Hacker News Reader

Comment by md224 | Hacker News Reader

> Charge more. Charge more still. Go on.

This might sound stupid, and maybe it's my inner hippie talking, but did this make anyone else slightly uncomfortable? I get that it's "good business", but something feels kinda gross about saying "extract as much money from other people as you possibly can." Like... shouldn't you just charge whatever you think something (a product, your time) is worth? I realize that "what something is worth" is often subjective, but charging more just because you can feels morally ambiguous to me at best.

(Then again, if you're talking about extracting money from a corporation, that feels less gross. But of course my inner hippie would say that.)

View on HN

Patio11 talks about charging more a lot: http://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick-... http://www.kalzumeus.com/2015/05/01/talking-about-money/ https://training.kalzumeus.com/newsletters/archive/consultin...

His argument basically is that, businesses/consultants/employees fail because they charge/bill/demand in salary negotiations too little WAY more often than they fail for charging too much. Therefore, you should charge more than all of the decision making biases in your head say you should charge.

I interpreted that point very much together with the preceding point:

> Technologists tend to severely underestimate the difficulty and expense of creating software, especially at companies which do not have fully staffed industry leading engineering teams ("because software is so easy there, amirite guys?")

That, in my experience, is very true. Teams are staffed to "we can make it work, maybe" not "we can actually engineer something"; the second bullet, to me, says, "you need to charge more than you think you do, because you're underestimating the costs of doing it, in particular, of doing it well."

The problem (other than your inner hippie :P) is that it can be quite difficult to accurately value a software product. Most physical goods are valued based on the cost of materials/manufacturing. However software is an intangible good without those fixed costs. The closest thing is hosting.

For B2B solutions, value is more tied to how much it would cost a customer to implement your solution instead of buying yours. But even a startup founder who's been an engineer for many years might not have a clear picture of how much the previous projects they worked on cost their employer. They only see their own hourly rate or salary (which already might be low) and don't see the total cost of development, the cost of infrastructure, personnel for ongoing support, etc. Engineers notoriously under-price startup offerings because they lack the broader perspective to accurately value their creations.

mini aside but products are never based on the price of materials as if you follow the chain all materials start as free. They are all priced starting at what people are willing to pay for the labor to take/prepare/transport the free materials. maybe that helps see that enginering is no different

I get where you're coming from, but my point was mostly that when a business develops a product, upfront engineering is often seen as somewhat of a sunk cost. The more important measure is the margin on the physical product. The cost of raw materials (and shipping, manufacturing, etc) is far easier to quantify.

Taken with the rest of his comment, the meaning here is to ensure that you build a viable, sustainable business.

The norm for techies is to underprice their offerings (based on underestimating the difficulty and expense of creating, selling, and supporting software). This leads to even "successful" companies closing because they weren't built to be financially sustainable.

One way of making a company sustainable is to charge a sustainable price (which is typically "more" than initially apparent).

He's not writing "extract as much money from other people as you possibly can". He's making a subtler point, similar to Hofstadter's Law, in that you're not charging enough, even if you know that you aren't!

So, the point isn't too extract as much money from other people as possible. It's too charge more than you'd otherwise be comfortable charging because, even when you do, you may still be under-charging relative to the actual costs required and value provided.

Yes. I think it's related to the Pareto principle, in that the last 20% of a project takes 80% of the time.

I took it as something more like "people are probably willing to pay a lot more than you think they are." Like you said, pricing is subjective. Sometimes people are willing to pay more than you thought, and they still feel they're getting a good deal. Other times, they pay because they feel they have no other choice. Perhaps there's some wisdom in telling the difference.

> shouldn't you just charge whatever you think something (a product, your time) is worth?

How exactly do you, as a programmer without knowledge of the employer’s or client’s business, determine what a piece of software is worth to them?

You have no idea. So you use various heuristics which are more easily available but misleading, like “what are other people being paid?”

How much it's worth to whom? Presumably the customer? (If you're doing it based on how much it's worth to you, that's more like a hobby than a business.) How can you know how much it's worth to the customer? One very simple way is to increase the price until they no longer want to buy it.

Charging whatever YOU think it's worth is where your reasoning is flawed. The point of charging more is so that you find out what the CUSTOMER thinks your product is worth. However, I understand that the brevity of the sentence makes it seem like the author was asking that you hike the price day after day until your clients start refinancing their houses to pay you, but there are more tasteful ways to increase pricing which is what he was referring to.

> shouldn't you just charge whatever you think something (a product, your time) is worth?

If you’re paying yourself, then sure, go ahead. But if you want someone else to pay you, then it should be based on what they think it’s worth. Why should they care what you think it’s worth?

Assuming perfect information and rationality, you can't charge more than something is worth, at least in the long run, so there's no conflict.

Sometimes charging more is a signal that you're serious and will increase demand, contrary to elementary ideas about demand curves.

Reply on news.ycombinator.com