Our favorite Italian restaurant recently sent us a note with the news that truffle season was upon us once again and we might consider coming in for a few grams of the freshly shaved fungi on our pasta, for a princely supplemental increment of $60 a garnish. Seems reasonable, in a way, when I discover that white Alba truffles are up at $3000 a pound this season.

Which brings me to book pricing. Why do we sell books as if they were potatoes when many of them are actually more like truffles? When something is generic and fungible (which has nothing to do with fungi — I looked it up so you don’t have to), supply and demand determines the price. Hard coal, everyday sea salt, water, topsoil. They go for the same price, everywhere, because it’s all the same.

And that’s about where we are with book pricing right now. Because books, on the surface, tend to resemble each other — paper with ink on the inside, covers and a spine on the outside — publishers tend to price them as if they were all hardly more differentiated than branded topsoil. But I’ll bet that for the avid reader of romance novels, Nora Roberts and Diane Palmer are not interchangeable. Fiction readers are addicted to the author, not the just the genre. Yet we price fiction as if it’s generic.

What about non-fiction books that we urgently need? Someone in your family becomes ill with Kukla Fran & Ollie syndrome that the doctor can’t take the time to fully explain. What do you do? You rush out and buy the very best book you can find about the rare disease. Do you carefully compare prices on all the books that address the issue while your loved one hovers between life and death? I doubt it. You look for the publication date, the credibility of the author, the quality of the review and endorsements. And you buy it, whether it’s priced at $9.95, $24.95 or maybe even $49.95.

Salespeople buy, on average, seven books a year. Salespeople face tough challenges every single day, and the good ones are constantly seeking ways to increase their productivity. A great sales book that really changes the effectiveness of a salesperson can be a genuine goldmine for the reader. To the right salesperson, the right book might mean an additional income of $100,000 dollars a year, or much more. And many sales books are worthless. Can you explain to me why both the valuable and worthless might carry the same retail price of $16.95?

Maybe one reason publishers price their books as if they were commodities, when in fact they are anything but, is because they fear they aren’t able to present a persuasive case for the true value of their books. “It may be worth $50 or $100, but if we put that kind of a price on it, no one would even pick it up.” And that’s true, if we don’t know who the author is, if the endorsements aren’t convincing, if the tidbits on the back cover aren’t irresistible.

When I was starting my publishing consulting business fifteen years ago, I was living in Aspen, and my nearest great book store was The Tattered Cover in Denver. When I finally got a chance to get to the store to see what kind of help I could find for launching my business, I discovered a pile of slipcased shrink-wrapped double notebooks called The Complete Marketing Handbook for Consultants, by Don M. Schrello. The price was $235. I took the liberty of slitting the shrink-wrapping and sampled the notebooks. I found letter forms, contracts, pricing guidelines, legal and strategy guides — everything I needed to start my business. I bought the set and used it as my guide. What was the real value of Schrello’s book to me? Much more than $235.

If we can’t figure out ways to convince our prospective book buyers of the unique value of our books, we will be inclined to take the easy route, treat our books as commodities and price them as such. But when publishers get the courage to examine what they really are worth to the audience that needs or wants them, publishers can then price based on value. It took Scholastic a while to catch on, but look what happened when they finally realized they had addicted several millions kids (okay, and some adults, too) to Harry Potter. The first three hardcovers were priced at $24.95. By book four,Goblet of Fire, Scholastic screwed their courage up a little and raised the price to $29.99. You can just imagine the fretting around that conference table when that risk was taken. Someone — come on, you know who you are — surely said, “If we price it that high, we’ll kill our sales.” Riiiight. And then, for the final book, which could have been priced as high as an Xbox, it came out at a courageous $34.99. Now I realize that the retail price was hammered by Amazon, but the point is — the publisher gets paid on the wholesale price no matter how idiotic Amazon wants to be.

How can publishing move toward value pricing? It may start when an editor or publisher decides they’re willing to experiment in order to find what the true value is for three or four night’s joy curled up with a favorite author. Or when a publisher chooses to take the time and calibrate carefully what the right information is worth to someone who’s career, health, or marriage depends on it. Two years with Dr. Krausenheimer over here or two weeks with this little book. Your choice.

You’ll have to excuse me for a moment.

“Ah, waiter! Could you shave a little more of that truffle on our pasta?”

Yes, I know it’s outrageously expensive. But it’s worth it.

If you read the N.Y.Times in its coverage of the disruption of the Kindle, you might think that publishers are losing a fortune from the sudden rise in Kindle sales.

