Small Brain: What is Value?

I Draw Charts (David Holt)
4 min readMar 6, 2021


My thought process

“Value” in my mind is one of the most ambiguous and useless words in the English language. It’s also one of the most interesting. It’s such a weird concept! To value something (i.e., to use the word “value” as a verb), means to attach a worth to it. For example if I am willing to exchange my car for $15,000, I have attached a value to my car. Maybe someone will pay that much, maybe they will not. How does anyone know whether that valuation adequately reflects the worth of the car? Let’s make it even weirder and say that I would not exchange my car for any number of dollars. I want 100 live chickens instead. Is my car now worth 100 live chickens? Does my car no longer have a USD value? By whose standard, and why?

Hopefully the absurdity of that first paragraph is enough to make you laugh a little, but it might also make you think a bit. It’s a good question isn’t it? What the actual fuck is “value”, and why are some forms of valuation considered reasonable and others aren’t? Some of you might also have done the math and wondered why I’m indirectly valuing a live chicken at $150 each and to be honest, I have no idea dude. Do any of us? I mean, how much is a dollar worth? What do we value it against?

Lots of questions. Feel free to puzzle through them and come to your own conclusions, but here’s mine: value isn’t real.

Here’s what I mean. It’s completely subjective! Value is an opinion, it’s ephemeral and useless. It changes constantly based on who you ask, and there’s no oracle of truth! Nobody is forcing you to agree with my idea of value, any more than I am forced to agree with yours (well, most of the time and the exceptions are pretty fucked up). So how in the hell can we possibly be certain in the value of anything? If there’s no value, no standard, what is the point of ownership or production?

Very mushy, vague sort of world we’re imagining (or waking up to?) and maybe your brain hurts a bit now. Mine does. Tends to happen when you start to really think about a lot of our base assumptions on Important Things and Ideas. Fortunately, there are actually two objective methods of valuation that we can use. The first is human necessity. Water has an intrinsic value (i.e., it cannot ever be entirely value-less), because humans require it to survive and humans are the only beings capable of understanding the concept of and therefore assigning persisting value. The standard of human necessity imparts a value, but does not impart an intrinsic quantity of value. There is still no standard against which to measure the value of water according purely to the rule of necessity, but there is an un-quantified imbuement of value.

The second method of valuation is the standard of a free market. A free market implies two things, without which it becomes nothing more than a disguised tool of force and a sham. Those defining qualities are property rights and free volitional participation. Everyone who wishes to participate must be permitted to do so, must own (read, retain full control, access and use of) their assets and must not be coerced by threat of force to exchange them for anything else, whether at a fixed rate or otherwise. If these things are not true, the market cannot adequately reflect any level of quantifiable value because the valuation is set by an arbitrary imposed force. This would make true valuation impossible beyond the intrinsic.

So. Big words, small brain. Let’s take a second to digest and recap. Value is an opinion. Necessities are intrinsically (but un-countably, by default) valuable. A free market provides a valuation standard.

Now let’s combine those ideas into a foundation for thought (the whole point of these articles).

Value is an opinion freely expressed by the act of buying or selling an asset for any reason (including necessity) on an open market, so long as that market remains free.

Note that this foundation does not mean that everyone agrees on value for… well, anything. A starving man will value a carrot much more highly against a gold bar than a farmer who grows thousands of carrots a year and only eats a very small fraction of them. So how is valuation standardized? The answer is market value, or mark price. If I value an asset lower than it is currently being exchanged for, I’m free to sell it (or short-sell it, which I’ll talk about in a much later article, maybe). Conversely, if I believe an asset is underpriced, I’m free to purchase as many as I’m able or willing. I am free to express my opinion of valuation via participation on either side of the market and doing so affects the mark price to some degree or another.

Regardless of whether I choose to participate or not, the mark price of any asset is the arbiter of value. I’m free to hold a differing opinion, but it either aligns with the market or it is wrong.

What this means is that even if the market later aligns to my opinion of value, until or unless it does so, my valuation is wrong no matter how well-reasoned I might believe it to be. The market price is a participation-weighted average of the opinion on the value of an asset and it’s the best and only way we have to truly quantify value on anything.

I wrote this article, there’s no financial advice in it or anything, insert usual disclaimers and follow me on twitter. Please clap.