What is Secret to Success?

What is the Secret to Success?

Do you want to know the secret to the world? The thing that makes everything go around and determines what some people say is their worth? People live and die by value. It is an interesting concept when you actually think about it. How do we really value things in life? To be honest, I have learned from my mentors in life that value is about perception. We are going to talk about companies, but I wholeheartedly believe this translates to individuals as well.

The Power of Value: Understanding its Significance

The concept of perception is related to the customer’s understanding of a topic or product/service. A high level of perceived value is maintained by a product/service that provides a positive customer benefit and/or experience. People often tend to pay more for products/services if they inherently believe they are valuable. This is because customers tend to enjoy using and paying for products that are valuable to them. Since everyone is different, the value will always be different among people.

Time is one of the only things we cannot get back, and that is why it is such a valuable commodity. I would argue that most consumers value time more than things. Having a product/service that has time-saving qualities can help boost their perception of value.

By charging a premium for products, a company can create an air of exclusivity that makes its products/services more desirable to consumers. This is also known as the reason why many companies or services try to avoid offering lower-quality products and/or services. When people feel like they are “getting a deal,” they often buy more. Some companies like TJ’s (Trader Joe's) and Costco have built their brand around “getting a deal”. This leads me to my next point: your brand.

Unveiling the Power of Perceived Value

Long-term loyalty can be developed with businesses that have brand reliability, as this ties the business reputation to their success. They are now so interconnected you cannot separate successful businesses from brand reliability. Cross-promotions can improve a company’s reputation by association with like-minded individuals, increasing their brand’s perceived value and exposure to a new audience.

Having a positive customer experience is literally the single most important element a brand can do to improve its reputation. People talk. The ability to see how people use and benefit from their product/service can have a huge positive impact on perceived value.

You may already know all this, and I’m repeating what is obvious to most people. The most obvious things are sometimes the hardest things to comprehend. I say this because value really is perceived value. The more everyone perceives it as valuable because of positive qualities that help solve problems, the more likely it will succeed. Sometimes we solve problems, but people cannot see the value yet because it’s not perceived as valuable yet.

This reminds me of a book I read that talked about Procter and Gamble problem with Febreze when it first came out. They had to find a way to make it valuable to the consumers and connect with them since sales were initially disappointing. They had a wonderful product that was odor eliminating spray with practical benefits. However, when they rebranded the marketing focus from odor elimination to tapping into deeper emotional triggers associated with cleanliness and freshness this transformed the product into a household staple. This is a great example of how perceived value and adopting the right strategies is key and sometimes just dangerous. If we don't analysis what we believe and why without strong values in place it can be dangerous.

Power in influencing Beliefs and Shaping Realities

The crux of the matter lies in our beliefs, driving us to reinforce them until influenced otherwise. Whether it's stock markets, houses, companies, or personal possessions like cars and jewelry, perceived value reigns supreme. While acknowledging the role of supply and demand, much of life's systems operate on perception. Remarkably, this aligns with biblical teachings, notably Hebrews 11:1&3 underscoring the significance of faith in shaping our worldviews and realities. Similarly, Hebrews 11:6 emphasizes the necessity of faith in propelling both individual endeavors and the functioning of society as a whole. It is impossible to please God without faith as it is impossible to make the world go around without faith.

Rethinking Value: From Labor to Margins

If you're familiar with Adam Smith, you'd recognize the labor theory of value (LTV), which posits that a good's value hinges on the labor invested in its production. This explains that the value of goods depends on the amount of labor that was used to produce them. Generally, it states that value of outputs is determined by the amount of inputs that were used to make them.

However, modern economics diverges from this notion, viewing value as a subjective assessment of a service or product's worth. This shift, akin to Copernicus's revolutionary ideas, challenges the traditional understanding of value. Instead, economists like Jevons, Walras, and Menger proposed the concept of value determined by the margin, based on the difference between total supply and the chosen unit of goods, considering time and place. This approach unveils the water-diamond paradox, demonstrating that a good's value lies not in its total utility but in its marginal utility.

This shift the concept of the margin is that we don’t consider all the benefits or costs of a given service/product, but now we consider the costs and benefits of that particular unit in question. For example, getting a college education. It would be wrong to argue that students should not take classes because the education is too valuable. Instead, the questions should be whether the value of the class is greater than the other alternatives. Therefore, in plain terms: the explanation above shows that the marginal benefits and costs of doing business are not related to the labor involved. Instead, it implies that the evaluation of these costs is done by the actor him/herself. The value of goods is not inherent in them or their physical properties. It is the judgment of men that the goods are important to their well-being. You saw this most recently in COVID lockdowns.

Unveiling the Dynamics of Perceptive Value

When you understand that a company can create value by employing the aforementioned strategies and distinguish itself from the competition, it will help you comprehend that the price a company charges drives everything. Our calculations of market, book, and enterprise values are all rooted in one fundamental concept: perceptive (subjective) value. Just consider the derivative market: Due to the intangible nature of financial derivatives, their value is assessed in two distinct ways. The first is the notional value, estimated at $558.5 trillion on the low end and potentially exceeding $1 quadrillion on the high end. This notional value represents the contract’s obligation, while the second is the gross market value, estimated at just $11.6 trillion. The derivative market epitomizes the essence of insanity. When you truly grasp the concept of value, price arbitrage becomes as familiar as identifying the back of your hand in a police lineup: EASY!

The Profound Human Quest for Recognition

One of my all-time favorite books that profoundly impacted my life is "How to Win Friends and Influence People" by Dale Carnegie. He plainly states that the deepest principle in human nature is the craving to be appreciated, which reflects the desire for a feeling of importance. This inherent need distinguishes mankind from animals. It's powerful to consider that a person who descends into insanity may find that their madness stems from a lack of importance that they were unable to attain in the realm of reality. This underscores the profound significance of feeling valued as humans. It's no wonder we're drawn to value—it's the very essence of what we crave and seek in our lives everywhere. With the exception of perhaps the most psychopathic individuals in the world (and even then, one might argue), we all desire value in our lives. Imagine how many people would change their life course if they were simply valued?

Conclusion: God sees your value:

In while we were still sinners Christ died for us: Romans 5:8 (NIV): "But God demonstrates his own love for us in this: While we were still sinners, Christ died for us." and made us special in his image. Psalm 139:13-14 (NIV): "For you created my inmost being; you knit me together in my mother’s womb. I praise you because I am fearfully and wonderfully made; your works are wonderful, I know that full well." Genesis 1:27 (NIV): "So God created mankind in his own image, in the image of God he created them; male and female he created them." An image that he was willing to give be best for his Son for us. John 3:16 (NIV): "For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life."