Actually, the opposite is true. Amazon is buying Kindle rights from publishers at the same price they’re paying for physical books. And Amazon is sticking with its policy to sell Kindle books at no more than $9.99. So take your average $20 list price hardcover book (if I were a shameless self-promoter, I would use my book The Genius Machine as an example, since it also has a list price of $20. But I will resist the temptation.) The publisher sells it to Amazon for 50% off, or $10. Amazon could sell my the book for $20, but they discount it down to $13.57, and make a profit of $3.57, or maybe a little less if Amazon is paying for shipping.

Now take the same book sold as a Kindle. Amazon pays $10 for those rights, too. And Amazon sells the download for $9.99, thereby earning a gross profit of 1¢ on each copy. On books that wholesale for more than $9.99, Amazon seems to be locked into a loss with every sale.

And what about the publisher? On a $20 retail book they get the same $10 for the Kindle edition as they did for the actual hardcover that cost them some $2.00 to manufacture, ship, and even keep a reserve for returns of unsold books. So who is making a killing on the Kindle? The publishers. And Publishers, please, if I’m wrong about these numbers, share the facts with us in the comments below.

Publishers are worried that Amazon will choose to stop losing money on Kindle sales at some point. They are just waiting for that shoe to drop. Hence the cheering for Barnes & Noble’s new reader, Nook. (Nook. Interesting name. Just asking, but what would you call a diminuitive version of the Nook?) Publishers are beyond eager for someone, anyone, to stop Amazon from completely owning ebooks!

Now let’s talk about those ten books that Wal-Mart and Target are offering for pre-orders at $8.99 and Amazon at $9.00. These are for hardcover books ranging in list price from Linda Howard’s Ice at $22 all the way up to Stephen King’s 1088 page monster Under the Dome that lists for a mighty $35. What is the meaning, if any, in these door-busting discounts?

Comes now (“Comes now” is a locution reserved for columnists who can’t find a better way to introduce a new character into a story. But I digress.) Motoko “Cassandra” Rich of the N.Y. Times in her “Price War” story in last Saturday’s paper, wherein she worries that Wal-Mart selling some pro-orders for books as a loss-leader will somehow “fundamentally damage the industry and the ability of future authors to write or publish books.” And, once more, end publishing as we know it.

To tell her story, Ms. Rich interviews bestselling author James Patterson, who she was apparently grateful to reach before her deadline, since she quotes him at length no matter how little light he has to shed upon the subject. Frankly, interviewing an author about retail price discounting is akin to interviewing a tuna about the price of a Salade Niçoise.

The fact is, publishers don’t really care what a retailer sells a book for. Retailers want to take a loss? No problem. What everyone needs to be concerned about, though, is when a Wal-Mart or Amazon pressures a publisher to sell at what is known as a “deep-discount.” That should set off alarms for authors and agents, since most author agreements call for author royalties to take a severe hit when the publisher sells at a deep discount.

Authors: Read your contracts! Find that “Deep Discount” clause. Does it say something to the effect that when the publisher sells your book for more than a 50% discount, the author royalty suddenly gets cut in half? Think about that. The publisher gives Barnes & Noble an extra 1% discount and you lose half your royalties on every book sold.

The big take-away here is that nine of the ten books being hacked down in price by Amazon, Target and Wal-Mart are fiction titles. Only one calls itself non-fiction. And this is the clue to smart book pricing. Fiction is generally sold as entertainment. Entertainment tends to be more fungible. Non-fiction is generally sold on the value of the information it contains. So pricing the two in the same way seems crazy.

How much would you pay for information that can change your life? Heal a child? Save your business? Is that information worth only $20? Is that all you’d pay for it?

We haven’t begun to touch value pricing for non-fiction. That is the real gold mine just waiting for publishers. We’ll write more about the potential and the theory of value pricing soon.

In the meantime, you have to wonder about the one non-fiction title that’s being treated just like all those other nine fiction titles being deep discounted. Yes, it’s Sarah Palin’s memoir. Now, if what she were about to disclose had great value, say information that could, in some way, save the Union, it certainly would be worth a lot. Some of us would pay real money for that kind of knowledge.

But Wal-Mart, Target, and Amazon say we can have it all for just $8.99. Maybe they know something.

This is from a speech I gave in Marin, California in May, 2008 to the Bay Area Consultants Network and also had recorded on video for use by my speaker’s bureau, The Bright Sight Group. The material is from a new book I’m working on, currently titled, Value — The Worth of Everything Including You. 

