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Sensuous Value is the Worst Kind

This article was written by in People. 12 comments.


This is an article by The Weakonomist, an anonymous blogger responsible for everything at Weakonomics.com. As a banking insider he’s witnessed the economic implosion from inside the bubble. You can usually find him at the corner of Wall Street and Main Street throwing rocks at traffic.

If I presented a monkey with two choices: a grape or a piece of paper that could be exchanged for a dozen grapes, what will he choose? Before the question is even asked, he will take the single grape. Stupid monkey.

We’re all stupid monkeys. Sure as an individual you’re smart, but as a population we’re terribly stupid. And much of that goes back to our monkey brains. We see value in the single grape but not the paper. And this isn’t a matter of instant gratification. Your senses are playing tricks on you. As a collective people, we place too much value on the things we can see, touch, taste, smell, and hear.

The best examples of sensuous value come from people that come into wealth quickly. Think of celebrities, rappers, and athletes. According to Sports Illustrated, an estimated 60% of former NBA players are broke within 5 years of retirement and 78% of NFL players have similar issues within 2. Now part of that may be due to poor spending habits and not just investments, but the two are really one in the same.

Bad investing and poor spending both focus on the material. You want to take cash and turn it into something you can really own. It might be cars, jewelry, houses, friend’s businesses, vacations, or restaurants. They can all be consumed in some form or another. You can brag about the company you’re invested in, sample Beluga caviar while cruising the Mediterranean, or take a hot date to your restaurant in your Maserati. The only thing that differentiates bad investing with bad spending is the expectation of a return. But if the return was unrealistic, then the only difference really is a tax write-off.

But why do we put our money into such ridiculous things? It’s because we put more value on something that appeases our senses. Our senses are really a low level genetic trait, we know this because just about every type of animal shares the same basic senses. And their lives are spent acting on these senses, because that’s how they survive. But the presence of opposable thumbs isn’t the only differentiator between us and other animals. We can think critically, and we can see value in things that go beyond our senses. Here’s an example:

Apple has assets of about $85 billion. If they used those assets to pay off all their liabilities (like bills, taxes, debt if they had it) they would still have $55 billion in value left over. This is a rough example of Apple’s book value. It’s the value of all the stuff the company owns. And yet, the company is actually worth more than $300 billion. What accounts for the difference is what separates us from other animals.

We can see beyond the simple value of something. We can understand that value can be created (and destroyed). Value doesn’t have to be material. Value can be something you can’t touch. Value can be an idea. Think of all the value in the Internet. There are trillions of dollars of value in the Internet, and yet you can’t touch it, see it, or smell it. All you can do is interact with it.

But even though we understand this value, we often reject it. When we’re worried about inflation, we buy gold. We believe that because it can be seen, touched, and not created that it must carry more value than a currency. Classic monkey thinking.

Thinking like a monkey isn’t necessarily bad. In fact it should be embraced quite frequently (it’s that gut instinct). But when it comes to what you should be doing with your money, you’re better off finding sensible, not sensuous, value.

Published or updated February 8, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

The Weakonomist is the anonymous blogger responsible for everything at Weakonomics.com. As a banking insider he's witnessed the economic implosion from inside the bubble. You can usually find him at the corner of Wall Street and Main Street throwing rocks at traffic. View all articles by .

{ 12 comments… read them below or add one }

avatar rewards

IANASA (I Am Not A Stock Analyst), so I don’t understand the $85 billion asset valuation. I understand that the balance sheets state that, but the balance sheets also reveal that $59 billion of that is in the form of cash or investments ($10b cash, $16b short, $33b long). Further accounting for net receivables ($13b) and building and equipment ($6) leaves $6 billion in assets. Is a company like Apple’s patent portfolio and “name brand” really only worth $6 billion (when in 2010 they made $26b in profits?)

