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Value creation

Business

There’s a simple law: No one buys anything unless it produces more value than it costs.

This seems obvious. Value could be in the form of sustenance, status, affiliation, peace of mind or health. And value is always measured by the user.

A $300 caviar spoon will only be purchased if someone believes it produces more than $300 in value (and they can afford it).

The user doesn’t care how much it cost you to create. They don’t care how much you need the sale.

So, why don’t nurses get paid more? It’s pretty clear that they produce value far in excess of their salaries.

And why are Taylor Swift concert tickets so expensive? It doesn’t cost the promoter much at all to offer that last seat…

The reason is clear: scarcity.

When there are substitutes, informed consumers usually choose the cheapest identical item. That’s why expensive wine costs more than water, even though you can’t live without water.

This all come together when we realize that a good business project doesn’t simply create value, it also is built around some sort of scarcity.

Freelancers are tempted to forget this, and end up racing to the bottom. “You can pick anyone, and I’m anyone,” is not a useful marketing slogan.

People are going to buy this from someone, but why would they buy it from you?

Tell us about the value you create. And tell your investors about why your offering will be persistently scarce.

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