The Unprofitable Valley Or: Why So Much Stuff Is Mediocre

 

Originally written in July 2010, at the ripe old age of 29

The short­com­ings of lan­guage and bar­ri­ers to con­sumer knowl­edge have divorced value from price, and cre­ated an unprof­itable val­ley that traps and kills many good prod­ucts, ser­vices, and inno­va­tions to keep the sta­tus quo a sea of mediocrity.

Ever try to find a good mechanic for your car? A good painter for your house? A good repair­man for your sax­o­phone? Chances are that if you have, you have found it dif­fi­cult to find some­one who will do the job right, and price is not always an indi­ca­tor of good quality.

How is this pos­si­ble? What is the fail­ure in the sys­tem that allows this to hap­pen? Well, I’ve spent more than a few years climb­ing the lad­der in the trade of sax­o­phone repair (where I still have far to go) think­ing about this prob­lem, and I believe I may have an answer.

First, let’s quickly explore a sim­i­lar phe­nom­ena called the Uncanny Val­ley that can help us under­stand the Unprof­itable Val­ley– and which is also where I got the idea for the name of this dol­drums of business.

The Uncanny Val­ley, accord­ing to wikipedia, states “that as a robot is made more human­like in its appear­ance and motion, the emo­tional response from a human being to the robot will become increas­ingly pos­i­tive and empathic, until a point is reached beyond which the response quickly becomes that of strong revul­sion. How­ever, as the appear­ance and motion con­tinue to become less dis­tin­guish­able from a human being, the emo­tional response becomes pos­i­tive once more and approaches human-to-human empa­thy levels.”

In other words, a stick fig­ure is cool. So is a car­toon, a stuffed ani­mal. But when you reach a cer­tain level of human­like looks with­out actu­ally being exactly human­like, the reac­tion is revul­sion. Like, check out this bad boy:

Super gross, right? Its just human enough to be dis­turbing and unsettling, but not human enough to be accepted. Had they made it a pen­guin or a school mascot type of deal, it wouldn’t have been a prob­lem.

So here is the Uncanny Val­ley visu­al­ized with a graph:

I believe that a sim­i­lar graph can be made with respect to busi­ness and it explains why medi­oc­rity pre­vails almost every­where you look.  As a ser­vice or prod­uct increases in qual­ity from bad to awe­some, shortly after sur­pass­ing the aver­age it hits a val­ley where the con­straints of the mar­ket make it an unprof­itable enter­prise until either inno­va­tion makes the qual­ity take less time/money than cur­rent means, or a rep­u­ta­tion for extreme awe­some­ness is acquired and the per­ceived value of the product/service is much greater than the competition.

I call this prob­lem the Unprof­itable Val­ley. Walk with me, and lets see if we can make it up mediocre moun­tain, through unprof­itable val­ley, and into the rar­i­fied air of the specialist.

In most areas of craft and some areas of prod­uct, there is no stan­dards board or eas­ily quan­tifi­able way to com­pare ser­vices– for instance, what one auto mechanic calls a tuneup will be com­pletely dif­fer­ent from what another mechanic calls a tuneup– yet, both are com­pet­ing on price because the word is shared.

If mechanic A does twice as much stuff as mechanic B and his prices are higher but both of their ser­vices are the Oil Change and Tuneup, it is unlikely the aver­age inex­pert con­sumer dri­ving by is going to know or want to com­pare spe­cific ser­vices within the offered pro­ce­dure and find out what they mean and what work they entail. Like that “check PCV valve” offered with your oil change. Sounds great, right? Super scary name, sounds com­pli­cated. In actu­al­ity it is an extremely easy thing to do– you dis­con­nect a hose and put your fin­ger over it while the car is idling. If you feel suc­tion, great, the PCV valve works. If not, pop in a new one– they cost a few dollars.

So did you get your PCV valve checked dur­ing your last oil change? If so, you’ve just paid for some­thing you could have eas­ily done your­self in about 2 min­utes because the lan­guage used to rep­re­sent the work sounds like some­thing you should pay to get done– and just com­pletely divorced the value of the work from the price you pay for it… sucker!

