How a Mathematical Model Helped Me Realize Our Infinite Value

No valuation model can find the price this asset holds. Intrinsic value scores more than extrinsic.

Recently, I experienced a very interesting conversation with a few office colleagues. They asked my opinion on the difference between two interest rate curves used by two different websites.

Because the curves were being used to value a specific asset within our company, the difference in two approaches by two different websites led to confusion.

Though both the curves were based on the same underlying asset, the answers given by the curves for a specific point in time were different.

Why?

Because we realized both the websites used a different method to achieve the valuation curve.

So, my colleagues used both the curves and calculated the value of the asset.

And what happened was obvious.

The asset received two different values.

In the accounting and finance world, the value of an asset or a liability depends not just on the valuation techniques; it also depends on the management who is seeing the valuation, the auditor, and the regulatory bodies who keep a tab on such numbers.

The circumstances around that number impact the method — like the state of the economy, the position of the balance sheet, management view, assessment, etc., also plays its part while identifying the value of a balance sheet item.

We All Are Assets

When faced with the dilemma of two different valuations, though a higher value of an asset looks like an obvious choice, the answer doesn't seem to be this simple for managing the balance sheet of big organizations amid a tight accounting and audit environment.

As my colleagues struggled to align the thoughts around the valuation of this asset, I realized a very fundamental truth.

We all are Assets.

And we all are being assessed using different valuation curves every day.

• Sometimes your parents derive a value for you.
• And, the next day, your friends and colleagues.
• Your life partner weighs you in completely different criteria.
• While your kids have a completely different opinion.
• And then, our 9 to 5’s and other workplaces are the breeding ground for such valuation methods.

Remember that all this while, the structure and the form of the asset remain the same.

YOU.

You are YOU.

Your value is intrinsic and not extrinsic.

Develop the Intrinsic Value and Ignore the Extrinsic

It’s so interesting to ponder that as an asset, only the external world is so keen to assign a value to YOU.

While if you intend and want to, you can keep yourself away from all the hysteria and enjoy the fact that you are the ASSET.

Isn’t this a strong perspective?

• YOU ARE AN ASSET.
• YOUR VALUE IS BEING DERIVED BY OTHERS.
• And, THAT VALUE HOLDS NO MEANING TILL YOU DON’T GET IMPACTED BY IT.

Often in companies, the yearly reviews and assessments impact people hard. The process makes sure that everyone on the board gets ‘valued’, and gets ‘compared.’

Every organization has a different method to arrive at these values. Even if you decide to hop on to a different organization, they will not fail in assigning a value to you.

I am not trying to find the downside of such approaches. The organizations are right on their part because ultimately they have to distribute a limited kitty of resources to the members of the organization.

The more you let these methods and processes impact your intrinsic value, the more the external world will keep assigning the extrinsic values to you.

If you wish to assign respect to your intrinsic value, you need to find ways to not let yourself impact by the methods and the value derived using them.

Instead, develop an intrinsic valuation model.

Value SELF.

A Currency Note

While reading the book — ‘The Bitcoin Standard’ written by Dr. Saifedean Ammous; a similar perspective nudged me.

We all have a piece of paper in our pocket that we call a currency note. We believe in the extrinsic value of this currency note, only to experience the constantly changing value.

The governments, external agencies, economic factors, geopolitical events, etc. — all lead to volatility in the value of these currencies.

Currency as a concept goes long back in time.

People have used different tools to let them trade and buy/sell things and services. And, through time, the concept of currency has evolved.

Seashells, stones, bronze, gold coins, silver, and paper notes all have played their part. And, owing to the human actions and assumptions, they all have seen changes in their value.

Imagine the extrinsic price of a gold ounce. Market conditions, demand supply, government interventions, volatility in mining activities, technology, prices of other investments, etc., decide the ounce price. And that’s why a gold nugget experiences constant changes in its value.

But note that during all these times, an ounce of Gold remains an ounce.

An Ounce of Gold. The weight of it doesn't change. It doesn't lose its chemical and physical properties.

Imagine you are this nugget. Just fresh from a gold mine. Stare into the eyes of these extrinsic valuers and smile at their naiveness!

Don’t Let External Value Define You.

Often we let people assign a value to us.

Be it our 9 to 5 job, where a few teams are designated to do this job. And, when they do this job, it often leaves us disheartened.

Why?

Understand that they are doing a simple job. The value derived is not for you. The derived value is for a specific purpose and that purpose has a temporary value.

We often carry these values to heart and let them impact us for a long time.

A simple trick to keep yourself away from the negative impact and instead believe in the intrinsic value is to ignore these values completely.

Simple to write and tough to implement?

No.

It is tough to write and simple to implement.

I have gone through the agony of constant self-comparison over a long period. Only to realize that I wasted a lot of valuable time and energy.

In the long term, things and circumstances have aligned themselves. Those temporary values assigned to me 10-years back hold no value. Those values being assigned to me every day have no value.

The only value that matters is what I assign to myself.

The only comparison that matters is with me. My yesterday’s self.

If I am better than my yesterday’s self, my intrinsic value is better.

Closing Thoughts

If you too wish to assign more weightage to your intrinsic value and ignore the negative effects of extrinsic values, you don’t need to ponder much.

Realize one simple truth — YOU ARE UNIQUE.

There is no one else on this planet Earth who is similar or the same as you.

You hold a special place on this planet.

Once this perspective makes a permanent place in your home, the asset will emerge from the mine and shine like a gold nugget.

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Nishith is an author and creator of a unique self-development platform — “Be Better Bit-By-Bit.”

Grab your copy of his debut book — Be Better Bit-By-Bit and listen to his podcasts: Be Better Bit-By-Bit and 10 Bullets — 100 Words Book Summary.