Creating Value Through Job To Be Done Theory

This article teaches you the history of money: where, why, and how to create it through job to be done theory.

Why'd I Write This?

When I was in undergrad my advisor asked a simple question, "what do you want to do in life?"

Stumped, I couldn't find an answer that was remotely on the same plane. In my head I thought "I want to create cool sh**, have a stable family, and not have to worry about money", but as it was a professional setting I told her "business".

She asked what about business, and I told her the ability to create businesses and control my income, to which she answered, "that's great, now what career".

Enter the career-box, a virtual bubble where anything outside of a degree or entry-level position is blocked. I call it the innovator's "Bermuda Triangle".

In this career-box, I believed finance/accounting was the only path to this. If I majored in a word that means money along with the "language of business" (accounting) I'd by default have lots of it right?

Then two things happened (No I didn't join a pyramid scheme):

1: Out of rage I started a business trying to bring power to the average investor by bringing transparency to Wall Street. Ambitious yes, successful...absolutely not. Not for effort, rather for lack of knowledge in starting a business, or what I've come to learn is creating value. But because of this experience, because of the people I came in contact with, I was able to see this value and distance beyond what my career advisor showed me.

2: Post-failure I started studying people that created massive value. From household names like Elon Musk (Tesla), Travis Kalanick (Uber), Jack Ma (Alibaba), Sara Blakely (Spanx), to success stories not in the headlines, I started stringing together patterns each one of these people held.

What I realized is this: While my career advisor asked what career I wanted, these people were answering an entirely different question.

While I looked at earnings projections, these people asked what value they could give, being able to see beneath earnings projections and see value at the source instead of it's "price". What these people understood can best described as the job to be done.

Problem: There’s a driver/cause behind prices, but generally we accept prices at face value instead of understanding the root cause.

Solution: Understand the root cause, value, best described as the job to be done. (Remember this visual, it's the foundation to what we'll learn).

In the following article I'll be answering the origin of this question. I won't give you an answer, rather I'll give you the tools to ask your own questions.

The flow will teach you as follows:

• How nature engages in exchanges with energy used as “currency”.
• How society at first handled this exchange, with social trust used as “currency”.
• How the advance of surplus and tribal distancing necessitated a whole new form of exchange with debt representing the value of and currency facilitating this value.
• How debt can be understood through the job to be done.
• How if you understand the job to be done, you understand the driver of currency and can control it.

This order will drop you off at 3 conclusions:

1: Price is the mean, not the end. It is the side effect of the job to be done, NOT the driver.

2: Price is relative, not absolute. Stock prices aren’t the true value, and value investors are samurai’s at differentiating the two.

3: Salaries are driven by the value of a job to be done. Want a higher salary? Increase your value to solve a job to be done.  

Let's Begin!

Why Bother Understanding This?

A market is inefficient. Some hold higher degrees of inefficiency, but every market, whether job market, stock market, or consumer market, all have drivers that aren’t completely aligned with price.

Beneath financial metrics and valuation techniques lies a biological truth of currency.

This truth isn’t found in the financial statements, or even the footnotes, but rather beneath the currency, deep into the actual exchange.

What do I mean by exchange? As you’ll learn, I mean the actual creating and transferring of value present to necessitate currency.

After we understand this we’ll understand that currency is the facilitator of a biological exchange, an exchange that has been around longer than air but is constantly evolving. Most importantly, we'll understand the driver of this biological exchange is the job to be done.

So let’s start at square one and take a trip to a far off land!

 

The Start: How Nature Engage’s in a Biological Exchange

To understand this biological exchange, we first must take a trip down to the Galapagos Islands.

Here we observe nature’s process of symbiosis- a mutually beneficial relationship between different people or groups, taking place between a sea turtle and fish. Upon first glance the turtle is being cleaned by different fish, but as we further observe, we notice the fish aren’t just cleaning, they are receiving nourishment through the parasites on the turtle. In essence, the fish are “selling” their cleaning service while the turtle is “selling” it’s parasites, and both are engaging in a biological exchange in accordance to nature's law of symbiosis (in other words, a win-win).

