The Elegant Fiction of Value

I should begin with a definition, because “value” is one of those words that has been used so promiscuously by so many people in so many contexts that it has been drained of nearly all meaning, like “synergy” or “bipartisan” or “your call is important to us.”

So here it is, stripped of its academic finery and standing in its underclothes: value is created when the benefits of an action exceed its costs. That’s it. If you spend a dollar of effort and produce two dollars of benefit—for yourself, for a customer, for the world at large—value was created. The universe has fractionally more in it than it did before you acted.

And the reverse, which nobody likes to discuss at dinner parties: value is destroyed when the costs of an action exceed its benefits. If you spend three dollars chasing one dollar of result, you have not merely failed. You have made the world poorer. You consumed time, money, energy, and human attention—the scarcest resource of all—and produced less than you burned.

The economists at this point will want to complicate things. They’ll introduce discount rates and opportunity costs and externalities and a thicket of Greek letters designed to make simple truths inaccessible to anyone without a graduate degree. And they’re not wrong, exactly—those things exist—but they are the ornamental hedgerows around a garden whose central feature is a single, simple flower: did you leave things better or worse than you found them?

Because here is the part that I find genuinely thrilling, once you see it: this lens applies to everything. Every meeting you attend. Every employee you hire. Every subscription you forget to cancel. Every relationship you maintain. Every dollar you spend. Is the benefit exceeding the cost? If yes, continue. If no, stop. If you don’t know, that’s the first problem to solve.

That twelve-person meeting where two people needed to be there? Value destruction. Eleven hours of human life immolated on the altar of corporate theatre.

That handwritten thank-you note to a client that cost you a stamp and four minutes? Value creation. It purchased loyalty that no discount could.

That employee who stays late not because she’s told to but because she gives a damn? Value creation of the highest order. And if you don’t recognize it, that’s value destruction too—because she’ll leave, and you’ll spend six months and ten thousand dollars replacing what your indifference drove away.

Nothing is static. The thing that created value last year might destroy it this year. The brilliant hire of January might be the dead weight of October. The product that printed money in 2019 might be haemorrhaging cash in 2025. Value creation is not a state. It is a direction. You are either moving toward it or away from it, and the ground is always shifting under your feet, which means you must keep moving or be swallowed.

I should tell you upfront that I’ve cleaned floors for a living. Not in the way a Fortune 500 CEO says he “started in the mailroom” at his father’s company and spent three weeks there before graduating to a corner office with a view of the Hudson. I mean I cleaned floors. With a mop. On my knees sometimes. For money that I needed to eat.

I mention this not because I’m looking for sympathy—God knows there’s a surplus of that and a deficit of honesty—but because cleaning floors taught me something about value that Harvard Business School apparently cannot, despite charging a quarter of a million dollars for the privilege of not learning it.

When I cleaned a floor, value was created. This is not a metaphor. The floor was filthy, and then it was clean, and the world was in some small but measurable way better than it had been twenty minutes prior. Someone paid me to do this. We both walked away satisfied. I had money. They had a clean floor. The transaction was, in the purest sense, honest.

I realize that’s a quaint word. Honest. It has the ring of something your grandfather would say before telling you to get a haircut. But quaint or not, it describes a quality that has been systematically engineered out of modern commerce with the same quiet efficiency with which asbestos was engineered into mid-century ceiling tiles—everybody knew, nobody said anything, and now we’re all breathing it.

Cleaning is the atomic unit of value creation. Anyone can understand it. Anyone can do it. The floor was dirty; now it’s clean. Nothing was financialized. Nothing was leveraged. Nothing was “disrupted.” A human being showed up, applied effort, and the world improved. And if the payment for that effort exceeded the cost of staying alive and showing up again tomorrow—food, shelter, transport—then that person was building something. Slowly. Painfully. With chapped hands and an aching back. But building.

And the entire elaborate superstructure of modern capitalism, with its derivatives and its special purpose vehicles and its collateralized debt obligations, is supposed to be in service of that person. It exists—or it is supposed to exist—to allocate capital so efficiently that the floor-cleaner can become a floor-cleaning company, and then perhaps something more.

Somewhere along the way, the superstructure forgot about the floor.

The truth that polite economics refuses to utter is this: every transaction is a tug of war. Every dollar your supplier saves is a dollar that didn’t reach you. Every dollar of margin you capture is a dollar your customer no longer has. We dress this up in the language of mutual benefit and win-win negotiations and stakeholder alignment, and some of that is real—I’m not a nihilist, just a realist with a mop—but underneath the pressed shirts and the PowerPoint presentations and the carefully calibrated handshakes, commerce is a contest over who gets what.

