comparative advantage – Sonya Ellen Mann

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When & Why to Pay for Free Information

Posted on May 13, 2016August 23, 2016 by Sonya Mann

It’s okay to pay for stuff that you could have gotten for free. Sometimes forking over your hard-earned cash is actually the optimal choice! It can save you time and frustration. The people who pay for freely available goods are people who understand the power of cost-benefit analysis. These people are business thinkers who take opportunity costs seriously. They always leverage comparative advantage.

Basically, the reason to pay for free information is the same reason why you might buy a sandwich from the deli instead of making your own. Buying the prepackaged version is easier, more convenient, and often more fun. If you’re low on time but have plenty of money — or at least enough money for the purchase you’re considering — then buying a ready-to-eat sandwich (or an instructional ebook, or a software service, etc) actually makes more sense than spending ten minutes slicing the cheese yourself.

Besides, someone who specializes in making pastrami sandwiches (or researching productivity techniques, or building time-tracking software) is likely better at it than you are. Paying them will not only save you time, it will also get you a better result than trying to roll your own solution.

Here are three things that I personally purchased in the past couple of months that I could have gotten for free:

$39.95 for an https certificate and installation thereof from A Small Orange. I could have spent a few hours figuring out Let’s Encrypt instead.
$79.98 for tax services from H&R Block. Is it possible to file your taxes without using software like this? Totally. Is it frustrating? Yes, to the extent that I would cry.
Any and all nonfiction books. The information that I want is out there on the internet, but it would take a lot of time and energy to assemble it into a coherent, readable format. Instead of skimming all of Brian Krebs’ articles about spam, I simply bought his book.

Amy Hoy addressed this phenomenon in a 2013 blog post:

When it comes to services in the professional sphere (as well some consumer goods), people will pay for three advantages:

more free time / less wasted time
more intellectual resources / less frustration
more money / fewer costs

The through-line here is efficiency. People will buy what you’re selling if you can help them get the same inputs to generate better or increased outputs. If you execute well enough, they’ll love you for taking their money!

So, in closing, why pay for free information? Because your time and energy are valuable. You deserve high-quality results.

The How & Why of Premium Pricing: Anxiety Included for No Extra Charge!

Posted on April 26, 2016August 23, 2016 by Sonya Mann

Update: I decided to cut the scope of the workbook and hence cut the price as well, but the reasoning remains the same.

“There’s one easy way to find out what customers think about prices. By selling them things.” — Tom Whitwell

I’m reaching the stage where I ask people to hand over their money. Frankly, it’s terrifying. What if I fail at the very thing I’m trying to teach? A big part of me wants to pretend that I’m sure the launch will be a slam dunk, that I’m abso-freaking-lutely confident 💪🏀👍 But a bigger part of me wants to be honest about my thought process and my anxieties.

Javon McCrea dunking. Photo by Chad Cooper.

Value > Dollars

When it officially launches, Product Communication Basics will cost $34.99. That’s definitely more expensive than the average ebook. Heck, Amazon wants to cap prices at $9.99! And yet I think $34.99 is justified; PCB is more of a guided do-it-yourself consulting session than it is a standard book. Like I wrote on the landing page:

“Consider this: if you hired an excellent copywriter, you’d end up paying them $50 per hour at the very least, and you’d spend most of that time just trying to communicate your vision. How much is your time worth?”

I chose this framing for a very specific reason. Price is 100% a function of perceived value. The time, effort, and cost of materials are close to irrelevant — it’s all about what the product will do for the customer. Bootstrapping guru Amy Hoy quips, “Don’t get snared into a price conversation. Turn it into a value investigation, instead.”

If people anchor on how much hiring a consultant costs — if they perceive the value of Product Communication Basics in those terms — hopefully they won’t worry about paying $20 more than usual for an ebook. My guess is that the kind of person I want to sell to will understand my point and find it compelling. Hoy has also written that people who pay money for things “value their time more than their money.” Why? Because they understand comparative advantage and opportunity cost.

If you’re a high-impact professional, especially an entrepreneur, then spending your time compiling a bunch of information into a useful format is not worth it, and your end result won’t be on par with what domain experts can offer. Any hours you might spend researching are hours that you could have spent improving your own product, which has an order of magnitude greater effect in terms of 1) saving your future time and 2) multiplying your future funds.

