Measure Cost vs Value

 

It's not what it costs, it's what it's worth. This is a principle you can apply in all areas of your life, but I hear people missing this important concept all the time. In this episode I unpack my cost vs. value philosophy, share some tips on how you can apply it in your own life, and begin identifying opportunities to start generating exponential wealth.

 

 

 

Full Transcript

 

Cost vs. Value

(0:02 - 0:30)

It's not what it costs. It's what it's worth. This is such an important concept and it's a cornerstone really of like so much business that I do and most, you know, if not all of the investing I do, um, and just the way I, I move to look at things.

(0:33 - 1:16)

you got to think of it like some people focused on the cost. They focus on the cost. They say, Oh, you know, that's a million dollars.

Like, Oh my God. Or they'll say like, Oh, that's 10 bucks. Oh my God.

Like, it doesn't matter what the, what the price is, but they'll respond to cost in this way. But let's take the million dollar example. You can spend a million dollars and you can overpay and you can spend a million dollars and you can underpay.

(1:17 - 1:30)

You can purchase something of great value. It's still a million dollars. So the million dollars is, is constant.

(1:30 - 2:08)

It's consistent. But the way you use that million dollars is critical. So when you're buying something for a million dollars, what do we want to do? We want to buy something that's worth more than a million dollars, right? We don't want to buy something for a million dollars that's worth a lot less than a million dollars.

This is like obvious. Obvious. And the way I'm saying it, I'm saying it slowly because I'm just wanting to make this super obvious.

(2:08 - 2:43)

And it's obvious to a lot of people, but not everybody. And you can tell who the people are because the people who don't understand that concept complain about price. Okay.

And the people who do generally understand that concept, focus on value now within reason. Okay. Uh, we can talk about food prices.

(2:43 - 3:01)

Food prices have been going up. People are rightfully questioning the how and the why and the motivations of these types of movements. Not everybody, but generally speaking, the price has gone up.

(3:01 - 3:15)

Has the value of food changed? No. I'd suggest the value of food is constant, but the price has moved. So what is the catalyst for that? Right? It's a huge topic in and of itself.

(3:17 - 3:25)

But that's an example where like, okay, the value of that is constant. The price has moved. It's impacting a lot of people.

(3:25 - 5:02)

So there's a question around, uh, why is the price going up? People don't want to pay more, but what is the value of food? The value of food is significant, isn't it? It's essential. It's critical. Uh, it's required.

What food? All food, not all food, all kinds of food, not all kinds of food. Every product. No.

So as the price of food goes up, what do we do? We assess generally. I mean, I do everybody else. I'm sure the price of what you're buying doubles or something, right? What is the best value? What is the best product of that type, right? That gives you what? The biggest size, maybe the most of it.

Uh, the best taste, best flavor, most nutrients. There's all these value criteria that we measure and what compared to, uh, and associated with the best price, right? So we do that on like small purchases like this and food. Like people are still buying food and actually people will generally always buy food to a degree.

(5:03 - 5:48)

I think you can hit a sensitivity point where people will look to farm their own food. It's already happening, you know, uh, um, you know, a source, their own food, this kind of stuff. If the price has got too crazy or unrealistic for certain people, they'd get innovative.

It's just how we operate, right? But, and you know, we're trying to keep our food costs modest. Everybody's trying to balance their expenses and their lives and all that sort of stuff. So like not to just over focus on the food, you know, scenario, but we measure food like that.

(5:48 - 6:38)

When you go to the grocery store, what do you do? You know, you pick up this bag of rice and that bag of rice. Why do I want to pay more for this bag of rice versus that one? That bag of rice has less race in it and it costs more. There's a special race.

Does it give me some special powers? Does it have extra nutrients? You know, you look at the labels, you've got all these fancy badges and stuff about it's this and it's that. And it's this other thing, right? Selling features to try and justify the pricing, whatever. We do this with small items, right? So the mindset to get in, uh, when looking to consider larger items, in my opinion, is the same type of relationship cost versus value.

(6:40 - 6:54)

Because the, the instinct is to look at something and go, Oh, it costs so much. That number is so big. And sure we can graduate into working comfortably with larger numbers.

(6:54 - 7:11)

That's part of the journey of, uh, money, financial management, investing, all of this. Right. But I would argue the philosophy and the ratios are generally the same.

(7:13 - 7:57)

Whether you have 10 zeros, I guess a lot of zeros, let's say, let's say you have, you know, uh, one zero versus, you know, four zeros or five zeros or six. You know, seven into the million, you know, uh, millions category six in the millions category, right? So when we look at something, when we're getting to those bigger, um, numbers, the types of pressures that emerge generally are the stakes. Well, if I'm buying something that is priced at that level, then I want to make sure I get it right.

