If you’re a clinician there is no doubt that you’ve spotted a problem and thought of a possible solution. This is having an idea, but how much is it worth? In my previous posts, I have been a little flat with the value of ideas, I’ve generally said that they are not worth much. If we are going to have a general army wavey rule, to be safe we can say this is true in general. However, it’s not strictly true. Like most things in life, there are trade-offs and variables. Many doctors and nurses have come to me with completely worthless ideas. It’s not that they are stupid or that the problem/solution isn’t needed or impossible. It’s because they haven’t sat down and evaluated the value of their idea. However, before we get into the details of what makes a good idea let’s explore some basics of value economics.

Pricing 

Take any economics textbook (basic economics is one I recommend) and you’ll come across the basics of pricing theory. One key element to take away from pricing theory is that there is no fixed value. Pricing in effect is a measure to ensure that resources with finite quantities are distributed as efficiently as possible. This may seem a little simplistic and naive as the difference between poor and rich can be upsetting. Although it’s not a perfect system it’s the best system that we can think of at the moment, and it’s the one that you’re living in. The main concept that fuels this conclusion is the fact that the value of something is always a spectrum, not a fixed value. For instance, I value the food I buy more than the money it’s charging. If I didn’t I wouldn’t buy it. The shop owners value the money more than the food, otherwise, they wouldn’t sell it. Personal circumstances dictate the value. I don’t own a car as I live by myself with no dependants in central London. As a consequence to this car insurance with worthless to me. No matter how low the insurance companies cut the cost of car insurance I would value my money more than the cost of car insurance.

Pricing also allows people to adapt to change quickly. Changes in technology, supply of materials etc affect the value something is to me regularly. Businesses respond to this quickly with deals, service changes and promotions. Price hikes are also a blessing in disguise. For instance, if there is a blackout for a couple of days there is a big demand in flashlights. Hiking the price of flashlights will ensure that more households will have access to a flashlight. If the price was kept low people families would buy maybe three or four. A higher price ensures that they only buy one. We could introduce policies where a family can only buy one flashlight, however, policing this would require extra resources and still wouldn’t achieve the desired effect. You could split your family up and get them to go into the store one by one to buy a flashlight each or you could store hop. If the price is too high the seller would drop the price as they want to sell the product. Keeping the price artificially low can lead to a shortage of materials. This is why centrally planned pricing in communist countries leaves to starvation, inefficiency and bizarre shortages of certain things. It’s not that the central planners are stupid, it’s that they cannot respond quickly enough to fluctuations and changes in circumstances, in all areas of industry and services. It’s also worth noting that citizens of centrally planned economies enjoy less freedom. Considering this we can now apply this to your idea to get an insight into it’s value to others.

 

 

Practicalities 

This is the biggest one which is why I put it first. It doesn’t matter how smart the idea is, if it’s impossible to implement it’s not going to be worth much to others. Theoretical physicists are smart but there’s a reason why engineers, in general, earn more. It’s because more people value practical solutions to their problems than theoretical solutions to abstract problems. Considering this how practical is your idea? I don’t just mean this in terms of use to society. If you’re in an industry it’s fairly easy to assess the use of an idea to the industry. The real question is how can you practically apply your solution. For instance, when I do my clinical shift I sometimes speak to doctors that casually talk about knocking up a medical device. The reality is that unless the device is simple you will generally need to have clinical trials proving the effectiveness of the device, you’ll also have to adhere to safety standards, go through regulations, and protect yourself legally from lawsuits and med-tech giants who can easily undercut you. I’ve attended a fair few talks from med-tech accelerators for start-ups.They generally say give it 4 years and £2 million and you might get to a stage where you can sell to an industry giant. For exchange of helping you out with this, they will take usually over 50% share of your company.

Let’s apply pricing theory basics to this. They value over 50% of the company more than their time and recourses in order to enter into a contract with the premise that more than equity will be given to investors when they go through funding rounds. Remember that the money is going into the business, not going directly to the company founder. Usually, the founder will have to have a working prototype to get accepted into an accelerator. Considering this, it becomes clear that the idea doesn’t hold the majority of the value if founders are willing to sacrifice more than 50% to get the admin done efficiently and professionally. If they didn’t no one would be entering into these contracts. In general, the more elaborate and resource-heavy the practicalities are, the less the idea is worth. This is because less people can find value in it as it’s only worth something to people with more recourses.

Insight 

This is where an idea in itself can gain value. Practicalities still have to be considered though. All ideas are bound by practicalities. There is definite value in an idea that simplifies, speeds up, or reduces the cost of a process. This is why the boom in big data has greatly increased the value of data processing, storing, and analysis. It’s no secret that big data can offer new insights and computing can simplify and speed up data processing and storing. As a result, companies such as Google are riding this wave pretty hard as there is high value in ideas that exploit big data. But be careful, efficiency is a subjective thing. It depends on what you chose to measure. For instance, we can compare the productivity of a warehouse in Africa to one in Germany. Due to the trade-off of material cost and labor cost, the German warehouse gives workers their own individual hammers. In Africa, there is one hammer for the whole warehouse. We could say that the African warehouse is more efficient with its hammers, as there will be little to no idol time for the hammer. However, we could also say that the German warehouse is more efficient with worker time as they spend less time waiting for a hammer to do their job. Neither approach is better, it’s a reflection of the hardware costs compared to the labor costs. In Germany, it’s cheaper to buy hammers than pay workers to wait. In Africa labor is cheap but imported good quality tools are expensive. Therefore it would be more expensive to buy more tools than waste labor time. When assessing your idea make sure that you’re not focusing on one one-dimensional outcome. Improving the efficiency of that outcome can sometimes end up being more costly overall. If that’s the case then the idea is pretty worthless.

Scalability 

Some surgical trainees I’ve met demonstrate their misunderstanding of scalability when they complain that they have gone to university for years, and burnt hours upon hours in training only to be outearned by their friend who did a 4-year physics degree and now codes algorithms for a bank. We can argue that the surgeon’s job is more valuable but this is simplistic. As discussed in the pricing section the value of the surgeon differs greatly depending on the buyer’s personal circumstances. The main difference between the two is scalability. It’s not a cosmic coincidence that the richest people in the world own software companies. This is because computing is easily scalable. The surgeon can only operate on one person at a time for obvious reasons. On the other hand, if you develop software that solves a genuine problem for the majority the sky is the limit. This doesn’t mean that one is better than the other. In my experience, people generally resort to emotionally charged value judgments when they don’t understand the dynamics of pricing. The reality is that the software is more scalable. If an idea can be scaled easily it will be more valuable to more people.

As we can see assigning a value to your idea isn’t simplistic and it will vary depending on the buyer’s individual circumstances. Avoid emotional or moral justifications, try and make practical implementation as easy as possible, and remember that your solution may improve the effieicney of a process but might end up costing the organisation more in general.