Valuation of a company. Valuation of a life.

I have been learning Corporate Valuation recently. It's just out of interest, yet I see the life of a corporation is the same as the life of a person. These concepts of Valuation of a company are fascinating as I have been on the other side of the spectrum Valuation life, thoughts and generally value of anything. In fact I have written a great deal about Values, in the following articles. Yet will summarize in a sentence.

The value of anything remains only in the consciousness of a person at the exact moment he or she is thinking about it.

With this principle in mind, I would like to compare the valuation of a company by the method introduced by professor in Finance, Aswath Damodaran who is one of the greatest valuators of our times. He introduces the value of a business doesn't depend on numbers alone. It also depends on the story behind the numbers. Yes, even stories value billions! If you do not believe me, listen to the master himself who is talking about valuation of companies like Uber, and twitter. Generally, in the start of a company, or the young company the story matters more than numbers. Obviously, this is because they do not even have numbers! But more mature the company numbers matter more as they take over the story. Compare this to a young enthusiastic boy with a lot of potential. We would never know where he would end up, as he has a lot of trajectories to choose from. But at 40 years a mature individual cannot go back and change their numbers, or suddenly change their character and become a young potential again. Their story is already written in numbers.

Story matters in life, often more than numbers

One thing I would like to point out and emphasize is the value of a young company could be much more than the book value of assets. To be truthful, the future potential story of the startup can even double or quadruple the book value of the company. Someone might say this is absurd. But if you apply the above principle of values, it can be greatly appreciated and understood why it is what it is. Even the values of the stocks of a company fluctuate daily mainly due to the reasons that chaotic thought patterns and decisions made by individuals show a combined chaotic value at the end of the day. This really is unpredictable. I am not saying there are predictable patterns. Some intellectual people will get together and exploit these predictabilities to make an income. But it is just like being a rat, and eating out other people's values. Obviously, someone will lose when one wins, in any game.

Valuation of a company vs valuation of life

More I learn these things; more I understand the shaky grounds we build everything upon. Think about it for a second. Let's consider Google stock. The value of this stock will depend on anything which affects, the individual thoughts of any shareholder. Even the weather in New York is going to affect tomorrow stock prize. If you do not believe me you can ask the inventor of the Medallion fund the former CEO of renaissance Technologies Mr. James Simons. Similarly Panic of a pandemic can plummet the value of a company overnight, If it changes the minds of stockholders. So, I would say nothing is stable as they appear to the commoner. More likely is that everything is unstable, just like a thought in the mind of anyone.

Art is not inherently valuable, nothing is.

So, the real question is not how to build stability on shaky grounds. But appreciate the fact that with better stories, we might even sell a tunnel in nowhere or a picture on a canvas which cost a few dollars to make, in billions. To understand that no matter how much we search in life, there is a big chance that we will never find a true value. As everything seems to disappear in a fraction of a second in any consciousness.

Let's stop it here. Reflect back. I would be even happier if you understood one paragraph from above. After all philosophy is not for faint hearts, but for brave people like you who would seek even if it made one to destroy the image of self by losing its value, like 29th September 2008.