A while back, I traveled to Chicago to attend a technology/advisory summit for my data analysis and reporting work in wealth management. The key theme at the conference was the importance of adaptability in our age of rapid change & technology. Thinking about how the finance industry is grappling with that fact led me to consider a few ideas for pricing creative work.
A Miscalculated Economy
It’s said that finance as an industry is one that is resistant to change. For instance, we stick to familiar patterns and measurements, such as GDP, inflation rates, employment rates, which are less and less useful in to explaining current economic events. As metrics designed to gage an unprecedented Great Depression, they measured how many people were affected and gave ammunition for politicians, but now are only marginally applicable.
Those terms and their principles were created with the notion that one country makes goods in one country only for one country’s people in one year. Our trade deficit with China causes immense concern to many, yet a fifth of it is simply due to the fact Apple and Walmart manufacture products on Chinese soil and sell the final product in our borders. Outsourcing labor seems an unfitting cause to decrease our “productivity,” but it does. To calculate GDP, we count that final iPad as a Chinese import – a Chinese product. Moreover, much of Silicon Valley is invisible to GDP, as GDP does not calculate intellectual property or include the utility of Google (aside from its ad sales). These are just two instances of how our economy has outgrown our definitions.
Also, we haven’t even been able to accurately capture enough data about our economy until the advent of computers (and subsequently stochastic algorithms) 20-30 years ago. “The economy” wasn’t part of our common vernacular, let alone “GDP” or “inflation,” until the last 60 years. Check out the rates that these relevant terms appear in Google’s body of literature over the last two centuries. It’s hard to say how reliable our conclusions are when the applicable data is so new and terms are evolving.
Moreover, the financial landscape is much more complex and globalized, so that many variables come into play, which can greatly alter our forecast models at a moment’s notice. Volatility becomes the norm with our current measurements.
Yet, many of us still use old metrics and analytics to decide what college degree to get (I’m a bit guilty of this one), how to save and spend, what assets to invest in and how many trillions of dollars of deficit spending we incur. Perhaps, we cling to the familiar concepts we were taught in school, since we had faith in them for so long and they gave us a comfort of predictability.
The idea that we get out what we put in is an attractive one. More input = more output. You inject the economy with money and provide buyouts, then you should get millions of jobs in return. It’s that old Keynesian trickle-down method used to bring our economy out of Depression. This is no longer the case for a reason.
The metrics we used before are better as guidelines rather than standards of measurement. There’s still cause and effect, but each is more complex. Above all, change is increasingly rapid. It’s up to us to make sense of it and adapt.
Application to Creative Work
The mindset that the value of a product can be calculated by a direct relationship between inputs and outputs still exists in photography. Many clients ask for a day rate or an hourly rate. Unlike law or banking, photography is a creative process not valued by how long the artist sits in front of the computer screen with ramen on the side. Labor inputs have less bearing on the outputs (more so since the product is intangible). A valuable photo has to do with how well we understand the client’s stylistic needs and how well we can complement that. Similarly, some artists believe that the more they invest in their technology, the better their photos will be. Technology is only as useful as the way we use it.
“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.” – Steve Jobs
Also, many photographers end up competing on prices thinking in terms of old demand-side economics. The lower the price, the more demand for their work and the more work they’ll have. It’s not so simple though. There will always be someone priced lower than you, now that the barriers to entry are so low. Being known as the lowest priced in your market is a predicament – you may never have the funds to expand and would be struggling to cover costs. In the long-run, it’s better to keep in the habit of competing on quality and innovation.
Rather than set your value primarily based on time (i.e. a day rate), it's wiser to value your services based on a combination of the complexity of a project and the hours required to deliver the final product. Also, rather than underprice based on supply and demand, set a creative fee to stay in business for the long-run. Until your skill can measure up to that price to stay in business, don't quit that day job. After all, if you're in it for the work, your time will be best spent chasing your dream projects.