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Price is what people pay, value is what they get, and it's completely subjective. The only reason people pay more for a BMW than a Honda is because they percei
by sbenitoj 9y ago
Price is what people pay, value is what they get, and it's completely subjective.
The only reason people pay more for a BMW than a Honda is because they perceive they're getting more value with a BMW than with a Honda. There is no such thing as an "objectively better driving experience" -- all value is derived from perception, and perception is individual.
- vasilipupkin 9y agoYes, but price that people are willing to pay is highly correlated to the value they get. And they tend to pay more for things that have some objectively better properties. Which is why tesla model s can sell for more than Honda Civic.
- vasilipupkin 9y agoeehhhh. No. People prefer faster cars on average over slower cars. that's an objective metric - one car is slower than the other. They don't just perceive it. If they simply perceived it, you could launch an advertising campaign and convince them that they should pay more for the Honda. But they won't.
- sbenitoj 9y agoThe maximum speed or acceleration abilities of a car are objective metrics, but how much people actually value those things is subjective. Value is subjective, each person values the same objective metrics differently (e.g. soccer moms generally don't value sports cars as much as single guys, if they did then we'd see a bunch of soccer moms driving their kids around in sports).
- vasilipupkin 9y agoyes, but a faster car with all other features being equal gives you objectively more features. There is a reason BMW costs more than a Honda civic. Right? Or else, if there is no reason whatsoever, Honda should be able to advertise in a clever manner and sell that Honda civic for the same price as a BMW 7 series or a Tesla. I mean if it's all subjective, right? But we can all agree that no matter what a Honda civic will cost less than a tesla. Yes?
- hossbeast 9y agoEven your example of faster speed is subjective. Some people may prefer the limitation of less speed. It's subjective.
- vasilipupkin 9y agoSome people - yes. Some people prefer all sorts of things. Some people may prefer jumping off a bridge. That's irrelevant. On average, people will prefer an objectively better thing to an objectively worse thing and pay more for it
- hossbeast 9y agoYou've just used the term "objective" to describe what the term "objective" means. Surely you see the problem?
- vasilipupkin 9y agoLook, cars that have specific features cost more than cars that don't have those features. That's objective. Stocks of companies that are very profitable, like google are more expensive than stocks of companies that are not. That's objective. Right ?
- sbenitoj 9y agoCorrect, but it's people's perception of value that ultimately drives the current stock price. Take Amazon as an example, in 2016 its net income was $2.4 billion, yet it currently trades at a total market capitalization (the value of all outstanding shares) of $471 billion (or approximately 196x its net income) [0] Compare that to Ford Motor Company, in 2016 its net income was $4.6 billion, yet it currently trades at a total market capitalization of $45 billion (or approximately 10x its net income) [1] So Ford was actually MORE profitable than Amazon in 2017, but it's market capitalization is only 10% of Amazon. So what's driving the differences? People's perception of value. People perceive that Amazon will be more profitable than Ford Motor Company in the future, even though objectively Ford is more profitable than Amazon right now. [0] Amazon Financials - https://finance.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii&ei=-IWxWZmbHsayjAHX3brQDg https://finance.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii... [1] Ford Financials - https://finance.google.com/finance?q=NYSE%3AF&fstype=ii&ei=zIWxWeHWLIzE2Aa-35KYBQ https://finance.google.com/finance?q=NYSE%3AF&fstype=ii&ei=z...