I may sound like I’m flogging a dead horse. I have blogged about value being contextual before, and I’m going to do it again. The reason is simple – every so often when we’re working on Pressyo (yes, we’re consistently updating it behind the scenes), we keep dreaming up things that we can possibly use or do.
They’re mostly fun stuff to do – mostly armchair economics and armchair computer science. But the thing about brainstorming things to do and actual implementation is that sometimes implementations can go spurious. We’d expect something to work one way and then it doesn’t.
So, yes, we have to constantly remind ourselves that value is contextual. And because I’m such a bore, I shall bore you, my readers as well.
One way we can value things (and in fact, as far as basic economics is concerned, the only way) is to analyze its opportunity cost.
For example, would you pay $100 for a Big Mac? Most people would not (unless you’re starving in a desert carrying nothing but $100, when a genie conjures up a very expensive McDonald’s for you). Most of us wouldn’t pay $100 bucks for two reasons: a) we know from prior experience that a Big Mac should be about $3.95 (in Australia); b) we can do far more with $100.
Reason (a) is what economists call anchoring – a fairly icky problem for us – most of us (except those from the Behavioural Economist crowd) try to circle around it. Reason (b) is the opportunity cost. An opportunity cost is simply the question: “with these resources I have to do X, what other things can I do with it?” That’s what we’re going to look at today.
With $100 we can do a lot more than just buy a Big Mac. You could use your $100 to buy a Denon AKDL1 Dedicated Link Cable
That’s one of the problems Pressyo faces. There are literally trillions of pages competing for your time and attention. Your opportunity cost of reading one site is reading another site that you may derive happiness from. And the best thing about the Internet is, these other sites are just a click away.
Today, you may feel emo, so you might read a livejournal page. Tomorrow, you’d be feeling all happy clappy and you wouldn’t even go near a emo livejournal. People’s moods change – we’ll talk more about that later with regards to anchoring in the next post – and people’s valuing of things change.
One of the easier solution is to provide a smörgåsbord of choices to cater for people’s changing tastes. In the coming days, you’ll see Pressyo changing into something that caters to a wider range of tastes – the so-called “long tail”, if you will (the other thing to do is to adapt to people’s anchoring – we’ll talk about that in another post).
That is the reason why we chose to use a price system for Pressyo. Why? Prices, in the very simplest manner, tells you about the opportunity cost. If you read a piece that is priced at Y5, you’d be reading Y5 worth of your time – that its 5 times more worth a Y1 post. These prices, are of course aggregate prices – that is the public’s valuation of the story. Your personal valuation? That’s anchoring. How we deal with that, we’ll talk about it in another post.
Why is it different from a voting system? A voting system produces ordinal data – at best it provides interval data (this doesn’t happen very much either). But a market, with a price system, provides ratio data. This provides at least 2 levels of data richness. With a voting system, you cannot say a story with 2 votes is twice better than a story with 1 vote (it simply means 1 more person voted the story). With a market, you can confidently say so, that a Y2 story is worth twice than Y1 (at least by public reckoning).
This would give users a lot more space to gauge whether a piece of information is worth their time (in economics term: if the pieces of information is worth its opportunity cost).
So, now that you’ve read this page, what’s your opportunity cost of reading this post? What things better you could have done instead of spending the last 4 minutes of your time reading this? That is your opportunity cost. Tell me.
Tags: opportunity cost, value