Patrick McKenzie, a former bootstrapper who is now CEO of Starfighter, similarly exhorts people building products to value their time highly:

“Instead of [trying to do more with the limited time you have], build time assets: things which will save you time in the future. Code that actually does something useful is a very simple time asset for programmers to understand: you write it once today, then you can execute it tomorrow and every other day, saving you the effort of doing manually whatever it was the code does. Code is far from the only time asset, though: systems and processes for doing your work more efficiently, marketing which scales disproportionate to your time, documentation which answers customers’ questions before they ask you, all of these things are assets.” (Emphasis in original.)

An effective product pitch is a great example of a marketing asset that scales — once you’ve found the essence of your value proposition, you can and should use it again and again on your website, in emails, in advertising, etc. Do the labor once and reap the rewards continually.

Looking Forward

I think I’ve made a solid argument that my potential customers will save money if they buy from me, because otherwise they’d have to pay a copywriter much more or waste their own time figuring out an approach. I’ve also made the argument that my customers will earn more money in the first place.

But… I’m still nervous. What if the people in search of marketing resources don’t agree with my reasoning? What if no one orders the book? Realistically, in that case I’ll lower the price and try again. I’m a big believer in ~markets~ and I’ll listen to the signals as they come.

Another point from Amy Hoy: “You’re afraid of asking for money, so you think the thing to do is to ask for only a little. It feels safer.” Welp, she’s right. In the grand scheme of things, $34.99 is not a huge amount of money. You can drop that much on brunch or jeans from Target. And yet I’m still scared that it will seem like a ludicrous ask.

What are you waiting for? Assuage my fears and go buy Product Communication Basics!

Middlemen Are Crucial: Open-Source Software & Economic Growth

Posted on March 11, 2016 by Sonya Mann

Disclaimer: I’m open to disagreement that is expressed respectfully. If you have an argument against my interpretation, please share it. (Of course, I can’t guarantee that I’ll agree with your critique.)

I want to elaborate on a conversation about the economics of code from Hacker News. User wrong_variable said:

“Programmers get no respect — and its our own fault.
The computing industry is directly responsible for 1/3 of global GDP in 2016.
Its time that this is reflected in our paycheck.”

Leaving aside the assertion that programmers aren’t paid well, I responded:

“Keep in mind that code is not useful or economically impactful without business and community management surrounding it.”

User overgard chimed in:

“I think that’s demonstrably untrue — open source and free software has had a massive economic and cultural impact with precious little of that originating from the involvement of business people or community leaders. (For instance, the GNU project or the linux kernel — not to mention how many commercial products must use zlib). Business support almost always comes after the value has been created.”

I disagree. There are two threads here that I want to tease out:

Writing and testing code on the scale of a project like Linux or Ruby requires a community. Some people in the community, even if they are adept programmers, will be needed to support the project in other ways.
Once a program / framework / whatever is ready, it can’t promote economic growth unless it’s deployed by a business. In other words, software for its own sake is economically pointless. (By the same principle, outside of the open-source world, managers, salespeople, and marketers exist for a reason.)

People who make things tend to underestimate the importance of middlemen. I mean “middlemen” broadly — anyone in between production and consumption. In this case, programmers are production and regular end-users are consumption. However, before any product can be consumed, you need distribution.

Prior to the internet, distribution was limited by physical location and thus geographically specific. Particular companies controlled particular regions; they maintained relationships with individual stores. On the internet this dynamic is fundamentally different because the cost of distribution is negligible. Digital goods are effectively free to replicate, meaning there is no marginal cost. (Ben Thompson’s “Aggregation Theory” describes the consequences: value comes from being the layer that users interact with, which compels suppliers or advertisers to use your platform.)

When it comes to software, distribution is simple but difficult. It consists of two crucial functions:

Making people aware of the software’s existence.
Convincing them to use it by providing a compelling value proposition.

For the most part, those things don’t happen spontaneously. You need evangelists (as much as I hate that word). And those evangelists need incentives. The creators and proponents of open-source software are usually not paid directly for their labor (there are exceptions) but they are rewarded with social capital that can be leveraged into professional remuneration. You need people to write documentation and blog posts, organize / host meetups, and generally nurture the project’s ecosystem. This is the “community” part of the “business and community management” that I cited as being vital.

Even more saliently, free and open-source software projects only have an economic impact when businesses exploit comparative advantage by using them. For example, Super Body Fuel’s online store was made with WooCommerce, which sits on top of WordPress. The owners didn’t have to hire a developer to build a site for them. Using PayPal [1] as their payment processor also lowered the up-front cost and hassle.

