About Price and Value — the get rich slow scheme

There is a big confusion in how most people think about price and value. We often use the two words interchangeably, which tends to be a clear sign that we’re thinking of them in the same way.

Whereas value is subjective perception of worth, price is an objective function of offer and demand.

The oxygen we breath has immense value to ourselves, we would value it as much as life itself, since without it we would cease to exist. Yet it’s price is zero, for there is virtually a infinite offer of air, for free. Whenever oxygen is commoditized, what is payed for is not the raw material, but the work, equipment and logistics to have it available to you in a cylinder or something else. Water would historically be in the same arena, although there are places where it’s already becoming scarce.

Let’s take the classical example of the janitor and the brain surgeon and the argument about the fairness of their respective salaries. Several times the argument of worth mixes up value and price with the social justice seeking vision. As value is subjective, it can develop into a confusing argument.

For 99.99% of the population the work of the janitor will have a far bigger value than that of the brain surgeon. Statistically speaking, over a lifetime you’ll probably notice and have your everyday life affected by the janitor’s work, whereas chances are you will never need the services of a brain surgeon. Yet, their salaries differ by a huge gap. It’s nothing to do with value. Sure lots of people would say they value the brain surgeon’s set os skills more, it took longer to master and what not. Still, the main reason for the salary difference is offer and demand. Market’s invisible hand.

There are simply more people available to work as a janitor for a low wage, and not enough on the brain surgeon side. As long as there are more people willing to pay huge amounts for their surgeries than brain surgeons, while a line shows up for the janitor’s position, the price distinction will exist. If one type of craft is or isn’t more valuable is a matter of personal opinion.

Now, value is not a fixed thing, for not all people are created equal. Each one’s perception or reality, of each thing’s worth, varies in a number of ways, for a number of reasons.

In the discussion of work and career often times it’s quite useful to separate the two — price and value. Although in the workplace price and value tend to be strongly correlated (the higher the value of a product/service, the higher it’s price, and vice versa), the devil lies in the details.

For a broad analysis we can use a big picture view of things, but when one is faced with a decision to be made, for his or her own personal life, then what we want is a very specialized and detailed understanding of that particular case. If we were to plot price and value on a graph, the curves would be very close, but seldom quite the same, and within a tiny gap could be the difference between barely making it to end of the month and buying a brand new yacht.

The best advice I’ve ever heard about career planning was this: “Create more value than you collect, give more than you receive”. Pretty simple, and an great motto to live by. But, as I said, the devil lies in the details. We want to be financially successful, as well as to have a feeling of significance, of contribution, that your work (and life) matters to others, to a cause, to something. Once you go up in Maslow’s hierarchy needs, after the basics of food and shelter are secured, humans strats craving ever more a meaning, to grow, to contribute, to matter. While thinking of paths to pursue, goals and objectives, its really important to have a clear understanding of the places of price and value to you.

I did a volunteer work once as a translator. I did it for a writer I truly admire, and as a volunteer, money was not an issue. I was doing it solely for the value I perceived in the action. I admire this author for offering everything he produces for free, I’ve gained a lot over the year by reading and consuming his books, articles and podcasts, and was eager to help, to work with him and be a part of this amazing project. Since time was not a urgency, I would ponder on a few paragraphs or sentences for a long time, we exchanged a few emails as how to better express this or that in a different language. The end result was of high quality, but I knew all along that the amount of extra time and effort over some tiny details would never be worth their price. If I was to offer my services as a translator, this strategy would be a poor choice. I could deliver pretty much the same quality, in the editor’s eye, with far less dedication, which means I could translate more and earn more by not being so detail oriented. But it mattered to me. I see value in this level of dedication, even though I understand enough of the field to know this value hardly ever translates into price.

