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What does it cost? What is it worth?

Cost and Worth are the two essential components – value judgements – of every single transaction.

This is the law of supply and demand: for a given price, suppliers will supply a certain amount of a good, and buyers will demand a given amount. If the price goes down, any suppliers whose costs are higher than the new market price will stop supplying because it’s no longer worth it to them – supplying the good has become unprofitable. Buyers will demand more of the good at the new low price, for example as new buyers enter the market now that the cost they have to pay (the price) is equal to or lower than the value that they get from the good.* For them, the lower price is now worth it.

It’s a well established, simple model with a lot of deeper implications*… and it glosses over the fact that both the Cost and the Worth of different goods – even of money – are always relative, and vary across multiple dimensions, all of which affect the monetary price that seems “worth it” to a given buyer or supplier.

Some people like ice-cream more. Some people are vain. Some people really love books. Or cars. Some people need more space. Or access to nature. Some want time with other people. Some need time alone. Some people care more about other people. Some people have a knack for some tasks. Some find difficult jobs rewarding. Some people have more money.

Money itself is worth more or less to different people. My 18-year-old self washed dishes for money that my 40-year-old self wouldn’t get out of bed for. Small amounts of money were worth more to him on a number of dimensions: he had less money (and so needed it more), but more time (which he was prepared to sell relatively cheaply), and fewer skills (so he had no better alternatives).

18-year-old me had a completely different cost-worth structure to forty-year-old me, which made it worth it for him to take part in the following value chain:

18-year-old me gave up time (worth little to him) for a small amount of money (worth a lot to him); my employer gave up a small amount of money (worth less to him than it was to me) for my labour (worth more to him when combined with his restaurant’s dishwashing machines); his customers gave up money (worth a variable amount to each of them depending on their circumstances) for their meal in the restaurant (which was worth it to them because it saved them time / made them feel nice / seemed to cheap / they were hungry and we were the only show in town).

Everyone paid a cost, and everyone got something (I hope) that they felt was worth it.

Opportunities to serve – and generate the income you need to keep on serving – lie in these gaps in the value chain.

The fundamental question is: “How (and with whom) can I make something that’s worth more to the people I serve than it costs me?”

*See these MRU videos for a good overview.

I'd love to hear your thoughts and recommended resources...