Because of this, businesses like Super Body Fuel need less capital to get started. The owners can spend more time focusing on factors that differentiate their business (in SBF’s case, formulating a healthier and less expensive competitor to Soylent). In terms of investment and payoff, growing their business is a higher-return activity than setting it up in the first place. Efficiency increases, which result from technological innovation, are the only impetus of non-zero-sum economic activity. In a word, growth.

Of course, none of this could happen if the Super Body Fuel owners didn’t know about WordPress and WooCommerce, or if they didn’t have access to the intermediary tools necessarily to deploy them. Some amount of information seeps around without anyone making an effort, but awareness and resources that will reach thousands of people almost always require intentional promotion. Thus, coding is not enough to propel the open-source world. Other types of labor are needed to keep attracting more contributors and users.

[1] Like every large software company, PayPal both uses and develops OSS. For example: OpenStack and Linux.

Emotional Labor as Comparative Advantage?

Posted on December 19, 2015June 19, 2016 by Sonya Mann

Emotional labor means putting up with other people. Enduring them, soothing them, and easing social relationships. This work often defaults to women, and jobs that rely on emotional labor are heavily feminized. Nurses are mostly women. Librarians are mostly women. Preschool and kindergarten teachers are mostly women. Even community and social media managers are frequently ladies.

It’s not true in every instance — for example, plenty of support reps are male — but women are especially likely to volunteer for emotionally weighted work in situations where that labor is unacknowledged. HR, a division characterized by listening to complaints and providing succor, is also predominantly female.

I want to view my socialization in emotional labor as a comparative advantage. If I explicitly call out this work and volunteer for it vocally, can that be a means of gaining professional leverage? The expectation that women perform emotional labor more than their male peers is regarded as insidious in part because it is so often unseen — suppose I refuse to conceal my efforts?

Granted, this is predicated on the idea that I’m good at emotional labor, which is debatable.

Labor-focused feminists have called for women to stop performing emotional labor when it is not adequately compensated or acknowledged, or for men to step up and demonstrate the same sensitivity and patience. Perhaps a third approach is to frame familiarity with emotional labor as a competitive advantage.

Communicating any of this is a challenge, of course. One of the types of social/emotional labor that nearly all of us perform is self-diminishment — straightforward confidence can be viewed as distasteful or even obscene. People use techniques like self-deprecating jokes and affected bashfulness to modulate the appearance of satisfaction with their own work, unconsciously performing a social ritual of modesty.

It’s Okay to Not Learn How to Code

Posted on December 9, 2015June 19, 2016 by Sonya Mann

Sometimes — actually quite often — I think to myself, “I should learn how to code.” When I’m feeling particularly peppy, I open up a Khan Academy tutorial. Then after a few minutes I get bored and scroll through Twitter instead. Sure, programming languages are cool and useful, but so is geometry, and I don’t spend my free time on that either.

Image created by Octavian Arnaut. Posted with this comment: "EveryMatrix is looking for programmers." — Image created by Octavian Arnaut.

Here’s the thing: if I were the type of person who would be good at coding, I would have already been playing with Python and Ruby for years. I would have been entranced by HTML in fifth grade — instead of learning the rudiments from Neopets and moving on — and I would have branched out from there.

Realistically, I don’t want to learn how to code. I want the social cachet of being able to build stuff using computers, and I want the high salary a programmer can command in today’s labor market. But there are much easier ways to garner social cachet, ways that exploit my comparative advantage. Maybe I won’t make as much money as the wizards who design APIs and put together apps, but that’s just a function of supply and demand. In other words, it’s a reflection of my skills’ economic value, not a reflection of my value as a human being. Besides, I’ll earn enough.

Even if I forced myself to learn to code, I still wouldn’t be competitively good at it, because I’m not interested. There’s nothing in particular that I want to build that I can’t already hack together using basic OSS or otherwise freely available tools. I have found that it’s impossible to teach myself anything that I’m not enthused by, so why bother trying? There are so many subjects that I do find fascinating — better to focus my energy on those areas instead.

I’m giving myself permission to NOT learn how to code. If something changes and I find myself drawn to it, or if I need more technical capabilities to advance a project, I’ll revisit those Khan Academy tutorials. Either way, ¯\_(ツ)_/¯

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