How many times have people told you that you should buy quality things? Many times. There is nothing wrong with that. We all want quality in our lives. The problem is not the quality, but bounding the quality. Why? Quality is an illusion which cannot be left unbounded for it to make sense.
You have a small startup and you want to have the best stationery (yes quality papers) to send your business introductory letters. The imagination is that the best stationery will do the magic. That itself is not the problem. The problem is that you have not figured out that you could save money on the stationery and still get the same value.
Why should you pay for a laptop with 100GB of hard disk, when before you get to 40GB, the laptop has been decommissioned. Technically, you have simply wasted 60GB and the extra money spent for it. You rarely take the old disk into a new one. A new laptop will come with its own disk.
We waste so much money in the world. In the illusion of value, swayed by marketing, we make stupid decisions. The higher the price of wine, the better the taste, even though the makers of the win pour the same liquid and assign different names at different pricing points. We congregate and waste money.
You want to buy prescription glasses where one company controls more than “20 brands”. You happily select the trendy one, which is always the most expensive. But behind it is the same product priced at different points.
When celebrities do this, it is not a problem. But when entrepreneurs do, I feel bad.
Entrepreneurs Need to Create Value
Creating value is not just in bringing more revenue. It can also come in the way you spend your investors’ money. For all the things Apple plans to do, on display, I know there is a physical limit, on the human eyes, after which improvement in resolution on the smartphone will not have any material impact.
Yes, most human eyes can do a resolution of about 180 dpi at 20-30 inches. So, if someone comes to you with 300 dpi with all the marketing, you need to understand that it makes no practical sense. As they increase the resolution in the smartphones, we all think we can get better value. Have you asked yourself the maximum possible resolution a human retina can resolve?
The fact is this: it is highly unlikely that any human can resolve the difference between 2160p and 4320p in a 4.3 inch smartphone. It is impossible for man to achieve that feat. But we are ready to pay and waste $500 extra for something that adds no practical value.
Yes, I have also heard people that can listen better with a $250 musical system cable. Yes, they are from the outer space. They can hear and listen better with better cables. Nonsense. You see them throw away $230 for something that is naturally indistinguishable by the human cochlear.
Sure, there are improvements but they are MARGINAL for the money we pay for them. Thinking of the Return on Capital Expenditure (ROCE), and Return on Investments (ROI) must not be far away.
My point is that quality must not always be associated with price for the best derivable value. If you focus on the price of the item, you will miss the whole point. iPhone will continue to up the specs for years, even when the value is marginal. Yet, we will continue to spend that money. When we go to buy cars, we check at Honda and Toyota even though we know there are Lexus and Mercedes Benz. We want to keep that extra saving to deal with other things in life.
Here, we are thinking of value, bench-marking the money spent to the intrinsic value of that car. But when we come to electronics and IT, we lose that discipline. Marketing is to be blamed. In America, you do not need the fastest speed from Comcast or Verizon in your home because the average speed is just fine. Yet, they keep asking us to upgrade, spending and wasting money on things that offer only marginal value.
Do not fall for the marketing trap: be disciplined on the things that matter. That is one way your startup funding will go a long way. In all practical sense, a $2400 laptop is a waste of money and yet entrepreneurs spend that kind of money when a $700 one will do. That does not mean there is no technical difference, but the saving could have helped you add an intern to support the growth team.
Earning value through saving makes an entrepreneur an earned value entrepreneur, just as free media is earned media.