It’s no secret I’ve taken a lot of online courses [1]. I’ve bought hundreds, perhaps thousands of books. I’ve also bought quite a few online courses ranging from helping improve my business, languages, networking and even painting.
In this article, I’d like to talk about how I make the decision to buy information products. Making those decisions wisely avoids two problems. The first, and most obvious, is wasting your money on something you never use. The second, and more subtle, is wasting your time because you didn’t invest in yourself.
Obviously, I’m horribly biased. I make my living selling information products, so that’s good reason to question any advice I’ll give.
However, I honestly don’t care whether you buy anything from me. Instead, I hope by outlining the decision making process I use to buy information products for myself, you can think critically about your own process for making decisions to buy books, guides and courses.
Why Pay For Knowledge?
People are funny creatures. We mostly decide how much things are worth, not by rationally calculating their value to us, but by comparing them to a reference category of what such an item is “supposed” to cost.
Since I’m also a funny creature, let me use myself as an example. I’m trying to learn to read in Chinese. I’m currently in a strange intermediate level where I know a lot of characters and words, but reading newspapers or books for native readers is still very difficult. The solution is to use graded readers—books made especially for learners to help them read better.
There’s many graded readers out there, but I particularly like a set [2] which tells myths and legends from ancient China. Not only are the books comfortable to read, but they introduce Chinese culture at the same time.
I’m missing the last book, so I go onto Amazon to buy it, and guess what? They only have used copies—starting at $65. Sixty-five dollars?! For a softcover book that’s, maybe, 150 pages? I balk.
But, on further reflection, yes that is expensive, but compared to what? I’m probably going to spend several hours reading the book—so at a dollar-per-hour cost, it’s probably less than the tutoring I spend money on to improve my Chinese.
There are other graded readers, but I really like this set. I know that if I buy it, I’ll read it right away. I’ve bought others where I’ve enjoyed the material less and they’ve sat on my shelf for weeks or months at a time, untouched.
So, framed a different way, sixty-five dollars is probably a pretty good deal.
Calculating the Value of an Idea
My experience with the Chinese graded reader (I did end up buying it, by the way) shows that information is a hard commodity to think about price. Our normal heuristic of comparing price to a reference category often fails because information varies wildly in its value and availability.
A truly excellent idea can be demonstrably worth hundreds of thousands of dollars—if it pushes your career or business into a profitable direction. Even for ideas that don’t directly earn you money, good information can save you time, reduce effort or increase your motivation. Given this, it’s often hard to properly assess the value of information products because they could be either very valuable or be worse than nothing (if they end up giving bad advice).
The way I try to think of it is that good information is like a multiplier you put on your time and effort in a self-improvement direction. Consider the following categories:
- x0.5 — This is bad information. It actually makes you less effective than if you didn’t have it.
- x1.05 — This is decent information. It makes you slightly more effective. Applied in the right area, however, even a slight improvement can have a large dollar value.
- x2 — This is really good information. It makes you much more effective. This doesn’t need to be even applied in a profitable area to be worth every penny.
- x10 — This is the very rare, paradigm-shifting information. It transforms your output. This is the kind of idea you might only encounter a handful of times in a lifetime.
Generally you’ll only want to invest in information if you believe the value is greater than one. However, the value of the information, and therefore the multiplier it potentially offers, doesn’t actually determine whether it’s worth the price. To find that out, you need to multiply it by how much effort and time you’re going to put into applying the idea:
Value = Information * Investment
So consider you have a good idea (x1.10), but you apply it in different ways:
- You buy the material, but never open or use it. (Investment = 0)
- You skim the material, but don’t (consciously) do anything with the information. It perhaps has a subtle effect on how you do things, but not much. (Investment = 10)
- You read the material deeply, maybe even taking notes or discussing the ideas with a friend. Again, however, you don’t implement the ideas with a concrete plan. (Investment = 100)
- You read the material deeply, and set up a concrete plan to implement the ideas, perhaps over several weeks. (Investment = 1000)
How much was the information worth in each of these four cases? Well, let’s look at how much extra value you got as a result of the information provided:
- In the first cases, you didn’t use the material. Anything times zero is zero, so that’s exactly how valuable the information was to you—zero.
- In the second case, you at least read the material. The investment was small (10) and the multiplier was modest (1.1) that means your residual value minus your investment was (11 – 10) = 1.
- In the third case, you started to put some effort in. Now you’ve made a bigger investment, you’re more likely to use the ideas and start to see results. The residual value was 10.
- The the fourth case, you really invested a lot in the idea—the residual value was high—100.
Let’s say we took the additional step of converting my unitless dimensions of value into dollars. The conversion rate here would depend on you—a big CEO might have a high conversion rate for an idea that helps his business (maybe $1,000,000:1) whereas a retired gardener looking for tulip planting tips might be more modest (say, $1:1). Since we’re being completely hypothetical, let’s say our conversion rate is $10:1.
Following these made-up numbers, this implies that our 10% better idea is worth nothing if you don’t even read it, $10 if you skim it, $100 if you read it deeply and discuss it, and finally as much as $1000 if you invest effort into implementing it.
The point of this exercise wasn’t to give a quantitative formula to perfectly calculate whether buying an information product is worth it. In real life, you won’t know these numbers exactly, so the formula isn’t that useful. Instead, it’s to show that different levels of investment and time can result in wildly different values for the same information.