If you work for an NGO, if you volunteer, this usually means money (price) is not the matter here, the motivation is not financial. What matters is your own perception of value through the work done, be that saving the whales, feeding the poor or teaching a night class to underprivileged kids. For those underprivileged kids parents, most probably their job, if they have one, is not one where significance is a big player. They’re in it for the check in the end of the month. Hardly anyone feels amazing for putting frozen chicken pieces into a bag to be shipped and sold for a profit, doing the same repetitive motion 12 hours a day. The definition of a shitty job is one where the work is of little (not to say no) significance, boring and people do them solely for the money. Ironically, the money tends to be microscopically small.

If you wish to earn more, you need to be aware of the value perception of skills and qualities in your field. Thats what is being exchanged. First you need to fully understand and accept the lesson in the advice already mentioned: “create more value than you collect, give more than you receive”. This puts you in a growth mindset, and forces you to focus outward, on the outcome of your actions, and inward, in evaluating your own ability to perform. This is paramount.

The first take is that you should be constantly improving yourself. That means you’ll be able to provide more value. We’ll talk about how to capture this value and translate it into money in a moment.

Wherever you are, there are skills and abilities to be exchanged. The very foundation of capitalism. To improve yourself means to be able to offer more (or better) skills and abilities, for that means more value to be exchanged, which leads to higher wages. But it’s not a linear progression — and this is a HUGE detail. Not all skills improvement lead to higher wages.

Take examples from the same profession. There are hairdressers who will cut your hair for $20. Other will charge $200, and there are even those making $2000 a cut. Although the technique is usually higher for the more expensive coiffeurs, it’s hardly the case that one is 10 or 100 times better. This is an assumption most people have when they think about a profession, that the value of a hairdresser lies in his skills with hair. If this was the case, there would never exist such a gap in this market (or any market).

However, if you take the client’s perspective, it’s all about the experience. People pay more not just for the hairdresser’s ability, although they are certainly very important, but the way the person talks, the environment they are in, who else goes there, etc.

You need to understand what creates value in your industry. In hairdressing, technique aside, having a stylish salon with marble floor, classical wooden furniture and fancy espresso machines may be a huge deal. Or the indication game could be big, who goes and their status, along with friendliness and good “vip” treatment.

There are many variables that come into play in the client’s perception of value. If I go to a rock concert, the whole thing could be ruined by a problem in the parking lot that had nothing to do with the band. The muddy distant parking spot might ruin my mood and the overall perception of value of the entire night. This band just lost a fan and a lot of potential money in future tickets, albuns and shirts due to a variable they were not even considering.

People tend to have their memories organized around subjects. If I buy tickets for a concert, the events of the entire night fall under this same mental“box”. Intellectually I would be willing to understand that the parking lot issue was not the bands fault, and be able to appreciate their musical mastery without taking unrelated matters into account. Yet we are emotional creatures. Most of the time we just rationalize our feelings and emotions. If I’m in a bad mood for something that happen while going to the show, in their parking lot, I’ll blame the band, even if only unconsciously. Or I’ll just have less fun for being in a bad mood and remember this night not so fondly. So my motivation to buy another ticket, album or t-shirt from them decreases, and if this happens with enough people, they just lost lots of money.

And this has nothing to do with their musical skills. This is important. As a musician, one may think that composing, writing and performing is all it takes to succeed, but not so much. The whole experience matters. Just like in the hair salon, every field and every job has a number of ways to provide and exchange value — and lots of them are not obvious. Your ability to understand this and play this game is directly correlated to how much you’ll be able to cash out. Metaphorically speaking for your sense of significance and meaning, literary speaking for your financial health.

If you want more money, the long term strategy is to focus on the abilities with high value and less people offering them. The ones hard to replace. I could make some money driving a Uber, and more money driving more hours, but it’s hard to improve in this field. I provide no unique value, and even if I took special driving lessons and became the best driver in the world, my wages would be same. That system, that company is blind to this variation in driving ability. My passengers might perceive and give me better ratings, but it is far too little a reward for such an investment. Not the best use of my time.

