Imagine for a moment that we live in a world without scales, and we don't even realize that weighing things is even possible. And to figure out whether an apple or a brick is heavier, we gather and vote. Absurd? But that's exactly how the world of market prices works. We don't measure value, we only set a price, voting with our money. And we've become so accustomed to this that we fail to notice the systemic errors of the market.

The same thing costs differently in different hands and in different markets. Businesses are sold for amounts that have nothing to do with their true value. Price is derived from opinions, expectations, scarcity, fashion, and emotions, not from the objective properties of a product or service. And yet, the principle "what we don't measure, we don't control" works flawlessly. Until we learn to measure true value as value, not as price, we will be dependent on chance, the mistakes of others, and manipulation. But there's good news: fundamental value exists, and you can profit from market mistakes.

Price is not the same as value. Price is volatile and subjective, while value is objective and changes according to different laws. They differ in the same way that weight and mass differ in physics. Any object on the Moon weighs six times lighter than on Earth, but almost three times heavier on Jupiter. Yet, it's the same object, and its mass doesn't depend on the planet. Exactly the same applies to value: everything has its fundamental value—analogous to mass—and there's a market price—analogous to weight, which constantly changes under the influence of external factors. Therefore, relying solely on market price means making decisions based on noise, not measurements. Historical examples of tulips and dotcoms illustrate this well.

So how is value measured? The answer will surprise you—it's measured in hours. To be more precise, according to the Probability-Time Theory of Value (PTTV), the fundamental value (V) of any resource is equal to the time (T) that the resource can deliver to a system—an individual, a company, a family, etc.—multiplied by the probability (P) of this happening:

V = T × P

The logic here is simple: anything that saves or provides time has value, while anything that takes time has value. Moreover, the higher the probability of receiving the promised time, the higher the value. Potatoes on the shelf at your local grocery store are more valuable than the same potatoes in the field because they are more likely to reach you. Therefore, faster and more reliable delivery costs more, and people pay more for a brand than for a no-name.

This is a simplified interpretation of the true nature of value, but it is sufficient for the purposes of this article.

Value and price have diverged for one reason: our brain perceives value indirectly, rather than directly, through biological and social signals. We don't want energy—we want food. We don't seek procreation—we want sex. We don't think in terms of social survival—we strive for status and luxury goods. These signals aren't always reliable. We can perceive something harmful as valuable if it gives us pleasant emotions, like alcohol or drugs.

As a result, goods and services have two values: a fundamental value (V_o), expressed in hours, and a subjective value (V_s), expressed in sensations and transformed into a willingness to pay, that is, money. Money is a conversion factor from value to price, which is unique to everyone, because everyone's time is worth different amounts in money.

A simple example: an ordinary apple contains a certain amount of calories and nutrients. It can extend a specific person's life by, say, 25 minutes. This is an objective fact, independent of whether the apple costs 2 dollars or 100. Market price changes, but fundamental value does not.

That's why learning to measure true value gives you a competitive advantage. If the fundamental value of a product or asset is higher than the market value (V_o > V_s), it is profitable to buy, and vice versa. This allows you to understand whether an asset is overvalued or undervalued, and by how much.

Yes, the market can be irrational longer than you are solvent. But the ability to determine intrinsic value reduces the likelihood of error and increases the chance of profiting from the difference between objective and subjective value.

Over the long term, subjective value tends to approach objective value. For products that are regularly overpriced, substitutes emerge. In the opposite situation, arbitrage occurs, which evens out the valuation. This is why price bubbles burst, and undervalued assets appreciate over time.

The conclusion that fundamental value lies in the time created, not in money, opens up a different approach to pricing and asset valuation.

Example: You believe your service costs 50 dollars per month because your competitors do. But it saves the client 5 hours. If the client costs 200 dollars per hour, the objective value is 1,000 dollars. You lose 800 dollars per client.

Another example: You're buying a business based on similar services. But your candidate has twice as many customer complaints, meaning the probability (P) of realizing value is lower. Their actual value is lower, even with very similar financial indicators.

Thus, valuing through created time allows you to understand in advance the future price and demand trends, identify undervalued assets, set the right price, and manage the value of the business.

Value is created when the future becomes more predictable, closer, and more understandable.

This is an introductory material. Calculate how much time your product or service creates for the client. I think you'll find it interesting and useful.

In the following publications, I will demonstrate:

- how to optimally price your goods and services in practice,
- why standard valuation methods don't work, and how to value a business, including competitors, even without financial statements.

The original article can be found at the following link: https://vc.ru/marketing/2876578-tsenoobrazovanie-i-oshibki-rynka