Cost vs. value: the $71,000 conference that’s a bargain

June 29th, 2011 - 11 Comments

The vast majority of Americans are fixated on cost, not value.

They complain about how much something costs, rather than understanding what value it could provide — whether financially, emotionally, or otherwise.

I’ve written about this before in my post on why I bought a new car, a decision commonly dismissed without any research or perspective. In that post, I argue that value (what you get) is much more important than cost (what you pay.)

Earlier this year, I discovered an extreme example that makes the distinction even clearer. Business Insider wrote about how huge corporations are spending $71,000 per year to attend the World Economic Forum’s annual meeting in Davos, Switzerland (pictured above.)

Predictably, most people reacted to this with shock, horror, and even disgust. “$71K for a conference? That’s crazy!” But like many of the people who criticized me for buying a new car, these folks were focused solely on the COST, while totally ignoring the VALUE.

Everyone, that is, except the people who actually attend the conference. They talked about what they were getting for their money:

“…because Davos is now primarily a huge, high-level business conference, in which senior executives from the world’s largest companies take advantage of their physical proximity to meet in person with partners and clients and would-be clients–meetings that can end up being vastly more valuable than the price of admission.”

You know what? People with millions of dollars are pretty smart. So instead of yelling how stupid wealthy people are to spend money on something, perhaps a better approach is to say, “Hmm….what do they know that I don’t? Why would they be doing that?” And try to understand, rather than demean and degrade.

That’s why everyone who flew to Davos this year will be back next year and for many years to come, no matter how high the price is.

It’s easy to look at a high number like $71,000 (or even $500-$1,000) and proclaim how “outrageous” it is. But it takes a little more insight to think about what that seemingly outrageous amount of money is BUYING.

I see this with my Earn1K course all the time. Each time I open it, a number of readers scoff at the price and invent all sorts of reasons why they would never pay it. (The excuses are so predictable that we actually have a scored taxonomy of excuses, as we’ve seen thousands of them.) Meanwhile, a smaller number of smart readers consider the price in relation to what Earn1K could help them DO.

DUMB PERSON EXAMPLE: “OMG…why would you pay that much to earn $1,000?? I have an idea…give me $1,001 and I’ll give you $1,000…hahaha ahaha aahaha.”

SMART PERSON: “Hmm…if this course teaches me the specific steps to earn $1,000/month on the side, I could earn $1k/mo for the rest of my life. Or maybe more…”

One of my students, Jackie, turned her Earn1K investment into $80,000 in new side income. Others have achieved incredible results. She saw the cost of the course not as money down the drain, but as a shorter learning curve (and faster financial rewards.) A classic example of spending money to make money.

The point isn’t that you MUST spend money to get value, or that spending money GUARANTEES you will get value. Rather, I just want you to be open to the idea that it can and often does make sense to pay for value — and that cost is not the only concern.

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  • How to identify and narrow down a profitable idea
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Image credit: Problemkind
Image credit: AMagill

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11 Comments

 

Comments

  1. The best example I have of cost versus value, is how much people will pay for the opportunity to have lunch with Warren Buffet. This most recent lunch auction went for $2.63 MILLION. That is a crazy amount of money, but I imagine that people derive a good bit more value from a personal conversation with Mr. Buffet than even that amount of money is worth. Think about how much money you could have if you had met with Mr. Buffet thirty years ago and listened to his investing advice! Suddenly $2.63 million does not seem like that much money at all. The value beats the cost in that scenario every time.

  2. I’m one of the LOSERS you often talk about who never seems to have the sticking power to make it happen…but I did send this post on two a few friends who hopefully will do as I say and not as I do. I valued your last 30-day course, even though I didn’t stick with it. I got a ton of VALUE at NO COST.

  3. I’m chomping at the bit to start your Earn 1K course, but I have some stupidity to finish getting rid of first. (read: credit card debt.) My hubby and I are blasting away at that and we should be free in a 10-12 months. I’ve enjoyed your book and your blog – especially your writing style. I like the no-sugar-coating approach. While we’re working on debt, I’m not sitting idle however. I’m working on ideas for side income and also looking into taking the necessary classes to attain the knowledge I will need. (I’m thinking of doing bookkeeping for the trade industries from home. I have contacts in the industry and I have been working for a plumbing contractor since I was 15.) The goal is, by the time we can take advantage of your course, I will have a preliminary framework in place to ramp up quickly. I’m so glad I can finally stop being a LOSER and start being a winner!

