What The Shredded Banksy Painting Teaches Us About True Value

A couple of days ago, one of street artist Banksy's painting was sold at a Sotheby's auction for 1.4 million dollars. 

Immediately after the end of the auction, the painting somewhat self-destroyed with an ingenious shredding system that Banksy himself had installed in the frame. Banksy had purposely decided to shred the artwork in case it was put up for auction. 

The woman that won the action had bid more than 1 million UK pounds to bring the painting home, and to the surprise of the crowd, she decided to keep the shredded painting and still pay the original amount. 

This provocative stunt left the art world in suspense but also reminded us what the meaning of value really is. 

The cost of an object is generally decided by the seller and by those who are willing to buy it. There are several reasons why the price of an object could rise or fall and here's what we can learn from this story.

Value and price are not the same: I could sell a bottle of water in front of a public fountain, but chances are no one is going to give me more than $1 for it considering that there's unlimited free water right beside me. My product is not adding any value to the prospect buyers so I can't drive the price of the object up because no one will buy it. If I brought the same water bottle to the middle of the desert and waited for a group of thirsty people, however,  I could probably sell it for $1000. Just because a price tag says $100, ask yourself if the value is indeed $100 or if it's only an arbitrary number chosen by a retailer. 

Spending 80 hours making a product that nobody wants won't make it valuable: Even though you poured your heart and soul on creating something, you may risk not having a market for it. Demand is the key here. Are there enough people that are willing to pay you for it? If the answer is no, you may want to look for a different product to sell. Before you decide what to sell, figure out who is willing to buy it. Is your market large enough? Are you providing more value than your competitors? Asking these questions will help you avoid unwanted surprises. 

Scarcity drives the price up (if demand stays constant): The woman that initially purchased the Banksy painting decided to keep it and pay the full price for it. After the picture made hundreds of headlines across the globe, it became more than just a Banksy painting; it became the "shredded Banksy painting." That put it in a category of its own making it a one of a kind artwork. Newspapers and blogs said it was the first artwork to be completed during an auction process. All of a sudden a regular auction was all over the news. The painting has more demand than ever, and its price went up. 

If you are looking to sell something or you are merely pondering on a large purchase, stop and think about both value and price. Billionaire investor Warren Buffet built a fortune on the gap between price and value. He would look for stocks that had a low price, but that had tremendous potential value. When you see the value of an object, you are looking at the bigger picture but when you only look at the price tag, all you are seeing is an arbitrary number.