NOAH
JACOBS

TABLE OF CONTENTS
2025.02.09-On-Overengineering
2025.02.02-On-Autocomplete
2025.01.26-On-The-Automated-Turkey-Problem
2025.01.19-On-Success-Metrics
2025.01.12-On-Being-the-Best
2025.01.05-On-2024
2024.12.29-On-Dragons-and-Lizards
2024.12.22-On-Being-a-Contrarian
2024.12.15-On-Sticky-Rules
2024.12.08-On-Scarcity-&-Abundance
2024.12.01-On-BirdDog
2024.11.24-On-Focus
2024.11.17-On-The-Curse-of-Dimensionality
2024.11.10-On-Skill-as-Efficiency
2024.11.03-On-Efficiency
2024.10.27-On-Binary-Goals
2024.10.20-On-Commitment
2024.10.13-On-Rules-Vs-Intuition
2024.10.06-On-Binding-Constraints
2024.09.29-On-Restrictive-Rules
2024.09.22-On-Conflicting-Ideas
2024.09.15-On-Vectors
2024.09.08-On-Perfection
2024.09.01-On-Signal-Density
2024.08.25-On-Yapping
2024.08.18-On-Wax-and-Feather-Assumptions
2024.08.11-On-Going-All-In
2024.08.04-On-Abstraction
2024.07.28-On-Naming-a-Company
2024.07.21-On-Coding-in-Tongues
2024.07.14-On-Sufficient-Precision
2024.07.07-On-Rewriting
2024.06.30-On-Hacker-Houses
2024.06.23-On-Knowledge-Graphs
2024.06.16-On-Authority-and-Responsibility
2024.06.09-On-Personal-Websites
2024.06.02-On-Reducing-Complexity
2024.05.26-On-Design-as-Information
2024.05.19-On-UI-UX
2024.05.12-On-Exponential-Learning
2024.05.05-On-School
2024.04.28-On-Product-Development
2024.04.21-On-Communication
2024.04.14-On-Money-Tree-Farming
2024.04.07-On-Capital-Allocation
2024.03.31-On-Optimization
2024.03.24-On-Habit-Trackers
2024.03.17-On-Push-Notifications
2024.03.10-On-Being-Yourself
2024.03.03-On-Biking
2024.02.25-On-Descoping-Uncertainty
2024.02.18-On-Surfing
2024.02.11-On-Risk-Takers
2024.02.04-On-San-Francisco
2024.01.28-On-Big-Numbers
2024.01.21-On-Envy
2024.01.14-On-Value-vs-Price
2024.01.07-On-Running
2023.12.31-On-Thriving-&-Proactivity
2023.12.24-On-Surviving-&-Reactivity
2023.12.17-On-Sacrifices
2023.12.10-On-Suffering
2023.12.03-On-Constraints
2023.11.26-On-Fear-Hope-&-Patience
2023.11.19-On-Being-Light
2023.11.12-On-Hard-work-vs-Entitlement
2023.11.05-On-Cognitive-Dissonance
2023.10.29-On-Poetry
2023.10.22-On-Gut-Instinct
2023.10.15-On-Optionality
2023.10.08-On-Walking
2023.10.01-On-Exceeding-Expectations
2023.09.24-On-Iterative-Hypothesis-Testing
2023.09.17-On-Knowledge-&-Understanding
2023.09.10-On-Selfishness
2023.09.03-On-Friendship
2023.08.27-On-Craftsmanship
2023.08.20-On-Discipline-&-Deep-Work
2023.08.13-On-Community-Building
2023.08.05-On-Decentralized-Bottom-Up-Leadership
2023.07.29-On-Frame-Breaks
2023.07.22-On-Shared-Struggle
2023.07.16-On-Self-Similarity
2023.07.05-On-Experts
2023.07.02-The-Beginning

WRITING

"if you have to wait for it to roar out of you, then wait patiently."

- Charles Bukowski

Writing is one of my oldest skills; I started when I was very young, and have not stopped since. 

