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Price vs. Value

November 16, 2012

Among the many pithy observations of the hugely successful investor Warren Buffett in the 2008 Berkshire Hathaway Chairman’s letter is the following:

“Long ago, Ben Graham taught me that “Price is what you pay; value is what you get.”

Warren makes it clear he’s talking about his propensity for buying when the price is low as long as the value is high.  I see another, equally important insight. Price (what you pay) is fixed but value (what you get) is highly subjective.

Many people pay close attention to Apple’s new product announcements. Recently, the iPad mini was introduced at $329 which influential “experts” regarded as too high. Ignoring “expert” opinion, millions of actual buyers have been visiting Apple web sites and stores, learning about the features and benefits of this new product, and growing the “value” of the new device in their minds…  until it far exceeds the low $329 ask.

No one doubts that the iPad mini will be hard to get for this holiday season despite Apple offering millions for sale. Apple’s figured out there are two ways to create wealthlower the price or increase the value.

Either way, the customer gets more for their money… and is wealthier as a result.

 

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From → Business, FAQ, Truth

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