On the stock market, prediction markets, and elsewhere, things don't have One True Price (or, therefor, one true valuation). There is the price people with the thing are willing to sell it for, and there is the price people without the thing are willing to pay to get it. These two prices are generally not the same, and the gap between them — the bid–ask spread — is often wide.

After decades of considering myself a fairly canny bargain hunter and negotiator, I noticed something: if I bought something that was “an incredible deal”, and then tried to sell it, I generally lost money. What?! Isn't the idea that something is a "good deal" if the asking price is below its value? And if its asking price is below its value, doesn't that mean that you should be able to sell it at its value?

No no no!

All this time, my mental model of the pricing dynamics at play was completely wrong. Because the bid–ask spread is everywhere!

The bid–ask spread generally represents the cost of doing business. In the case of the stock market, transaction fees (and liquidity).

In-person used-good transactions, though generally fee-less, have an invisible cost of doing business. This, along with the fact that both buyers and sellers are opportunistic (and negotiation room is often included in the price), explains the bid–ask spread. The cost of doing business — the hidden transaction fee — includes the risk of getting scammed, or discovering that the item is worth significantly less than expected, and the time and energy of arranging to meet a scary stranger somewhere safe, getting cash out of the bank, asking friends whether you should buy it, researching whether it's a good deal, waiting in a coffee shop with sweaty palms waiting for the scary stranger to show up, etc.

All this blithering is leading up to a very simple idea. Well, three ideas.

First: good deals are expensive, not in money, but in time/risk/stress. There is almost always a reason something is underpriced. Sometimes, the reason is simply, sometimes things are underpriced for no reason. But the reason you found the underpriced thing is because you'd been obsessively checking for underpriced items in category X every morning, instead using that time to making enough money to buy a fairly priced item in category X, or decide you don't need the thing in the first place, and can re-assign the time to reading Proust.

Second: possessions are far more expensive than they seem, when you include the deferred financial and attentional expense of maintenance and disposal. I highly recommend David Cain’s exploration of this idea:

Everything Must Be Paid for Twice

One financial lesson they should teach in school is that most of the things we buy have to be paid for twice. There’…

Raptitude.comDavid Cain

Third: If you want a good deal, don't think about whether you’re getting an incredible deal. (You will usually answer, Yes!) Instead, ask: how much could I reasonably get for this if I immediately flipped it? How much would I be comfortable charging? (For bonus points, how much would I charge a friend if I sold them this, or what would I let someone negotiate me down to if I was selling this.)

This flips the set-point from is this a fair ask-price to is this a fair bid-price. Which can turn something from a great deal into a pretty bad deal!

If you're just getting something for yourself, and you're in a hurry, it might not matter. But if you're getting something, and part of your plan is that you want to be able to sell it, at a minimal loss, if it turns out buying it was a mistake, then you shouldn't pretend you'd be able to sell it for the price you'd be willing to pay for it.