In the course of my work to help my clients understand the bedrock of differentiation, I discovered something that seemed to be a new concept regarding the roots of value. The new theory relates to classic and evolving economic theory, but it also suggests a revolution in the understanding of the meaning of value and of the relationship between value and pricing.

My speech begins here:

Oscar Wilde famously said that the cynic knows the price of everything and the value of nothing.

In classical economic theory, price and value tend to get blended together, almost as if they mean the same thing.

But intuitively, we are always comparing price and value. What is the right medicine worth that heals a child? What is a book worth that changes your life? What is a consultant’s insight worth if it turns your company around?

Wouldn’t it be nice if we had a simple and reliable guide to the nature of value, and maybe even a guide that could explain what the price of everything ought to be?

Here’s a little piece of paper that was printed in 1918, a postage stamp from the issue that was to be used on the first ever United States airmail service. Because it was a two-color stamp, it needed to go through the press twice.

One sheet of a hundred stamps, and only one sheet, got turned around, and the image of the Curtiss Jenny airplane was printed upside down. That sheet made it all the way into the hands of a collector, on the first day the stamp was in circulation. The clerk asked for it back, but the buyer ran out of the post office with his purchase. The sheet became the most valuable United States stamp ever issued. The 100 stamps were divided up and found many owners over time. Recently one turned up on a mail-in ballot, but it turned out to be a forgery, a joke. The last real one at auction went for $300,000, so that sheet today would be worth $30 million. 

One little tiny piece of paper. $300,000. That was the price. What was the value? Obviously a great deal of value to someone.

What would be different if we could understand the roots of value, and easily see for ourselves the true value of everything? We would be able to see where our education might lead us, we could make intelligent decisions about where to live and how to invest. In business we would know how to position our goods and services and how to price them. We would see why, if we commoditize ourselves, we would need to compete on price and service, with some possible tiny help from brand.

If we knew the roots of value we might also see why, if we do a few things right, we could price ourselves right up to an amazing theoretical maximum — the threshold of pain — that I will share with you in a bit. Imagine if you could double or triple your hourly rate, or do the same for your profit margin. 

Welcome to The Map of Value.

Today, I’m going to talk about the two great forces that govern value, distinction and desire.

Then we’ll look at the four great regions those forces create,

and then we’ll look at the Map of Value in more detail, to see how we live our lives there, how some people get rich, and we’ll talk about the threshold of pain pricing concept that might impact your bottom line as soon as today.

THE TWO FORCES THAT GOVERN VALUE

Let’s start by looking at the two great forces that govern value.

If everything were the same, everything would have the same value, which is the same as no value. Grains of sand, mud, seawater. The great cosmic goo.

Value begins with differentiation

This is the Axis of Distinction. The Axis of Distinction is the horiontal axis, the blue axis.

We can think of distinction as being on a continuum, with the totally undifferentiated over here on the left, which we can call “Generic,” and at the extreme other end along the Axis of Distinction, is “Unique,” the one-off, like no other, totally and completely differentiated. If you want, you can put those labels on that axis — Generic on the left and Unique on the right.

PEOPLE ARE DISTINCT

From my cousin who is a mathematician who specializes in the human genome, he assures me that no two human beings who have ever lived or who will ever live can have exactly the same DNA. Even identical twins and clones quickly develop along unique paths. So therefore I can say without fear of contradiction that human beings are inherently at the unique end. But, if we do not develop ourselves, nor understand our inherent uniqueness, we will often perceive ourselves, and have others perceive us, as being more toward the generic end of things. If we want to be used and valued as our most utilitarian selves, we certainly will be. To a coal mine owner, all miners look about the same, from the perspective of the owner’s need to extract coal.

I think we can see that just about everything and anything can be placed somewhere along this Axis of Distinction, from ideas to schools, raw materials that are dug up out of the ground and everything that’s manufactured.

So that’s about where we were a year ago when I spoke here about differentiation. The more unique something is, the higher the value. The more generic, the lower.

Now we come to what’s new.

What if no one wants the stuff that’s over here, no matter how unique it is? And what if someone really wants stuff that’s over here, even though it’s pretty generic? After all, most of us need potatoes and Kleenex, gasoline and water.

The Axis of Desire

That brings us to the second axis, the Axis of Desire. That’s the green axis, the one going North to South.

On the Axis of Desire, everything can be put on a scale that reflects how strongly any individual or group wants some thing. And that someone can be an individual or the whole world. Here we can look at the complete spectrum of human desire for wealth, and health, children and education, entertainment and wisdom, and rank everything by how much you want it, or by how much I want it, or by how much everyone in the city of Philadelphia wants it.