If we’re to look deeper into this exchange, we see a process to that of the atom. Now let me disclose that I am not a scholar of chemistry/high school science so I apologize if it’s not as scientifically accurate as a textbook. But at an atomic level, to maintain homeostasis (stable equilibrium between interdependent elements) the atom needs a positive and negative charge. Think a magnet. With the turtle, the turtle’s parasites were positive and the fish and their cleaning were negative. Thus, they engaged in their relationship to maintain balance.

But what’s facilitating this? To adjust this for business school, who or what is the middleman?

 Let’s observe a similar example, an example we’re engaged in as we speak.

When we breathe we’re letting off carbon dioxide and breathing in oxygen. How’d this happen? In business terms, we sold our carbon dioxide to plants for oxygen. At the atomic level, we held a positive in CO2 and needed a negative in oxygen. Thus we exchanged our CO2 with the plants for oxygen. We balanced our positive with their negative. 

So back to the main question, what’s facilitating this?

Is it paper money? What about Venmo? It must be Facebook’s new payment through messenger!

Not quite…in nature this middleman is energy.

Just like I need a coffee to write this, fish need energy to perform their cleaning. Likewise energy is keeping the parasites alive, and without energy, there’d be nothing to carry this exchange. Same goes with our carbon exchange. Energy is fueling us and plants to breathe, thus facilitating oxygen consumption and our carbon sale.  

 So if energy is facilitating this, why do we need currency? 

Good question, and our first step is to understand how nature’s laws compare to societies laws.

We’re still engaged in symbiotic relationships, but the nature of exchange is different and it stems from the first days of man.

Nature has a currency of energy which facilitates symbiotic biological exchanges. As we breathe, we’re engaging in a carbon exchange with plants where we buy a plants oxygen while selling our CO2.

 

Society’s Exchange: How Society Engages...The Cavemen Laws

Let’s go back in time and see this with the early days of man (by man I mean both men and women). Original man needs two things: food and a safe environment to live and sleep. To bring this to the atomic level, we’ll call the food a positive charge and the home a negative charge.

In the alone state, man simply can’t do all of this. Just like the fish can’t grow and eat their own parasites, man simply can’t hunt for food and keep an orderly home.

Thus, specialization is born. The men hunt, the women take care of the house (or hut, or cave). To bring it atomic, the man has the positive charge, and the women yields the negative. Through specialization, both are brought to homeostasis through their exchange, and at first there was no dollar amount attached to this symbiotic relationship since as you’ll learn there was no surplus (We’ll call it the ultimate just-in-time lifestyle).

Specialization was our way to reach homeostasis through divide and conquering our positive and negative charge…food and a home.

 

Societies Middleman: Social Trust

Now just as energy facilitated the exchange between the turtle and fish, what facilitated this exchange between man and woman?

On the surface social interaction, but the deeper variable is social trust since in order to socially interact there must be a common trust. The man must trust that if he hunts his other will do their part in up-keeping a home. Likewise, the homemaker trusts the man’s not sitting under a tree the whole time. If one doesn’t hold their end of the exchange, one party would need to find a different way to reach homeostasis. 

This worked great when life was “just-in-time” and both parties were within an arms-reach, but problems arise when we hit surplus and people aren’t an arms-length away.

In our first days the need for specialization created an exchange using social trust as the medium instead of energy.

 

Time to Share: How to Engage in a Post-Social Trust World

Social trust is great when parties are interdependent and what each could offer held a 1 to 1 relationship, but what happens when two forces undermine this?

Force number one is surplus. What is it? Let’s go back to the atom.

Under the original symbiotic relationship, both charges were of equal degree, meaning if we were to use a 1-10 scale, both parties had the same proportional level of charge (+5 & -5 , +1 & -1, etc.).

With surplus, this degree is now unequal, meaning when one is a +10 the other is a -5.

