Price, value, worth and cost

It didn’t look like much. Not worth much, certainly. It had been a gift from a friend, a former colleague: I’d had it for years, kept it reasonably safe in an old battered ring-case, until finally it was lost somewhere.

In appearance, and in fact, it was just a small wedge of dull brown sandy rock, maybe half an inch long, and quite a bit less than that in both width and height. It was kind of T-shaped, a bit like where the vanes of ‘desert rose‘ crystal intersect, broken off from an underlying base, and with little glittery bits of embedded sand showing through where the edges had been snapped off.

Yet for all that, it was out of this world. Literally.

To be more precise, it was from the¬†other world that’s shown as the foreground in this so-famous image…

To which, of course, there’s a story attached. ūüôā

Way back when, I’d been near-obsessed by anything to do with astronomy and space. At school, a close friend’s father ran the university’s radio-astronomy observatory; in later decades, he became a Nobel Laureate for Physics, and, eventually, the Astronomer Royal. It’s where I first came across computers: I remember being allowed, at a very early age, to print my name on six-channel punch-tape. I had my own telescope; even as a teenager got involved in academic and observational arguments about the formation of the moon; for a few years was also a keen member of the British Interplanetary Society – a serious engineering-oriented group of which my mother, it transpired, had also been a member when it first started, way back in the late 1930s. So yeah, kinda committed, you might say.

Late at school, I’d still perhaps intended to take up a career as a professional astronomer: but reality was that my maths wasn’t up to it, and I needed to try elsewhere. Which took me on a different path, to a different college, and, eventually to long, shared conversations with a technician there whom I’ll call Hans. (There’s a risk that, even after all this time,¬†some people might get into trouble for what follows, so best I don’t use real names here.)

He was German. Back in the late 1930s he’d been an apprentice engineer, working on hydraulic pumps for everyday agricultural tractors. Come the war, he found himself posted to¬†Peenemunde, working with¬†von Braun‘s team there, developing fuel-pumps for rocket motors. (They’d succeeded in their brief, he said, whilst at first the plumbers didn’t – hence some very interesting explosions on the launch-pad…!) As the war came to a close, the whole team had decamped to the west to try to evade the Russians; by intent, he was captured by the British, spent some while in a PoW camp in Britain, and, with his home now in East Germany, had simply stayed on after his release. He was one of the few of his cohort that had managed to evade being caught up in¬†Operation Paperclip; with some difficulty, he’d convinced his British interrogators that he really would¬†not get involved in designing military missiles, and had taken a much more mundane job instead.

But he kept in close touch with his former colleagues – which is why our small provincial college was one of the few in Britain to receive a tiny fragment of moon-rock, brought back by Apollo 11. (That item arrived with its own security guard; in the meantime, Hans’ own personal piece arrived in the ordinary mail…)

Some months later, he took me to one side, and, with an unusually broad grin, said “This is for you”. And he gave me a tiny package, wrapped in paper-tissue. Straight away I knew exactly what it was – even though it didn’t look like much at all:

It’s what I’d described earlier: much smaller than that sketch above, a small T-shaped wedge of rock, dull-brown, seemingly a bit burnt, with little glittery bits of sand that, if I wasn’t careful how I handled it, came off at the touch. It had been part of the¬†contingency-sample¬†from the¬†Apollo-12¬†mission, apparently: taken from directly under the lander’s exhaust, it was pretty much useless for science, hence quietly – if very much unofficially – kept aside for private mementos and private gifts. We were promised more from the upcoming Apollo 13 mission, he said – but as everyone knows, it never got there. Soon after that, it was time for me to move on to another college, and we soon lost touch. These things happen, of course.

I kept it for quite a few years, tucked away in that old ring-box. Not surprisingly, it was a focus for quite a lot of attention, and some great conversations. (Without my knowledge, someone broke off a tiny fragment and tried to smoke it – which kinda tells you a bit more about what it looked like, and the kind of people I rubbed shoulders with in those Glastonbury days. ūüôā ) Eventually it was starting to look a bit worn – a bit finger-greasy from all the handling, and more and more of the glittery little sand-particles rubbed away – so I gave it to a jeweller-friend to make a mount for it, for better protection. And that was the last I heard of it, or him: when next I enquired, he’d left the country, and my little piece of moon-rock was nowhere to be seen. Thrown out with all the other rubbish of the move, most likely: after all, given who I was, not everyone would be likely to believe that it was what I said it was.

And truth be told, it’s possible that the whole thing¬†was a fantasy, of course. There was enough evidence to indicate that it was indeed all real: but yeah, Hans could perhaps have been taking all of us for a ride – not just me, but the college administration, and many others as well.

Yet it actually doesn’t matter: that’s the whole point here. It’s what it was¬†worth, to me and to others, that actually matters.

Which brings us to an interesting point that we come across very often in enterprise-architecture and elsewhere: value, worth, cost and price are not the same.

Many people seem to treat each of those terms as synonyms for each other: in Australia, for example, if people ask “What’s it worth?”, what they actually mean is “What’s the price?” Yet there are key differences between those terms; and if we¬†do treat them as synonyms, we’re likely to create confusions from which there is often no clear way out. And it might be helpful to use this little piece of putative moon-rock as an example to illustrate the real differences between those terms.

The¬†value of something resides primarily in the services that it can enable. In the case of that moon-rock, its scientific value was close to nil. It would have been damaged by the blast, heat and chemistry of the rocket exhaust: by comparison with the pristine materials available further from the lander, it was almost useless. But that was the whole point of the contingency-sample: if they’d had to leave straight away, at least it would have been something from the place. Yet since they didn’t have to leave straight away, all the real scientific value was from other rocks elsewhere.

