Seth Godin Is Wrong

image I have read most of Seth Godin’s books and am an occasionally reader of his blog. On June 9, 2010, in a post entitled Hourly work vs. linchpin work, he wrote the following:

You should pay people by the hour when there are available substitutes. When you rely on freelancers you can put a value on their time based on what the market is paying. If there are six podiatrists in town, and all can heal your foot, the going rate is based on their time and effort, not on the lifetime use of your foot.

There is no other way to say it, this is just plain wrong.

Once again, a really smart person has fallen prey to Marx’ Labor Theory of Value. Effort does not have value, results do. The value of a podiatrists healing your foot is based on the lifetime use of your foot. This does not mean that the price is solely based on that lifetime value.

All value is subjective, not objective. Assuming a free market for this service (laughable considering it is healthcare), the “going rate” is not based on the time and effort of the doctor, but what a patient is willing to pay the doctor, period. Increased supply does bring price down, but not because any change in time and effort.

5 thoughts on “Seth Godin Is Wrong

  1. I think you might miss the point: “The going rate is based on their effort” seems an extension from the idea that, when there is no other differentiation between providers of a commodity, only price remains. When price is the sole differentiator, then competitive markets make the provider’s costs the limiting (and therefore determining) factor.

    I think that both he and you tend to advocate against marketing one’s self by providing a commodity in a price competition, and FOR the idea of adding specific and differentiating value as part of what one provides. Maybe finding and communicating the value to the customer IS the differentiator?

  2. Jon, yes, of course finding and communicating the value is the differentiator. My point is that Seth is falling into the trap of thinking that hours (effort) equals value. I am sure his advice to the podiatrist in the market of six would be to make the experience of having worts removed be spectacular.

  3. I don’t think the podiatrist quote is representative of Godin’s opinions. Of course Godin said it, but maybe he was anxious to get on to another point and didn’t think about his example. I believe he would heartily agree that value is subjective. His book Linchpin is an exhortation to do more subjectively valuable work.

  4. Thanks for pointing this out, Ed! But, hmm, I’m not sure you’re picking up on the spirit of the post (at least not the way I interpret it).

    In the post—especially in the part following the quote you’ve pulled—I think Seth is praising value pricing. With the quote you’ve pulled, I think he’s saying you can treat commodities like commodities when they are commodities, except that he uses the word “substitutes” instead of “commodities.” I don’t think he’s recommending paying hourly… just that you can get away with it when you have equally poorly positioned service providers. When the value is the same across options, the customer will pick the cheapest option, which, in this case, is the likely the one that bills their time.

    Another way to say this is that market prices can only exist when there’s a market. Well-positioned providers create their own market, which makes comparison all but impossible. In that scenario, it’s much more inevitable for a customer to want to enter value conversation instead of evaluating effort in regards to time spent.

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