Valuations - A myth , A calculation , Or Just a random number

For generations, human mind has been perplexed by a question which looks simple but is still unanswered!
What is the value of this??

This question applies to everything from an electronic gadget to a house to even company valuations!

For products, it gets a little simpler, as the answer to this question is given by the manufacturer itself by attaching a price to the product. Despite that, the human mind still evaluates if the price is greater than the value or not and based on that makes a decision whether to buy it or not.

However, even in this case, the value is more or less a perceived value of it and would vary from one person to another. Someone might value a product at 100 dollars while someone else might value it at 500 dollars.

Lets look into this with an illustration - A bag made by a local vendor priced at x. Now suppose this local vendor becomes famous and besides starts using a better quality of raw material and as a result produces a better quality product. Also, he creates a loyalty program to benefit loyal customers, how should I value it?

Mathematically

Original price of the product = x
Add better quality of raw material ensuring the bag looks better and life of it increases twice = x
Add loyalty benefits = 0.25 x
Brand value (Esteem value for using that brand ) = y

Nett price = 2.25x + y

However it is common to see people paying a price of 10x ( or even 30x).Does it make sense for the same product. Look at Rolex or LVMH etc.

Now Isn't paying this amount a blunder for a value buyer! However this segment still exists and its pretty commonly perceived that the owners of such products are generally perceived as more successful people. This is an irony that these successful people are rather the most foolish value buyers!

The same is the case with company valuations. A company is valued at x. A sudden increase in someone's interest in buying that company pushes it valuation by 5x too! Besides, higher is the desperation (Rather foolishness) of the acquirer, the higher is the value it fetches despite any change of underlying fundamentals. Essentially, this simply shows how the so called smarter CEOs and investment bankers ( who show off complicated excel sheets and business fundas) are rather foolishly wasting time on valuing a company when the value of the company is simply the buyer's perception (desperation) for buying it.

Broadly looking at it, one could conclude that valuation of a product/ company/ service or anything for that matter is just a random number which comes from elaborate calculations which generally are simply based on one's perception and need.