My client (his construction company built factories) walked into the conference room where I was writing a keynote for him and I threw an envelope on the table.
“We’re offering a small job,” he said, “and our proposal is crap.”
I got to the pages. My first thought was that $525,000 didn’t seem like a “small” job. My second thought was yes, it was crap.
“Want me to give it a shot?” I said. “All the numbers are here. Maybe I can tune it up a bit.”
An hour later I went to his office. He was on the phone and I put the revised proposal in the corner of his desk. He nodded and I went back to the conference room.
Twenty minutes later he slipped a $5,000 check next to my laptop with “(ACME) proposal” in the memo line.
I looked up in surprise. “Wait,” I said. “It’s too much. It only took me an hour.”
“I don’t care how long it took,” he said. “I care about the value. Not the time. And this,” he said, pointing to the check, “is how much I deserve a great proposal.”
The Locksmith’s Paradox
The difference between time and results is often called the Locker’s Paradox. (I like to call it the Picasso Paradox, more on that in a second.)
Let’s say an inexperienced locksmith repairs a lock in about an hour. The price is $100, and the customer is happy.
Over the next few years, the locksmith gains considerable skill and experience. When the same customer needs him to do the same type of repair, he finishes the job in about fifteen minutes.
Great — unless it gives the customer a $100 bill. The job didn’t last long. And the locksmith made it look easy. How could it be worth $100?
This is the locksmith’s paradox: Same result — but because of the shorter time required, the customer perceives the value very differently.
As for the Picasso paradox?
The paradox of Picasso
As the legend goes, one day Picasso was in the market. A woman recognized him, recognized him, and when he gave it to her she said, “That’ll be $1 million.”
“But Mr. Picasso,” he said, “it only took you thirty seconds to paint it.”
“No,” said Picasso. “It took me forty years to be able to do that.”
(A similar story involves the artist James McNeill Whistler. Whistler was asked by a lawyer how he could charge so much for a painting that only took two days. “Oh, two days! Two days’ work, then, is that you ask two hundred guineas!” Whistler replied, “No. I ask it for a lifetime of knowledge.”)
Picasso’s paradox is not unique to artists or locksmiths. Picasso’s paradox applies everywhere.
- Like when managers evaluate their employees based on hours worked rather than results. Workers who come in early and stay late are not necessarily more productive. We all know people who work long hours but achieve relatively little.
- Or when business owners decide that the freelancer who quickly fixes their software problem can’t be worth the price they’re charging because the fix seemed too “easy.”
- Or when the same happens with business owners whose skill and experience allow them to deliver exceptional value relatively quickly, causing customers to question the cost rather than appreciate the value they receive.
Solving the Picasso paradox
The first problem is easy to solve. Don’t focus on what hours your employees work or where they work from. The seat backs are irrelevant. Tangible, valuable results are everything. Plus: Constantly worrying about what your employees are doing — or not doing — is a waste of mental energy you can’t afford.
The second problem is also easy to solve: Focus on the value you receive. A warehouse door lock fixed in just 15 minutes? Large. This means you’ll be back in action sooner. Is a coding problem fixed in an hour? Large. This means you will start earlier. The result — and the speed of the result — is what matters.
Solving the Picasso paradox your businesses face is a little more difficult. The key is to separate hours from cost.
For example, an estate planning attorney I know spent a lot of time and money developing software that automates much of the process. Now, once he interviews a new client, most of the relevant documents — Wills, Trusts, Powers of Attorney, etc. — can be created in just a few hours.
If customers knew this, though… yes: Picasso Paradox. So it charges a flat fee. Customers are happy because they believe the results are worth the cost. After all: The time it took is irrelevant, especially since he invested in automation that greatly speeds up the process.
What matters is the value of the result.
Whenever you can, separate time from the billing of your services and charge based on deliverables. Focus on the value the customer receives, not the time it took to create that value.
The fact that you can do more, and do it better, in less time — because of your hard expertise, experience, intuition, etc. — should not result in you being paid less. In many cases, a faster result is worth more, especially if speed of delivery is important to your customers.
That’s why I like to call it Picasso’s Paradox: Because when you’re really good at what you do… one hour of your time can actually be worth more than ten hours of someone else’s time. Make sure you find ways to capture that value.