Price and Value

Bill Parrott |

A young ruler had a magnificent painting hanging in the main hall above his fireplace. Guests and visitors were attracted to its beauty and assortment of colors. It was the focal point of his mansion; he admired it greatly.

While viewing his artwork, the young ruler asked his curator what he thought it was worth.

It's only worth what someone else will pay.

How do I know what they will pay?

What did you pay?

I paid very little.

Is the painter still alive?

What difference does it make?

If the painter is dead, and there's only one picture, it will be worth a lot.

I think he's alive; I have no idea. He was traveling through town with the painting when I bought it. I have not seen him since, and I don't know where he was going. He was in a hurry, so he let me buy the painting at a low price.

Well, in that case, let's post an ad to let people know you want to sell your magnificent painting. If they feel it's worth a lot, the price will climb. Of course, if they don't like it, the price will be low.

Okay, let's see what they'll pay.

The people were excited for a chance to own the majestic painting owned by the young ruler. Hundreds of people walked through his main hall to get a glimpse of the great artwork. The crowd was amazed by its beauty, and a bidding war ensued. The price of the painting climbed to dizzying heights. The young ruler could hardly believe how much money he would receive once it sold, more money than he had ever made in his entire life.

He asked the curator what he should do as the price continued to rise. The curator told him to sell it to the highest bidder, but the young ruler was greedy. If people were willing to pay a high price today, they would surely pay a higher price tomorrow. The young ruler canceled the sale.

The next day he let the people bid again, and he was right; the price of the painting soared. He was now the wealthiest person in the land, but he wanted more, so he canceled the auction again.

On the third day, the people returned to bid on his precious art, and the price reached a staggering sum. The young ruler could hardly believe his good fortune, but he still wanted more, so he stopped the bidding for the third day in a row. The people were angry, but the young ruler knew they'd return tomorrow to bid again.

On the fourth day, the people did not show up. The young ruler was confused, so he ventured into town to find out what was happening, and to his horror, he saw the traveling artist selling hundreds of copies of his painting. The townspeople paid very little for their artwork.

The young ruler's painting looked like everyone else's. It was no longer unique, and he couldn't sell it for a king's ransom; the price plummeted. It was worthless.

Moral of the story: Price and value are not the same things.

Nowadays, people know the price of everything and the value of nothing. ~ Oscar Wilde

November 19, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

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