Intrinsic Value

There is no such thing as intrinsic value. The value of all things is relative to the amount that someone wants those things. Nothing is valuable in and of itself.

Still I would argue, some things hold value more intrinsic than others. In particular, the single most intrinsically valuable thing is time, which is to say I value time more than any other thing, and I value all other things in proportion to the amount they increase the quantity or quality of my time.

In functioning markets, the market value — the price — of a product or service is directly proportional to the amount the product or service improves people’s lifetimes. Conversely, dysfunctional markets overvalue or undervalue a product or service due to other factors — factors that are misaligned with the intrinsic-ish real value of time.

In the recent housing bubble, the housing market overvalued owning a home, and undervalued renting, in part due to a false perception that ownership is forever. In reality, ownership is temporary, bounded at the outermost extreme by death. In many cases, your actual use of a home will be considerably shorter than your lifetime. As a home shopper, you can live a happier life by viewing home ownership as using a home for some amount of time, and thereby avoid a lot of detrimental rationalizations for owning over renting. Would be home buyers often say that they want to stop “throwing money away on rent.” Unless you’re fortunate enough to have enough cash to pay for a home in full, you’re going to be a renter even if you buy your home. You’ll just rent money from a mortgage bank instead of renting a home from a landlord.

But enough about housing. Back to value.

The intrinsicality of a value differs from the power that value holds to influence a person. To illustrate:

Eric Ries describes four kinds of value to help explain why people buy virtual goods. He argues that “identity value” is the strongest of the four kinds and that we as consumers are less influenced in turn by each of social, perceived, and practical value. The first time I read Eric Ries’s ideas about the relative strength of practical, perceived, social, and identity value, I had two reactions. First I thought he has it exactly backwards. Then I thought he has it right, and what a sad commentary that is on us as people.

Three of Ries’s four kinds of value map closely to Abraham Maslow’s hierarchy of fundamental human needs — physiological, safety (practical), love & belonging, esteem (social), and self-actualization (identity). Ries’s fourth kind of value — perceived — maps somewhat to each of Maslow’s love & belonging, esteem, and self-actualization. What does it say about us if self-actualization (identity) is more valuable to us than our physiological and safety (practical) needs?

It says that intrinsicality and strength are different qualities of value.

Affluent Americans can take our most fundamental needs of clean air, nutritious food, clean drinking water, and safe shelter as given. We attribute the highest value to the next most fundamental needs — the ones we that don’t come as easily. When things come easily, more of them provides only a marginal improvement in the quality or quantity of our time. Instead, we derive a larger marginal improvement from our next virtual reward. In the third world, the most fundamental needs don’t come as easily. So cleaner air, more nutritious food, cleaner drinking water, and sturdier shelter provide stronger value than less intrinsically valuable needs.

Maslow’s hierarchy of needs provides a good model of intrinsicality. Ries’s classification of value provides a more direct model of value in the first world. The strongest value to any individual is the most intrinsic value that the individual can’t take for granted.