We spend our lives making choices: clothes, profession, partner, doctor, investment. But if you ask most people, even professionals, what exactly they mean by “value”, the conversation quickly stalls, and the range of opinions is enormous.
This question has occupied Evgeny Sedinkin for several years. He is the creator of the Probability‑Time Theory of Value (PTTV), a graduate of Lomonosov Moscow State University, the University of Rochester and AIBEc, and a practicing financier and economist with international experience. His concept explains the essence of value and shows that it is determined by the amount of future time a resource can provide, adjusted for the probability of achieving the desired outcome. Put simply, value is expected future time and freedom of choice.
Evgeny arrived at this not as an academic, but as a practitioner who was once caught in a convergence of circumstances: work tasks, a biography of Kant he had just read, and his teenage daughter’s question – why study in a world where there are so many easy paths to success? Out of that coincidence grew a solution to a problem that, as it turned out, none of the major schools of economic thought had resolved, even though each had tried: what is the fundamental nature of value?
— Evgeny, tell us how it all began. How does a physicist end up in economic theory?— At some point, several things coincided at once. I was working on financial issues, at the same time reading a biography of Kant and, under its influence, wrestling with what can actually be considered knowledge. I also had a situation with my teenage daughter who did not understand why she should study in a world where you can find any information in a second and make a fortune from a single video or meme without years of effort. All these things suddenly merged into one big question: why do we do anything at all? Surely our life cannot be just a disconnected set of desires, fears and accidents.
The answer came not as a logical chain, but as an insight. I realized that every action we take is a drive to gain more freedom of choice, more opportunities for the future. As a physicist, I am used to the idea that almost everything can be measured, so it seemed natural to look for the answer in economics: it is special because it combines measurability and human choice. Physics is actually a convenient language for these reflections – it shares an important property with value as worth: the simultaneous existence of an apparent and a genuine side. For example, we see color, but it does not actually exist – it is our brain telling us about different wavelengths of light. Physics also tells us that any system tends toward chaos – entropy. Life is an attempt to resist this decay. That is why I like to speak not just about the nature of choice, but about the thermodynamics of choice.
— So, you went to see what had already been done. What did you find?— Disappointment. The greatest minds – from Aristotle to Smith, Marx and Mises – had grappled with the nature of value. But all existing theories fall into three groups, and each has a fundamental flaw.
Cost‑based theories say value is determined by the cost of production. But when you choose a doctor, do you consider how much his diploma cost him or what effort it took? No, you care about what he will give you.
The currently dominant theory of marginal utility declares value to be subjective. When I hear the word “subjective”, for me it is a synonym for “not yet explained by science”. It is a sign that science has given up on that area.
Behavioral economics records cognitive biases but does not explain their nature. It is a brilliant theory that elegantly sidesteps the main question of economics. In the end, none of the existing theories of value answers one question: what is the fundamental nature of value? That means there is room for a new solution.
— And what is your answer?— Value is possessed by anything that can create or save time for us. This is not a metaphor – it is a physical definition. When a person hires someone to dig a hole or buys a shovel, he is not paying for the work or the tool – he is paying for the time saved.
— But the future is unpredictable – the shovel might break; the craftsman might ruin everything.— That is precisely why there is a second element in the formula – probability. The value (V) of any resource equals the time (T) it can give or save, multiplied by the probability (P) that this will actually happen:
V = T × PPotatoes on the shelf of a shop near your home are more valuable than the same potatoes in a field, because the probability of actually getting them is much higher. You pay more for a familiar brand because the risk of getting something other than expected is lower. The formula works everywhere and always, regardless of what is being discussed.
— So, you have solved the famous diamond‑water paradox of Adam Smith, which had been debated for centuries?— From the perspective of the Probabilistic‑Time approach (PTTV), there is no paradox at all. When water is abundant, the risk of not satisfying the need for it is very small (P tends to zero), and there is nothing to pay for. When diamonds are scarce and satisfy an important need for someone – social, status‑related – the risk of not satisfying that need is high. Value is determined not by scarcity as such, but by the ability to reduce the risk of not getting what you want. Scarcity is only an indirect sign that the chances of getting what you want are low, but without value it says nothing by itself. There are countless rare things that nobody wants.
— How does this work in everyday life?— We choose an experienced doctor not for a beautiful diploma, but because the probability of achieving the desired outcome is higher. His value lies not in his knowledge as such, but in reducing our risk of not recovering.
Here is a contrast that has always amazed me. People easily pay a hundred times more for a branded item that gives them a fake social signal, and the same people haggle fiercely with a plumber or electrician, even though a good craftsman saves them days and weeks, reduces the risk of repeat breakdowns and relieves stress. If you calculate by the formula, the craftsman often creates much greater real value. But the market pays differently, because we have no built‑in organ for perceiving value.
