NET PRESENT VALUE
Wednesday, August 3, 2022
In financial work, real estate asset and business asset valuations rely on this math – as does everyone from investors, bankers and financial brokers, and appraisers look long down the road. They look at value from a future perspective, how that asset will appreciate in the future, take reasonable views of inflation and lifts in revenue down the road, and then do backward math to project based on ‘if it’s worth X at some point in the future based on a set of reasonable assumptions, what is it worth today? And, what would I pay for it today?’
For those of us in and around real estate and finance, this is a simple concept to grasp and terminology we deal with frequently.
But why aren’t we using the same thinking when we value people?
What will they be worth in the future – their solid calculable value, ability to produce ideas, income, work, and every metric we measure?
This kind of thinking should, I believe, be at the root of decisions by parents, educational institutions, providers of student financing, and anyone who spends time thinking deeply about how we learn, how we teach, and how we produce leaders, professionals of every stripe, and the shakers and movers for the future.
And, I might add, to prepare for a future that is being reinvented before our eyes faster than ever in history. And next year, the rate of change will increase, and the pace of that increasing will increase too.
So doesn’t it hold then – that if the future is being created so fast and the best of our past is being replaced or rendered obsolete at a fast pace too, the ‘present value calculation’ of what the future might deserve a re-think?
Yes, you could do some deep thinking on this – and I will too, but for the moment, I’m thinking about a tiny sliver of this future-think/present value puzzle, and that is ME. And YOU. Where do we fit in this?
If the future, to say nothing about today, is entirely unlike life/work/career ever was for us, why are we still measuring our ‘net present value’ the old way?
My expectations of life/longevity, thriving through the next few decades as opposed to languishing with the masses of the retired, semi-retired, and soon to be ‘just very tired’ among us – are very high. I realize that any peril could knock me down and out – but that’s been true all my life, and I’ve never feared life. The landscape has been changing all my life, and I’ve not been grabbing for a safety bar to avoid falling or falling behind.
Of course, we are behind ‘all that is breaking news, innovation, and technology driven,’ Still, the reason experienced older people are so often at the helm and/or on the boards of organizations and institutions is not because they have all the money or that much control over anything but because their experience has a high net present value. Not a bad combo, methinks, in a rapidly changing world.
Yes, some new things are brewing for me – some new approaches to my life and business/career ambitions, and I find writing my ideas down (or tossing them out for scrutiny and comment) is helpful to me in ways I might never have imagined. OK, that’s partially true: imagined, yes, but did I take action steps – no.
Reader feedback:
Great idea Mark, going to book it today , DA, Toronto, ON
Good on you, Mark. Unfortunately, once you’ve had a heart attack, you are forever banned from giving, RH, Calgary, AB