Some describe value as a simple equation: benefits – costs. This is a rational way to think about value. But people, especially when assigning value aren’t rational.Even when we’re trying to make a rational evaluation it’s difficult to calculate because benefits and costs are frequently qualitatively different. Benefits may be intangible feelings, memories, or experiences. Costs can come in the form of money, time, missed opportunity or pain.

When it comes to designing and building great products, the traditional economic methods of understanding value have little to offer in the way of guidance: Decreasing cost (to the customer) is a business strategy, but is likely only to have a negative effect on the product build. Increasing quantity, giving the customer more product, support or subscription is like decreasing cost. It works for marketing, but likely means less investment in a good product. Increasing quality is the one economic model that addresses the product directly, but it only tells you that it matters, it doesn’t clarify exactly how you might make a more valuable product.

Who assigns value?

You can create a product which has value, but you can’t make a customer value something. You can leverage what you know about your market to add value, but you can’t make someone see your definition of value. The value of a product or service is determined by the person receiving it.

Value is determined by the receiver of the product or service. A customer sees value and pays for it, an investor sees value in potential and underwrites it, a user sees value and continues to engage with the product, and employee sees value and shows up ready to work. You might own something that you value a great deal. But if you want to extract that value you must find someone else who sees the same or more value who is willing to pay to get it.

Producing value

When you’re creating a service or a product any one of the following methods can produce value. All have their strengths and weaknesses. For any given end user one might be vastly more important than another, which is why it’s good to get out of the building and meet your potential market.

Learn about what matters to your users. Learn to see their sense of value. You might be able to combine a few different types of value to produce a more compelling value.

The most robust approach employs as many of these methods as possible. Not every method is compatible with one another, but there are ways to combine them without canceling the effectiveness. Often the combination will increase the perceived value for a product or service.

Intrinsic value

Intrinsic value is something that you value for it’s own sake. When something has intrinsic value to you there aren’t external motivations which drive your actions. When you value something intrinsically it’s more rewarding and harder for you to let go of. In short, it matters more.

Autonomy (ability to direct one’s own activities)

New or improved abilities

A service or product the gives people new powers or enables them to perform work that was beyond their capability. A hammer when all you have are nails. Gas for a automobile. Internet access for a computer.


Access to information, people, resources, attention (all of which have inherent limits) creates value. Channels which deliver access become valuable when they can be quantified for their access. Advertising, lobbying, record labels.


A person’s ability to exercise a choice for how their time is used, effort is directed, work is performed, or resources are used. Voting, debate, media, cash, agreements, rule-setting, negotiating, culture building.


A person’s ability to absorb and respond to shocks or changes in their world in a way which doesn’t completely interrupt their life. A savings account, insurance, free time, support of family network.


A person’s ability to access, prioritize, consider local and long term impacts. Similar, but different than slack. Bandwidth is how many balls you can keep in the air, slack is the ability to deal with an interruption to your juggling. You get more bandwidth with Taskrabbit, an accountant, a babysitter or a professional mechanic. By letting someone else take over some of your responsibility you increase your available bandwidth for other activities.

Competence (mastery in activities)

Challenges matching skill/interest

Activities that match the skill/mastery of the individual so that a flow experience is possible. Activities that are inherently interesting and engaging to the individual and which match the process/method known and valued by the individual. In the best case this is your job. If not you might find this working out, taking classes, adventure travel, or making art.

Experience, knowledge, skills

Value is created by the accumulation of capabilities. The learner gets value from an experience that makes the knowledge theirs. Employees are valued for the experience they bring to the enterprise. Education, employees, books, videos, news are all examples of this.

Connectedness (participation and relatedness with others)

Personal investment

The ‘ikea effect’: successfully putting something together makes it more valuable. Developing a relationship to the product or the service creates a connection to it and increases the value. You can find this in making art, doing a startup, putting together furniture, caring for a garden.


The peace of mind that comes from trust is immensely valuable. Trust is also one of the hardest things to earn and the easiest to destroy. But between the earning and destroying its one of the strongest value creators. Trust leads to great efficiencies, you don’t need to guard when there is trust. Gated communities, banks, Uber, AirB&B.

Good feelings, experience, memories

The actual and residual experience of an event product or service is important. The better the experience the more value is generated. Vacations, first-time use, entertainment, culture.

Extrinsic value

Extrinsic value can be as compelling as intrinsic value, but the value derives not from the thing itself, but from what it gives to you. ┬áPaper money is a good example of extrinsic value. We value a paper bill not because it is inherently valuable, but because of what we can do with it. We value it because other people value it and this allows us to use it as currency. Gold has more inherent value, both because of it’s relative rarity, it’s beauty and it’s usefulness; it doesn’t tarnish, it conducts electricity and is easy to work with.

Anything extreme has too much cost associated with it. Extrinsic value comes from delivering a product or service that helps someone move the needle, but not in the extreme. Too scarce and no one knows about it,and no one cares. Too well circulated and no demand is created. Too much belief without evidence and failure follows.


Having a special association with the past, giving status. Specific history. Connection to the original effort and relationship. You will pay more for an actual piece of history or an original artwork than for a replica or copy. Your childhood home, your car, your honeymoon.

Scarcity/artificial scarcity

The limited availability creates value. When something is rare, like gold it has value. When something is artificially rare, and has a good marketing campaign, like diamonds it’s also valuable. Twitter’s character limit creates value. Path’s initial limit to the number of connections promised value (you would value connections because they were finite).


Especially true of social tools or services. The use and adoption, and sharing of the product is what makes it valuable. One telephone is useless, a country where everyone has one brings an immense value to the ownership of one. Scarcity appears to be at odds with circulation. But the paradox happens only when either one is too extreme. Owning the only electric car means you have no support network of charging stations. Following everyone on Twitter leads to a feed full of noise. Moderation makes both scarcity and circulation work well.


Feeling or knowing that what is valuable to you is safe and secure. In places where crime is low and safety is the norm security has little explicit value. But when threatened, people place a premium on safety or tools and services which bring it. Car alarms, gated communities, personal firearms.

Beliefs and perceptions

Alter the mind of the customer and what they believe about your product. Diamonds didn’t change, but how people thought about them did. Tesla has changed how we think about electric cars. Facebook how we think about personal privacy.