Monday, February 20, 2012

Overvaluing Intangibles, Part 1

If you're anything like me, you watch Pawn Stars (because you're interested in historical items) and you watch Hardcore Pawn (because you're a horrible person).  One of the defining moments in both shows occurs when people walk into the pawn shops wanting to either sell or pawn items, and they inevitably think that their item is worth a ridiculous sum of money.
"So, all you'll give me for my seal is a
swift kick in the pants?
I guess I can do that."
Sometimes the object is worth as much as the people expect, but most of the time it isn't.  Even if it is worth money, because the pawn shop needs to make money when they resell it, the pawn shop gives the seller a necessarily lowball offer to ensure that money can be made.

In the first place, in this age of eBay and Amazon, why on earth do people still insist on selling to pawn shops?  If you have something of value that you want to sell, SELL IT YOURSELF TO MAKE MORE MONEY.  This is called the American Way.

In the second place, when something isn't as valuable, why do people assume that it is?  The answer to this lies in an object's intangibles.  This can also be known as sentimental value that we tend to place in items that is above and beyond what those items are actually worth.

As a point of comparison, consider Tim Tebow.  The guy is not your normal quarterback in that he can't throw two consecutive good passes to save his life.  Still, he was a first round pick in the NFL draft because scouts really talked up his intangibles.  He isn't a partyer.  He is a natural leader.  He says his prayers, minds his manners, and chews with his mouth closed.  Because of these things, certain coaches in the NFL ate him up and drafted him (arguably) much higher than he should have been.  He began starting as a quarterback last season, and he lead the Broncos into the playoffs even though nearly every person who comments on football considers the guy a sub-par quarterback.

Will Tebow's intangibles eventually translate to a Broncos Superbowl victory?  Only time will tell, but in my opinion, you'd be better off engaging in a land war in Asia or going against a Sicilian when death is on the line than betting the Tebow will lead the Broncos to a Superbowl.
Not Pictured: Wallace Shawn.
In a similar way, we overvalue objects that we've had with us our whole lives.  Sure, you've had that clock that your great-aunt Mildred passed down to you all your life (so it's worth a lot to you), but the truth is that it's not as much of a clock as it is a piece of plywood with (most of) the numbers between one and twelve painted on it.  Even though you may value this item intensely, from an objective standpoint, it's not worth a whole lot.

Make sure to come back later this week to see how this mindset costs you money (even if you're not a pawn shop regular).

Photo 1 from Thomas Shahan 3.
Photo 2 from Jerf Kern.

This post was featured in the Carnival of Personal Finance #350.


Daisy said...

Sometimes, items value more to the owner than to anyone else - this is true for items with sentimental value. I've never been much of a "thing" person - ie I don't really have many attachments (at least sentimentally) to objects, just to people.

Bryan said...

I think that's a great way to live, Daisy. I agree that relationships ought to mean more than material things.