April 19, 2022

That’s a great value!

The English language makes it really hard to have a meaningful conversation about value.

My favorite definition for value is from Ron Baker (paraphrased):

Value is the maximum amount a buyer would pay for something.

Given this definition, a sentence like, “This $1 case of paper towels is a great value!” makes no sense.

It confuses value with profit.

Here’s the thing...

Getting a case of paper towels that you would have paid as much as, say $10 for, for only $1 is a great PROFIT for you because the PRICE is way lower than the VALUE you place on the product.

To put it another way, if the VALUE you assign to a case of paper towels is $10 (i.e., the max you’d pay) and the PRICE you pay is $1, then you got a $9 PROFIT because you would have paid $9 more.

To put it yet another way, the seller left a TON of money on the table.

You didn’t get a great VALUE, you got a great DEAL.

Which is to say, you captured a huge PROFIT in the transaction.