— Elaborate on that thought.— For millennia, people felt heat and cold, but could not measure temperature. We are now in the same situation with value – we feel it, but often disagree with others in its assessment. We perceive it indirectly: we do not want energy – we want to eat; we do not calculate the probability of danger – we feel fear; we do not calculate survival chances – we want status. That is why we so often make mistakes and are so easily manipulated.
— So marketing is an exploitation of this gap?— Business, politicians and con artists – excuse me for putting them in the same row – have learned to use the fact that we read value only indirectly. A countdown on a sale, an urgent discount, a stock market analyst shouting about a unique moment, a beautiful future under a new president – all of this creates a feeling of risk of losing something valuable. The value is apparent, but the fear is very real, and it is precisely an understanding of the true nature of value that protects against such manipulation.
— Why is value felt so acutely at the moment of loss, rather than possession?— Value within the PTTV framework is mathematically defined through the volume of missed opportunities, not through those obtained. You can give a beer lover a whole ocean of beer – it will not make him as happy as being completely deprived of beer would make him unhappy, even though in his entire life he would not drink a billionth of that ocean. Take away a man's boat in the sea – he will die. Give him five more boats – it will not bring him any closer to rescue. Loss is the perfect measure of value, because it shows what volume of future, what degree of your freedom, is taken away by the absence of that good. We value things not for what they give us, but for the abyss we fall into without them.
— You constantly emphasize the difference between price and value. Why is that important?— Because price and value are not the same thing at all. Price is a point on a graph where, at a given moment, the subjective illusions of consumers and the ability to satisfy them meet. Money is a very convenient ruler, but a terrible currency. The ruble, dollar or euro – it does not matter: today, yesterday and tomorrow they are three different substances, their purchasing power constantly flows. But time is absolute. People are often obsessed with accumulating money, they want to become millionaires, but they have difficulty understanding what they will actually do with it. All the value of money lies only in the fact that it can be exchanged for what really matters to you: time, health, freedom of choice. Money is probably the most overrated thing in the world. Chasing price is chasing a phantom, while striving for value is a path to preserving yourself.
— Let us go back to your daughter. Did you find an answer for her?— The question “why study when there are so many easy paths” is precisely a question about the value of education, and the answer here is very concrete: education increases the probability of achieving the desired result in important life situations. It reduces the risk of failure, expands the space of choice, and increases freedom of action in the future. Easy paths do exist; the chance that your song, your video, your drawing, your tweet, your amateur blog will suddenly “take off” with millions is real, but extremely small. Hundreds of millions try, but only hundreds succeed.
There is a real example. A friend of mine was finishing his first year of law school. In the summer, he faced a choice: a seaside holiday with friends or working for an international research organization – travelling to prisons, interviewing inmates. Boring, hard, no sea, but he chose the second anyway. After the research was over, instead of money he received a recommendation and a grant to an American university. Now he can afford any sea at any time. Always choose what expands your field of opportunities in the future, not what seems more desirable right now.
— So, value is freedom?— In a sense, yes: the more a resource opens up opportunities for us in the future, the more value it has. More precisely, value is a measure of the degrees of freedom we can obtain. That is why I am convinced:
no human activity makes sense unless it creates value. This applies not only to business, but also to medicine, science, art, raising children, and any relationship. If an activity does not create time, does not expand opportunities, does not reduce risks, then it is either useless or destructive.
— What would you advise a person who wants to start thinking in this logic?— Take any important choice you face right now and ask yourself two questions: how much time or opportunity will this save or add for me, and how likely is it that this will actually happen? Some things that seemed profitable look completely different when you add probability – for example, the idea of finding a life partner in a nightclub is nullified by the probability of meeting that type of person there. And some things that seemed expensive turn out to be very profitable – for example, hiring an experienced craftsman to lay tiles in your house instead of doing it yourself. And always ask yourself one more question: are they trying to influence your emotions? If so, then you are being manipulated and someone is trying to give something more apparent value than it really has – your value thermometer is being hacked. That is exactly what marketers, con artists and politicians are constantly trying to do to all of us.
Money is only a conversion factor from time to price. Everyone has their own, but time itself is the same for everyone. An hour today lasts exactly as long as it will last in a hundred years. That is its enduring value as a measure of everything else.
— Perhaps the main question that will stay with me after our conversation is: what value do I create in work, family, relationships, my own life? And what value do other people create for me?— You know, without mysticism, from a scientific point of view, we are all open thermodynamic systems. And we are all doomed. Sooner or later entropy will win, and we will all reach thermodynamic equilibrium with the environment – in plain words, we will die. Our entire life path is a rebellion against entropy. But in this rebellion, we cannot win alone. Therefore, putting aside all economic or religious overlay, the answer to your question is this:
the only value we can give to another person is time and freedom of choice. When you create a business that solves a client’s problem – you give them time and choice. When you heal a person – you give them time and choice. When you love, raise a child, or simply support a friend in a difficult moment – you reduce their internal entropy, their chaos and fear. You give them the probability that their future will happen. No human activity makes sense unless it creates value. And value is the future time and freedom we give each other, so that each of us has the right to choose. That is why we do all of this.
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