I’m not one to beat a dead horse but I don’t mind kicking it a little. Last week I posed the question, What’s The Answer?

I surrounded the question with information and thoughts about valuation. Today I’d like to surround the question with a theory. It’s called the “We Are Desensitized Theory” and I put it on the table for your thoughts.

If memory serves correctly, Yogi Berra is credited with this jewel: “A nickel just isn’t worth a dime anymore.” He has so many Berraisms it is hard to keep track of all of them.

My son and I co-own an insurance agency and we bump against this wisdom at least once a week. One would think in an industry as straight forward as insurance, a nickel would be worth a dime. After all, a premium is a premium is a premium. The only difference is the company charging it.

Premiums are set by the insurance company and approved by the Insurance Commissioner. No law says they have to be uniform for a particular coverage type. I’ll use auto insurance as my example.

Everyday people come in for a quote and tell us so and so agency said it would cost $XXX a month. We go to our computer and “shop” their auto. We almost always beat the quoted premium. The customer looks at us and says words to the effect, wow, I save $YY a month.

One would think, on the surface, they mean the $YY dollars means something to them. But when you get to the under belly of the scenario, they are simply thrilled spitless they do not have to go to another agency in an attempt to find a premium that is lower than the one they are paying.

In other words, they don’t give a hoot they are saving $YY, they are just happy their insurance ordeal is over. They are completely desensitized to the numbers. They know the law requires insurance and insurance costs money.

The $YY is immaterial as a meaningful number because it does not have any relevance in the long term. It is a short term, read the here and now, reason for them to buy.

Here is another real life insurance scenario from our world. A 20 year old male drives by our office every morning to drop off his girlfriend who is employed in the day care center in our plaza. He drives a souped-up pickup truck that uses at least a tank of gas a week.

My son stopped him the other day and asked how much he was paying for his insurance. The young man said $250 per month. Yes, $250 a month. You read that correctly.

My son did some research and found we could insure him for $185 per month. A savings of $65 per month or $780 a year. So, my son stops him the next day and presents him with the figures.

The young man’s response was a mind blower, at least to me. He looked at my son and said words to the effect, yeah, man, I’ll have to stop by one of these days.

At first blush it looks like the kid, as I call him, is a moron. $65 a month would buy him at least a tank of gas or dinner out for him and his sweetie with change to spare. But, like I said that is at first blush.

This kid at 20 is already desensitized. Money doesn’t have any value. He has been paying $250 for probably all of his driving life so what difference does it make we can lower his premium (create free money?) by $65 a month.

Saving money has been relegated to old school thinking. It is old school because money was our store of value. It was our measure of value. We could wrap our heads around the numbers behind the money amount.

Today, or at least this period in time, money has no value. It simply buys stuff. The foreclosure scenario is a perfect example. We simply bought houses for whatever reason. The numbers behind the money amount had no value so we agreed to any price and got a loan for that amount. A house has never been a store of value no matter what the late night buy my course pitchmen say.

We knew we could get a loan without too many obstacles because everybody and his sister was on TV telling us we could and by golly they were making the loans. We became desensitized to the numbers.

Its result shows in the aggregate value of the foreclosed properties we are seeing at this moment. The numbers weren’t meaningful. We had become desensitized to the figures so we simply walked away when we couldn’t meet the required monthly number.

I will agree this is philosophical and open to all sorts of interpretations and arguments but I believe it is also a grain of truth we will have to live with for a long time. It doesn’t answer my question but it does put a train of thought on the table we can add to the solution quest.

I’d love to hear your opinions and thoughts.