We will look at the extremes of this Axis of Desire, and see that at the North end is Essential (for the living that might include breathable air and food for a start) and at the Southern end is the Unwanted, where disease, crime, garbage and junk of all kinds are likely to be found. You caqn label them if you want, Essential at the North end and Unwanted at the South.

Everything both tangible and intangible can be placed somewhere on the Axis of Desire, and that placement will depend on who is doing the placing.

As is so with our differentiating, few people would have an identical  Axis of Desire because, once you get beyond the requirements for sustaining life, Desire is in the eye of the beholder.

Now what happens when we combine the Axis of Distinction by crossing it with the Axis of Desire?

THE MAP OF VALUE

We end up with a nicely defined territory with some interesting revelations.

This is the beginning of The Map of Value. Suddenly everything has a place.

The Map of Value give us Four Distinct Zones.

Everything in heaven and earth falls into one of these zones. And which zone it will be depends on who is doing the deciding: How distinct do we think something is? And how much do we, or someone else, desire it.

Let’s take a brief look at the four zones and get a feel for what things are like in them. The surprising thing is that each zone has a distinct flavor,  a strong unmistakable personality.

First, what are things like when they’re not distinct, and yet we need them? Here are all the commodities, the stuff of life.

Welcome to The Acres of Plenty!

This is the territory of the fungible, the interchangeable. Here are the raw materials and foods that feed the industrial and human world. Here are services, such as most public transport, hotels, restaurants. Education lives here more than anywhere else, with most public schools of all grade levels and large public universities tending to be found here.

Since everything here tends to be generic, branding can play an important role in some areas of the Acres of Plenty.

What about the human component in the Acres of Plenty? What about large groups of people that can afford to pay for health insurance? From the perspective of Big Health, like hospital chains and big pharma, the insured sick are a valuable commodity to be found here. And the uninsured sick? We’ll soon see.

Also in the Acres of Plenty are the masses that consume mass entertainment, mass magazines, mass anything. This is where the mass market lives. 

Ladies and gentlemen, the Acres of Plenty.

Classical economics has tended since the time of Adam Smith to think of value in terms want or need. With want or need we have economic exchange, we have industry, money and markets. Need and Desire make the world go round.

But what about Unwant? What about the unneeded?

Let’s take a look at this strange end of the Axis of Desire, or the Unwanted. It’s like negative matter. But unlike the strange negative matter of theoretical physics, negative Desire is easy to find, and describes one-half of the Map of Value.

Can you imagine something that’s both unwanted and pretty generic? What comes to your mind? A million people in prison? Toxic waste? Junk? Noise?

The Plains of Rubble

Say hello to The Plains of Rubble, where the unwanted meets the indistinguishable.

The domain where we find, not only junk and garbage, pollution by-products, and waste lands. But we may also be surprised to find here, depending on the viewpoint of any given person or society, poor people, the elderly, the medically uninsured. We will return to the Plains of Rubble.

But now let’s let this intriguing force of negative worth intersect with the unique. I’m going to ask you to imagine what you might find in this zone of the highly unique and the highly unwanted. For instance, exactly what kind of people would you put here? They are unique, and yet I don’t think you’d want to have dinner with any of them, or even cross their path.

Extremely unique and extremely unwanted.

Any thoughts?

A world that at its worst contains sociopaths, psychopaths, the evil, the conniving, those that are simultaneously highly dangerous and highly skilled. You are perhaps seeing the worst of what I call…

The Vale of Curiosities.

Interestingly, the Vale of Curiosities is also where most creativity comes from. Once we get past the criminal class, we will discover that this is where Van Gogh got his start and, unfortunately, spent all of his life. When Larry Page and Sergey Brin first started refining their search engine software at Stanford in the late 1990s, they were here, since all Googles start here.

We will see that the Vale of Curiosities is a region of immense fascination, a resource for storytellers and thrillseekers alike. Here are oddballs, cranks, and unsuccessful cults. This sector also contains most of the young, who are inherently unique and yet not developed enough to be valued by society. You can think of the Vale of Curiosities as the Star Wars bar of the Map of Value. You never know who or what you’re going to find here.

Finally we come to that happy intersection of the unique and the desired. This is where the best of everything, as far as each individual is concerned, is to be found.

Welcome to The Land of Dreams, which, by definition, can never by crowded!

