How to Evaluate New Ideas For Value?
It is easy to know the value of a product or service which is used often and is accepted as something worthy to pay for. Everyone agrees gold coins are valuable even if they don’t know the current gold rate in their currency. Everyone agrees Amazon Prime is a valuable service even though they might not know the exact market cap of Amazon.
Finding value is something everyone does in life, in different forms. Deciding which college to attend, which subject to study & which job to do are all about understanding the potential value these choices can create.
Finding value when it is raw, undiscovered and unaccepted is an art worth seeking.
The task of finding value gets more complicated if you are evaluating business ideas in their early phase that have not evolved into cash-generating organisms. The number of uncertainties for the idea to reach a stage of agreed value is many. And the path is often cut short. But ideas can be evaluated at their merit using some powerful mental models.
One such mental model is TIME.
The thesis behind the model is that the true cost of anything is the time spent to get it. And if the potential business idea is about giving back time to the consumer then it is worth exploring.
Let me elaborate —
It is often a misconception that dollars or rupees or bitcoin is the measure of value for any object or service. It is not.
Currency is the language of value, not the measure. Time is the true measure of value.
Think about what you need to buy a product or service of desire. Sure the payment needs to be made in dollars. But what you really need is a job where you spend time clocking the hours to get paid. The returns on the time you spent, would give you a choice to buy things that you desire.
You are converting your time into the product you need.
Money is the representation of the time you spent at work and the time you need to buy a product.
From Cornelius Vanderbilt to Elon Musk the greatest entrepreneurs have one thing in common. They all created products that gave back time to the consumer by reducing the true cost, TIME. They helped their customers get more stuff spending less time.
In this process of reducing the true cost at a massive scale, they have accumulated huge wealth for themselves as a side effect.
- Cornelius Vanderbilt reduced the cost to travel
- Andrew Carnegie reduced the price of steel
- Jeff Bezos reduced the cost to shop everything from soaps to laptops
- Elon Musk reduced the cost of launching a rocket
In case of Amazon, the customer got time back in all the following ways.
- Consumer doesn’t have to go to the store to buy a product, its delivered to their home with a click.
- Vendors get back their time by using Amazon’s fulfillment service.
- AWS gives back time for developers, who would have otherwise spent time spinning up new bare metal servers and monitoring them with custom solutions.
All this time added up for the customer and would now prefer to shop with amazon even at a premium(Amazon Prime). Because no one has extra time.
A successful idea when executed into existence will often give back time to its consumers by doing things in a way that were otherwise taking more of the customer time away.
This lens of time as the true cost of anything will change how you look at value-creating ideas. Sometimes it’s obvious how the idea gives back time to the consumer but sometimes it isn’t.
Next time you evaluate the worth of a new idea, business model or startup — remember the true value of anything is Time.
Time is not a measure of the continuum but it is of the value.
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