Don’t confuse cost and value

by | Oct 6, 2021 | Life Planning | 0 comments

It’s easy to confuse costs and value. But cost is what you pay and value is what you get. That’s a significant difference…


My wife and I had an interesting discussion the other day. She wanted to invite her whole department (the 17 people she manages) for dinner after the annual department meeting, but the company didn’t provide any funding for dinner. So we were discussing if she should pay for the dinner herself. The projected costs were clear: around 60 francs per person or 1,000 francs total.

My first gut feeling was: « 1,000 francs? Are you crazy? »

For the longest time, I’ve been focusing on what things costs. Because, the less you spend, the less dependent on your job you are. See, I’ve always wanted to be free to do what I wanted. That includes being able to quit a job. The problem with spending everything you earn is that you have to maintain that level of income. So by lowering my spending level, I would make myself less dependent of my job. I could switch to a lower paying job and still be OK.

But I now believe that focusing on costs is the wrong mindset.

Focusing on what something costs is called a scarcity mindset. It’s useful when resources are extremely limited. It’s good for surviving but it’s terrible for thriving because you never take any risk and therefore never get any reward.

An abundance mindset focuses on the potential value that something can bring. Not only monetary value by the way, but also: quality of life, time and effort, health, etc.

One might ask: Is it better to buy a 200 francs mattress or a 2,000 francs mattress? Economically speaking, the 200 francs mattress sounds very appealing. But if the 2000 francs mattress can prevent you from getting back pain at age 30, then you might want to choose the 2,000 francs mattress. The thing is: you never know in advance, it’s all a matter of potential. And it’s not always that the most expensive option is the best. But it’s wrong to not consider the potential added value a more expensive product can bring.

Trying to apply an abundance mindset to the dinner question means thinking of the value it could create: everyone having a good time. Relationships being built. That good atmosphere would transfer into a friendlier work environment. How many crises will be avoided? How many nasty emails won’t get sent because people had the time to get to know each other? Is 1,000 francs expensive for that?

Even on the monetary side: if just two or three employees decided, because of that dinner, that my wife is a wonderful boss and sent a email to the big bosses to let them know, that might be enough for her to get an additional 0.5% raise at the end of the year. Bam, pay back after just more one year. Maybe, because of those emails, she will be considered more seriously for the next promotion. This dinner has tremedous potential value.

Another domain this mentality applies is for education. I used to think: Why should I pay someone to teach me anything if I can just google it and learn it myself?

Can you feel the arrogance?

This mindset assumes that no one has anything to teach me that I couldn’t learn myself. But it also assumes that I am aware of everything I still have to learn!

See, even if I was so smart that I could learn everything perfectly from a text book (believe me, I wish that was the case…), my knowledge would still be restricted by what I am searching for.

In some areas, we know what we don’t know. For instance, if I want to watch the new James Bond movie in a theatre and want to know when is the next screening, I might Google something like « James Bond Zürich movie program » and it’s very likely that I would find the information rather quickly. But if the studio had decided to post the movie on YouTube for free (one can dream…), my original Google search would not return that information. I could stubble upon that information had I googled « Tell me everything I should know about the new James Bond movie » but that query might return 100 irrelevant information, from the name of screenwriter to the list of goofs and from the location of the filming to the IMDB critics.

We often don’t know what we don’t know. In the field of risk analysis (my day job), that’s a big topic. But it translates to everything in life. When we feel stuck, that’s often because we don’t know what we don’t know. We feel stuck because we don’t even know what to ask or what to search for. And that’s where we reach the limits of Google.

Contrary to popular belief, the main goal of education is not to provide you with an answer. The main goal of education is to help you formulate the question. Once the question is formulated, the answer is often relatively easy to find. Education makes you aware of what you don’t know, so you can search the answer. Otherwise, you might not even be looking.

A personal example to illustrate: for 4 years, I paid 150 francs in rent in excess to what I should have been paying. Why? Because I didn’t know I could ask for a rent reduction. Why didn’t I google « how to pay less rent in Switzerland » ? Because it simply didn’t occur to me that there was a way to pay less rent, so why would I be looking for something which doesn’t exist?

So how can you become aware of what you don’t know? Several options, not mutually exclusive:

  • Ask Google broad open questions. That’s like casting a wide net: you might get a lot irrelevant infos but there might be nuggets of gold hidden in the dirt.
  • Wander around. It’s often by chance that we discover new knowledge. Read magazines and newspapers. Set your playlist on random. Share your knowledge with people with the hope that they might share it too.
  • Ask an expert to condense all the relevant infos for you. That’s the quickest way to go about it, but it’s also the most expensive.

To be completely honest, it feels like I’m still very much in the scarcity mindset. It’s hard for me to think of potential value when the costs are so obvious and guaranteed. But I’m under treatment and this website is part of the cure 🙂

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