One of the main responsibilities of my job is to value real estate. Let me walk you through how to value an industrial building. So you have the income approach, comparable sale approach and the replacement value approach. Let’s start with the… ah, I’m just effing with you! You didn’t come here to read about my job. But you should have seen your face. I got you good!
However, I am sitting on a plane and thinking to myself, “is there a way to value friendships?” Initially I said no, but since you are reading this, it probably means I thought of something to say. So let’s give this experiment a shot.
How to Value a Friendship
As I explored this topic, I decided there is one valuation type that makes more sense than the other two. And I want to save you a little time. So I am only going to explain this using the Replacement Cost Approach. No horses need to be beaten.
Replacement Cost Approach
In real estate we usually find the ultra conservative approach of value by determining what it costs to rebuild the property. That is (incoming math alert):
Land Value + Building Construction Cost (aka Materials + Labor) = Replacement Value
This would tell you what it would cost for someone else in the market to buy a neighboring property, procure materials and labor, and then use time value of money (if you don’t know, spend 1 hour learning about this, and then you are qualified to put MBA after your name. I just saved you $150k and two years of your life. You can thank me later) to determine a value.
So if we translated that to making friendships, we would need a similar equation. So I thought one up:
Price of living human body (you)(aka Land Value) + Price of other human (aka Materials) + Time Together (aka Labor) = Replacement Cost
Since we can’t really price human life, we will just label these as constant values. This leaves the only variable that determines replacement cost as Time Together. This is the one thing, as a person, we can control.
For starting new relationships, it comes down to putting ourselves out there. Putting effort into making connections. For Extroverts, this may be a lower cost because they comfortably put themselves out in the world regularly. And by default, because they have created more time, they get more bites at the apple. They create friendships pretty readily. Introverts like me on the other hand, have a bit more friction to putting themselves out there. The amount of effort and energy I need to scrounge up to get out into the friend making arena is more scarce. Thus my cost of friend making labor is very high.
But this just explains the cost of a new relationship. Next you have to add all of the time you have put into nurturing a relationship. These are things like happy hour drinks, sports games, camping trips debating under the stars, phone calls in the middle of the night when they need you, etc. These are things you can’t just create over night. These things take time (see how you got your MBA above).
It takes time to build relationships. For some, they are easy to start, and for others they are easier to build stronger. Some never build valuable relationships because they are unable to get deep or experience life together (aka make memories). Some may have a lot of relationships, but very few, if any, are deep relationships. They never put the labor in to build the structure. Effectively they buy lots of plots of land, place a bunch of lumber on site, but never hire a construction team, to keep the real estate theme alive (stick with me).
Now it doesn’t take an MBA to tell me which is more valuable, a built building or dirt with a pile of wood on it. Our relationships are a direct resemblance of how much effort we put into them. How much time we spend together. It is truly the only variable that matters.
So to sum up:
Deep Friendships > Entry Level Relationships > No Relationships
Invest accordingly, and you may just be the Warren Buffett of friendships.