Now, the economists will tell you that I’m being simplistic. They’ll say that markets are efficient, that prices reflect information, that both parties to a voluntary transaction benefit or they wouldn’t transact. This is the catechism of the discipline, recited with the same unblinking certainty with which medieval monks insisted the earth was flat. And like the flat earth, it is a model that works beautifully right up until you walk to the edge.

Here is what rational economics cannot explain.

I once paid forty dollars for a shirt. I was happy with the shirt. The shirt fit well. The colour was agreeable. I wore it to dinner and received a compliment from a woman I was trying to impress, which alone made it worth four times the price. By every rational measure, I had captured value. The transaction was efficient. Both parties benefited.

Then my friend told me he bought the same shirt for twenty-two dollars.

And I hated the store. Hated it. Not disliked. Not “felt mildly aggrieved.” Hated, with the irrational intensity of a man who has been made a fool of in public, which is precisely what had happened, except the public didn’t know and didn’t care and the only person keeping score was me. The shirt still fit. The compliment still happened. Absolutely nothing about my life had changed except the knowledge that someone I knew had navigated the same transaction more successfully, and this single piece of information retroactively poisoned the entire experience.

This is not rational. This is not efficient. This is not what happens in the models. But this is what happens in life, and any theory of value that doesn’t account for it is a theory of something else entirely.

Humans do not evaluate transactions in isolation. They evaluate them relative to their tribe. Relative to their neighbour. Relative to the man at the next table whose steak looks larger and whose wife looks happier and whose car in the parking lot is newer and shinier and a colour you didn’t even know they made. We are social creatures operating in a social economy with social brains that were optimized for survival on the savannah, not rational decision-making in a shopping mall, and the sooner we accept this, the sooner we can stop building business models for a species that doesn’t exist.

There is a brilliant and thoroughly entertaining Englishman named Rory Sutherland—Vice Chairman of the advertising agency Ogilvy, which is to say he has spent his career studying the gap between what people do and what they say they do—who illustrates this point with a speedometer.

If you’re driving at ten miles per hour and you accelerate to twenty, you feel it. The change is dramatic. Perceptible. Exciting, even, if you are the sort of person who finds excitement at twenty miles per hour. But if you’re driving at a hundred miles per hour and you accelerate to a hundred and ten, you barely notice. The objective change is the same—ten miles per hour—but the perceived change is radically different. And here is the uncomfortable part: the risk at a hundred and ten is catastrophically greater than the risk at twenty. The perception went down. The danger went up. Your instruments are lying to you.

Sutherland uses this to make a point about Uber. He argues that Uber’s great innovation was not cheaper rides or better cars or an app that worked. It was showing you the car on the map. That tiny, almost trivial piece of information—a little icon moving through cartoon streets toward your location—eliminated the anxiety of waiting, which was the actual pain point of taking a taxi. The ride itself barely changed. The experience of the ride was transformed completely.

This is the key to everything I’m trying to say about value, and if you take nothing else from this essay, take this: humans feel first and construct logic afterward.

We do not rationally evaluate a situation, form a judgment, and then experience an emotion consistent with that judgment. We feel something—in our gut, in our chest, in whatever ancient lizard circuitry predates language by a hundred thousand years—and then, after the feeling has already made our decision for us, we assemble a tidy rational explanation and present it to the world as though we arrived at it through careful deliberation.

We don’t just feel and then justify. We behave based on feeling and then construct the logic afterward to explain the behaviour we’ve already committed to. The rational explanation is not the reason. It is the press release we write after the decision has already been made.

My forty-dollar shirt was fine. My feeling about my forty-dollar shirt was destroyed by eighteen dollars of new information. And no amount of rational argument about consumer surplus or market efficiency or voluntary exchange will repair that feeling, because feelings do not respond to arguments. They respond to other feelings.

This is why customer experience is not a layer you add on top of value. It is the value. The map on the screen is the ride. The story you tell about the handbag is the handbag. The feeling your customer walks away with is the only product you actually sold, because everything else—the physical object, the contractual terms, the line items on the invoice—will be forgotten. The feeling won’t.

