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801 points tnorthcutt | 2 comments | | HN request time: 0.69s | source
1. noelherrick ◴[] No.7526440[source]
Whenever I read Patrick, I'm reminded I have bad thinking about how to price something. My idea of a fair price is = COST_TO_MAKE x 2 or something like that. In reality, it's VALUE / 2. Meaning, if a backup service provides $100 worth of value (reduction in risk), I should be ok with paying $50 for it. I shouldn't reject a backup service because I know that it costs $1 and they're charging me $100.

Consumers are pretty price sensitive, and business that sell directly to consumers must cater to this. This is why Patrick is always advocating that you start a business that sells to other businesses. A business doesn't mind paying for something as long as the cost is below the value it gets them. Isn't that the basics of business? Buy low, sell high? Buy a service that provides $X value as long as the cost is < $X?

I first can across this difference when I was a newbie DBA. We needed to upgrade our SQL Server cluster to the latest edition. I reviewed the differences between the various editions, and decided we could use some of the features in Enterprise vs. Standard. I did a little estimation, and showed how much time we could save between the DBAs and the developers if we got Enterprise. It was nowhere near the difference in the license costs, but I passed my findings onto the IT manager and the CEO. The CEO said buy Enterprise. I was stunned, and thought it was a bad decision. The reality was that we got so much value out of SQL Server, it didn't matter that we paid more than what was absolutely necessary.

Developers have the consumer pricing mindset as well. They complain about IntelliJ, Xamarin, or Visual Studio licensing, or worry about SQL Server costs. Even if an IDE provides you with a 1% performance gain, I'm pretty sure that's worth it for most companies. Who cares if a language/framework/database/server is free if reduces your output by even 5%. That's just bad business. You can claim a license fee on your taxes, but you can't claim an opportunity cost.

Consumer tight-fistedness for consumers can also be a bad thing. I live in a relatively cheap area of the US. When I travel, I'm shocked at the prices. In order to feel comfortable, I have to ask myself not Is this a good price? but Would I rather pay $15 for a pina colada or go without? Often the answer is, Yes, I'd rather sip a coconutty concoction on the beach in Hawaii than have an extra $15 when I get home.

replies(1): >>7528792 #
2. NoodleIncident ◴[] No.7528792[source]
It's not wrong to think of stuff in terms of whether it's worth the price, though. See: the Mr. Money Mustache school of thought, in which every dollar you don't spend is a dollar closer to not ever having to work again.