Thursday, July 29, 2010

Highest and Best Use

In times of boredom/dissatisfaction at work, we amuse ourselves by applying various financial theories to everyday life decisions. Sometimes it doesn’t work. For example, if you calculate the net present value of having children, it is highly negative. Unless you expect your kids to generate lots of cash flow to support you in your old age, having children is a bad idea. Love and happiness don’t translate into cash, unless your kids are huge moneymakers. If you run an NPV on getting an eggmcmuffin for breakfast, it is less negative and therfore a better decision. I digress.

Other kinds of nerdy financial-related things can be applied to life pretty easily. After reading a lot of appraisals that said the "highest and best use" of the property was to "hold for future development" (FYI--that is bad) we talked about what it what it would look like if you applied the "highest and best use" concept to your own life. TD gets total credit for this, but I'm telling you anyway.

According to wikipedia: "Highest and best use or Highest or best use (HBU) is a concept in real estate appraisal. It states that the value of a property is directly related to the use of that property; the highest and best use is the reasonably probable use that produces the highest property value. This use, the Highest and Best Use, may or may not be the current use of the property. "

Take out “property” and substitute “individual” and, VoilĂ ! You’ve found the meaning of life. Obviously the meaning of life is to “find your highest and best use.” –TD Think about it for 5 minutes or so, and you’ll see that it makes sense. Pretty sure that my HBU is not my current use.

Interestingly, during my google search of “highest and best use” I found the following picture. The resemblance to my workstation is uncanny. Right down to yellow legal pad, coffee cup, and red legal files full of loan documents. I wore pearls today. FML.

3 comments:

  1. Oh, personal highest and best use. Lately, thoughts of this concept have filled me with pangs of guilt for not having done more since our discussion back in the spring. Is there a place for urgency in this framework?

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  2. Sigh. By "place for urgency" I assume that you mean absorption or marketing period? Agreed. I've been too busy floating on the big river of life singing into an empty bottle of gin to really focus on my highest and best use.

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  3. Hey, now. There may be wisdom at the bottom of that bottle. Perhaps, a slightly longer absorption period will allow for gains from future upward market trends. Unlike our institutional counterparts, we (luckily) don't have to write anything down.

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