The Three Laws of Value
I’ve recently started to take notice of just how often the word “value” comes up. Especially in the context of business and entrepreneurship. Delivering value is discussed with such regularity that we tend to assume that everyone is operating from the same assumptions about it.
But, are we?
I live at an interesting intersection of higher education as a professor and entrepreneurship as a startup founder. And while I owe my focus on value to the latter, I’ve come to appreciate how relevant the idea of delivering value is to all walks of life. I’m also convinced that not only are we NOT all operating from the same assumptions about what value is, the source of frustration we experience both personally and professionally could be avoided by adhering to what I call the “Three Laws of Value.” At least that’s my hypothesis.
What follows is a discussion of the three laws as I described them in my last book. Test if for yourself and let me know what you think.
It doesn’t matter whether you’re trying to close a sale, looking for a promotion, or trying to decide whether a college education is worth the cost. It all comes down to the same thing — value. And if you think disappointment is the result of over or underestimating value, you’re absolutely wrong! That’s a symptom. The sickness is the same one that infects every person who has ever complained about being overworked and underpaid, can’t find a job that matches their skills, or has ever suffered a broken heart.
They have confused their value with their price
Value versus price is not a difficult concept to understand. But it can be a difficult concept to accept because it’s almost always tied to emotionally-charged situations. These are the conditions that affect us like a pit bull being poked by a stick.
Consider someone we’ll call Rose who refuses to drop the price of her house even though it’s been on the market for over year without any offers. We could easily label her irrational because, to us, the value of her house is an objective fact. But not to Rose. To her, it’s the years she sacrificed to save up for the down payment, the hours she spent picking out floral wallpaper that makes her smile every time she walks into the room, the holiday dinners she’s hosted there and the pride she felt at being the first homeowner in her family. These are the emotions that can make the line between value and price impossible to see. Once you do, however, you’ll see possibilities where once stood only limitations. Understanding the three laws of value is the first step.
Law # 1: You cannot set your value, you can only set your price.
This is the first law because it’s the one that trips most people up. As I’ve already mentioned, talking about your value is usually an emotional conversation. How many times have you heard someone who thinks they deserve a raise describe their situation by saying “they’re worth more.” Unfortunately, that’s not how value works. Wanting more doesn’t mean what you’re offering is worth more. What you want to be paid is your price. As long as you need someone else to pay it to you, they are the ones who set the value of what it’s worth. That brings us to law #2.
Law #2: Value is set at whatever someone else is willing to pay.
Rose can set a price of $300,000 for the sale of her house but it isn’t worth that until she can get a buyer to pay that amount. Nothing about her reasons for setting her price will change that. Not how much she loves her house, or how much she’s invested in decorating it. Not even what she paid for it. Value is set by the person who is paying. Period! The same is true for the customer of a business or the supervisor of an employee. Now, let me pause here to anticipate (and then obliterate) the most common objection to this law.
This is NOT about your value as a person!
We can all agree that’s priceless. But surprisingly, most employers aren’t interested in paying for your essence. A paycheck is for a skill set. The same is true for the fee you’re charging customers, the grade you want on an assignment or [fill in the blank of your heart’s desire]. Your payer evaluates what you’re offering and then decides what it’s worth to them to have it. In other words, (and this is going to hurt) you may not like what you’re getting but you’re getting what you’re worth. Now that that’s settled, let’s turn to what you really want to know. How do you get your price? That’s law #3.
Law #3: Deliver value that exceeds your price and you can set your price as high as you want.
This is the tricky part and it’s where so many of us get stuck. You can’t deliver value that others will pay a premium for unless you know what they value. Focusing on what’s important to them (from their point of view, not yours!) is the only way to do that. But we often miss opportunities to figure out what others value because we’re hardwired to focus on our wants, needs, problems and . . . you guessed it . . . price!
This kind of disconnect is happening in workplaces all over the world. And it happens in other parts of our lives too. Just ask the boyfriend who pulls out a little velvet box on Valentine’s Day only to watch his girlfriend go from excited to disappointed when she opens it to find a pair of earrings inside.
Frustration is a natural response to feeling like what we bring to the table is not being valued as highly as we think it should. Here’s why a focus on delivering value is more productive than brooding over price.
Value is relative.
If what you have to offer isn’t highly valued where you are, it might be highly valued someplace (or by someone) else. This can be an instructive exercise if you’re paying attention. Sometimes our talents and abilities have simply outgrown our current surroundings. As I argue in Your GENIUS Mind, GENIUS is generative. That means we’re on this earth to grow. If you feel that what you’re offering isn’t appreciated where you are, that’s not a reason for resentment. It’s a reason to move on. But know this.
If you can’t find anyone to value what you’re offering as highly as you do, the market is telling you something. Sorry love, but you still have some growing to do.
Not to worry. Here’s a growth hack for you-
Whenever there are layoffs, no matter how massive, keep your eyes on the employees who aren’t let go. Among them are people who were never even considered for the layoff list. They are your exemplars for delivering value.
Sure, favoritism may explain some of it but you can’t keep a company afloat on butt kissing alone. I’m talking about the employees who are highly valued because of the value of what they contribute. You will find these people at every level of every organization. They’ve figured out how to bring something to their position that decision-makers prize so highly they will pay a higher price not to have to replace it. I call it the GENIUS within each of us and there will always be a receptacle for that plug. This is the secret to success and the control valve to your fount of fulfillment.
Your value must always exceed your price
What you contribute must always be more important to those you are seeking payment from than what it’s costing them to get it from you. This doesn’t just apply to work. It applies to life. And it’s not always about money. What you force people to put up with to be a part of your life is a cost to them. When relationships end, it’s sometimes a way of saying the cost of being around you became higher than it was worth.
The next time you feel frustration rising, before you pull out your grievance list, check yourself against these three laws. Odds are you’ll find one of them broken. The good news is, no matter which one it is, you have the tools and the power to fix it.
What do you think? Let me know in the comment section and if you found this useful please click the little green button to recommend it to others. Cheers!