Age 13-16 - My first recorded journal entry was at 13 | Continued journaling, on and off.

Ages 17-18 - Started writing a bit more poetry, influenced heavily by Charles Bukwoski | Shockingly, some of my rather lewd poetry was featured at a county wide youth arts type event | Self published my first poetry book .

Age 19 - Self published another poetry book | Self published a short story collection with a narrative woven through it | Wrote a novel in one month; after considerable edits, it was long listed for the DCI Novel Prize, although that’s not that big of a deal, I think that contest was discontinued.

Age 20 - Published the GameStop book I mention on the investing page | Self published an original poetry collection that was dynamically generated based on reader preferences | Also created a collection of public domain poems with some friend’s and I’s mixed in, was also going to publish it with the dynamic generation, but never did.

Age 21 - Started writing letters to our hedge fund investors, see investing.

Age 22 - Started a weekly personal blog | Letters to company Investors, unpublished. 

Age 23 - Coming up on one year anniversary of consecutive weekly blog publications  | Letters to investors, unpublished.

You can use the table of contents to the left or click here to check out my blog posts.

Last Updated 2024.06.10

Join my weekly blog to learn about learning

On Value vs Price

XXIX

2024.01.14

Even though I’m no longer an active hedge fund manager & am now nothing but a recovering hedge fund manager, there are some investing concepts that I’ll use everywhere I go. 

One of them is pretty straightforward but can be very potent: value vs price.

Subscribe

-------------------

Investing

Value vs Price is a great investing concept, and is pretty self explanatory.

“Price is what you pay, value is what you get.”

  -Warren Buffett

In investing, when you buy a stock, the share price is what you’re going to pay; it moves up and down with the mood of the market. It could be $10 today, $15 tomorrow, $7.50 the next day, and maybe $0 or $100 in a year–who knows, and, quite frankly, who cares?

Contrary to what you might think if you watch some people react to the news or price movements on a stock, you’re not buying a share of some idea that has a price that just shifts up and down haphazardly. You are buying a sliver of a business, a slice of something real, and that real thing is worth something, t has value. 

What is it actually worth? If you knew that with certainty, you would never have to think about another investing decision again. If you knew with certainty that the value of a stock was $10, and it was trading at $5, you would spend your life savings on it. On the other hand, if you knew the value of the stock was $10, and it was trading at $15, then you’d go to great lengths to make sure you profit when the price inevitably falls. Easy enough, right?

Well, the problem is, you don’t know the value of the stock. That’s what many investors make a career of: trying to figure out what that value is, so they can compare it to the price of the company, and make a no brainer decision.

That takes time and patience, and even then, you can be wrong. What if that $15 priced stock worth $10 never corrects to the “value” before you run out of money betting against it?

Thus is life. 

Decision Making

Over all, the price vs value paradigm is a great decision making heuristic in life. If something is worth more to you than it costs you to buy it, then you should buy it. 

If Price < Value: Buy = True Else if Price > Value: Buy = False

Simple as that. 

Is your hunger worth $20? That double chicken bowl at Chipotle is a great solution to your problem, and you’ll still have some cash left over. 

You just got asked to find 100 linkedin profiles and emails based on a list of jobs and names? My friend Alyanna will fill the info for you at maybe 20 leads an hour for $4 an hour; is the time it would take you to do that same amount of work worth more than $20? If so, I’ll connect you with her and she’ll take care of it. 

Simple math. Why ever make another decision any other way ever again? 

Well, sometimes it’s not so obvious what something actually costs, or what it’s worth. After all, there could be some shady salesman trying to pull a fast one on you. You can’t let that happen!

The Power of Sales

An exceptional sales men can sell ice to eskimos, but he won’t. A truly great salesmen wouldn’t even try. Take it from one of the best salesmen there is:

“I could never sell ice to an Eskimo because it would not be ethical for me to do so. The Eskimo already has plenty of ice; what I need to do is find out if the product I have meets his needs.”

