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What is Money?

     I've been talking about making money online for 14 years. Actually, what is this “money” which all of us are trying to "make"?

Monetary Value

     When we hear the word “money”, many of us think about it in terms of "hard cold cash", or sometimes we think about that number--just a piece of computer data really--on our bank statement. Coins and bills or computer data aren't special though: what really attracts us is the value that is associated these. That is, there is $10 worth of "value" that is associated with a $10 bill or with the $10 credit amount in our bank statement.


     Even though the whole world is crazy about it, the monetary value of a product or service--of something we want to buy--is largely based on how we feel about it. This "feeling" creates an illusion of value that is often based on ignorance and bias.

     Imagine, for example, that we want to buy a new car. First, we try to determine the market value of the car we want by checking the prices of similar cars. Next, we compare this market value to the price of the car we want to buy, and we assess whether or not the price is "fair". Even though the price seems fair, if the car dealer is going to make $4,000 by selling a $10,000 car, we tend to feel that the price isn't fair. On the other hand, if the dealer makes only $400, we may feel that the price is fair. This feeling is based on our perception of the value of the dealer's service. In most cases, we do not know the actual dealer price of the car (our perception of value is based on ignorance), but we judge the fairness of the price based on the market value that has been set by the car dealers (in this case, a bias to the dealers). Furthermore, some people believe that exotic cars have greater value than others. Considering the fact that a Honda can take you wherever a Ferrari can, it's not entirely logical that a Ferrari costs 100 times more than a Honda. In some (or perhaps many) cases, human desire increases the value we place on material possessions and physical comforts: materialism creates a perception of greater monetary value.


     Since the value of a product or service is based on individual human perception, "anything goes" as long as all parties can agree on a price. For example, during a loan application process, once you agree with a banker's valuation of your assets, his or her number will be the value of your assets. If you object to his number and successfully convince the banker that your assets are worth more, then your number will be the value of your assets. In this example, there is no single, definitive formula to calculate the value: all you have to do is persuade the other parties. (This is obviously much easier to do if the price is in favour of the other parties.) My point is this: selling products or services is all about persuading your customers that your products or services are worth the monetary value you've established for them. A big part of this persuasion is to manage your customers' perceptions.

© February, 2013