Let’s say you make something. It doesn’t matter what—a candle, a sandwich, a piece of software, a senior living management system. You acquire inputs, combine them with some measure of skill and effort and, if you’re lucky, a proprietary secret sauce that your competitors cannot easily replicate, and you produce something worth more than the sum of its parts.

The difference between what it costs you and what someone pays you is your margin. And that margin is the entire game, because it is the pool of money from which you must simultaneously satisfy three groups of people who all have competing claims on it.

Your investors need a return, or they stop funding you. Your staff need fair compensation and working conditions that don’t make them fantasize about arson, or they leave. Your customers need to feel—there’s that word again—that they received more than they paid for, or they don’t come back. Three groups. Three competing appetites. One pool of money.

When the margin is fat, this is easy. Everybody eats. The investor gets a return. The staff gets a raise. The customer gets a deal. Smiles all around. When the margin is thin, it’s a knife fight over scraps, and someone leaves the table hungry, and hungry people remember.

So the existential question of every business is: how do I keep the margin fat?

And the answer is emphatically not the physical product.

Here is the hard truth about anything you can touch, taste, weigh, or measure: if someone else can make it too, competition will grind your margin down to almost nothing. This is not a theory. It is gravity. Every commodity on earth—steel, wheat, gasoline, plain white t-shirts—trades at razor-thin margins because the product is the product is the product. Nobody cares who made it. The cheapest wins.

The real margin—the only sustainable margin—lives in the parts of your product that cannot be weighed on a scale.

Brand. Story. Exclusivity. Perception. Trust.

A Gucci handbag and an unbranded handbag can come from the same Italian leather, the same factory floor, the same pair of hands. The materials are nearly identical. The craftsmanship might be identical. But one sells for three hundred dollars and the other for three thousand. The difference isn’t the leather. It’s the story the leather is wrapped in. The interlocking G’s don’t improve the stitching. They improve how you feel carrying it. And that feeling—that subjective, irrational, unmeasurable, indefensible feeling—is worth twenty-seven hundred dollars.

Now, these subjective levers overlap in ways that can be difficult to untangle, and this is by design. Expensive feels like quality. Quality feels like scarcity. Scarcity feels like exclusivity. Exclusivity feels like status. They blur together in the customer’s mind into a single seamless sensation that cannot be broken apart and therefore cannot be argued with. The best brands don’t pull one lever. They pull all of them simultaneously until the feeling becomes a fact.

But for the person building the brand, it helps enormously to know that the levers are separate, because you can pull them independently. You can create exclusivity without high prices—limited releases, waitlists, invitation-only access. You can create perceived quality without exclusivity—exceptional packaging, obsessive customer service, visible craftsmanship. You can build status without scarcity—think of Apple, available on every corner but carrying a very specific identity.

Different levers. Different strategies. Same destination: make the story powerful enough that the margin stays fat enough that all three groups—investors, staff, customers—remain in a state of voluntary enthusiasm rather than grudging compliance.

Because here is the equation that matters, the one they don’t teach you: can you create enough subjective value that your margin sustains satisfaction across all three stakeholder groups, indefinitely?

If yes, you have a business.

If no, you have a job that’s slowly killing you.

And if you’re competing on price alone—if the only reason customers choose you is that you’re cheapest—you are not first. You are last. And as a great American philosopher once observed from the driver’s seat of a Chevy Monte Carlo, if you’re not first, you’re last.

He was joking. But he wasn’t wrong.

I think of business less as a machine and more as a courtship. Not the sanitized, swiping-right courtship of the digital age, but the old kind—the kind where one wrong word, one miscalculated gesture, one moment of taking the other person for granted, and the whole delicate architecture collapses into an awkward silence from which there is no recovery.

Because that’s what a business really is: a precarious agreement among people who could, at any moment, choose to be somewhere else. Your customers could leave. Your staff could quit. Your investors could pull their capital. You need all three—all three—in a state of ongoing, voluntary enthusiasm. Not tolerance. Not contractual obligation. Enthusiasm. And the moment any one of them shifts from enthusiasm to mere tolerance, you are living on borrowed time, because tolerance is just the waiting room before departure.

This is why I say the courtship never ends. You don’t close a customer and stop performing. You don’t hire an employee and stop investing. You don’t raise capital and stop reporting. Every relationship in business is a continuous courtship, a daily renewal of the case for why this person should remain voluntarily involved with you when they have alternatives, and they always have alternatives.