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avatar razmaspaz

No, I think the point was that Apple’s patent portfolio, name brand, and other intangibles like employees future contributions to the product line, are worth $300B – $55B or $245B. Its those intangibles that are hard to quantify as monkeys. This is true of every company out there. It’s value is not in its assets, but rather in its future potential to return a profit. Similarly you are not worth the sum of your stuff, but rather having money in the bank represents real value because it has earning potential vs. a car which will just be worthless in 10 years.

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avatar eric ♦1,549 (Half-Dollar)

Nicely put raz!

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avatar SavingMentor

I found the examples and analogies in this article very interesting. I hope that I’m not one of those overly sensuous people and that I have more brains that a monkey!

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avatar Ridwan ♦295 (Nickel)

“But even though we understand this value, we often reject it. When we’re worried about inflation, we buy gold. We believe that because it can be seen, touched, and not created that it must carry more value than a currency. Classic monkey thinking.”

This is SUCH a good point. Bring up the topic of gold on Reddit, and acrimonious debate explodes. Gold and paper currency are equally arbitrary mediums of exchange. Neither one will keep you fed or sheltered. Yet there is this notion that possessing gold is superior to having cash. Do people think the US government will collapse in the next 10 years or something?

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avatar krantcents

As a consuming society, we tend to spend our money on things. Things that rarely increase in value like cars, clothes, services, entertainment, restaurants etc. More recently, overpriced homes! Why do we do it? For many of us, it makes us feel good. It makes us look prosperous, That is what rich people do. The excesses are seen with people who were either poor or instantly rich. There is a sports agent named Leigh Steinberg who requires his clients to put away X amount for savings and give back time to their hometown. He sees a life after sports as important to prepare for as well. This could be applied to regular people too. Save during your working years to provide for your retirement which could as long.

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avatar Holly

Loved this post! Unfortunately, I have fallen prey to my senses more times than I care to admit…but I have slowly become more and more aware of the lure of spending/acquiring over the last 2-3 years and am proud of the direction we are facing now.

Good insight into why we many of us are motivated to spend rather than to save.

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avatar skylog ♦368 (Nickel)

i would like to think that more often than not, i am that critically-thinking, opposable thumb possessing guy; however, i am the stupid monkey more often than i would like.

that said, while i believe the statistics with regards to the NBA and NFL players…i don’t believe it. it is just so hard for me to stomach how so many people involved in that world have financial trouble. millions and millions of dollars spent instead of saved. so many lives that should be “set for life,” being set for disaster.

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avatar Ann

This is so true for me. Money in the bank often feels like it’s just wasting away, whereas physical objects are there in front of me and seem more real. It’s tricky shifting my thinking to appreciate the money on the bank.

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avatar Jenna

Where does happiness come into this? I can understand why fame and fortune can lead to disaster, but what about the average person who really enjoys driving fast or wakeboarding. Who really cares if they decide to buy a boat instead of stock?

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avatar Barb Friedberg

Outstanding and creative. When you’re really hungry, maybe it’s time to be monkey. But true wealth comes from determining what has personal value. Sometimes its monetary, but beyond a certain point riches are usually intangible. I’m off to visit your site :)

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avatar Anonymous

It’s absolutely true that making a bad investment is the same as spending lavishly. I think a lot of people overlook this … they think all investing is “good.”

The truth is, bad investments have bankrupted many people. It’s laudable to make a wise investment based on managed risk. It’s stupid to make an investment without doing much homework, or to expect the wild rewards while thinking that the risk — the downside — will never happen to you.

I spoke to a man about two weeks ago who told me he puts $2500 in individual stocks each month. I asked him how he chooses which stocks to invest in. He didn’t have a good answer.

“I go for the lowest-priced stocks,” he said. I pressed to see if he meant value stocks, or stocks with a low P/E. He had no idea what I was talking about … he literally didn’t know enough about investing to even understand the questions that I was asking him. He didn’t know what a P/E ratio was. He never looked at debt-to-asset ratios. He had no idea about earnings per share.

And this guy is putting $2500 per month in the stock market. Unbelievable. He may as well buy a Maserati.

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