#TBT: It’s All About Value
Happy #TBT. To celebrate, we’re sharing an oldie-but-goodie post from Jim: It’s All About Value.
You think I’m going to talk about pricing. That’s a very reasonable guess, but in this case, it’s wrong.
Value is a ratio of what somebody puts in to what somebody gets out. If you paid $100,000 for a 5-year-old Hyundai, that’s a lot you’ve put in (in this case, money) for what you get out (a pretty mediocre and aging car).
If you paid $150 for that same Hyundai, you’d feel really differently about it. You’d still have the same car, but you’d have scored a heck of a lot more value for your money.
But money’s not the only input. Time and mental energy are in many cases the more important inputs that people are stingy with.
How else to explain something like FarmVille? This is, bluntly, a stupid, stupid game. (For a hilarious review of this, the best source is this video from our friend Toby. Watch it. You’ll thank me.) But there’s no denying that legions of people play it. Heck, “legions” is an understatement. Nations is more precise. Tens of millions of people spend time on this truly trivial pursuit.
Why? Because the value is great. Not the money value, although being free removes that as a barrier. It’s also the effort and startup that go into playing. You can do it from your computer, with just a few active brain cells, slumping like a troglodyte in your chair, right now, in your bathrobe.
So the value equation looks something like this: Output / Input. Let’s say FarmVille is a 5 of its output, or value, to us (these numbers are completely arbitrary). But it only costs us a 2. That makes the value 5/2, or 2.5. We get 2 1/2 times more out than we put in.
Certain things are really, really satisfying. For me, learning a piece of music on the piano and being able to play it well is really satisfying. Hitting a golf ball squarely with a driver and seeing it fly 270 yards is really satisfying. Seeing Phantom of the Opera for the first time and making the music part of my life is really satisfying. Learning to play a Chopin prelude or hit a driver are things that are probably 50 times harder than playing FarmVille. Maybe more. Fortunately, they’re much more satisfying.
So if the input is 100, instead of 2, the output needs to be 250, instead of 5, just to have the same ratio of output to input. Fortunately, that’s the case.
Unfortunately, the output takes a long time to show up. The first year or so that you hit a driver mostly results in digging holes in the tee box, having to yell “fore!” to spare the lives of bystanders, and generally looking like a jackass.
Live entertainment, by contrast, has some of those costs too, but it has the advantage of a much quicker payoff. You have to pick something, buy it, dress yourself, take yourself somewhere and actually engage in the material. Compared to learning how to play an Alberti bass line or form a diminished seventh chord, it’s pretty easy AND you don’t have to wait forever to get a benefit. You’re there; it’s happening; it should be fun.
So live entertainment is somewhere in the middle — maybe not as satisfying as hitting a good golf shot or competently playing piano, but far, far, far better than FarmVille.
But in communicating to people, I wonder what we communicate about this value equation. Are we trying to overstate the output while not doing anything about managing the perception of the inputs being too high? Or perhaps we’re not emphasizing the immediacy of the high output?
In other words, what do people think the value equation for going to see live entertainment is?