If anything goes wrong—if the service slips, if the culture sours, if the returns dip—the courtship falters. And once it falters, recovering is exponentially harder than maintaining would have been. Ask anyone who’s been through a divorce. The negotiation to stay together is always cheaper than the litigation to come apart.

A business that is stable on all three pillars—happy customers, happy staff, happy investors—can survive remarkable external shocks. A new competitor. A substitute product. A recession. A pandemic. A regulatory change. These are strong winds, but a well-planted tree can bend without breaking.

A business that is wobbly on even one pillar will be toppled by the first stiff breeze. And in today’s economy, the breezes come daily.

Every founder I have ever met is looking for the button. The one button. The magic automation that transforms effort into scale, sweat into software, a thousand hours of boring work into a single elegant click.

They never find it. And here is why.

I built a social media presence that reaches over half a million people a week. Not with bots. Not with APIs. Not with some growth-hacking tool that costs ninety-nine dollars a month and promises to ten-times your engagement while you sleep. I did it with my thumbs. Following people. One at a time. Manually. Like, as my developer friends enjoy pointing out, a trained monkey.

Every software engineer I know recoils at this. It doesn’t scale. It’s not efficient. It’s not optimized. It’s not programmatic. It’s not—and this is the word they always land on, as though it settles the matter—elegant.

No. It isn’t elegant. But it works. And the reason it works is precisely because nobody smart wants to do it.

Every programmer who tried to automate what I did by hand got throttled, shadowbanned, or shut down entirely. The platforms are designed to catch robots. They are not designed to catch a human being who is simply willing to do boring work longer than everyone else. The tedium is the moat.

This is a pattern that shows up everywhere, not just in social media. The most defensible position in any market is not the best technology, the cleverest algorithm, or the most elegant code. It is the willingness to do something tedious that creates real value, long enough and consistently enough that it compounds into something nobody else can replicate—because nobody else had the patience to start.

Paul Graham wrote about doing things that don’t scale, and he was right, but I think the point goes deeper than startup tactics. The obsession with scale is itself a form of value destruction. People skip the foundation to build the penthouse. They want the app to go viral before it works properly. They want enterprise clients before they’ve sold to a single human being face-to-face. They want recurring revenue before they’ve earned a single dollar the hard way.

Go back to the floor. The mop. The tedious, unglamorous, deeply unsexy work of creating value one unit at a time. Not because it’s romantic—it isn’t—but because that is where the compound interest starts. Every manual follow, every hand-delivered proposal, every floor cleaned with care is a brick in something that eventually becomes too solid to knock over.

The people who skip the bricks and go straight to the billboard are building on sand.

Let me tell you what the clever people do instead of cleaning floors.

A private equity firm—and I use the word “firm” loosely, the way one might describe a cloud as “solid”—borrows a billion dollars from a bank that created the money from nothing, which is a separate magic trick we’ll address another time. They use this borrowed billion to purchase a chain of, say, nursing homes.

Nursing homes are attractive to private equity because old people need care reliably and without interruption, which in financial parlance is called “recurring revenue” and in human parlance is called “being alive.”

Having acquired these nursing homes, the firm loads them with the debt it took on to buy them. This is like buying someone a birthday present on their credit card and expecting thanks. They then fire a third of the nursing staff, reduce meal quality to something between airline food and punishment, sell the real estate underneath the buildings and lease it back at extortionate rates—a move that has the structural elegance of selling your own kidneys—and extract a two-hundred-million-dollar “dividend recapitalization,” which is Wall Street’s way of saying “we took the money.”

They call this “unlocking value.”

I call it picking the lock and emptying the safe.

The value was already there, you see. Nurses built it, shift by shift, changing bedsheets and administering medications and holding the hands of frightened people at three in the morning. Patients paid for it, month after month, from savings they spent a lifetime accumulating. The private equity firm didn’t create anything. They merely stood between the people who did and the people who needed it, and charged both for the inconvenience.

There are now more private equity firms in America than McDonald’s restaurants. I’ll let that settle. More people in this country have dedicated their professional lives to the relocation of other people’s money than to the preparation of other people’s lunch. Say what you will about a Big Mac—and people have said plenty—at least it’s a product. At least someone had to show up at four in the morning and heat the grill.

The instruments became more profitable than the industries they were supposed to serve. The toll booth became more valuable than the road. And now we have an economy in which the most handsomely rewarded activity is not the creation of value but its elegant redistribution from the pockets of people who earned it to the accounts of people who didn’t.

