I stumbled upon a quote the other day that really resonated with me – although I had thought through it many times before, I hadn’t ever heard or read it put so succinctly. It is called “The Common Law of Business Balance” which is a meditation on price and it is attributed to John Ruskin – a 19th century English poet, fervent art critic, and socialist.
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It reads as follows:
“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey. It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”
This is a classic quote on the possible folly of automatically choosing low-cost as the best way to make a purchase decision. It appeals to those who believe, or who want to persuade others to believe, that price is a possible indicator of quality. While this is not always true, it does align with my way of thinking simply because I tend to see it played out this way on the job site. For the most part (and there are exceptions to the rule just as there are examples that set the rule) the really good contractors tend to work with really good sub-contractors and the combination of these two things generally translates into a superior product – which typically translates into a more expensive product.
What I try to talk about with my friends and clients is about finding the appropriate balance between product and cost – which would be value. If you don’t appreciate the more expensive item, or can’t tell the difference between something and its less expensive alternative, how can there be value in paying for it? The only time this really becomes an issue is when someone wants to pay for the cheaper alternative but expects the quality level to remain unchanged. It simply doesn’t work out when the expectations don’t align with the associative cost.
Just something to think about.
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My dad gave me a cliffs notes version of this as advice when I was in college. It’s called the 2/3 rule: In it there are three variables – time, cost, and quality. The rule is, you can have two of the three at once, but not all three at once.
Example: you can have something done quickly and done well, but not inexpensively.
OR you can have something done inexpensively and quickly, but not done well.
OR you can have something done well and inexpensively, but not quickly…
That is actually an excerpt from a speech given by Fred Smith of Fed-X at a business convention where he was the key note speech.
That is actually a version of the Project Management Triangle, which evolved from the Triple Constraint Theory in Business…years before FedEx existed. I’m 47 yo and that has been told to me since I was old enough to understand the costs of items–middle school.
This is a great quote and really resonates. I work for the county that I live in and I often wonder how after so many bad results they can stand by their rule of choosing the lowest bid contractor every time.
In the wonderful legal world of privitisation and sub contracting, the people who make the decision to hire the lowest bidder manage to absolve themselves of responsibility for the execution of the product/service. There’s also the side effect of having more money left over to spend on private projects, like another investment property.
Though if we’re talking about politicians, they’ve managed to create the illusion of choice. You pick which to vote for but you can’t not have them, which manages to continue the practice of mediocre contractors and lowest bidding situations. There is a wonderful Douglas Adams quote to that respect involving lizards if you’re bored.
A much needed reminder! BTW your Twitter button above does not work.
The key for a quality result is to strike the right balance of budget and time. Now a days,I find many clients are even OK to spend a little more for quality but are not willing to give that extra time to achieve the quality result. They understand the relation between money and quality but very rarely understand the one between Time & Quality.
This is such a fitting blog post for today. Our company was called in by a historian/designer to provide tile for a restoration on an architect’s 1930s home. Unfortunately the current owner was not as concerned about having quality, period appropriate tile as she was the price tag. After several weeks of trying to resource products that would be suitable historically and to current code.
The client is always right but they are not always the right client. Some deserve to be fired. And some money is too expensive (to earn).
All things hang in the balance of three variables: cost, quality and time. If you get a low cost product it (likely) took less time to make and is of a lower quality. More time costs more but (usually) gets a higher quality. Higher quality does not always cost more in comparison to lower quality. Nor does it always take more time than lower quality. It depends on who is delivering the product. The entity delivering the product (or service) controls all three variables. So who you chose is as important as what you choose. Reputation is everything.
I couldn’t agree more – thanks Paul.
This is so true and what serves as a big source of pain for us who deliver quality, reliability and trust which all translates into quality. Very hard to communicate to those who have a ‘first coat’ mentality, so thanks for sharing and providing another perspective into what our firm has always embraced.
Thanks Marcia – I might steal that “first coat mentality” phrase. I have been saying “it’s like buying a car by the pound” but I think I like your’s better.
Thanks for leaving a comment, I really appreciate it.
This resonates a lot with me as well, along with your work motto!
Aside from product choices, how does the “value is the balance between product & cost” come in to play when discussing your fees with potential/actual clients? I had a recent episode of this with a relative who regularly plunks down big money for expensive products & stuff (because high price = better quality according to him), but was balking at the proposal received for architectural services on their home. They couldn’t understand why the number was what it was when all they perceived the work to be was drafting. After I looked at the proposal and pointed out to them that it included contract administration and supervision, along with the fact that the scope was to completely gut and re-do the whole house interior (changing load-bearing walls, raising a floor, moving the kitchen to the opposite side of the house), I explained to them that this is DESIGN WORK, not just drafting, and the proposal was actually quite reasonable. I got surprised stares, awkward silence, and a sheepish “oh.”
I don’t have a good answer for why some people are willing to pay exorbitant fees for one thing but not another – I can only assume it’s because they don’t appreciate the latter. In my office, we believe that this reflects a lack of understanding of how the process works rather than an indifference to the effort required.
Bob, believe it or not I actually included a copy of that Ruskin quote in a drywall bid a couple of years ago BALLSY, I know. The contractor never called me back and did not return my phone calls. About a month ago they filed for chapter 11.
Great quote! This comes up probably 1-2x a week with clients. I try to guide them to select items that will provide the most quality over the longest period. When budgets are tight, that’s when we can get the most creative. That’s why our motto is ‘Life’s too short for crummy hardware!’
difficult topic to discuss without sounding preachy or coming across as trying to advance your own agenda.
Our motto is “Life’s too short to work with people you don’t like.”
Thanks for leaving a comment
How come he was a socialist, if he had such a liberal economic views?!
I wouldn’t say this view is particularly liberal – but it is only a small part of of a bigger picture for him. As part of his philosophy, John Ruskin also advocated a fixed wage system believing that it promoted healthy competition while sustaining work quality.
“It’s unwise to pay too much, but it’s worse to pay too little.” Great quote. Great find, Bob. Thanks!
anytime!
Great comment Ted – service is part of the package but in some ways it is also an intangible at the beginning of a project. Only at the end when everyone is looking back do these things come into focus.
Thanks for adding your comment to the conversation
Ruskin has an impressive beard, and he seems to be reaching for a gun in his jacket pocket. We should listen to him.
he’s firing blanks these days…
And this takes on another dimension when value is an intangible. As in design. Does one get a design off of the internet and have a draftsman “draw it up”, or hire someone with talent to explore alternatives. And being an intangible, to go the latter route involves a little (or maybe big) leap of faith.
Doug
most of what clients are interested in is the intangible … but it is how we go about executing the intangible that typically makes the difference and where we create our value. Hard to explain those things on day one.
Sometimes I don’t think clients realize that what they’re interested in is intangible.