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Meaningful Metrics for a Smart Society
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Date: 2019-01-24 Page is: DBtxt001.php L0700-TVM-n8-Value-1

TRUE VALUE METRICS
VALUE


VALUE
For all practical purposes there is no organized data about value. Value is subjective ... and therefore difficult to quantify using a single number.

The value is arguably far more important than money cost or money price. The challenge with value accounting is how to have quantification of value that is an integral part of the system.

The TVM solution to this is to have elements of value, just as there are elements of cost, and to have standard values that reflect the perception of value that people have. From this it becomes possible to have standard value profiles for a community ... and from this to create reports that reflect the consumption and creation of these values. The difficulty with using value in metrics is that value is subjective and therefore not easy to quantify ... but value is much more at the core of socio-economic performance and quality of life than anything else. Value is what the recipient thinks it is worth. These relationships are key: (1) When value is greater than cost there is value adding; and (2) When cost is greater than value there is value destruction.

Value is subjective ... and therefore difficult to quantify. Even though value is very important, it is not routinely quantified. The challenge with value accounting is how to have value quantified with numerical values that can be an integral part of the system.

The TVM solution to this is to have standard values that reflect the perception of value that people have about all the elements of value ... just as there are elements of cost in financial, cost and management accounting.

From this it becomes possible to quantify standard value for all the value elements and from this to create reports that reflect the consumption and creation of these values.

TVM uses a range of standard value profiles depending on the characteristics of the people and the community. This is a recognition of the fact that people have different views about the value of different things.

Even though quantifying value is challenging because value is subjective it is essential that it is done. Value is much more at the core of socio-economic performance and quality of life than anything else.

Price is not value. They are two different concepts. Value is often expressed in terms similar to a price ... but they have a different origin. Value has to do with perception ... what someone is willing to pay for something in order to be gratified.

Because the money numbers associated with value are rarely articulated, and not the subject of conversation and news reports, there is a weak set of value information. It is critical that this is changed. Associating a money number to values is regarded as a difficult ... even impossible ... task. However, this is very important if society is to have metrics that reflect what is the most important in society.

Value in markets It is perceived value that sets the price in a market. If value is lower than price, there is no incentive to buy the item. Conversely when value is higher than price, then there is an incentive to buy.

Something may have a low price, but have enormous value to the person using the product. An aspirin may have a low price ... but getting rid of a headache has big value.

Society is in a good place when goods and services have low prices and these goods and services have high value for the community.



The text being discussed is available at


TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
It has been funded by family and friends plus donations from well wishers who understand the importance of accountability and getting the management metrics right.
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