For me, the value – the ‘services‘ that it enabled – lay primarily in the way I could use it as a conversation-starter. There wasn’t much else I could use it for, really. ūüôā

The¬†worth of something probably resides less in the thing itself, but in what it¬†means to someone. In that sense, value and worth are similar, and often related, yet not quite the same. To the scientists, for example, this little piece of moon-rock was all but valueless¬†and worthless, because it could help very little towards what¬†they regarded as ‘meaningful’. Yet to others, it¬†symbolised all of the relationships, the memories, pride, achievement, and much more – as can be seen in the way that small pieces were passed to other nations’ embassies as an overt, even ostentatious, display of politics and prowess.

For me, in my own much quieter way, it symbolised many things too: my lifelong passion for cosmology and space, my friendship with Hans, my commitment to the ‘bigger-picture’ view of the world, and much more. That’s what it was worth, to me. And yet, when it was lost, that didn’t much matter – the¬†memory of that little piece of moon-rock was, and still is, almost as much of an anchor for those connections as the physical thing itself had been. Do I have the thing itself now? No. Do I still have the¬†worth of that thing? Mostly, yes. That’s the difference there.

The¬†cost of something is the sum of all of the effort needed to create it, find it, move it around, act on it, whatever, and in every sense – including emotional and aspirational (‘spiritual’) costs of relationship and meaning and the like. For example, the costs included the effort and expense and everything else in NASA’s enterprise to get vehicles and people to, on and from the moon, and everything that led up to that end – including the political will of people like President John F. Kennedy, who committed the US as a whole to that task, and, further behind it, the military and other fears that drove the ‘space race’ in the first place. Further back again, for Hans, the costs included things like the fear created for him during the Allied bombing-raids at Peenemunde, and – for him, and for many others on von Braun’s team – the shame of having been entrapped in war-work, when what they’d originally aimed to create (and, ultimately did achieve) was a full-scale space-programme.

For me, of course, the costs might at first seem trivial: after all, it was just a gift, and that was it. Yet behind that, there¬†were very real costs too, no matter how enjoyable most of them might have felt at the time. For example, the ‘meaning-effort’ to find astronomy and space interesting in the first place; the effort involved in all of that study, to develop understanding of the issues and what (often very little) part I could play within them; the effort of conversations, and of building person-to-person connections with my schoolfriend, and his father, and Hans, and with many others too within that overall context. Mapping out the full set of costs, and the interactions and interdependencies between those costs, can often be very complex indeed – but sometimes, to make sense of a context, we do indeed have to go quite a long way down the rabbit-hole…

The¬†price of something is… well, a¬†mess, really. It’s supposedly a ‘valuation in monetary terms’, but it’s probable that the most honest description of price and pricing is that it sits somewhere between a random guess, wishful-thinking, self-delusion, and, too often, outright fraud. Crucially, it describes a¬†subset of costs – usually those most amenable to a possession-type model, aligning far more with the physical and, to some extent, virtual (informational dimensions of assets, and often ignoring or excluding all relational and/or aspirational dimensions – yet also attaches or focusses on arbitrary concepts such as ‘scarcity’. In the case of that little piece of moon-rock, technically no price should be available, since in principle it always remains the property of NASA. The nominal price – total monetary-cost of mission divided by total mass returned – should be around US$50 a gram¬†at 1970s figures, if my back-of-the-envelope calculations are anywhere near correct; but I have seen prices quoted of upwards of US$250,000 for even a piece as small as that one, simply because of its rarity on the so-called ‘open market’, or anywhere at all.

For me, the price was zero.¬†And that was the whole point: it was a gift, from friend to friend. If a price had been put on it, it wouldn’t have been a gift any more – not of that type, anyway. And the relationship would have been different, too:¬†the price of the gift would have clashed with the worth of the gift.

To put all of this into a more everyday perspective, consider the value, worth, cost and price of a house:

— The¬†value of a house is the services that it delivers. Interestingly, the effective value of an average house or apartment in Britain – floor-space, room-size, garden-area, facilities and so on – reached a peak somewhen around the 1980s, and has actually been going down ever since.

— The¬†worth of a house is in the emotional and other drivers that it supports and represents. This is, by definition, highly subjective.

— The¬†cost of a house is somewhat more complex to assess. In monetary terms only, the cost is the sum of all costs to build and maintain. More realistically, we also need to take many other forms of cost into account, such as loss of amenity-space to others, damage or loss of history, impact on future generations, and much, much more.

— The¬†price of a house is an arbitrary monetary ‘valuation’, based primarily on spurious and often delusory notions such as¬†microeconomics¬†and the like, and which may bear little to no connection with the value, worth or cost of the house.

In short, the price of a house is not the same as the cost of a house is not the same as the worth of a house is not the same as the value of a house. They’re all different from each other.

And the same applies to everything Рthe price, cost, worth and value of anything at all.

Hence, for enterprise-architects, don’t mix these terms up, or use any of them as a synonym for any other. They represent very different things, very different attributes of or assigned to an entity – and getting this wrong will¬†guarantee problems for someone further down the line.

That’s it for now: over to you for comment, perhaps?

5 Comments on “Price, value, worth and cost

  1. I think your distinction between price, value, worth and cost also helps with the art of making a business-case. Particularly during the dialog with different stakeholders and adressing non-tangible benefits or investments. Thanks!

  2. Great post Tom. Easy to reuse in many discussions and absolutely spot on in the distinctions. It’s amazing how many people not merely confuse value with price minus cost but also assume there’s some kind of linear relationship between cost and price (maybe there should be but that’s another discussion).

    Joel also makes a very good point about business cases.

    • Glad you found it useful, Stuart – again, many thanks!

      Also please do feel free to post examples of how you might use these distinctions in business-practice (or elsewhere for that matter), in business-case development and the like – quite a few people would likely find those examples helpful too.

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