Learn more about strategy with this collection
Why happiness is the ultimate goal
The importance of creating value
How to create wealth in the modern era
Value explained
Value is the difference between a willingness to pay and a willingness to sell. This can be shown with a value stick.
- At the top, we have a willingness to pay.
- At the bottom, we have a willingness to sell.
The difference between the two is the value the company creates.
The value is split in three ways:
- Some go to customers. (The difference between willingness to pay and price.)
- Some go to employees (the difference between willingness to sell and compensation.)
- The middle wedge is the margin of the company.
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How to create more value
We can create more value in two ways.
- By increasing the willingness to pay. It describes the customers. It's the most a customer would ever pay for a product or service. Value can be created by focusing on "customer delight".
- By decreas...
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Ways to raise willingness to pay
- Product quality. The higher the quality, the more appealing the service, the higher the willingness to pay.
- Product complements. A compliment is a product or service that supports willingness to pay. For example, razor and razor blades, or printer an...
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Strategy is simple
A strategy is a plan to create value. Value for customers, value for employees, value for suppliers. It is planning for the future.
Strategy doesn't begin with a focus on profit. Financials, profitability, return on investor capital is the result of strategy. It is not the ...
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How to lower willingness to sell
Two ways to be more attractive in the market for talent:
- Pay more money. When you pay more money, you will be more competitive in the marketplace for talent.
- Make the job a better job. Create more attractive working conditions, for example, bet...
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More like this
What is Margin of Safety?
‘Margin of safety’ is the difference between a stock price and its intrinsic worth, or value.
So if a stock is trading at $70 in the market, and you calculate the company’s intrinsic value as $100, you have a margin of safety of $30 (100 minus 70). In other terms, the sto...
High Value at a Low Price
- Price = what you pay.
- Value = what you get.
You lose money when the price you pay does not match the value you're getting. For example, when you're paying high interest on credit card debt or spending on stuff you hardly use.
...2. Value Determines Price And Costs Are A Choice
With value being in the eyes (and experience) of the consumer, the price they are asked to pay must be (much) lower. The entrepreneur’s job is to figure out at what price their product is attractive, and then choose a cost structure that allows for profit. In other words, the price is a
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