  4. Oh, and the cost of your course is going to repay itself exponentially. I would pay more for what you offer than what you ask because, as you say, the VALUE is so high.

  5. Hey Ramit,

    I live in Boston now, which is the most expensive city I’ve ever lived in to date. I live with absolutely terrible housemates and pay $600 for rent, but am moving into a studio for $975 in August. It’s more than I’ve ever paid before and it’s going to be tight, but I can do it, and happily, because of the value I find in living by myself.

    This is what I tell everyone who wonders why I would pay that much. Same reason I told my brother I was willing to pay a realtor: to take the hassle out of the search and make it as easy as possible.

  6. Hidden (or not-so-hidden) problem that crops up with this reasoning:

    Most people know on some subconscious level that their ability to DISCERN value is fucked. Between the white noise of personal insecurities and plain dumb fear, lack of media literacy when it comes to gauging marketing and advertising messages, atrophied critical thinking skills, risk aversion, etc., a lot of people wouldn’t know how to spot ‘value’ if it walked up and punched them in the face.

    Thinking about value over cost is an awesome approach. But value’s a lot harder to figure out than cost, which a big-ass black-and-white number that requires no thinking at all. (no active OR passive barriers to figuring out “what this is” when it comes to cost. Look at the number, and go HOLY SHIT NO.) And we haven’t even gotten into ‘value’ as a matter of personal taste.

    I guess figuring out value requires a certain amount of skill in projecting yourself/a purchase/whatever into the future. It’s sort of woo-woo visualization/imagination stuff crossed with cold hard facts, economics and lots of logged experience. Most people want ‘The Secret’ OR an Excel spreadsheet with real proof, not the challenge of meshing the two.

    So what are the questions you start with when trying to figure out the value of something so you can weigh it against the cost?

  7. Cost vs Value,
    We exchange our expensive lifestyle and downgraded so that we could travel more.
    To do that, my family, hubby and 3 kids had to leave our picturesque suburban home just south of San Francisco, it cut our expenses enormously and we lived and still do live going on a year now.
    Now we’re panning a trip to Europe for a year. starting our own side hustle and experiencing life to the fullest. We don’t have new fangled things like we used to, the new cars, boats, gucci glasses are all gone

    Some say we are crazy trading our life for a nomadic one but we gladly exchange experiences for physical things at the moment. what we consider valuable today might be different tomorrow. But we love living our dreams and passions instead of driving in rush hour commute on highway 101 in California everday..
    That’s value for me..I’m just sayin…

  8. I truly enjoyed reading your book on eliminating debt. I just started my own true life debt elimination project and would love to share your book and blogs with my readers. I’m hoping to help, not only myself, but people who need information and guidance eliminating their debts. I read your book which will appeal to a lot of my readers. If you don’t mind, I will be using some of your info from your book to help my readers. My blogsite: ‘CarlitosWayOutOfDebt.blogspot.com’. I will share your link and the tiltle of your book on my blog. Thanks again and keep up the good work.

    Sincerely,

    Carlito

  9. Purchase decisions are made as follows:
    1. If the cost to you is outweighed by the benefit to me, I’ll gladly pay it.
    2. If it is not, I won’t.
    Note, I decide the answers based on my own situation. You do not have any input into it. That’s human nature, Mr. Sethi. I will read your books, as they cost $9.99 on my kindle. I gleaned some useful insight out of them as well. However, they were so comprehensive, that I don’t see any further benefit that meeting you in person would bring me.

    In other words, you could buy the ticket for me and I still wouldn’t take your Earn1K seminar.

    • Appreciate your comment, but the idea that you are not influenced by outside factors (advertising, psychology, situational influence) is simply incorrect. I’ve written about this extensively, and in fact the idea of influence (for pro-social behavioral change) is the backbone of IWT.