Look for what is highly valued, at this moment and in future trends, and also check offer and demand for those things. Thats the intelligent outward focus. To know what is of high value and low offer, or what will be. To understand the value perception — both from employees and clients — in your field. Then there is the intelligent inward focus, in which you take hold of you strengths and weaknesses. You want to find that sweet spot where you see something of value that fits you, that inspires and motivates you to pursue.

I say “intelligent” focus, for there are many unhelpful and even harmful ways of looking both in and outward. Self-depreciation, doubt and disgust when looking in, the ease with which we put ourselves down is not an intelligent way of looking inward. Your brain is an outstanding answer-finding machine. Whatever you ask yourself, it’ll find a way to encounter. If you direct it’s focus to your mistakes and errors, that what’s gonna be in your mind, making it appear that those occurrences are bigger and happen more often, that they mean more than they should to you. The same goes to outward focus. If you deploy this resource badly, you’ll end up with jealousy, the never-ending line of people/reasons to blame, fear, hatred. It’s easy to follow this route, tragedies sell and there is no shortage of them to consume, gossip is interesting, hate is compelling. It’s comforting to place the blame on others, the stupid boss, the media, corrupt politicians, the system. Yet, this is a downward spiral, a feedback cycle that leads to nothing good. Stop it as soon as you notice, take the wheel and force your focus elsewhere. It gets easier with practice, for you do get better.

The intelligent way of using your brain is to move forward, to progress, intellectually and morally, in whatever way you define it. Once you have a clear view of what you want as price and value — how much you wish to make (a clear number) and what you can offer that’s worth more than that — you go about looking for ways to make it happen. This calls for that inward-outward balance. You need to know thyself, what interests you, what you are and what you can become exceptionally good at. Then you need to understand where the market is, and will be, as far as those skills and abilities matter. As Dan Carlin said, you need to become so good they can’t ignore you.

This asks for becoming good at what’s valuable. Becoming good at this level, becoming “this good”, usually takes diving into something you like. It’s hard to really dedicate 100% to something you despise. It doesn’t have to be something you love, this is a foolish and naive expectation to have. Just something that you think somewhat attractive as a subject, something that doesn’t turns you off immediately. Love is left with unicorns and rainbows for now. Go with curiosity and interest.

Because once you start to invest in that skillset, to become better and even master it, you’ll find increasingly more ways to express yourself through that craft, whatever it may be. You’ll be able to change the aspects that you dislike, because the better you are and the more you understand “the game”, the more you have to trade. Doing what you love will be a later result, for with practice and mastery you’ll get to love what you do. You don’t start with it, but you surely end up there if you play your cards right.

A good data scientist today that knows his value for his company can ask for some time off, to work from home or for a raise. He understand the market, how hard and costly it would be to replace him, to train and onboard someone new, if they manage to find someone. So he can use that to negotiate, change the aspects of his job he’s not so comfortable with, have the company invest in an education program for him, buy a new computer or whatever. The intelligent outward focus means he knows his ground, knows his worth and not to overstep.

We’re playing the long game here. As you follow your strategy, you develop yourself and constantly increases your value to the company or market you’re in, and correspondingly you can use that new position to make the changes that will make you happier. Brad Pitt can work in movies he likes, with directors he appreciates, he can change things in the set, have all his staff wear blue and display flower petals in his trailer if he wants to. For a simple reason. He brings far more to the table. His appearance ia a film is worth millions of dollars.

Know your worth, and increase it. What is it your market, your company, your boss, what do they value? And what can you do about it?
Maybe learning chinese is a good bet for you, or to program in python. Maybe is developing amazing negotiation skills, to manage people in a unique way, or the classic networking. Whatever it is, even the cliché ones, focus on becoming The Best at it. Read books, articles, talk to people who achieved success there, interview them, ask them to mentor you. Find resources and be patient, be persistent. This is no shortcut, but there are none. This is truly the fastest way, to build a foundation based on what you want and can do, and what people want and need (and are willing to pay for and respect).

