Measurement and Value Or which is more valuable, Diamonds or Water?
Measurement becomes a hindrance when you sacrifice outcomes that are hard to measure but more valuable for measurements that are easy to gauge, or that are accepted by other people. The challenge is then to find the best measurements that are easy to gather and great to use.
An example where measurement may becomes a hindrance; how do you measuring the value of diamonds vs. water?
Most people see the obvious crux of the problem, namely, diamonds have a much higher retail value, but you die if you don’t get enough water.
So obviously price can be a hindrance to measuring the value (and impact) of water. So how could we change this way of thinking to get a more complete way of measuring the value of water?
Increase the dimensions and scope of measurement.
Example
The answer to “which is more valuable” is, it depends on what valuable means. Let’s review.
Value may be measured in a couple of different ways, 4 of which I think are very valid.
- Value = Total willingness to pay
- Value = Marginal Willingness to pay
- Value = Price
- Value = Market Value (price * quantity)
If you ask how much people are willing to spend in total on water vs. diamonds, it’s clear that over a year, or lifetime, that water is clearly more valuable.
If you ask what is the marginal willingness to pay, we’ll see that diamonds are generally far more valuable (for the first one)- would your rather have someone propose with a diamond or a gallon of water? People are willing to pay quite a bit for that first one- diamonds win this valuation.
If we look at price, then diamonds generally win- this may be thought of as a good indicator of relative scarcity. Diamonds are valuable because the De Beers family keeps supply limited, and hence, the price high.
Market value leads to a different conclusion- the results of price*quantity of diamonds is far outstripped by price*quantity of water globally- it’s not even close.
So we can see that depending on which valuation we use, diamonds or water may have drastically different valuations.
What does this mean about measurement as a hindrance? This comes back to our conversation yesterday about indicators of Charity Navigator; when we get hung up on certain indicators, or measurements that stop us from understanding the whole picture, then measurement is getting in the way.
Whoa. My mind was just blown. I don’t even know what else to say except that I just realized I need to go to more strategy classes/clubs meetings. Haha.
That post was great! I think I will propose with a gallon of water now! Would it be helpful if there was a consolidated measurement place, like a charity navigator with a bunch of measurements? Or is this “true valuation” thing just a losing battle?
Nah, it’s not a losing battle. We got this.
Very thought provoking. So, the CONTEXT matters a lot when we are deciding what to measure and what the value of that measurement means. This analogy really helps you see that depending on how you look at a situation there are lot of ways to measure everything. But, if the measurements stop you from seeing the big picture then it’s a problem. Love it.
Great point that people value things differently, for different reasons, and at different times. People have different value systems… some people value a Big Mac every day for lunch over having good health. If I provide one of these people with a Big Mac, my impact in his life would probably be greater than if I gave him a treadmill, keeping in mind that he values Big Macs over health. I’m trying to work this out in my mind, but it seems that sometimes social innovators measure impact based on the responsiveness of their customers. This may not always be a good measurement because people can place higher value on things of lesser worth–but value is a matter of perspective, just as you stated.
Let me just say, sir, straight out… that to be able to convey one’s message succinctly, yet powerfully is a highly sought after trait, one that will prove VERY valuable in this field of social innovation. To get to the point that I have about MCOM 320 (which I am taking right now), in terms of OABC format, you create an amazing ‘Agenda’ i.e. your symbolism creates an impactful visual mental image. I just want to recognize you for this, because you have done it so well so consistently, and I promise you, it is worth the thought you put into your images and your titles: it drives the point home, every time!