In The Land of Dreams the value of everything is at its highest, where the people who can supply their unique talents are handsomely compensated, from CEOs to hairdressers to heart surgeons. And even amongst these, the most differentiated are valued even higher by those who can afford and want these singular services. An average lawyer over in the Northwest Zone bills at 3 or 4 hundred dollars an hour. A great barrister who is able to cross the line to the Northeast Zone, with a mere phone call can generate billings in the thousands.

In the Land of Dreams every diamond has a name like Winston or Tiffany, vehicles are Bugattis, dresses are by Chanel, and shoes, of course, carry the signature of Manolo Blahnik.

In this pleasant zone, fine art lives, so long as it is in fashion — since to be in this zone, you must be considered essential by someone.

So there’s the rough overview of The Map of Value. We can see that it includes everything: people, goods, and even ideas. And since the Map of Value depends completely on the eye of the beholder, whether it be each of us as individuals or a group of us acting as a community or a nation, everything on the Map of Value can move, depending on who is doing the valuing and what their beliefs are at any given moment. A diamond may for many be up there in Heaven, in the extreme northeast, but if wearing diamonds were suddenly discovered to cause Alzheimer’s Disease, they would soon be strewn on the Plains of Rubble.

The four zones yielded a lot of insight about value, but I felt there were still a lot of differences within the regions. So I looked closer and realized that the Map divided naturally into useful arrondisements, something like Paris, but different.

THE ARRONDISEMENTS

The Eleventh — Hell

Let’s start in THE PLAINS OF RUBBLE

The strongest forces apply to Hell, the Eleventh Arrondisement. Here are the extreme negative in terms of both what we perceive as our needs, as well as how well-differentiated something is. Imagine volcanic rubble strewn around a blazing desert, yielding nothing but heat and dust, forbidding, harsh, and vast. If we linger too long here without water and shade, we will surely perish.

Now imagine all that we might not want as a society, and all that we don’t care to distinguish one bit from another. Here is garbage, industrial waste, exhaust. Some groups in our society might also place certain people in or near this sector: such as vast prison populations and terrorists. Each of us has our own Hell, and for every culture, every society, each will have their own notions about what goes in Hell.

The Seventh — Shoddyville

As we move toward the center, we have the play of weaker forces: a little less generic, a little less undesired. That gives us the Seventh Arrondisement, Shoddyville, where we find neglect of all kinds. Shoddyville is almost the center of the world of necessary evil. Here is ugly: ugly housing, ugly neighborhoods, ugly stores, ugly streets, maybe even ugly ideas.

When we ignore a large part of our population because they’re not worth a lot to us, we shove them off to Shoddyville, where we don’t need to see them too often, or think about them. Here we dump the poor, the uninsured sick, soul-sucking big-box discount stores, shrinking rust-belt industrial cities and their remaining populations. When we think about whether or not we want a social safety net, we are thinking about Shoddyville, and what to do about it.

The Third — Carborundum

Arrondisement Three, Carborundum is the Arrondisement within the Plains of Rubble that is closest to the center, and is an unpleasant little area. The name Carborundum is drawn from the funny, and phony Latin phrase” Il-le-giti non carborundum, freely translated as “Don’t let the bastards grind you down.” Biting flies, pet peeves, Sunday morning sales calls from call centers in India, basically everything that can spoil a moment or an hour lurk here.

Most advertising gets tossed here, even though occasionally, it might bring us some value. That’s what saves advertising from being all the way down on the Axis of Desire.

When we fail or don’t care to see people as individuals, we consign them to one of the three arrondisements that make up the Plains of Rubble. Here we put things we don’t want or need but are part of our lives, and those things that are also not particularly distinct to us.

If we wake up in a Shoddyville Motel in Butte or in Trenton, the inside of the room isn’t going to tell us where we are. One thing we know for certain, though, is that we’re just one ring from Hell.

THE ACRES OF PLENTY

Shall we venture to more pleasant fields?

The Twelfth — Acme

Acme, the twelfth Arrondisement, is where we find the interchangeable, the fungible. Here, maybe surprisingly, is gold, since pure gold is all the same. Also water, coal, grain and light sweet crude. Manufactured products can also fall into the category of the generic, so here can be ram chips, disposable ball point pens, and PCs. Professional services are often here, although needlessly. Private banking, consulting, advertising agencies, attorneys.

Acme also presents a great trap for any supplier or maker. If what you make can be perceived as distinct, like an iPhone, you have no competition. When your product becomes increasingly like everything else that’s on the market, you are moving into Acme territory, which may be your intent, and may not be the worst thing in the world. But beware of the implications of moving to Acme: once you’re here, you are no longer seen or valued for being distinct, even though you are still needed. Now you must compete on the tougher playing fields of Acme: you must compete on service, quality, location or, gasp!, price.

