Thoughts on the Value of Value

A person who can make something that one million people can use is much more valuable than a person who can make something only one person can use.

In most cases, you want the first type of person on your team, rather than the second because you’ll get the most bang for your buck. It would take a million of the second type of person to make up for the first’s work, but by then, your operating expenses will largely outweigh your revenues. If you don’t treat the first person well and cultivate their talents, they will most likely leave the company.

Economies of scale is why many businesses thrive, but in a business where you’re not making products meant to be mass produced, you can’t benefit from economies of scale. In our business, we provide services, which means we don’t have the ability to do something like bulk discounting. For example, if you’re selling a couch for $50, you can drop the price to $40 when someone is buying one thousand of them. The price drop doesn’t hurt you because at the end of the day, the revenue from selling one thousand couches will be far greater than the revenue from one. This doesn’t work when you’re a service provider. You can’t embed a consultant at a rate of $35/hr, and then embed one thousand consultants at $20/hr, because people aren’t products that get cheaper as you ‘get’ more. Each of them has value that can’t be measured by their salary or hourly rates.

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