My favorite American, Warren Buffet says price is what you pay and value is what you get. Value for money is when you pay as little as possible for good value.
This is at the core of his investment philosophy but it is
really common sense, or not. If it was common sense Buffett would never have
become the richest investor in the world.
He has made his billions from the lack of common sense of other
investors.
He looks to buy companies – whole or off the stock exchange,
that are selling at a discount, hence representing good value and holding them
“forever”. Benefitting in the short term from their dividend payouts and in the
long term from their appreciation.
Interestingly his company Berkshire Hathaway doesn’t pay a
dividend, it paid out once in the last 50 years and Buffett thinks he must have
been in the bathroom when that happened.
Not the subject of this discussion but why he doesn’t pay dividends is because he argues that his shareholders will be better served by him reinvesting the dividends for them as there is no better investment vehicle on the horizon. A share of Berkshire Hathaway, at the time of writing this was trading at $431,421.70 (about sh1.55b).
Buffett and his investment philosophy we shall shelve for
another day.
If you took his quote and flipped it around it would read
something like, how much you get paid is commiserate with the value you deliver
to the market.
I got to thinking about this when I passed a driver who had
broken his seat, was sleeping, feet on dash board as he waited for his boss.
And I thought this guy has one of the most valuable
commodities in the world hanging loosely on his hands – Time.
Then I wondered what could he do with his time to increase
his value to his boss or in the job market or to the general economy?
If Buffett is correct the more value you deliver the more
you get paid.
"You are not being paid enough (who is?) either because you are not of much value or the market does not see your value. So the question for everyone who wants to get paid more is, how does one increase their value and have the market recognize that value?
This probably is a whole course unit, or should be, in some
university somewhere so we will be only be scraping the surface of the subject
in the 700-odd words that we are allowed here.
To begin with value is determined by the market and not by
you. You can go to Harvard and master in rocket science and come back to
Uganda, you may die a pauper despite the high price of your education and the
sophistication of the subject you are a specialist in. If you stayed in America
you are more likely to be paid better, especially now that the private sector
is sending rockets to the heavens.
On an individual level you increase your value by increasing
your knowledge and experience, that’s why a university graduate would be paid
more than a S4 dropout. But an S4 drop out can study and become an accounts
technician and by the time his contemporaries are off to university will have a
job and by the time they come out after three or four years, he could have got
his ACCA and be more valuable to the market than his graduate friends.
A combination of experience and marketable qualification
will make the difference.
If you are in business the value of your company will
increase to the extent that you can develop a competitive advantage – develop
production processes that cannot be replicated that produce a quality good that
many want. Again you would have to invest in the knowledge of your people and
processes and develop the competence that only come with time.
Back to the driver dozing in his boss’ car what would he do
to increase his value to the market?
Going back to school is not practical, in the traditional
sense, but maybe he can use his smart phone for more than just Facebook and
premier league scores. He could improve his English, learn business
administration, acquiring the skills of a personal assistant – in addition to
his driving skills, and become more valuable to his boss.
If he used those same skills to start a business, he would serve more people than his boss, immediately increasing his value. There in is a major trick, to make more money you need to serve more and more people. And to do this successfully you not only have to have built in yourself or business, value but communicate it to the market. It will not serve you to have the sweetest rollex around when no one knows about it.