In caveman times, this means that now the man produces 2 times more of a hunting unit than the woman’s unit of housekeeping. Thus, the 1 for 1 relationship we experienced prior is out of whack.

This begs the question, is energy still the best facilitator?

First, let’s ask how exactly does surplus happen?

I gave you a little tid-bit since the man has now a +10 charge instead of +5. But according to Ray Dalio, founder of investment firm Bridgewater Associates and a $15.9 billion dollar man (Ray Dalio Markets Video), it comes down to productivity. In this case, the man has figured out a way to have twice the units within the same time frame. He might’ve learned the patterns of his hunt (market research), he might’ve made better tools or found or more efficient hunting processes (R&D), or in alignment with market randomness there might just be more game. Either way, we see how this exchange has now become more than a one for one relationship.

Because of this mismatch, a new form of exchange is introduced in the form of a “market” (environment where buyers and sellers interact). The man can sell his excess hunting unit to someone else for an equal symbiotic exchange, trading his remaining +5 units for a tool that’s worth +5 units, or a piece of clothing, or a weapon.

This is how surplus works. Instead of a 1 for 1 exchange it creates a market with each transaction following the basic rules we learned of symbiotic exchanges. But with this new model of symbiotic exchanges comes significant challenges we’ll learn how to fix below.

Force number two is the distancing of tribes. As societies grew, no longer were interactions isolated to people within arms-length, and this meant a loss of accountability and with it a loss in trust.

We tried bartering, exchanging my rice for your meat, but it proved ineffective as each party was trying to make sure they didn’t get screwed.

So with both surplus and a negation of trust, we need a way to identify, understand, and facilitate symbiotic exchanges.

What should we do?

Surplus and distancing beyond individual tribes forced us to abandon social trust and create a new method to identify, understand, and facilitate symbiotic exchanges.

Identifying: How to Enagage Through A New Model

So to summarize, nature engages in symbiotic exchanges with a currency of energy. In society, this exchange existed with social trust as the currency until surplus and tribal distance forced us to abandon this for a model that could identify, understand, and facilitate the new process of symbiotic exchanges.

But before we can find a solution in this post-trust world, let’s make sure we’re asking the right question, and that is “What model can facilitate symbiotic exchanges with surplus and a trust challenge”?

Our first clue takes us to Ancient Mesopotamia, where dating all the way back to 4,000 BC we discover financial loan documents. Loans? Did they have an inflated university system too? Just kidding…

But this clue leaves us with a question. Since bartering was ineffective, and surplus/ tribal distance created a need for one uniform medium of measurement, what exactly are we measuring? 

Here’s your hint…according to Kabir Sehgal, author of Coined, “just as miles measure distance, money measures debt”. Okay it was more than a hint. We are measuring debt.

And what is debt? It is the tangible form of value, as you'll learn it is the "hiring" of a job to be done. For these loan documents, debt was in the form of currency. But currency isn’t it. 

Who here has received a gift?

Did you feel a sense of obligation to the gifter? Of course you did. Gifts are one of the most powerful forms of currency.

Gifts are also one of the many forms of intangible debt we deal with on a daily basis.

One of my favorite examples in business is an intro. If someone can deliver you an intro to someone important you owe a serious social debt. Whether drinks, a dinner, or an intro in return, these exchanges all happen because there’s been debt.

So how can we measure this debt?

Debt, whether or tangible (monetary) or intangible (a gift) is what’s being facilitated in a symbiotic exchange. How can we classify and measure debt?

 

Through Clayton Christensen’s theory on a job to be done.

This job to be done is the driver behind every price we see. It is why you’re salary is where it is, it is why stock prices are where they are, and most importantly, it is the driver one can use to predict where the inefficiency lies.

In our carbon exchange, the job to be done is our need of oxygen. In caveman times, this job to be done was hunger and a roof. If you're reading this your job to be done may be a thirst for knowledge or that you want to read something extremely boring. Either way, you're hiring this article for whatever that job may be.