How to Think About Price When Buying Information
The result of this exercise is that you are now well-equipped to think about how much you should be willing to spend for different information products.
The first step is to look at how important ideas could potentially be for that area of your life. I’m willing to spend more on courses that could potentially improve my business, even by a very modest multiplier of effort, than I am for courses which will make me better at a hobby. The reason is simple, it doesn’t take much improvement for a business idea to pay for itself.
This also works for important-but-non-financial areas of life, like health or relationships. Being healthier might not directly make more money, but if I can make an improvement here, it will indirectly pay for itself by increasing my energy.
The second step is to consider how much time and effort you’re willing to put in to realizing the value of the information. It’s not possible to maximally invest your time and effort into every idea you encounter. It’s not even clear that would be a good strategy even if you did. Instead, you’ll probably find yourself split—investing lightly in a lot of ideas and heavily in a few.
This is what I do. I can read a book in far less time than it takes to do a course. I can also do a regular course in less time than one which requires extensive self-improvement practice. Therefore, my self-improvement investment tends to be to read dozens of books, do a handful of courses and one or two major investments every year.
Once you have done this, it’s easier to see whether a book or course is worth the price.
- For a book that costs $10, this is pretty easy. Even skimming it, might more than pay for itself just by giving you extra ideas when you confront new situations.
- For a digital product that costs $100, this might require some more commitment. I might have to invest in it in order to see a return.
- For a large course that costs $1000, I would want to be serious. Now I’m almost certainly going to have to invest myself to make the price valuable.
These numbers are, of course, purely hypothetical because the exact conversion rate of value to dollars depends so much on your unique situation. If I’m an overworked doctor making six figures, I might scale these numbers up so even a course improving my medical practice costing $1000 is still valuable even if I skim it. If I’m a broke student, I might need to be more serious before even considering spending $100.
What About Substitutes?
All of this analysis also assumes that the information you’re choosing to buy can’t be obtained much more easily or cheaply somewhere else. If you do have a competing book or course to consider (even if it is completely free), you may still end up buying the more expensive one if you have reason to believe its multiplier is higher.
Imagine two courses. One costs $100 and you have high trust in the teacher. You’ve looked around and none of the other teachers seem to be quite as well-suited for you. The other course is free. Which should you take?
To make it quantitative, let’s say the first course has a predicted 1.5x multiplier and the other has only a 1.1x multiplier (the base-rate—of not doing either course is 1x, of course). Taking our hypothetical investment and conversion rate numbers from earlier, we can see how much the courses are worth in different cases:
- Do nothing. Course A: $0 – $100 = $-100. Course B: $0 – $0 = $0
- Skim. Course A: $50 – $100 = $-50. Course B: $10 – $0 = $10
- Read deeply. Course A: $500 – $100 = $400. Course B: $100 – $0 = $100
- Engage. Course A: $5000 – $100 = $4900. Course B: $1000 – $0 = $1000.
As you can see, the value of the different courses depends on how you plan to use them. Going to do nothing or skim? The second course is clearly better. Going to read deeply or go deep and engage in self-improvement? The more expensive course actually ends up being a better purchase, even though the competing product is technically free.
These numbers are hypothetical, but the situation is not. I recently bought an drawing course online [3]. I had seen a lot of his free material, so I was confident the multiplier for the information he was giving was higher for me than most of the other stuff out there. I was also committed to going through the course, so the course was clearly worth the ~$100 I paid for it, even though sketching is just a hobby for me.
Decide to Invest Before You Buy
The main message here is that more expensive courses can be worth it, but usually only if you invest in them.
I can also see this in the attitudes of the people who take my own courses, as it becomes clear who is going to make a return on their investment and who isn’t.
Some people enter a course wanting it to mostly be interesting or counter-intuitive ideas. While surprisingness can signal the value of an idea, most good ideas aren’t surprising. The value of counter-intuitive ideas is that, since you think about them a lot, they’re more likely to influence your behavior if you’re not actually putting in effort to deliberately implement the ideas.
This means whenever I see people signing up for my course wanting a really catchy insight, I get disappointed. Because it means, more than likely, they’re just at the level of skimming the ideas, which is probably not going to deliver a return on their investment.
On the other hand, if you’re committed to actually investing in doing the work, the value you get is mostly dependent on whether the ideas are good or not. Catchyness is somewhat irrelevant, so you’re more likely to be investing at a deep enough level to see returns.
I also like counter-intuitive insights, but I seek them more from books and free articles. That’s because a $10 book that has a surprising insight can influence my behavior even from skimming and therefore probably be worth the purchase. If I’m going to invest more deeply, quirky ideas matter less than whether the underlying suggestions are solid and help me avoid wasting time.
Pay For More Information
Although this article comes down hard on people who pay for information and then don’t invest in themselves properly, I don’t think the lesson should be to avoid buying more books or taking more courses. The truth is, for someone actively engaged in self-improvement, self-education has a good long-term rate of return.
If you know you won’t have time to reap the rewards of a big course, it’s probably better to just get a book or skim some free articles. However, the other implication of this is that if you know you want to invest in improving an area of your life, sometimes it can actually be more valuable to choose the expensive option, even if it’s only modestly better than a free alternative.