Understanding the idea of value in making money

October 10, 2013

Seattle, USA

First, there are many different ways to make money, but all have the same underlying theme of importance. This essay is about that theme. Understanding it is the source of money-generating ideas. In addition, this essay provides certain examples to demonstrate how this theme works. Furthermore, this is not a finance essay or any college-type of essay. Because of that, it will stay away from using big words or any jargon that only cloud common sense, and clarity. It will not address the morality or justification of making money.  Finally, this essay will not tell you how to get rich with some scheme as if getting rich was some magic gimmick. In contrast, it will tell you how to organize your thoughts and hopefully understand how to make money.

To kick off, let’s get the wrong ideas out of the way. People do not make money because they are intelligent. They do not make money because they have a college degree or because they are tall or because they are talented in some freakish nature. And my favorite, people do not make money because they are following their passion. That is just nonsensical thinking. What we see are just symptoms. And they are many of these symptoms. There is fundamental reason and straight up logic issue when we confuse a symptom from a cause. Yes, in many cases, people that are intelligent make money, and people that have a college degree can end up being CEOs or tall people can play basketball and make money. But that’s just half of the story. Similar people with exact traits (college degree, intelligent, tall, voice) do not make a penny. So saying “following your passions will make you money” is utterly stupid. It is true that some people can make money while following their passions (e.g. singers), while others don’t make money following their passions (e.g. some hipster selling tomatoes in Portland). And I am all for passion, you must believe me on that. But why is that? By the rule of logic, there isn’t an “if and then” condition here. If life was that simple, then every 4.0 student would be guaranteed a fat paycheck. To make money, whatever you do or service you provide has to align with the theme of value.

For one to make money, he/she should provide an ENTITY that is PERCEIVED to be of VALUE by an ENOUGH number of people.

The above statement deserves to be in a paragraph of its own. It’s that simple. Read it aloud and reread it again. While you are still thinking, allow me to explain the history of money. The concept of money, or papers or coins that some government prints is a fairly modern one. It is just a means of organization to enable day to day commerce. And it is one that is soon to be phased out. Have you ever heard of Bitcoins? If not, use your favorite search engine to search what this new online currency is. The way we will decide to measure value or exchange valuable entities will change from time to time. What will not change is the theme underlying obtaining wealth or money or bitcoins or whatever we will call it in the future. The literal meaning of money has clouded our understanding of value. Back when people used to barter trade, they knew exactly that to make a living, or to have a lifestyle that you need, one had to offer something; something of value! Something that would be perceived to be of value by other people involved in the barter trade. And this is where you want to start; you want to understand that theme, and then use it to generate money.

For one to make money, he/she should provide an entity that is perceived to be of value by an enough number of people. I have highlighted some words that I would like to explain further. What is an entity? In our modern world, an entity can vary from providing service, singing as an entertainment service, playing sports, building computers, building houses, blogging, or commenting on some radio show, or some fantasy- fake football league and so many other things that we do for a living now. This is very easy to grasp, whatever you think can make you money is an entity is some way. The key to making money is that whatever you do should be perceived to be of value. Oh boy, how important is that word perceived! We all agree that some things of value make money, for example, being a heart surgeon. But there is a host of other things of no inherent value that will make a lot of money. So perception matters. It is really the cornerstone. For example, there is some website, I think we all know it, called Facebook, that is valued over 1 Billion. Really? It does not really provide more value than a website for exercising. I guarantee that if you spend more time on an exercise website than Facebook, you are more likely to have a healthier lifestyle. However, the perception of Facebook’s value makes it worth a billion. The number of people that hold this perception is overwhelming that whether you like it or not this website has been validated and the owners will reap the benefits of creating that perception.  This is the very same concept about clothing. Clothes and stores that are highly perceived cost money than those that are not. So if you want to be a fashion designer, your clothes should possess high value in perception. Consider another example, teachers get paid pennies while CEOs make a lot of money. This is because the perception of value for CEOs is off the charts with a lot of people. If you knew exactly what a CEO actually does, you would know that any high school kid can run a company if surrounded by smart people. Maybe that is why they don’t want you to know about it. My point is that the perception of value is so important.  In other words, people pay for things that they perceive to be of value, even if in reality they are not of any inherent value. In fact, if tomorrow for some godly reason, everyone perceives oranges to be so valuable, and few fat cats gained control of every orange farm, I can guarantee that the price of oranges will be higher than that of gold. I do not know what the magic number is, but the bottom line is that if a large enough number of people are backing you up, it does not matter if you are right or wrong (in the context of followers), you will make money because of their perception. Humans are social animals. We feed on each other’s perception. 

In conclusion, I’m not saying that you should not follow your passion, or you should not pursue your degree, or you should not use your talents, all I am saying is that to make money they ought to be a perception of value to what you are doing. Think about it, what makes one job pay more than the other? In reality, it’s not the difficulty of the job but the perception of value. In fact, there is empirical evidence that suggests that as your paycheck goes up, you work less. Why? Because people perceive you to be more important. Have you ever wondered why people go to Harvard Business School?  Seriously, the answer to “1 + 1”, is the same at Harvard as it is at some state school. It is important to understand that some people will make money providing real value and some will make even more providing a perception of value. Like I always told my friends in college, If 1000 people say you are wrong, even if you are right, it’s going to be hard for you to live in a country of those 1000 people. I would love to hear of anyone who made a lot of money despite everyone thinking that their entity was pathetic. People may know deep inside that their product is bad, but the product will still have a perception of value. I would even go further to say that people that get promotions at work or in life in general holds a perception of importance from their colleagues.

So next time when you think of making money, remember it’s all about the perception of value by an enough number of people. For one to make money, he/she should provide an ENTITY that is PERCEIVED to be of VALUE by an ENOUGH number of people. In addition, this thought process is not to teach you to be gimmicky, but it is indeed the best way to start thinking about your ideas and how to materialize them. Hopefully, you can achieve both value and a good perception of value in your endeavors.

Good luck!