(7:58 - 8:23)

And I'm less inclined to get it wrong because the stakes are higher. A mistake could be costly, right? Because the numbers are, are bigger. There could also be other, uh, you know, intangible or generally measurable costs.

(8:23 - 9:28)

If buying things at larger asset values like that, um, reputational costs, if it doesn't work, maybe social costs has a certain impact on a community or similar. Um, and more, right. It could cost you maybe your job depending on who you're working with.

Uh, if you're in charge of managing funds, um, or making strategic decisions like this versus if you're like, am I going to buy this coconut oil? Or am I going to buy that coconut oil? You know, if you get it wrong later, and you're like, Oh, overpaid for that. Well, it's, you know, you'll get over it. In fairness though, when I do overpay for something that I could not necessarily, uh, overpay for, like if I pick an item, and it, uh, it's more expensive, the lesser quantity.

(9:29 - 11:19)

And then I kind of missed the opportunity to get something that's just the same quality, the greater quantity for lesser price. I'm kind of like, uh, I kind of missed that one. Right.

I like finding those things. I enjoy finding the best value. Um, I hunt for it.

It's like treasure hunting. It's, it's, it's, um, it's where all the good stuff is. You know what I mean? It really is when you find these things and you need to sift through stuff a bit.

You need to look around, you need to compare, you need to do your homework. But in my world, the whole game of doing business, building business, acquiring opportunities, uh, uh, you know, raising capital, investing in companies, um, all of this stuff, recruiting people, you know, engaging, uh, teams, engaging, you know, contractors like all of these things relates to being able to find great value and even offering products and services, right. Is also really important to offer great value.

Um, or Mosey, you know, uh, Alex or Mosey, anyone followed him yet? Uh, he, you know, he's a, he's a dude doing some big business and he's a, he's a rock star and he's putting a lot of interesting content out there. Um, reminds me of Gary V a lot. Uh, some of his energy.

(11:19 - 11:38)

I haven't seen as much as Gary lately, but I got a lot of time for him and uh, and Alex, um, just really just beasting out there. He's just doing amazing stuff. But his book, um, what is it? A hundred million dollar offers.

(11:38 - 11:57)

I think that was the title. And it was about this. It was about, you know, creating your offers for the world that are so stocked full of value that, you know, it makes people just feel stupid to say no.

(11:57 - 12:10)

Really? It's like, how can you say no to that? It's like, all this is in that, that's the cost. I'm like, look, everything you get. Um, I think there's some notes and caveats and thresholds.

(12:10 - 13:12)

I saw some of those content recently and it was like, I'm giving you like all this stuff. And I almost found like the amount he was giving was almost like overwhelming maybe to the average person. Like would they even get into that stuff? That was just the thought I had, but not a critique really.

But regardless, he has that, um, mindset, right? About just going super heavy overweight on the value. So it's indisputable. And it's so much greater than the value that is being offered by your competition.

And that's in business, you know, as far as like building products and offering products and stuff. So her, uh, her Mosey and that's his book, uh, worth checking out. Um, but this plays into all the things that I, you know, I do.

(13:13 - 13:34)

And, um, and it's such an important part of finding opportunity. Like it's one thing to go for groceries. It's another thing to like do business, find an acquisition, find an amazing new company to get involved with, uh, you know, and grow like exponential wealth.

(13:35 - 13:53)

Right? Because that's where the greatest opportunities lie when you find these types of things. And that's what I look for. I look for companies that are distressed, um, but have value in them.

(13:55 - 15:12)

I looked for companies that are ignored, uh, but have things like they have reduction row, they have it together. Right. Um, but just nobody really knows about them.

You know, this could be like a team of technical people, you know, like engineers or geologists or like, you know, uh, computer programmers or something who are like really good at that thing, but they're not, uh, well-versed in raising capital, telling their story, positioning their company, you know, understanding like macro trends, uh, building an audience, building a community around their mission, you know, things like this, right. But they have the goods and, you know, even if you're just trading, you know, you're just looking at the market, you're looking for, um, for these types of opportunities where people are just not paying attention. And then that's your thesis is like, okay, well I found this company.

(15:12 - 15:47)

I believe this company, it represents, you know, a great, what we say, value play, right. Uh, where it's trading, where it's currently performing, where it's priced at its share price, it's market cap, which is market capitalization, which is like the value of the company at present based on how many shares out and where it's trading, right. Versus the actual value that you believe the company is worth.

(15:47 - 16:33)

And those things can be quite a bit different, right? So I look for those types of things. And in many of those types of situations, uh, I personally get involved to assist, you know, when I say personally, I mean like me and some form of engagement role, uh, with, um, my companies and, you know, in various kind of service roles, um, depending on the scenario. But because this, if you can find something that does not cost necessarily a lot, but let me say this, it's those almost misleading in the way I'm framing that.