Many great products and companies have ended up in Acme. Some have thrived, some have been absorbed by others, some have disappeared completely. Compaq built the first great portable PCs, stayed differentiated for a while on pure performance, began to compete on price alone, and got swallowed up by HP. HP is in a duel to the death with Dell, competing on anything but differentiation. 

Meanwhile, in a place far, far from Acme, Apple reaps the harvest of having played out a massive gamble on differentiation, now naming their own price for all of their computers, protecting their margins.

The Eighth — Rah Rah City

The middle ground of The Acres of Plenty Sector is Arrondisement Eight, RahRah City. Why RahRah? Because this is a place where the things we care about are more a result of what we put into them than what may actually be there. In this middle ground we have some clear distinctions about things: we wear clothing that expresses our brand attachment, we cheer for our pro sports teams, we become loyal to our cars, our schools, our religion. RahRah is a place where we often see our own identity through the lens of what we affiliate with, as opposed to what might affiliate with us.

For young people, RahRah can often serve as a place of transition, on the path from youth, yearning and learning, to a resting spot of safety in numbers. Here our affiliation with our high school or college will help us see who we are for awhile.

The Fourth — Brand Land

Moving toward the weaker forces in the Acres of Plenty, not well differentiated but still somewhat valued, is Arrondisement Four, Brand Land. Welcome to Calvin Klein underwear! This is the place where the only difference between the generic and the differentiated is the brand itself, a place where the brand doesn’t serve to identify that value is present, but the brand is the value in and of itself. Here are cotton t-shirts by the millions where the last act in the manufacturing process, and the most important, is the attachment of the label. Here is where Proctor and Gamble conduct their warfare against American Home Products, Crest and Tide slug it out against Colgate and Oxiclean.

THE VALE OF CURIOSITIES

The Tenth — The Undertow

At the intersection of the strongest forces in the Vale of Curiosities, where the highly unique and the enormously unvalued, meet, is the Tenth Arrondisement. The Tenth is called the Undertow, where fiction and non-fiction writers of all kinds come for their material, for every figure in the Undertow deserves at least one good biography. Here are monsters, the great dictators, the sociopaths. Take whatever mad genius you can imagine and if they’re up to no good, this is where you’ll put them or find them.

Now comes one of the most interesting, even curious, results of the Map of Value. At first blush we would not be expecting to find the rest of the territory of the Vale of Curiosities filled with entrepreneurs, artists, theatre people, and the young of all kinds. And yet, here they are, tumbling in their own vats of creativity, many of whom will eventually migrate to regions of the map far from their current locales.

The Sixth — The Left Bank

The middle arrondisement in the Vale of Curiosities is the Sixth Arrondisement, The Left Bank. The people here are not well-known yet outside of their own fields, but they are often hard at work pursuing their unique paths. It is, of course, their uniqueness that puts them here in the Vale, and it is their failure, so far, to be recognized as having something to contribute that keeps them in the Unwanted end of the Axis of Desire. If and when they break out, they are likely to become a brand in Rah Rah City, or, if they focus on differentiation, they could end up in The Land of Dreams. Bill Gates began here, dropping out of Harvard to pull a group of techies together to create a disc operating system. When that became DOS and Gates licensed it to IBM, Microsoft moved diagonally on the Value Map, straight to Acme, since you can’t run a computer without an operating system.

The Sixth is home to artists and actors, many of them in the midst of respectable careers, but not well-known enough to carry a major film. But virtually everyone who has made it in a big way, whether actor, or artist, inventor or entrepreneur, could have been found here early in their careers. If you’re an investor looking for value, the Sixth is where hidden treasures lie everywhere. The next Google is here, the next Apple, the next Internet.

The Second — The Source

Now to the core arrondisement, the space from which all else flows, which is why the Second Arrondisement is called “The Source.” In this area everything is just a little bit more unique than generic, and no significant desire has yet been established in the greater market. Children start here, of course highly valued by their families, but not yet by the larger world. And this is where they grow up, for awhile, as well — still not valued highly by the outside world, with a few exceptions, and still not strongly differentiated.

Of course, from a societal point of view, how the young are valued has varied from culture to culture and era to era. In the U.S., although we give a lot of lip service to the importance of our young people, the quality of education we offer most of our children, the quality of healthcare, the mass media we overwhelm their sensibilities with, perhaps speaks volumes about us a culture.

