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Why would anyone pay $1.3 million for a cell phone?
Only one reason: because, to them, the cell phone is more valuable than $1.3 million.
The Le Million, developed by Goldvish, is the most expensive cell phone in the world, according to The Guinness Book of World Records. It’s handcrafted, constructed from 18 carat gold, and mounted with 120 carat diamonds.
Still, how do you justify $1.3 million? And more importantly, how can you convince other people to pay you so much money?
Price vs. Value
In most people’s minds, value means the same thing as price. If the price tag says $9.95, then it’s worth $9.95. We’re taught by a Wal-Mart type shopping culture, where you buy something for what they’re asking or you don’t buy it at all.
But in reality, value works a little differently.
If you think the price is higher than the value, then you don’t buy it. For instance, let’s say you’re shopping for a new pen. The price tag says $9.95. “That’s awfully high for a pen,” you think, so you buy a cheaper one instead.
To you, the price of the pen was greater than its value to you. Or, put another way, $9.95 was more valuable to you than the pen.
We can also reverse the situation. Now imagine that you’re a pen connoisseur, making a quick run into the store to find the highest quality pen available. You scan the pens for sale and pick the one selling for $9.95 to be the highest quality. “This is a good deal for a pen like this,” you think to yourself, so you take it to the cash register and buy it.
In this case, the price is lower than the value, or $9.95 is worth less to you than the pen. You gladly trade your money for it because the pen is worth more to you.
Make sense? If not, think about it as a scale.
The Value Scale
Imagine for a moment that we have a special scale, one that weighs the value you place on each item and lowers the “heaviest” 
one. When you’re thinking about buying something, you put the money on one side of the scale and the product on the other. Depending on which one you want more, the scale tells you whether or not to buy.
The scale answers the question, “Is it worth the trade?” After all, that’s what we’re talking about: trading money for something that you’re considering buying. The only way you’ll consent to the trade is that, to you, whatever you’re trading for is worth more than the money, making it dip lower on the scale.
Let’s go back to the example of the pen that’s for sale for $9.95. We put them on our scale, and what happens?
If you’re just browsing for a workable pen to take notes, then the craftsmanship is irrelevant to you. It has no value. Your money, on the other hand, might have significant value. If you’re making $10 per hour, then the price of $9.95 represents an hour of your life. Because the money has higher value, it is heavier on the scale.
On the other hand, let’s say you just got promoted. You’re moving into a big, luxurious office with a high-end desk, and you can’t imagine continuing to use those cheap, disposable pens. You’re looking for something nicer, but still reasonable. When you see the $9.95 pen, its value is high. If you’re making $50 or more per hour, then the $9.95 is also a small sacrifice. Because the value of the pen is higher than the value of the money, the pen dips lower on the scale.
You can do this exercise with any sort of product… including a $1.3 million cell phone.
Why the Cell Phone Sold for $1.3 Million
The rumor is, a Russian businessman bought the cell phone for his wife. Nothing I can find says exactly why he bought it for his wife, but we can certainly make some interesting speculations.
If you’re a diehard investor, you might believe that he bought it because he thought it would go up in value. Here, the value of the phone would be derived from the belief that other people would perceive it to be worth more than $1.3 million in the future.
If you’re a romantic, you might believe that the man was making a statement to his wife: that he wanted to give her all of the finest things in life. Here, the value of the phone would be derived from the love for his wife.
If you’re a cynic, you might believe that the man was recently caught having an affair. The wife was threatening him with a 
divorce, so instead of facing a divorce, he bought her a breathtaking gift. Here, the value of the phone would be derived from avoiding the cost of divorce.
Regardless of how you look at it, the main point stays the same. He put the $1.3 million and the cell phone on his own mental value scale, and the cell phone was heavier. So he bought it.
How Can I Make This Worth More Than It Costs?
You can condense the entire value scale theory into one question: how can I make this worth more than it costs the customer?
If you’re selling a pen for $9.95, then figure out how to make it worth more than $9.95 in the mind of your target customer.
If you want a job paying $100,000 per year, then figure out how to make yourself worth more to the company than $100,000 per year.
If you’re selling a cell phone for $1.3 million, then figure out who is willing to pay that much money and convince them it’s worth more.
Not only will you create lots of happy customers from thinking about value in this way, but you’ll also put more money in your pocket, assuming you have a healthy enough margin.
So let me ask you… how does the value scale look for this blog? Which is more valuable: the advice or the time it costs you to read it?
If the advice is more valuable, then why not go ahead and subscribe? After all, the value scale says you should.
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October 23rd, 2007 at 1:25 pm
I like your ideas. I feel the same way, it’s all about what the individual’s values are at. And if you’re in sales, you can’t pitch everyone the same benefits… You have to LISTEN or ask questions first to see what they value. Great blog by the way.
Bas
buildandsucceed.com
November 7th, 2007 at 10:17 am
[…] of those benefits will directly make you more money, but indirectly, they can add up to significant increases in your value to everyone around you. As your value increases, you’ll also have more […]
December 3rd, 2007 at 8:19 pm
[…] it usually is. Starting a new search engine to dominate Google would be tough, but it would also be worth billions. Similarly, getting into Harvard is difficult, but it also sets you apart and helps you get a […]
December 15th, 2007 at 7:04 pm
This post and your other post that talked about your ninja star business made me thing of this…
Back in elementary school I used to purchase hot lunches from other students (until the principal got wind of it and asked me to stop). These were the hot lunches other students had bought (or their parents had) from the cafeteria. I rarely paid anything near full price (usually 25% to 50% of, uh, “retail”). I either ended up with some bonus food over what I would have gotten purchasing my own food at “retail” or I saved a bit of cash.
For a while I couldn’t figure out why other kids were willing to do this. Were they being irrational? Were they clueless? Nah. Later it donned on me… most of my trading partners probably were a mixture of the following types: (a) parents pre-paid for lunches so the kids never got the cash but, given the cash, would have happily purchased cookies instead (b) were on the low income reduced price and often also pre-paid or even free lunch programs. They were thus breaking even or even making money from the transaction (c) were second guessing their purchase of the lunch (perhaps after getting a closer look or drooling over someone elses better looking alternative) and, since they couldn’t return the food to the cafeteria, I was providing them with a straightforward solution to their problem.
In any case, the idea is that value is relative. And that’s also why price is neither high nor low on anything. It’s all relative to value and value is relative to the individual (and often even the context such as the time, place, and mood).
-jr
December 29th, 2007 at 3:10 pm
[…] it usually is. Starting a new search engine to dominate Google would be tough, but it would also be worth billions. Similarly, getting into Harvard is difficult, but it also sets you apart and helps you get a […]
January 4th, 2008 at 4:32 pm
[…] If your product or service clearly provides more value than it costs, raise your rates or prices and see what […]
March 8th, 2008 at 11:56 am
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