(16:33 - 17:50)

So let me just like try this a little bit different. If you can find something of great value that is currently, uh, seemingly, significantly undervalued by way of what it's currently priced at, what its cost currently is. So let's look at a stock.

You know, the cost is the current trading range, right? The current, you know, uh, market price per share, uh, in the market on any given day, that's the cost for you to buy a share of that company. And let's say it's trading at a dollar, but let's say you did your homework on this company and felt, you know, this company is really trading at a discount to what I feel the value of this company is. And you can get into, you know, financial analysis and you can, you know, uh, take a real close look at the, at the company and do that homework to assess for yourselves or for yourself, or you can read, you know, analyst reports and get their take on it.

(17:50 - 17:59)

It happens all the time. They publish things every day. Basically it's a, we feel this company is undervalued and has a target of this.

(17:59 - 19:07)

And here's the reasons why. And here's where it's currently at, right? This is happening all day long. People are making these determinations or at least presenting their thesis doesn't mean it's always going to happen.

It's always going to be realized. There are always, you know, unknown variables, factors, natural forces, things like this that, um, can support or, um, impede or slow down the realization of that sort of a scenario. But that's the analysis.

That's the, um, the, uh, reconsideration you're looking for. So for me, I like to find scenarios where I could see like 10 X potential, maybe 20 X potential. It could certainly be more, but I'm looking for stuff that has that like exponential gap between the price that's currently at and what I feel the value could be.

(19:09 - 19:27)

And the best time to find those types of things are in really rough times. Markets, you know, or really rough economic, um, environments where the average person is under financial pressure. Companies are under financial pressure.

(19:27 - 20:20)

They aren't finding it easy to access capital. Um, where just assets are, are needing to be sold to cover things. And you can find bargains, right? And when things get better, um, as an example, then, um, you can realize the difference as, as, you know, as we say, when the tide comes back in, right? When the tide goes out, you know, you see where all the things are that don't work, right? They're just stuck in the sand.

You know what I mean? Like when the tide goes out in the ocean, you see the like the crabs and the seashells and maybe the fish or so they get stuck in a pool and like they can't get out. And it's, you know, the tide goes out, it catches the things that aren't working. Right.

(20:20 - 21:12)

But when the tide comes in, they say like, you know, it lifts all ships, right? The tide comes in. So everything's back in. So you want to be looking, you want to be beachcombing.

It's a great word for this. Beachcombing, looking for the best shells, you know, the best discoveries, the treasures of the beach when the tide goes out. So when the tide goes in, you can realize the tide comes in, you can realize the fruits of that.

Right. And you can sell into a high tide and, um, and you can crystallize that return and you can do that over and over and over again, really. And it's not just in those scenarios, but that's one scenario where you can find these types of things.

(21:14 - 21:45)

Many people do this in real estate, right? Like distressed homes, you know, fixer uppers, um, as everybody likes to call them. That's, you know, an example that can happen in any environment. Um, the startups, right.

Um, earlier stage companies and startups, there's a cycle there for many companies of like, this is, this is what we're doing. This is what we've got. This is going to work.

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And then it hits kind of an inflection point where they've been using the capital and things are happening. It's like, this is working. This isn't working.

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You know, it's going to work. It's not going to work. Or maybe it doesn't work for a bit.

And then it finds its legs somewhere in that mix are opportunities. And that's both, you know, private and public, you know, in the public market, um, listed companies as well as just privately held companies. So it's another place you can find these things.

(22:19 - 22:48)

You can also find them like in, in crafts, you know, you can find them on Craigslist as an example and classifieds where you can find like, you know, an old bookshelf or an old dresser or an old thing, you know, that's just been beat up and looking, you know, disheveled and needs some love. And maybe you're good at that thing. And so maybe you can pick that thing up at a discounted price because it means the love.

(22:49 - 23:41)

And then maybe you can give it the love and you can relist it and now it'll command the multiples because it's at a different, you know, level, it's a different condition. Um, it's been, you know, rejuvenated. And that's the process, right? Like when I look for distressed companies, it's those types of situations.

What does the company actually have? All companies, you know, go through different forms of challenges and dramas and shareholders can get tired for different reasons or management can have challenges for different reasons. And there's so many factors. There's a whole bunch that contribute to a company that just like really has the goods still not, um, succeeding, still not realizing their potential.

(23:41 - 24:47)

So I look for those opportunities because in that, uh, if we can, you know, clean it up a little bit and make some adjustments and turn some things around, get things realigned, then it can start to realize that value. And there can be huge, huge upside in that. And you can do really, really, really well.

Uh, in those types of scenarios and I have in the past and I will again in the future, you know? So, uh, so I'm always looking for that kind of stuff and you can apply this to every category in your life. I really feel it. Um, so the challenge for today is to think about that, especially if you're, you know, reflecting on your, the way you use money and that you want to grow money and you have some dreams and you know, you have a bunch of skills and, um, and a ton of abilities and you're just, you're kind of reflecting on your world.