Because the aver­age con­sumer doesn’t know as much as the pur­veyor of the goods or ser­vice (and can’t pos­si­bly, given the amount of stuff we buy), the aver­age product/service is com­pet­ing on two things: price (a num­ber) and words used to rep­re­sent ser­vices ren­dered– ser­vices the con­sumer may not even under­stand at the most basic level!  See what hap­pened there?    We have quickly aban­doned the actual work and moved into a meta level, an über.  We are now per­ceiv­ing the work in terms of its price and its words with­out under­stand­ing the mean­ing of the words, much as Plato’s pris­on­ers beheld shad­ows on the cave wall.  This is why adver­tis­ing works: it is eas­ier to sell a feel­ing, a con­nec­tion, than it is to actu­ally explain why a prod­uct is bet­ter than the competition.

(note: I originally wrote this in 2010, and the video below was about the iPhone 4.  I have replaced it with something a little more timeless)

But words are great, you say.  Words are awe­some!  Nay, good friend, words are super not awe­some.   Words are good for a quick and dirty under­stand­ing like “this giant sloth tastes great for some­thing so defense­less” or “duck!”, but for con­vey­ing deep and spe­cial­ized mean­ing words often fail us.

“Words are pli­able things that serve best those who speak them.“
–Matt Stohrer, para­dox slinger

Some­times the words can be used to make a sim­ple ser­vice sound com­plex. What are you more likely to pay for– “check PCV valve”, or “unplug hose and put my fin­ger over it to see if a $2 valve you can order on rockauto.com is still working”?

Some­times the oppo­site hap­pens– a com­plex ser­vice is dragged down by the over­sim­pli­fied nomen­cla­ture. In my busi­ness, a sax “over­haul” can mean many dif­fer­ent things to dif­fer­ent repair­ers, but to the lay­man it means “over­haul, you know, fix it”.  But when you get to doing the actual work, the spe­cific pro­ce­dures used by dif­fer­ent repair­ers can vary to the extreme. Some “over­hauls” rep­re­sent 8–10 hours of labor and $50 in mate­ri­als, some rep­re­sent 60 hours of labor and hun­dreds of dol­lars in mate­ri­als. I’ve seen the word over­haul used in ser­vices cost­ing as lit­tle as $200 and as much as $1600– and we aren’t even talk­ing about the rel­a­tive skill of the repairers in this example!

And yet, because the word over­haul is shared and the pro­ce­dures involved remain opaque to the con­sumer with­out the train­ing involved to under­stand them, the two ser­vices are directly com­pared on the price.

So when Joe Sax­player goes to shop around for the best price, he may buy an over­haul, but its not the same thing as the over­haul across town that may cost more but actu­ally does much more work– work his horn might really need. Joe Sax­player pays for the over­haul, gets home and plays his horn, and much to his dis­ap­point­ment the horn doesn’t play as well or feel as well as it could. Or per­haps he lacks the capac­ity to judge, hav­ing been unfor­tu­nate enough to never have played a sax­o­phone in per­fect work­ing order.  “Sax­o­phones are just hard to play down low” becomes the com­mon wis­dom.  They aren’t, if the sax­o­phone is in proper work­ing order.

For another exam­ple, look at cur­rent com­puter proces­sors. Can you eas­ily tell me which one is the fastest? The nam­ing con­ven­tions make it dif­fi­cult for all but the most well-informed– those who make a sig­nif­i­cant time invest­ment to learn– to know for sure.  What about the sec­ondary and ter­tiary fac­tors such as mem­ory bot­tle­necks and bloat­ware that can affect the per­ceived speed of the com­puter? “Com­put­ers are just slow and crashy”, becomes the com­mon wis­dom.  They aren’t, if you have the knowl­edge to build and set them up right.

For another and rather more evil exam­ple, check out mat­tresses.  You will notice that the same brands exist at mul­ti­ple retail­ers, but the same mat­tress mod­els do not.  In actu­al­ity they do, but they are named dif­fer­ently at dif­fer­ent out­lets.  This is delib­er­ate on the part of the retail­ers and man­u­fac­tur­ers, and makes it so they never com­pete directly on price.    Since the aver­age con­sumer knows noth­ing about the specifics of mat­tress man­u­fac­ture, the end result is that the price (which is mostly an illu­sion any­ways in this case) and the words of the sales­man are the only data points to go on. This is sim­i­lar to the prob­lems faced with the word over­haul in sax­o­phone repair, except pur­pose­fully done to con­trol prices!