The man cleaning the floor at your office tonight will create more real, measurable, honest-to-God value in a single shift than most hedge funds will create in a fiscal year. The difference is not one of effort or intelligence or worth. The difference is that the hedge fund knows how to capture value—how to position itself between money and the people who earned it, and take a percentage from both directions without anyone noticing, or at least without anyone objecting, which in America amounts to the same thing.

That’s not innovation. It’s a toll booth on a road someone else paved.

The social contract in North America—the real one, not the one in the textbooks—goes something like this: if you show up, work hard, play by the rules, and contribute to your community, you will have a reasonable chance at upward mobility. Not a guarantee. Americans, in particular, have always been comfortable with inequality of outcome provided there is equality of opportunity, or at least the convincing appearance of it. The deal was never “everyone gets rich.” The deal was “everyone gets a shot.”

That deal is broken.

Not bending. Not under strain. Broken. And the people who broke it are, with characteristic audacity, now charging admission to view the wreckage.

The median American worker has not seen a real wage increase in forty years. Forty years. That is not a policy failure. That is a design. Every productivity gain, every technological advance, every efficiency improvement for two generations has been captured by the people who own the means of production, which is a phrase I never thought I’d use without irony, but here we are.

And now they want us to do more with less. Less humans, more AI. Less money, more output. Less security, more hustle. They’ve rebranded the elimination of the middle class as “innovation” and the atomization of stable employment as “the gig economy” and the slow death of the American dream as “disruption,” and I have to hand it to them—the marketing is superb.

You want to know why the middle class is disappearing? It’s not robots. It’s not China. It’s that we built an entire economy of toll booths and ran out of road.

There is a subset of gentlemen in Washington—and they are almost exclusively gentlemen, in the biological sense if not the behavioural one—who believe that a large-scale military conflict would be good for America. They look at the Second World War and see a country that entered in depression and emerged as the dominant global superpower, and they think: let’s do that again.

This is the equivalent of a man who survived a car crash at twenty and concluded that high-speed collisions are good for your health.

America came out of the Second World War on top because every other industrial economy on earth had been physically destroyed and America’s had not. It was the last factory standing. The last creditor standing. It set the terms of the post-war order because it could, and it could because it had something everyone else needed and nobody else had.

That is not America’s position today. Today, America is the world’s largest debtor nation. Its infrastructure is crumbling. Its industrial base has been hollowed out and shipped overseas. Its national debt is so enormous that the interest payments alone exceed the defence budget—which is itself the largest on earth—and the only thing preventing a sovereign debt crisis is the polite fiction that the United States will never default, a fiction maintained by the same people who maintained the fiction that housing prices never go down, right up until they did.

Bond auctions will fail before the war starts. That’s the part they haven’t considered. You cannot fund a war on a credit card that’s already maxed out, and you cannot borrow from allies you’ve spent the last decade alienating. The world has changed, and the men who haven’t noticed are the ones with their fingers nearest the buttons.

I have taken you on a long walk, and for that I apologize, though not excessively. We have covered definitions and emotions and handbags and nursing homes and speedometers and national debt and a man in a Chevy Monte Carlo, and you could be forgiven for wondering whether there is a point to all of this or whether I am simply an Irishman who enjoys the sound of his own sentences.

There is a point. Here it is.

Most people cannot see the forest for the trees. They live inside systems they don’t understand, governed by rules they didn’t write, competing in games they can’t see. They work hard—genuinely, admirably hard—and watch the gap between their effort and their reward widen year after year, and they don’t understand why, because nobody has explained the underlying mechanics of the reality they’re operating in.

The mechanics are these: value is created by effort. Value is captured by positioning. And the entire architecture of the modern economy is designed to separate those two activities as completely as possible, so that the people who create value and the people who capture it never occupy the same room, and if they do, one of them is cleaning it.

The way out—and there is a way out, I am not a nihilist—is to understand these mechanics and use them deliberately. Create value that is real and measurable. Build a brand, a story, a subjective identity that makes your margin defensible. Do the tedious, unglamorous monkey work that nobody else will do. Treat your stakeholders—customers, staff, investors—as partners in a courtship that never ends rather than parties to a contract that can be exploited. And resist, with every fibre of your being, the temptation to skip the foundation and build on sand.

The floor is where value starts. The floor is where honesty lives. The floor is the only place in the entire towering, elaborate, beautifully lit edifice of modern capitalism where you can look down and see something solid.

Start there. The floor doesn’t lie.

Everything above it might.