Let’s look at a quick example, one we’re all engaged in right now. According to Wikipedia, the company Microsoft “develops, manufactures, licenses, supports and sells computer software, consumer electronics and personal computers and services”.

But is that their value, or job to be done?

When I think of their signature Microsoft Office, I need a platform to write (Word), a platform to deliver pitches (Powerpoint), and a platform to analyze data (Excel). I “hire” Microsoft Office for this, and quite frankly could care less how “tech-advanced” it is, instead caring about what best helps me write, pitch, and analyze data (my pain points).

Ray Dalio in his book Principles tells us “society rewards those who give it what it wants”. What he means is society rewards those it can hire for its jobs to be done. 

So when we think of what’s measuring debt, it’s the pain of society, or the job to be done. What society uses to “hire” is the other end of the exchange, in other words the solution.

 Here’s a better example from Clayton’s consulting project with MacDonald’s.

MacDonald’s came to Clayton because their recent milkshake campaign was struggling. Common wisdom tells you people get a milkshake for the ingredients or the price, so if you make it richer, or thicker, or more Peanut Butter Cups, or drop the price, sales will increase. However, this wasn’t happening.

Let’s examine using what we know now is real value. Part of Clayton’s research was sitting in the parking lot of a MacDonald’s from open to close. When people bought a milkshake, they’d walk up and ask for what job this milkshake was hired. At first people looked at them as if they had two heads, but after a little explanation the interaction wasn’t as weird as it started.

The team had two unusual observations. For one, the peak milkshake time was around 8 in the morning. A milkshake in the morning? I know as Americans we’re struggling when it comes to the whole healthy thing but really? Second was a theme that kept promulgating, and it was the question what if taste or price isn’t the actual job?

Most people said things like “I want something quick, something I can hold during my commute, and something that makes me feel full”.

Do you hear anything about price or taste there?

The insight was that MacDonald’s was allocating it’s resources in all the wrong directions. Instead, they should be making it as easy as possible for people to get this milkshake since convenience pre-commute was essential. And because of this, their new campaign was a homerun.

Without understanding the true value, by not asking what exactly is this job to be done, MacDonald’s was engaging in the wrong type of exchange. It was as if you went to the Weather Channel and instead it was politics.

This application of a job to be done permeates across many different functions, my favorite being salaries and the dangers of taking them at face value.

Before we can understand that, we must understand the facilitator, and after that I promise you’ll know the secret to making your salary your slave vs. being a slave to your salary.

More on Clayton Christensen

Prices are a reflection of jobs to be done, specifically what we’d sacrifice to “hire” for our jobs to be done.

Identifying: How to Facilitate the Job To Be Done

So we understand our new exchange is one of debt, specifically the debt of the job to be done, but what do we use to facilitate this debt?

Thinking back to the atomic level, what will connect the positive and negative charge of debt?

In the gift economy, social interaction is still a viable medium. 

But with material exchanges that aren’t with arms-length parties, do we want personal interaction? For example those 2 am doughnuts or buying laxatives at the grocery store (Don’t act like you haven’t bought a pack of gum, a magazine, and a couple drinks in hopes the cashier doesn’t notice the laxatives).

This is where currency comes in.

Think of currency as the tangible form of a job to be done. For example, units of charge have been replaced with a dollar amount, and the convergence of an exchange takes place when there’s an agreed currency exchange.

This brings about three major inferences.

Our first inference is price becomes the mean, NOT the end. When we talked of salary, a salary is the reflection of its value for a job to be done. We looked at a software engineer, a marketing associate, and a fitness trainer, and see how salary can be misleading if taken at face value. We see how initially the software engineer held dominance in salary, but in ten years fell behind as the other two individuals better understood the job to be done and thus commanded more value.

Our second inference relates it to price as relative vs. absolute. The agreed price becomes uniform when both parties, the seller and buyer agree upon an equal price.

