Dollar Shave Club and the Disruption of Everything
> Value Destruction<p>These words, they are not what is happening.<p>Value is the thing the shaver gets from having a razor. P&G doesn't get any value from giving you a razor, that's why you have to pay money to get them to do it. You have to transfer some of the value you get back to them in cash form.<p>If razors now cost 25% of what they used to, there is still exactly the same amount of value in existence. There are the same number of razors and the same number of dollars, only now more of the dollars stay with the customer. Probably there is <i>more</i> total value because at a lower price people will buy more of the thing.<p>This may be more easily confusing because we have become used to measuring the economy by stock prices. But stock prices are a measure of the <i>inefficiency</i> in the economy. They're a measure of the return on capital. The amount more that companies skim off the top between what the customer pays and what was necessary to produce it.<p>A company that makes products for $5 and sells them for $5 may have a negligible stock price while creating an enormous amount of value. A company that buys products for $1 and sells them unchanged for $10 may have a high stock price while creating no value at all.