple million. Organ selling is not a unified market and there’s various degrees of legality throughout the world. Furthermore, if you’re a truly desperate millionaire with little scruples, and a failing kidney, you wouldn’t think twice about tossing out a couple hundred thousand for a compatible kidney. But I’ll use the $10,000 – $100,000 provided by the Detroit Free Press, as it seems to be the most reasonable source that uses actual court evidence and doesn’t seem to be hyperbole and clickbait like others[37].
- The monetary value derived from their work, here’s where it starts getting tricky. Whereas before we could reasonably calculate the value of something based on the utility it provided, here it’s extremely subjective. Unlike purchasing a liver from the black market or the base elements of a human body, where there’s ample potential supply if the prices are good enough, in this category there are items of incalculable value because of their perceived uniqueness. How much do you sell the Mona Lisa for, for example? Even if you make a copy of it that is identical to it atom by atom, the “copy” wouldn’t sell even remotely close to the original. There’s no substitute commodity for it and thus the only point of reference is itself. Not because Renaissance paintings of women are so rare, but because it’s the Mona Lisa. Basic things like insuring it are a nightmare. In 1962, it was valued at an insurance payoff of a maximum of c.$790 million when adjusted for inflation, but the security necessary for its safe transportation exceeded the maximum premium payoff [38]. Should these costs not be factored into its valuation? After all, its safekeeping and conservation are value added to the end product. But then, if you follow that logic, its value spins out of control as it becomes a self-perpetuating cycle that approaches infinity, despite there never being anything extra actually added to it.
Incidentally, Lorenzo the Magnificent said that from 1434 to 1471 the Medici spent 600,000 Florins for public purposes and this expenditure “casts a brilliant light upon our condition in the city” [39]. If we take this 37-year timeframe to be representative of their willingness to be patrons, and we guesstimate that the Italian Renaissance lasted 200 years, from 1300 to 1500, they would’ve spent a total of 3,243,243 florins or $468.399 million nowadays. Meaning that the Mona Lisa’s low-ball insurance payoff is worth almost twice as much as that of the entire Renaissance from the Medici’s perspective, which is frankly ridiculous.
Contrary to what your parents would tell you, people or art of any sort are not irreplaceable. It’s just our own sentimentality getting in the way of rational thought. For example, people might well believe that every life is unique and incalculable in value. But our behaviour says otherwise.
We don’t add an infinite number of dollars to the GDP every time someone is born, that would be silly and patently unhelpful. We usually subconsciously draw a distinction between real value and feel-good “irreplaceable value”. Or at the very least our laws imply as much, given that as a society we’re fine with some deaths for the sake of convenience. Automobiles are allowed on the streets despite the fact that there are accidents, for instance.
If we genuinely believed that whoever saves a life, is considered as if he saved an entire world as the oft-quoted phrase from the Talmud says, we wouldn’t be allowed to drive cars at all. Instead, as a society, we’ve reached a compromise. In areas where there are speed limits, we’ve agreed that no matter what the person stands to gain from going fast to their destination, society stands to lose more from their risky behaviour. However, we also implicitly know that there will be casualties, even if everyone respects the speed limits. Hence, we are willing to tolerate a certain cost of life to satisfy our individual desires. It might change from day to day, from legal jurisdiction to jurisdiction, or even based on the time of day, but there is an implied monetary value hidden away in our practices and conventions, which we unconsciously and collectively apply to a human life.
A potential future Da Vinci might be run over, but we accept this as a reasonable compromise for our convenience. The unconscious mechanisms that drive our society have thus arrived at a monetary value for a life, and it is far from an infinitely high one at that, but neither is it anywhere near the $4.50 number. Hence, the middle of the road number, our $10,000 to $100,000, might be more appropriate and closer to the monetary value we apply to a life – neither is it disregarding the value of the shape that the components are in, nor is it blowing it out of proportions by assigning freakishly large value on it.
Same logic ought to apply to stock valuations. One should not be so pessimistic, so as to only consider the scrap metal of the machinery of the company, but neither should one believe that the ideas behind it can perform miracles.