THE LAND OF DREAMS

Ah, the great northeast, where what is distinct is also valued.

The Ninth — Heaven

The Ninth Arrondisement is, simply, Heaven. Some people put the U.S. Constitution here, others would add their hairstylists and colorists, and their favorite works of art. For movie studios, the bankable stars are all here because those same stars are somewhere in the Land of Dreams for millions of moviegoers. For Berkshire Hathaway shareholders, here is Warren Buffett. Hello Dahli Llama and Mozart. For others, it might be whoever reigns at the top of the pops.

Artists who are magnificent at what they do but are not well-known to even the broad art world would not be found here. Although the entire Map of Value can be used to understand any culture more clearly by looking at what falls in all of the zones and all of the arrondisements, perhaps it is in the Land of Dreams that societies and peoples speak most clearly about themselves. What do we as a people cherish?

This is where we find the priceless — our loved ones and treasured friends. Here is intellectual property of all kinds, but not all intellectual property. Here are billion dollar formulas like that for Coke, or hedge-fund algorithms, E=MC2, the Pythagorean theorem. The Golden Mean, however has fallen out of favor over the last thousand years, and has dropped back down to the Left Bank: Not all intellectual property gets to stay in Heaven.

The Fifth — Equipage

The Fifth Arrondisement, Equipage, is where everything that’s “nice to have” can be found, from luxury goods to great restaurants, quality travel, establishment arts (London theater, symphony orchestras, major museums) and quality services. Custom first and second homes are in Equipage, as well as all the great stuff that fills them up. Designer clothing is here, gourmet food, and custom services of any kind. This is the land of discretionary spending.

The First — Delight

Finally we arrive at the First Arrondisement, simply known as Delight. Here are the smaller pleasures and treats of life, from your favorite flavor of ice cream made by your favorite ice cream maker, to a lovely weekend with someone you love being with. A vacation to your favorite spot might be here as well, so for some folks Delight, although small on the map, could include all of Italy.

That completes the brief introduction to the Twelve Arrondisements that make up the Map of Value, where the strong and weak forces of Distinction and Desire begin to explain the disconnects between price and value.

DIGRESSION ON THE YOUNG

Let’s take a moment and think about how understanding the Map of Value could help a young person plan their career.

If you are a young person looking over the Map of Value, you might be looking ahead to the rest of your life and thinking that you’d like to be valued in a way that you’re working in the Land of Dreams, where you will be wonderfully unique and highly desired. You might also notice that a great many of your peers, although they want to end up, somehow, in the Land of Dreams, spend an awful lot of time headed toward RahRah City, a place where peer pressure to conform makes us mask our own unique gifts, and where we basically try not to be too distinct.

Again, as an intelligent young person, you might ask yourself why you would want to wander around RahRah City when you might as well start differentiating yourself right now, getting an education that will make what you do unique and essential to a reasonably large group of people.

It’s one of the great lessons to be gleaned from the Map of Value:

With a little imagination and a lot of hard work, you can go where you want to, and you can go there directly.

 FROM 12 ARRONDISEMENTS TO PERSONAL MAP OF VALUE

Each of us not only has a place on the Map of Value, we all can make our own Maps of our Values. Let’s take a moment to see how that works. 

PERSONAL MAP OF VALUE

I’d like for each of you to place each one of those items somewhere on your Map of Values. Let’s take a few minutes.

(The eight items:

1. Your family.

2. Young people other than family.

3. The San Francisco Giants

4. Two weeks in a tropical island resort.

5. Other people’s pets.

6. Those who purchase your products or services.

7. How do the people who hire you see you?

8. How do you see yourself?)

How many people had the San Francisco Giants in Heaven? And how many had them somewhere in or near RahRah City?

And how many of you had your clients’ value of you in the same place as where you see yourself?

And how many had those two views on opposite sides of that vertical axis, the Axis of Desire?

A SAMPLE PERSONAL MAP OF VALUE

So one of the first things that we can see is that everyone has their own unique Map of Value. On the back of your Map of Value are some fifty additional items you might want to place on your map, or place there as a way to look at how you believe others may value various aspects of our world. You can try it with your mate and your families and see how differently or similar you are.

You may get some surprising results: No wonder he hates going to museums!

And groups of various kinds can have their own maps of value as well. You might be able to make a map of value for people ten to thirteen years old, or of Republicans and Democrats, maybe even of religious groups and even entire nations.

