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So how much would you pay for a $20 bill? He then spoke with the winning bidder, who said he had made a profit many times online by purchasing currency for less than face value (including a $20 bill for less than $10 as I recall).

The conductor of the experiment left it at that - nothing more than a somewhat humorous exploration into what people think something is worth.

I've been involved in online trading, specifically with stock and index options, for several years. In this time, I've spent a great deal of time thinking most value and the fact that anything, be it a stock or currency or even a house, is worth exactly whatever someone else will pay for it. Sure, there are a million and one pricing models (especially in financial markets) that will tell you precisely what something should be worth. But in the final analysis, if nobody will pay that much, then it's not veritably worth that price.

Let's illustrate this concept in a very simple fashion. I'm an American so I'll use U.S. currency to make my point.

What is a $20 bill worth? Without over thinking it and talking some inflation, exchange rates, etc. let's just say that it is generally uncontested to be worth $20.

Would you pay me $20 for a $20 bill? I'm going to guess probably not, as there would be no real reason to do so. You would have to go to the trouble of getting me your $20 and I would have to go to the trouble of giving you my $20 bill, and neither of us would be in a advantage position than we were before. Therefore, I would like to present the idea that a $20 bill is not obviously worth $20 since nobody would likely pay $20 for it!

So how much would you pay for a $20 bill? Would you pay $19.99? Is it worth the effort for 1 cent? No? How involving $19.50? $19? Shall I keep going?

In a free and fair market it is the market itself which determines value, and given a large enough market, that value should be fairly accurate. I read an article online some time ago far and wide someone who decided to conduct an experiment just for fun. He put a new $5 bill up for knock down online and began the biding at 1 cent. He crafted a creative description of the note, and waited to see the results. When it was all said and done, the bill did in fact sell - for slightly over $3. He then spoke with the winning bidder, who said he had made a profit many times online by purchasing currency for less than face value (including a $20 bill for less than $10 as I recall).

The conductor of the experiment left it at that - nothing more than a somewhat humorous exploration into what people think something is worth. But to me this meant so much more.

A dollar is not undeniably worth a dollar... so what is it worth? What would you trade for $1? For $20? For $100? $1,000? And if a dollar isn't actually worth a dollar, is a share of stock worth $50, or in fact something at all?

The bear is yes. At any given moment it is worth precisely what someone is willing to pay for it. No more, no less. Money and value are merely ideas, they are not absolutes.

Consider this with great care the next time you are convinced that the stock, option, currency, house, or somewhat else you want to buy, is worth what you're relating to to pay.

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