April 12, 2020

Skittles vs Starburst

This morning after an impromptu Easter egg hunt in the yard, my two kids engaged in an age old childhood tradition:

Trading candy.

Specifically, my son traded his Starburst with my daughter for her Skittles.

Why did my son want to make this trade?

Was it because he believed that it cost the manufacturer more to make Skittles than it cost to make Starburst?

No, of course not.

He couldn’t care less how much it cost to make either candy. I’m sure it never entered his mind.

The reason he suggested the trade is because he likes Skittles better than Starburst.

And the reason my daughter accepted was because she likes Starburst better than Skittles.

It’s that simple. The cost of making either candy has no bearing whatsoever on the value.

Let me say that again:

The cost doesn’t matter.

Here’s the thing...

When Alice agrees to pay Bob $100,000 for a Wordpress website, it’s not because she believes that is a fair price based on Bob’s cost to produce it. It’s because she’d rather have the website than the $100,000.

It’s a trade, like Skittles for Starburst.

And when it’s a good trade, it’s mutually profitable - i.e., both parties are happier after it’s done.