(24:49 - 25:09)

Um, and you want to make some moves. So the challenge is to walk around in your world and consider this, the cost that you're looking at versus the value. What is this worth to me? And when you're looking at engaging somebody, hiring somebody, all this, it's like, this is their price.

(25:11 - 28:27)

Okay. But what is their service worth to me? What is their, um, what is the end result of their offering worth to me? Right? That's how you can, um, measure if that's, if that's a good purchase or not. Right.

If their number, if you look at their number and you say, when I'm done, if I'm going to have this, that's worth way more than that or whatever, at least equal to, but you know what I mean? Then that's a good deal. But then you can go this exponential cost versus value assessment, which is the real treasure hunting, which is looking to find opportunities that have that 10 X 20 X potential gap in the current cost versus the value of what it is or the potential value of what it is. And if you start making moves like that, my suggestion, the way I live, my belief and how I roll is that if you make moves like that, you can substantially transform your life and your world and your lifestyle and all of these things.

And you know, inclusive that your financial circumstances, your finances. So let me know what you think about that. Let me know how it goes.

Go poke around, come back to me, share with me or your ideas, maybe the things you've found after you've locked them in your game plan. You can build businesses around this stuff. For instance, like you could rejuvenate old furniture.

I'm not the best at that stuff, uh, but I really like vintage things. You know, that's an example. Start that right now and go, go dig in, um, and, and start flipping that kind of stuff.

You know, it doesn't have to be full companies, but when you look around through this lens, you will see these relationships in every area of your life and you'll make assessments adjustments and you will start to steer towards making smarter choices on these levels in all these areas. And you know, your life will improve and you're, you're in the game. You're playing with what they call smart money.

You know, you become the smart money, you become the savvy player and, um, you understand how to generate, you know, exponential gains, um, and leverage your capital in exponential ways by, and your cash, right? Capital cash and same difference, as far as I'm describing it at the moment. Um, you know, you, you will, um, you'll realize the difference. You will realize the significant changes in your life by applying this mindset, running things through this filter, considering all things in this way and making moves in the spirit.

(28:27 - 28:46)

So go for it. Start now and let me know how it goes. Let me know what you see, feel, what you're finding.

Um, yeah, I mean, I love this stuff. It's such a great feeling when you find that thing. And then when you got it, here's a little tip to this too.

(28:46 - 29:07)

When you know that you found something that has significant value, that is a very big difference than its current cost, right? The cost is heavily discounted to its current value. You need to trust your eyes. You need to trust what you know.

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All right. I'm not qualified to give you investment advice. I'm not an investment advisor, but this is how I roll is I've developed my mind.

(29:17 - 29:38)

I've developed the confidence to trust my own instincts, do my own homework, make sure I'm right. You know, like do my due diligence that goes without saying, do your due diligence always ask the people who are experts on this stuff if you need to, that sort of thing. But then ultimately you have to make the move.

(29:39 - 30:37)

So the thing that I've developed is the confidence to know when I want to make the move and when I do, uh, I don't need other people to confirm my call and the deeper you can develop the confidence in doing that by identifying these opportunities, then the stronger you get in the work you're doing, the business you do and the realization of opportunities. Because depending who you're sharing it with and looking for confidence in, uh, or from to make your call, um, depending, you know, how much you can trust them, they might scoop you on it. Uh, also your, um, your hesitancy, uh, might just be long enough that you miss the opportunity because depending where you're looking and what it is, opportunities come and go and they don't wait for anybody.

(30:37 - 31:03)

So when it's for you, you'll see it. If you have the confidence, you'll recognize what it is. You'll assess it.

You'll make the call and you're, you know, you'll go, you'll make your move. Now if you miss it cause you're just developing your confidence, you don't have to be hurting yourself about that either. There's always another opportunity, but part of the game is not missing opportunities because this is also true.

(31:04 - 31:14)

I believe that the world is an abundant place. There are many opportunities. I'm sure there's no reason why many opportunities couldn't come my way.

(31:15 - 31:29)

Anywhere away. However, it seemed to be true. Generally speaking that on average, the really, really big opportunities only come around so often like the really good ones.

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And so we want to be ready for those and we can practice on all the other things. So when the big ones come, we see them, we know what we can move with confidence, with intention, um, without, you know, unnecessary delay and we can lock those up and legitimately change and transform our lives. That's what it's all about.

(31:55 - 32:00)

Playing that game. It's a ton of fun. So good luck.

(32:00 - 32:21)

Go give it a try. Come back to me. I want to hear all about it.

And um, if you have any questions, let me know. You got all my links and stuff below depending where you're listening to this. And, um, until next time, we'll, uh, we'll have a great day, you know, go have a great day out there and we'll catch you on the next one.