Going to the circus used to be a low level entertainment, a second tier way to spend the night. The place was poorly located, seats were uncomfortable, often smelly, a lack of professionalism was all around. Even though the artist’s skills could be amazing, tickets had to be cheap. Guy Laliberté, the founder of Cirque du Soleil, turned all of this around. He took a good look and understood what was there to offer on the inside. He was himself part of a troupe for some time, and as a street performer he had a good grasp of artists strengths and weaknesses, their potential and what they could become. His outside look was also a turning point. He understood that doing multiple backflips and juggling a hundred balls was not all it took for the public. There were a lot of value on unfocused areas of the field.

He learned from theater, a place where people were willing to pay more, and opera and other entertainment arenas and brought it to the circus. He put together a performance with a storyline, not just a bunch of acts one after the other. He had the whole place to level up, good seats, ushers to take you there and professional staff, top of the art lighting and sound system, coherent dressing for everyone and much more. He created and collected value where the typical circus businessman was not even looking.

As prices went up, so did his revenue and profit, and this resources abundance allowed him to develop even more. He could hire and train his artists, improve the show on and off stage. What used to be a market for single independent family owned shows, now became a true enterprise. Cirque du Soleil had a growth and success that reinvented the circus scene for good.

His ability to focus off stage is an excellent display of intelligent outward focus. He understood what value was for a client in a night out, when going to the circus, and what were the bottlenecks. He could find the most amazing group of artist with unbelievable skills, but in the conditions they had they would never achieve success, they would never create and capture that much value for a client in a consistent manner. So he focused on what worked where, if people were willing to pay for something else, what was there that they didn’t have? He saw the market in a new way, and changed it accordingly.

But he didn’t stop looking inward as well. He made the performance follow a storyline, a continuous act, he improved the songs and dances, got rid of animals that were expensive, hard to move and didn’t fit with a more elegant form of show. He hired olympic gymnasts, famous choreographs, world class musicians, he did everything to develop the art level as high as humanly possible. And he reaped the benefits of it all.

Another interesting example is of Arnold Schwarzenegger. He showed an amazing inward-outward balance. When he decided to go into the movie industry, he took a good look at him and at the market. Hollywood can be demanding and unkind. He was a foreigner with a strange name, weird accent, huge body that would fit a small number of characters. He wasn’t a real actor, no theater or TV background and no connections, no network of director’s friends to put a word for him, and his goals were not shy, he wanted big roles. He understood his chances at this game, and he decided to never audition. Never. He understood his odds through that route, and chose not to play that game. He also never tried a small part, the path of starting with minor roles and moving up wasn’t for him and he knew it. They way he did it was to play a different game. He was already a millionaire by the time he got his first movie, Conan.

He invested in real state with all the money he could save up from his dedication as a bodybuilder. He took acting classes, got an good agent and invested in developing himself for that job, but he bought himself time and a leverage to negotiate by having financial freedom, by not depending on the movie industry to survive. He could reject any offer that didn’t fit his strategy and play the long game until the right one appeared. He devised this strategy by intelligently looking both in and outward, understanding the game as far as he was concerned. And he made it. He played his weak and strong points like no one ever did.

It’s not an easy path to success. You’ll need to become someone different than you are. You’ll need to follow a plan. Truth is, time will pass no matter what, and you will change no matter what. This is a given. Now you can control or at least steer this change consciously, or not. It can be in a direction that suits your goals and aspirations, or you can allow someone else to decide for you, to let it happen while you watch TV, eat junk food and drink out to numb the pain of not becoming what you know you could. Unrealized potential is a major source of regret. The decision is all yours, and not deciding is as much a decision as any other.

Take a good look in. Take a good look out. Think. Study your grounds, your troops, take hold of what is yours like an ambitious general faced with a life-or-death challenge, and know that victory is a few battles away. Know the price you’ll pay to become what you can, the value you’ll receive as a result, and rejoice in the process, for a life well lived happens on this journey. Farewell.