So, life is hard for the con­sumer.  Igno­rance is tem­po­rary bliss or per­haps just per­ma­nently low­ered expec­ta­tions, and a sig­nif­i­cant time invest­ment is needed to gain the knowl­edge required to judge the value of work or item pro­vided.  Some­one should call this “bar­rier knowl­edge”. Hey, I just did! So awesome.

How does this affect the busi­ness owner?  Well, if they are crooked, it makes life easy, at least tem­porar­ily until word gets out– words are pli­able, services/products firmly entrenched behind a bar­rier of required knowl­edge for accu­rate judg­ment.  If they are hon­est it makes life harder, at least tem­porar­ily, for the same reasons.

Ok ok, so what do we do to cross the Unprof­itable Valley?

Say you are a craftsperson/designer/inventor/entrepreneur and you want to do X, and you want to do it right.  You see how things should be, what per­fec­tion can be attained, and you are off-put by the amount of medi­oc­rity in the X busi­ness today, so you go into busi­ness to do X the way it damn well should be done.

Wel­come to the Unprof­itable Val­ley.  Your services/products are con­strained by the lan­guage used and in place before you arrived, and you are com­pet­ing on price with similarly-named services/products priced way too low for the amount of time you spend, for the proper tools and mate­ri­als (speak­ing broadly here) needed.  Edu­cat­ing the con­sumer is dif­fi­cult and time-consuming at best, impos­si­ble and unwanted at worst.  You are faced with two choices: rejoin the sta­tus quo or fig­ure out a way to do the work the right way and get paid for it.  If you decide to rejoin the sta­tus quo, con­grat­u­la­tions, you’ve got lots of com­pany.  Its the easy choice, and the lion’s share of the busi­ness in X goes to guys like you, and the money can be easy, and if you are unscrupu­lous you can take advan­tage of the very prob­lems that make life harder for those with scruples.

But what if you decide to con­tinue on with your fool­ish ways of doing things the right way?  Whats up with this mis­er­able Val­ley and why are you work­ing late all the time?

You have choices:

• inno­vate and/or become more effi­cient and badass, so that you can do bet­ter work in the same amount of time (not always pos­si­ble)
• do such excel­lent work and be so awe­some that peo­ple specif­i­cally seek you out because they know you do things right, and they are will­ing to pay what it takes to have it done right (a big bet)
• edu­cate your cus­tomers so they can prop­erly judge your work/product.

Best way is to try to do all three, so you do, and after many years of work­ing twice as hard as the next guy and a lot of luck, you have bro­ken out of the Unprof­itable Val­ley and you are now a spe­cial­ist.   Your skills/product set you apart now.  Peo­ple seek you out, and you are more busy than you know what to do with.  Your name and rep­u­ta­tion are estab­lished, and oppor­tu­ni­ties begin to appear that are closed to the ranks of the mediocre.  You find your­self deal­ing with exas­per­ated peo­ple who have been search­ing for some­thing other than the low­est com­mon denom­i­na­tor, and they are thank­ful that peo­ple like you exist, and want to see you suc­ceed and pros­per and they will tell their friends.  You never need to pay for adver­tis­ing, because your cus­tomers– who are dis­cern­ing and knowl­edge­able– do it for you.  You can charge what you think the ser­vice you pro­vide is worth, and you feel good about doing the right thing.

Notice any­thing about the spe­cial­ist?  Their story involves work­ing harder than aver­age– for less return per hour than aver­age– for a long while.  It requires spe­cial cir­cum­stances– either inno­va­tion or extra hard work or luck or most likely a com­bi­na­tion of the three.  For this rea­son, until we can get Matrix-style mind­jacks and sur­pass the bound­aries of bar­rier knowl­edge and lan­guage defi­ciency, you will always be look­ing extra hard for that hon­est and skilled car mechanic, and when you do meet him you can look in his eyes and know he has been through the Val­ley to get to you.