Why is it valuable?

How much is this house worth?

3 bed 2 bath 1,800 square feet.

Not sure?

How about some more details?

Two-car garage. 1/5 acre lot. Walking distance to elementary schools

Still not sure?

Of course. It’s impossible to even guess without one more key piece of data.

Location.

The price could vary from $120k in ​Youngstown OH​

to $2.7 Million in ​Newport Beach, CA​.

One key feature makes one house worth 22x more than another house of the same size.

Without understanding that variable you might try adjusting other things to create value. Add another bathroom. Paint the exterior. Remodel the kitchen. Add 3 bedrooms in a major expansion project. But you will never get a house in Youngstown to be worth what is in Newport Beach.

People are happy to pay more to live near the beach in Southern California. Way more. This is so obvious to most of us. “Duh, Sawyer. Of course, California is a more expensive location than Ohio”

But it’s the difference between knowing THAT something is valuable and knowing WHY something is valuable is.

Only when you understand that location is the key variable, it’s far easier to define, design and create value.

If real estate and location seem obvious, try this with something else.

Google search is more valuable than Bing search. Why?

A hot dog at Yankee Stadium costs more than a hot dog at Costco. Why?

A Mercedes costs more than a Volvo. Why?

A band t-shirt at a concert costs 3x what a t-shirt of the same size and material does at Walmart. Why?

Being invaluable to the business means not just knowing what’s valuable.

But why.

Thanks for being here,

Sawyer

from ​The Data Shop