2012 Series 004 – Respect

Respect here means respect for human and the human nature, which are:

  • Man will always seek value
  • The definition of value is different for each man

And that respect is important because the person, company, or organization that respects the human nature will be successful.

All successful ventures (e.g: government, corporations, school clubs) are successful because they are filled with engaged and motivated humans. Computer and machines, so far, provides mere leverage to what man do.

So, if we want to have a good game, we need to give reasons for others to play, and to play well.

This means the disclipine to always think, as we create a game, “what’s in it for him?” and “what’s in for her?”. Not just “what’s in it for me?”.

This practice of always thinking “what’s in it for the other guy” exist in all great companies and communities. The mindset exist, but not always visible because it has been a way of life for the organization.

For example:

The internet. Although it was started by a unit of the government, the internet we see today is supported by a massive and expensive globe spanning infrastructure that is paid by its participants (you and me included), yet the internet has no “owner”, no central governing body created from day 1 to define and control all aspects of the internet. The standards that allow the internet to exist were developed by “consortiums”.

Why would so many people pay so much money for something that has no clear owner? In a world obsessed with property and rights, the internet looks like a very fragile technology.

Because the internet is so beneficial to all its participants. We use it to communicate, to find information, to educate, and to entertain ourselves, some do it to advertise their product/services, some use it to lower their cost to service customers.

It doesn’t mean that everyone thinks that internet is beneficial for him/her. Some sort of natural selection will occur and people who don’t see the benefit of the internet will opt out.

But it’s just that the internet’s benefit is so big that so many people can derive value from it, continuously, that the internet becomes this ubiquitous presence that we are starting to take for granted.

We often need to remind ourselves, that progress is not automatic. Time is automatic, but not progress.

When the internet started, some other technology also emerges or even precedes the internet, yet few has the far reaching and intense impact of the internet.

Think of any large and successful organization that you admire, and you will find that the organization is such because it has discovered how it, or a venture it created, can give attractive and sustainable incentives for all the participants.

On the other hand, the willingness to think “what’s in it for everyone involve” is rare in organization that stays small, in revenue or impact.

A trading company that deals in writing tools provided so-so pricing, as competitor found ways to lower their cost of goods and transfer that benefit to the customers, the trading’s company customer slowly reduce their business with the company. Furthermore, some partners in the company don’t feel that they were being treated fairly and left the company, creating gaps at key positions. The trading company exist, meagerly, for some time, but it finally has to close shop.

The practice of only thinking “what’s in it for me” is also prevalent and equally hidden. Prevalent because it’s easy, hidden because those who can only think “what’s in it for me” could not possibly make a big impact.

—-

From the example on the trading company we also see another aspect of value. That value is subjective.

Man is rational in the sense that he will always seek to maximize value

Man is irrational in the sense that the definition of “value” is different for each man

Money is important, but it’s not everything to man. If money is everything to man, then man will never spend money.

What does that mean? We can observe what man buy and understand what is value for man.

Sustenance is important, but so is comfort, self-esteem, physical safety, financial safety, pride, status. A wide variety of what man would consider valuable.

But on the flip side, we can think about what man values and think what man would buy.

“Buy” not just as in exchanging money for goods and services, but also “buy” as in being an active and continuous participant of a community.

This is what successful ventures do, not only they really care about “what’s in it for everybody in this transaction”, but they also care enough to identify the value driver for the different party and work on that. So each party enjoys the same amount of total value, but the specific components and the amount of each component are different.

Many times, there is an asymmetry on the components of value among the different party. For example: manufacturers of luxury good receives value in the form money from their customers; the retailers receive value in the form of less money, but with less effort; and the customers? What do they receive? Money? No, some customers decides that he receives a huge amount of functional value, some customers decide that she receives value in the form of increased self-esteem, some customer decide that he receives value in the form of envious looks from others.

The customer never receives money, he receives other form of value, the form of value the customer receives is subjective. But rest assured, unless the customer feels that the amount of value in whatever form he receives is equal to the amount of value of money he spend, the seller won’t last long.

Recently, a very beautiful Ferrari was sold for several millions dollar. Some people would find the transaction confusing, why pay so much for a car? But when we understand the rational and irrational aspect of value, what value is money for the Ferrari buyer and what value the car is for the same person, we find that the transaction is completely rational, for the buyer.

In the asymmetry on the definition of value, businesses make money.

In the symmetry on the amount of value, businesses stay in business.

When a business fails to respect both man’s desire to seek value and that the definition of value is different for each man, the business will stay mediocre or slowly dies.

When a business respects both, and has the humility to keep asking how the value it delivers stay relevant, the business will be great and long lasting.

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