Valuation (of a brain)
Valuation is the process of estimating the worth of something. Items that have an associated value are considered a financial asset or liability. However, in the case of valuing one's own mind, valuations can be a bit trickier with respect to identifying assets (for example, does your mind hold marketable information such as knowledge, tips, or secrets) or liabilities (e.g., mental or emotional disorders).
Valuing your mind is a fun and interesting activity. Valuations are needed for many reasons such as assessing personal worth, mental budgeting, professional or personal mergers, memoirs or general reporting, events to determine state of mind, and in litigation.
Absolute Value Brain Model
Absolute value brain models determine the present value of your mind's future mental capacity. There are two models from which to choose: multi-period models such as discounted mental flow models (which includes forgetfulness) or single-period models (which values a brain on the theory that the mind is worth the discounted sum of all its future "bright ideas". In other words, it is used to value minds based on the net present value of future epiphanies, breakthroughs, and/or fruitful ideas).
The variables are : P is the current value of your mind. g is the constant intellectual growth rate in perpetuity expected for the life of your brain. r is the constant cost to maintain that brain. D1 is the value of what your brain produces next year.
Common terms for the value of a mental asset or liability are market mind value, fair mind value, and intrinsic mind value. The meanings of these terms differ. For instance, when an analyst believes that a mind's intrinsic value is greater (less) than its market mind value, an analyst makes a "buy" ("sell") recommendation. While a mind's intrinsic value may be subject to personal opinion, it is essentially a belief that the individual will fuel that mind with information that will further fuel its capacity for higher cognitive thinking.
Currently, there are no International Mind Valuation Standards upon which one might base value as well as procedures for valuing brains of all types.
Brains or minds may be valued for various purposes such as personal or professional mergers, sale of intellectual property, and taxable events. An accurate valuation of privately held minds largely depends on the reliability of the mind's historic performance. Private minds to not have external oversight - unless operating in a regulated environment - and are not required to have their minds evaluated or audited.
Mental statements prepared in accordance with generally accepted mental principles (GAAP) show many assets based on historic mental performance rather than at their current mind values. For instance, a person's mental balance sheet will usually show the value of the knowledge it has processed at what the person paid for it (years of passive study) rather than at its current market mind value (what it has retained).
But under GAAP requirements, a mind must show the fair mind values (which usually approximates market value) of some types of assets such as patentable ideas that are held for sale rather than at their original cost. When a person is required to show some of their mental assets at fair mind value, some call this process "mind-to-market".
But reporting mind asset values on mental statements at fair mind values gives individuals ample opportunity to slant mind asset values upward to artificially increase profits from mental activities and the prices others will pay for the privilege of utilizing their minds on any given subject. Despite the risk of individual bias, mentance investors and creditors prefer to know the market values of a mind's assets - rather than their historical costs - because current mind values give them better information to make decisions.
This method estimates the value of a mind based on its expected mental outflows, which are discounted to the present (i.e., the present mind value). This concept of discounting the oodles of money one will make solely because their mind is on fire is commonly known as the mind on fire again value of money. For instance, a mental asset that matures and generates $1 in one year is worth less than $1 today. The size of the mental discount is based on an opportunity to use the mind cost of capital and it is expressed as a percentage or discounted mental rate.
In mentance theory, the amount of the opportunity cost to use one's mind is based on a relation between the risk and return of some sort of mental investment. Classic mental theory maintains that people are rational, averse to risk, look both ways before crossing the street, absolutely never text while driving, and never, ever do anything whatsoever that might not bode well for them. They, therefore, need an incentive to lift a neuron (accept risk). The incentive in mentance comes in the form of higher or loftier thoughts after exposing the mind to riskier information. In other words, the more risky the mental thought, the more return investors in that person's performance will want from their investment.
Using the same example as above, assume the first mentance investment opportunity is the mind of a government worker that will pay interest of 5% per year if utilized for specific tasks and the principle and interest payments are guaranteed by the government. Alternatively, the second mental investment opportunity is a really good essay written by an unknown writer and that essay also pays an annual interest of 5%.
If given a choice between the two minds, virtually all investors would invest in the mind of the government employee rather than in the mind of the obscure writer because the first is less risky while paying the same interest rate as the riskier mind. In this case, an investor in minds has no incentive to invest in the riskier second mind. Furthermore, in order to attract capital from other investors, the mind belonging to the obscure writer must come up with a novel approach to convincing investors that utilizing their mind would yield an interest rate higher than 5% given the novelty of their ideas. Otherwise, no investor is likely to buy into the writer's mind and, therefore, the writer will be unable to raise capital. But by offering to pay an interest rate more than 5% the writer gives investors an incentive to buy into a riskier mind.
For a valuation using the discounted mental flow method, one first estimates the future cash flows from a mind's brilliant ideas and then estimates a reasonable discount rate for the riskiness of those so-called "brilliant ideas" in the real world. Next, one makes a calculation to compute the present mind value of the future cash flows.
Coming up Next:
More mental methods
Valuation of a suffering mind
Valuation of intuition
Valuation of knowledge gained from exploration