Marc Andreessen Has Two Words For You…

On the latest Tim Ferriss podcast, we get a glimpse into the mind of Marc Andreessen, Silicon Valley visionary and all around super-bright guy. It’s a solid hour of discussion about the future, the past, the way the Valley really works and the ideas he is most bullish about. It’s an absolute pleasure to listen in and learn about how Marc thinks and what makes him tick. Thanks to Kris in my office for bullying me into making the time for it this week.

Anyway, one of the big issues my industry is now struggling with is what to price our services at. ETF firms, mutual fund companies, financial advisory shops – everyone is trying to figure this out. I have a lot of thoughts on this, but they can be summed up by the following:

Good advice is worth multiples of what a client pays for it. Mediocre advice is not worth a little less, it’s worth nothing because it won’t be adhered to.

Also, the value of advice is not measured in basis points, which is what asset management is measured in. This is because investing mistakes don’t cost basis points to the investor making them – they cost hundreds of thousands of dollars, and in some cases, millions. A real advisor prices his advice at a level where value is being added (as opposed to siphoned off) and clients are getting a fair deal for the attention and expertise they’re looking for.

I know of some advisors who assume they need to compete with the lowest cost for advice out there, which is now approaching zero (well not really, because there’s a catch, but I digress). The problem with this is that these advisors literally bring nothing to the table because they aren’t running sustainable practices. They can’t invest in performance reporting software, they can’t invest in cybersecurity to protect their clients’ personal data, they can’t do compliance right, they have no budget to do nice things for their people or visit those who live far away, they can’t hire quality support and operations help, or spend on research tools or CRM or any of the things that make the client experience a worthwhile relationship.

But back to the podcast…Marc is asked a very interesting question toward the tail-end of his discussion with Tim Ferriss, I’ve transcribed this nugget for you below because it’s so important…

 

***

Tim Ferriss: If you could have one billboard, anywhere with anything on it, what would you put on it? If you wanted to convey a short message to as many people as possible.

Marc Andreessen: I’ve got one, I’ve actually thought about hiring a skywriter to do this one. Right in the heart of San Francisco would be a billboard with just two words on it: Raise Prices.

TF: Raise prices?

MA: Yes. The number one thing – just the theme and we see it everywhere – the number one theme with our companies have when they get really struggling is they are not charging enough for their product. It has become absolutely conventional wisdom in Silicon Valley that the way to succeed is to price your product as low as possible under the theory that if it’s low-priced everybody can buy it and that’s how you get the volume. And we just see over and over and over again people failing with that because they get in the problem we call too hungry to eat. They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can’t afford to hire the sales rep to go sell the product. They can’t afford to buy the TV commercial, whatever it is. They cannot afford to go acquire the customers.

TF: Too hungry to eat.

MA: Too hungry to eat. And then they sit there and they don’t sell anything and then they get nervous and then they cut their prices.

TF: And then it’s a race to the bottom.

MA: It just makes the problem worse. And so, probably the single number one thing we try to get our companies to do is raise prices. By the way, it’s like, “Is your product any good if people won’t pay more for it?”

***

Josh here – If you’re not charging anything and your entire value-add is “lack of cost”, then by definition you are announcing to the world that all that matters is lack of cost. And you will never win this battle. I don’t know of any sophisticated investors who are looking for a lackluster client experience with a wealth management firm in exchange for paying the cheapest price. No one wants discount sushi either, for obvious reasons.

There’s a lot of room between, “Here, this shit is almost free” and an egregiously costly service that doesn’t deliver. Advisors need to think in terms of “Here, this is a good value in terms of what you’re getting for your money. And we continually invest in the practice to make it better for you every chance we get.”

Now please find the time to listen to the whole interview. It’s so good you won’t believe it.

The Tim Ferriss Podcast (iTunes)

If you think you should be getting more out of your financial advisory relationship and want to see what else is out there, we would love to chat with you. Get in touch here:

Ritholtz Wealth Management

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Why the digital drug model may be floundering commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  2. Why the digital drug model may be floundering | AnncPress commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  3. Why the digital drug model may be floundering | ABC Featured commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  4. Why the digital drug model may be floundering - Audience Info commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  5. Why the digital drug model may be floundering | ChrContent commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  6. Why the digital drug model may be floundering | Culture Across commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  7. Why the digital drug model may be floundering commented on Jun 06

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  8. Why the digital drug model may be floundering | FEBE Associates commented on Jun 07

    […] In an audio interview last week with technologist Tim Ferris, Silicon Valley’s most ardent defender and promoter, venture capitalist Marc Andreessen, came out against the tech industry’s obsession with freemium models, noting that: […]

  9. Blazing Trader Review commented on Sep 21

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2016/06/02/marc-andreesen-has-two-words-for-you/ […]

  10. Are Bitcoins safe? commented on Sep 25

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2016/06/02/marc-andreesen-has-two-words-for-you/ […]

  11. bitcoin evolution commented on Oct 01

    … [Trackback]

    […] Here you will find 68499 additional Info on that Topic: thereformedbroker.com/2016/06/02/marc-andreesen-has-two-words-for-you/ […]

  12. Cannabis Oil Shop commented on Oct 13

    … [Trackback]

    […] Read More Info here on that Topic: thereformedbroker.com/2016/06/02/marc-andreesen-has-two-words-for-you/ […]