How We Decide What Things are Worth

[Mamiamato24]

This is an except from the book "Connected", which brought about a very fascinating story on how us humans interpret the value of things around us. I thought I'd share this partition with you guys to see how you react.

"Whether groups of people are able to reach a correct decision about something (the value of a product, the number of jelly beans in a jar, the weight of an ox) depends on whether decisions are made at the same time or sequentially. If a group of people is decided on the price of an item and bid on it independently, their average guess is probably a good indicator of its market value. However, if people make decisions in sequence and are aware of prior decisions, if information moves from one person to the next (as in the game of telephone), we can end up with the blind leading the blind. Once a critical mass of people make a decision, the rest of the group goes along, reasoning that others cannot all be wrong. Like the people in chapter 1 looking up at the window in New York City, they fall in line. So whether the wisdom of crowds can be trusted may depend on whether the members interact concurrently and independently or sequentially and interdependently.

Sociologists and physicists Matthew Salganik, Peter Dodds, and Duncan Watts studied this problem using an online music market. They designed an experiment involving an online site they created that gave away downloadable songs. A total of 14,341 people came to a website featuring forty-eight songs. There were different "worlds," however, that visitors to the website could experience, and these worlds were created by the actions of previous users. Visitors could download songs from bands they had never heard before and evaluate their quality after listening to them. In one "world," subjects were able to see what the previous participants thought of a song's quality, while in the other "world" they could not. The scientists found that in the world where song ratings were visible, the first person's rating influenced the whole trajectory of ratings for particular songs, keeping them high for a very long time. In other worlds, musical tastes are contagious. A tiny tweak in the sequence of social interactions when people make cultural choices can turn an average tune or a mediocre singer into a sensation."

That is the main phrase that caught my eye after reading about the experiment. As we all know, there are a plethora of popular artists in which the opinions people reflect are one of two extremes; either they're viewed as a vile anathema or that they possess the voice of gods. Either way, with such contradictory views it's difficult to comprehend how these artists got popular in the first place. Wouldn't the large crowd that loathes these artists give them a bad name?

Or maybe, when the first few initial supporters of these popular artists gave them good reviews, it may have influenced others to view them in a different light, or to "fit in with the crowd". Either way, it gives them a higher perspective of the artist at hand even if they didn't initially think they had any talent. Even the people we surround ourselves with can affect our decisions three decisions removed. If the people we surround ourselves enjoy this artists then there's an immensely high likelihood that you begin to appreciate the artist as well.

It doesn't stop there. We can apply this to absolutely everything we know and value; from the price we think gold is worth, to our everyday decisions and beyond. The cost of the products we know on store shelves isn't just influenced by supply and demand, or by how rare the materials found inside of it are worth. There isn't some magical machine that spews out what the value of goods are. Apart from supply and demand, the baseline that we set is influenced by no other than ourselves. As stated in the text, if we ask a bunch of people independently what they think something is worth, calculating the median of their guesses would probably give us a good idea of what something's worth. Whether that figure is actually accurate or not, it's what we use. For all we know, we could be devaluing or overvaluing everything around us.

What do you think?

 

[TheRealOG]

i think that I am first

 

[Mamiamato24]

i think that I am first

No, I am.

 

[TheRealOG]

No, I am.

 

[crits]

dang good thread, lots of pvp, my type

 

[RishSA|Imaboss2414]

Whiled this is correct, this is on the psychological side of the scenario. In the "materialistic" side of this conversation, I believe we judge somethings value by a few criteria.

1. Applications
2. Rarity
3. Demand

If all three of those are there, that substance would be very valuable. For example, diamonds have a ton of uses, are fairly rare( Considering all of them are controlled by DeBeers.) And people certainly want diamonds.

 

[Mamiamato24]

Whiled this is correct, this is on the psychological side of the scenario. In the "materialistic" side of this conversation, I believe we judge somethings value by a few criteria.

1. Applications
2. Rarity
3. Demand

If all three of those are there, that substance would be very valuable. For example, diamonds have a ton of uses, are fairly rare( Considering all of them are controlled by DeBeers.) And people certainly want diamonds.

Yeah, but say for example we're taking about a golden car. While gold is probably more rare than the other materials used to make cars, the golden car has the exact same applications as a regular car would, except it's made of more valuable material. We would price it at a higher point because it has more expensive materials even though it doesn't give the car any new features (though the demand would probably be reduced). I believe it's partly how rare the material is as well as how we value or devalue it.

And it isn't just rarity. If diamonds weren't as shiny and beautiful as they are, we would devalue them even if they're equally as rare (say, if poop was as rare as diamonds). We also have to consider how we perceive the said material, which makes a full 360 and brings us back to the fact that humans do play a role in how we value products. If a car was made of a poop equally as rare as gold we certainly wouldn't price it as high (wow I used the word poop a lot in this ) But I see where you're coming from, and yeah the three you mentioned probably do have a bigger impact, but I thin the concept in general can extend further than just economics, like the music example in the thread.