In nature this happens when we agree to breathe out a +5 charge of CO2 and plants breathe out a -5 charge of oxygen. With markets, this charge now turns into currency, and a charge of 5 becomes a price of $5. In markets where prices are determined by the law of supply and demand, this happens in the background and as consumers we’re limited to simply “accepting” this price at fair value.

But anyone that’s negotiated sunglasses from $100 to $10 (My experience in the Dominican Republic) knows this agreement doesn’t have to be simply what’s accepted.

This is no different than a stock price. When you buy a stock, your job to be done is a return and you “hire” that stock for the return. The price you’re willing to pay for that stock is simply what you believe your job to be done is worth. For finance/accounting geeks, you can do this through a discount cash flow method to find the “intrinsic value”, and your answer is simply a reflection of the value inherent in this job to be done.

I mentioned the field of value investing. Value investors are just job to be done experts, deciphering which stock prices are below the actual job to be done unit value and buying when so. They understand the difference between stock price and intrinsic value.

Our third inference is how this relates to careers and salaries, and where we break free from the crowd and take control over our salary.

Just like a product, society rewards those it can “hire” for its job to be done. So if a software engineer starts at $80,000 a year, a marketing associate starts at $50,000 a year, and a trainer at Planet Fitness starts at $27,000 (numbers are U.S. entry level averages), it’s because of their value in relation to societies jobs to be done. In ten years, the software engineer may be making $100,000, the marketing associate may be making $150,000, and the trainer may be making $200,000. What happened? The marketing associate and trainer increased their job to be done value while the software engineer just coasted. The trainer may have opened his own gym, then franchised his unique model, while the marketing associate may have become a leading salesmen.

This understanding becomes powerful as it lets you see beyond the salary and into the driver. For me, I thought rich people were exclusively finance or accounting majors. My thinking was they must be the smartest at money. But by understanding the job to be done, I understood wealth was the result of value in the job to be done, not in just finance or accounting.

If you want a higher salary, you need to position yourself to be hired by higher jobs to be done or be the best at specific jobs. If you want the highest jobs to be done, instead of looking at earning projection reports, look at problems and understand what solutions will be in highest demands to solve these problems. If you want to be the best in your job to be done, be the fitness trainer who build his unique process and franchises it, not the software engineer who replaces continuous learning with continuous coffee breaks.

Currency facilitates the hiring of jobs to be done. Whether a product, or a salary, currency is the medium, not the end, and relative, not absolute.

What about different forms of currency?

Throughout history currency has evolved to different forms, with it’s first documented form of coin in the 7th century to paper and now cryptocurrency possibilities, but through each iteration it’s purpose has stayed relatively unchanged.

Where do the different and ever evolving types of currency fit in? Do they change the exchange?

As of December 31st, 2016, currencies are just the means, not the end in the symbiotic exchange of debt. Companies and methods like PayPal or Venmo have made it easier, but haven’t altered their duty of measuring debt. Credit card companies obviously have increased the volume and frequency of credit, but for the sake of jobs to be done, this just increases their value. I can go deeper into credit assumptions and possibilities, but for the sake of an already too long post I'll keep it at this.

Remember the 3 Inferences?

1: Price is the mean, not the end. It is the side effect of the job to be done, NOT the driver.

2: Price is relative, not absolute. Stock prices aren’t the true value, and value investors are samurai’s at differentiating the two.

3: Salaries are driven by the value of a job to be done. Want a higher salary? Increase your value to solve a job to be done.

Summary

If you've just skipped to the summary here's the deal: Prices are reflections of jobs to be done. They are not absolute, they are not the end, and in inefficient markets (every market) they are interpretations, not exact reflections of the job to be done.

Now I offer this as a challenge of interpretation, a challenge of not finding an answer but rather finding the right question.

I ask you all today, tomorrow, and with every decision you make, to ask yourself not what’s the price, but what’s the job to be done?  

For Additional Knowledge:

Kabir Sehgal, Coined

My Free Executive Summaries

What I Learned From Clayton Christensen