The Unprofitable Valley Or: Why So Much Stuff Is Mediocre
Originally written in July 2010
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.