Our personal Value Map may change over time. Finding the right mate might have enormous import until achieved, as will other goals: education, professional, financial, familial. We may become more socially conservative over time, or come to value certain arts or literature. Who knows? We may become addicted to croquet!

THE PRICING REVOLUTION

Now that we all understand where the value of everything comes from, we can make some surprising observations about price. Maybe for the first time, we can see why price and value are not the same for every buyer or seller, and why the Map of Value might help cause a pricing revolution.

Let’s look at the Acres of Plenty and contemplate how price gets set here. At the farthest out, in Acme, potatoes are potatoes and oil is oil. If you’re selling generic accounting services or an MP3 player that’s not from Apple, you’re going to charge about the same as everyone else. So on what basis can you compete over here in Acme? Maybe location. That seems to be the answer to growth for McDonald’s and Starbucks: We’re everywhere!

How about competing on service? That’s a funny thing, because as soon as you get to be legendary on service, you may actually have moved yourself out of Acme altogether and now would be lounging over here in a whole lot of folks’s Equipage. Not the worst thing, because, like Lexus, when you’re in Equipage, you can raise your prices!

But what if there’s no possible way you can get out of Acme? What if you’re oil, or a PC operating system, or ice? How can you raise prices when you’re a commodity? Scarcity. And how to create scarcity? The best way is: monopoly! So unless you’re OPEC cornering the oil market, or Bill Gates with a lock on 90 percent of the PCs on the planet, the market is going to set your price.

When something is fungible or generic, it gets priced along the classical guidelines of “ingredients plus labor.” Branding can help add to price somewhat, but brands don’t contribute much as long as the products themselves dwell in Brand Land — not well differentiated, not highly valued.

What about Heaven? What if we’re Heaven to someone, or a whole group of people? What if you’re auctioning off a Ferrari 1957 SuperAmerica, (just under a million) or an Inverted Jenny, or a Van Gogh? When there is no limit on price, what is the limit? Why will someone pay $300,000 for that tiny piece of paper, or a million dollars for a bucket of bolts (my father’s feeling about cars), or $35,000 for an hour of Vernon Jordan’s time?

The answer is, in Heaven, the limit to price is the threshold of pain of the beholder.

I can repeat that: in Heaven, the limit to price is the threshold of pain of the beholder.

When we leave The Acres of Plenty and move into The Land of Dreams, classical theory goes out the window. Value is no longer based on the seller’s costs, but can be based instead on the buyer’s needs, desires, and budget limits. If what you are selling is unique and highly desired, then price is only limited by the buyer’s threshold of pain, which is a reflection of their feelings about their liquid disposable assets.

In the Land of Dreams, chocolate can be valued at $100 a pound, shoes at $1000 a pair, and professionals can bill at thousands of dollars an hour.

Here’s the potential revolution: What happens when this understanding about value in the Land of Dreams  is brought to bear on goods and services that have been traditionally priced as if they were commodities, such as the way books or consulting fees are currently priced, when in fact they could be priced on their value? And what is the challenge for enterprises of all kinds in planning their product range? For products that fall into the Acres of Plenty, they must compete on service, price and brand. If their new offerings can cross the line and become differentiated and desired, they can sell on value. Apple has been on the differentiated side since its beginning. What’s new is that it has begun to move up from not highly-desired by the greater part of the market, to highly-desired by the larger part of the market.

What happens when professionals begin to differentiate themselves? If you serve your clients’ specific needs with specific service and solutions, you will no longer be competing with those that serve their clients with generic solutions.

What will move you from Acme to Heaven is: quality, customization, and the clear demonstration that you care deeply about your clients’ well-being.

Moving to Heaven is really about dating. You will need to go to school on your customers and clients as individuals. And then, once you know them, what they need, what they value, and what moves them, you will need to seduce them and have them fall in love with you so completely that they simply cannot live without you.

Because the moment they think they can live without you, you’re leaving Heaven and headed back to Acme.

SUMMARY

So now we’ve seen how the Axis of Distinction and the Axis of Desire intersect to give us a complete Map of Value, with four distinct regions. And we’ve seen how those four regions divide up into Arrondisements where we can both see where our interests and values might be. We can also see how we might want to place ourselves on the Map of Value, and whether or not others perceive us as being where we want to be perceived, or not.

That’s as far as we can take the Map of Value in this time frame. I hope you have found the intersection of Distinction and Desire to be a worthwhile concept and that you’ll let me know what observations and improvements you might have to contribute to the Map as they come to you. Thanks very much, and I hope I’ll be seeing you soon in Heaven!