  - Grant Cardone

Of the 75+ sales people I’ve interviewed in the past 2 months, the best ones have all said the same thing: they are not selling a product, they are selling a solution. They listen to the customer first and foremost to see if the customer even has the problem to begin with. If they don’t, it’s “No thank you, next.”

If the prospect doesn’t have the problem, then the value of the solution is almost always lower than the price.

Why would you try to sell a solution to a problem that someone doesn’t have? Nothing sells itself, but you do have less selling to do if value > price, which only happens if the prospects will get value from the purchase!

Building Things that Have Value

If you’re building something, you want to build something where the value exceeds the price, at least for a subset of people—your target customer.

I don’t know what this newsletter is worth, value wise, but I can tell you the price that you pay each week to read it–your time!

So, if you read it, I’m going to assume that you got value out of it, or you’d just stop reading it. You keep me honest! If you stop liking what I’m writing, then you can just stop reading it. 

The goal of a creator should be to build a product that is worth an insane amount of value. That way, you can charge an off the wall price and still be helping your customer out. 

As much a I hate it, here’s some basic econ: 

Consumer Surplus = Value Received - Price Paid

With Ultima, we are obsessed with creating something that has undeniable value for the user. I can’t really prove that to you, as the product is still in its nascent stage, but I can make an interesting observation–we haven’t tried selling anything since the beginning of November.

Rather, we’re testing and iterating on what we’re delivering, ensuring that it has enough value for users to want to use it each week… that’s a pretty good litmus test for whether or not there’s any value in something.

Secrets & Value

Switching gears, keeping secrets has a pretty interesting value vs price frame that reveals something about the effect of time on price and value.

In the short term, the price of sharing someone else’s secret is incredibly low–all it costs is the time it takes you to say something you shouldn’t out loud. And god, does that dopamine from being the guy able to say a thing that nobody else knows feel good, or what? 

Price of saying a secret < Value of saying a secret

However, if we extend the value and price over a longer time scale, that equation quickly flips:

Price of saying a secret > Value of saying a secret

Your friend, when he or she finds out that you spilled the beans (and trust me, he or she will find out), will lose trust in you. The person you told the secret to, if they’re at all wise, will also lose trust in you. And, if you keep doing this, everyone will just generally lose trust in you.

Something I realize that I do subconsciously is give people who I’m not sure if I should trust low order secrets, ones that I won’t be super heartbroken about if it gets out, and just wait and see. Do they bring it up inappropriately? Do I hear about it from someone else?

Hyperbolic Discounting

This last example emphasizes an interesting point about an underlying human bias when it comes to value & price equations: we, as humans, tend to do “hyperbolic discounting,” which is just a fancy way of saying we prioritize immediate rewards more than we would if we were thinking more strictly in mathematical terms.



Caption: The discount is what you multiply the perceived value of price by based on when it occurs. So, we multiply all immediate values and prices by 1, just as we would with exponential discounting. However, we quickly discount consequences that are slightly further out MORE than we should.

Survival wise, there are arguably some good reasons for this, but those reasons fall apart a little outside of a context in which your existence is constantly threatened. 

This concept is pretty loaded and deserves more time than one section, but the rub is that when you’re making decisions, it can pay dividends (literally) to not just think in terms of the immediate price and value of something, but to factor in the long term price and value of something, as well.

Most good, but hard to make decisions, like working out or reading a book, have incredible long term value, even if the short term price feels high. On the other end, those bad but easy to make decisions, like Twinkie eating, have a much higher long term price than you think, and no real long term value.

Back to the selling concept–maybe the short term value of selling something ice to eskimos is high, but the long term price of doing that is not having any returning customers, or a long term business model for that matter.

So, why not try to make something in which the value is outsized, and then figure out the pricing question later?

Subscribe

-------------------

Value, value, value. How can you create it and add to the world with what you’re doing, rather than taking from it?

Live Deeply,