 

[RishSA|Imaboss2414]

Yeah, but say for example we're taking about a golden car. While gold is probably more rare than the other materials used to make cars, the golden car has the exact same applications as a regular car would, except it's made of more valuable material. We would price it at a higher point because it has more expensive materials even though it doesn't give the car any new features (though the demand would probably be reduced). I believe it's partly how rare the material is as well as how we value or devalue it.

And it isn't just rarity. If diamonds weren't as shiny and beautiful as they are, we would devalue them even if they're equally as rare (say, if poop was as rare as diamonds). We also have to consider how we perceive the said material, which makes a full 360 and brings us back to the fact that humans do play a role in how we value products. If a car was made of a poop equally as rare as gold we certainly wouldn't price it as high (wow I used the word poop a lot in this ) But I see where you're coming from, and yeah the three you mentioned probably do have a bigger impact, but I thin the concept in general can extend further than just economics, like the music example in the thread.

The golden car has rarer materials making it more valuable then the standard car. And also the beauty of the diamond is associated with demand( people want it beacause its pretty.) My point being, I believe everything would tie back to those three concepts. I understand what your trying to say, but I believe that your points tie back to my original three criteria

 

[Mamiamato24]

The golden car has rarer materials making it more valuable then the standard car. And also the beauty of the diamond is associated with demand( people want it beacause its pretty.) My point being, I believe everything would tie back to those three concepts. I understand what your trying to say, but I believe that your points tie back to my original three criteria

Yeah, I guess so. And the criteria on how we decide how things are worth are the ones you listed. IT ALL MAKES SENSE NOW!!!!!

 

[Mooclan]

The concept of value and worth is so deeply ingrained into us that it's often difficult for people to re-evaluate something from an entirely neutral point of view.

Let's take the example of a computer, which is something that many of us gamers are familiar with.

A few things to note is that the computer parts themselves can look as ugly as the creators want, and yet if it's still functional, then it'll have a high price. In this case, it's because people buy it for functionality, not aesthetics. (Aside from the case/monitor etc.)

What goes into the computer parts?
- A higher-end, higher-priced part will generally require more materials, materials of a higher grade, and/or more detailed and complicated assembly.
- The parts, depending on the quality, will generally run at varying levels of efficiency and consistency.
- The advertising and promotion that goes into the selling of a computer part can allow the producers to price it higher, because the buyer's opinion of it has been elevated through said promotion.

If you could buy a processor for $50, change its aesthetic look, and then convince someone to buy it from you for $100, then the step that you took is changing the buyer's perception of its value.

If you bought a processor for $50, somehow changed its efficiency so that it runs at 3.5 GHz instead of 3.2 GHz, and installed another two cores in it, then you could re-sell it for a marked-up price.
This would be changing its quality so that it has a higher value. Using these facts, you could tell your buyer that what they are buying is better than what you originally had (pre-modifications) and thus, you raise the amount that the buyer is willing to pay for it.

 

[Mamiamato24]

The concept of value and worth is so deeply ingrained into us that it's often difficult for people to re-evaluate something from an entirely neutral point of view.

Let's take the example of a computer, which is something that many of us gamers are familiar with.

A few things to note is that the computer parts themselves can look as ugly as the creators want, and yet if it's still functional, then it'll have a high price. In this case, it's because people buy it for functionality, not aesthetics. (Aside from the case/monitor etc.)

What goes into the computer parts?
- A higher-end, higher-priced part will generally require more materials, materials of a higher grade, and/or more detailed and complicated assembly.
- The parts, depending on the quality, will generally run at varying levels of efficiency and consistency.
- The advertising and promotion that goes into the selling of a computer part can allow the producers to price it higher, because the buyer's opinion of it has been elevated through said promotion.

If you could buy a processor for $50, change its aesthetic look, and then convince someone to buy it from you for $100, then the step that you took is changing the buyer's perception of its value.

If you bought a processor for $50, somehow changed its efficiency so that it runs at 3.5 GHz instead of 3.2 GHz, and installed another two cores in it, then you could re-sell it for a marked-up price.
This would be changing its quality so that it has a higher value. Using these facts, you could tell your buyer that what they are buying is better than what you originally had (pre-modifications) and thus, you raise the amount that the buyer is willing to pay for it.

I guess the way that you would apply what I was suggesting would make less sense in a situation where it is blatantly obvious that the better the performance computer parts have, the more expensive they will be since they run faster and complete tasks quicker than cheaper ones. In that instance, the appearance of any of your computer parts don't mater because you won't be in direct contact with them very often while using your computer (you'll be in contact with the monitor, keyboard, mouse, etc.)

In the situation that I suggested in the thread, it's a bit different since how one perceives someone's voice and music in general is quite subjective and varies from person to person, but seeing good reviews influences you to give it a good review as well since so many other people like it.

Maybe that principle applies to only specific things, not necessarily economics, but something that can be interpreted many different ways, things like art. One may value an abstract painting low if it looks like a mess, but a fervent connoisseur would value it to be much higher since they understand the apparent message it's trying to convey. And maybe if you see that a popular artist or reliable critic enjoys the piece, your perception may shift and you may understand the hidden beauty of the painting. Suddenly, abstract becomes a big hit.

 

[benji_r]

math