Here’s a story that I heard:
A bright young man is on the edge of adulthood. At home, he has been encouraged to do the right things. Study hard and get a good profession and high status in the community. Instead of going to study medicine or engineering he has chosen to become a musician. He is faced by his grandmother:
Grandma: What is the benefit of that way of life?
The man: Grandma, what is benefit?
That is a really simple and extremely relevant question but good answers to it are difficult to find. Perhaps it would be easier to argue what benefit isn’t.
The word benefit has its origin in latin, good (bene) and help/service (facio). In our current society the word benefit has been almost exclusively reserved for money. And as we know, money is almost exclusively used in the service of good.
Money is never good only by itself. And although it is said that money doesn’t bring happiness, we could argue that money is good when it actually does bring happiness. That gets us to my favorite definition of benefit: “Whatever promotes personal happiness”.
The world is run by incentives. If you want to understand the behavior of an individual or an organization you should look at their incentives.
Let’s look at the incentives of lost property offices in Finland
- If a person loses an item and somehow finds out the office where the object was taken, they are first charged 1,70 €/minute to call to confirm the object is there. If the item is found, you will pay the finder’s fee (10 % of the item’s value, up to 20 €). Other fees like storage fees may still apply (up to another 10 % of the item’s value). It is in the interest of the person to pay these fees probably up to about 75 % of the item’s current value if the other alternative is to buy a new item altogether. So they’re happy to pay. But the office only takes up to 20 % of the items value, so it’s a real bargain.
- If no one comes to collect an item that was delivered to the lost property office, they will auction it off. At the auction the office will get 100 % of the item’s current resale value.
What would you do?
Lets assume you are running a business where you have a fivefold incentive in not finding the owner of an item you have in storage. Would you try to find the owner knowing that even if you find him/her, you only lose money.
Can the incentives be changed?
Most people agree that it would be nice if you could get your stuff back without having to pay anything. The problem is that losing something happens so seldom that no one really has any incentive to do anything about it.
The incentives change automatically after enough people can agree that they are wrong. In our case that equals to the number of people who like FinderBase better.
Today, May 2nd 2010 at 17:28 we got the first paying customer in FinderBase.com.
This is remarkable!
The first earnings is a critical point in any business model. Making a dollar of earnings is obviously quite far from the expenses that have been needed to make our service. But we have hope.
There are only two things that are truly important from the business perspective.
- Viable business model. Viability meaning that someone actually pays for it.
- Scalable business model. Scalability meaning that there are more than one someone who might pay for it.
At this point we can quite safely assume that the first step is completed. Doing the second step is the reason our company exists.
But this is not the whole story.
I will argue that the reason of us getting a customer is not our business model. It is our passion and dedication to do things well and help people. The business model is always just a result, never the cause.