The Value We Create

Value is measured in currency. Usually cash. The more cash you get for something of value, the more valuable it is considered. The token of that value is price. Price is like a protocol we use to communicate value.

You build something of value. You communicate the amount of value by setting the price - $649. People buy it. You get cash and now you too can buy things. Want more cash? Just build something else, or something better and repeat the cycle. Right?

Well, there’s another way - marketing. Take your original product and remove something. Memory, for example. Keep the price - $649. Now create new products by adding what you just removed in two steps. Now you have three items valued at $649, $749 and $849. People buy it.

How much did you save by dismantling your original product? Next to nothing. How much more value did you create? Up to $200.

Let’s just say you had to spend $249 to build your creation. In the first scenario, you sold it for $649 and got to keep $400, or 61% of total value. But, by doing a marketing trick, you received $849 and retained $600, or 71% of total value. Whoop de doo!

But that’s not all. If you would separate the two activities, building and marketing, and measure their performance individually, something strange becomes apparent. Your original labor was 61% efficient when it comes to extracting value. But the marketing effort cost nothing and created $200 of extra value. That’s 100% efficiency.

Heck, you probably would be better off spending your time on marketing if you wanted to create the most value with the time you had.