Read Millionaire Fastlane!
- Apr 28, 2017
Is This Course Worth It...?
I've seen a lot of threads around here with people being unsure about whether a certain course or ebook is worth buying.
For example, one member asks: Why Believe Any Writer/Speaker/Guru?
The fear is justified, nobody wants to make the wrong decision and lose money in the process.
This thread is the answer to such fears.
And it will show you how to scientifically estimate whether a course is worth buying or not.
Certainty Doesn't Exist - You Must Make The Best Decision Based On Uncertainty (and Probability)
You will never be 100% certain that buying a certain course is worth the investment. That just doesn't exist. Even the very best courses out there aren't suited for everyone. So there is always a possibility that the course will not be for you, even though it is the very best course out there.
You can certainly choose to question everything (like the OP of the thread mentioned above), that is certainly one strategy to have, but you're unlikely to make any progress. Questioning everything is being stuck, not moving forward, closing yourself from opportunities to learn things that could be useful for you.
That way you won't be buying any courses which gives you 100% chance to miss out on information that could have taken you forward.
So this is NOT a smart strategy.
This means that you need to learn to take decisions based on probability, much like a poker player. Your goal is to learn to take the RIGHT decisions at every single step. Sometimes, your decisions may not work out. But in the long run, you will have gained far more than you have lost.
That's why you need to know how to calculate the EXPECTED VALUE (EV) of your purchase. Given the uncertainty, the expected value will tell you whether you're making a good decision (if the balance of probabilities is in your favor - we call this +EV), or you're making a bad decision (if the balance of probabilities is not in your favor - we call this -EV).
Please note that it is absolutely possible for the EV of a decision to be +EV, and yet for the course to not work out. This doesn't mean that it was a bad decision to buy though. If you stick to taking +EV decisions all the time, even when you actually end up losing, you will have gained FAR more than you have lost in the long run.
It's like rolling a dice.
If you win $1 every time the dice lands 1,2,3,4 and you lose a dollar every time the dice lands 5,6, then it may be possible for you to lose $10 if you throw the dice ten times (all ten times the dice would land either 5 or 6). But in the long run, say if you throw the dice 10,000 times, then you will have earned $3,333. How come? Because the balance of probabilities is in your favor, so you're making a good decision by playing the game, even if variance means that for the first ten throws you may just be losing money.
Determining The Expected Value Of Buying The Course
Ok, so how do you calculate the expected value of a course?
(Ew-C) * Ps - (1-Ps) * C = EV
Ew = Earnings if it works out favorably
Ps = probability of success (a favorable outcome)
C = Cost of the course
EV = Expected Value
Seems like a complicated equation to remember...
It gets easier.
Here's a much easier version to remember:
C/Ew < Ps
THEN WE ARE +EV!
So it's quite simple. Say the course says that it will teach you a specific skill that you can make money with. The first thing is to quantify how much money you'll make if it works out. Say it teaches you copywriting, and you can expect that after taking it you'll be able to earn $50,000 income in a year by writing copy. You estimate that based on what the person who created it claims, testimonials, and your knowledge of yourself, your situation and your background skills. The cost is $500. What % of the time should you succeed in making $50,000 income by buying the course for this to be a +EV decision?
Well, let's calculate it.
$500/$50,000 < Ps
1:100 < Ps
So the probability of success must be greater than 1 out of 100 tries, meaning 1%.
So if the course gives you even a 1% chance to make $50,000 income, then you should pay $500 for it. It's a GOOD decision.
As you can see, in this case, your probability of success doesn't actually have to be very big at all to make it a good investment.
Another way to think about it - if you can make $50,000 1% of the time by buying the course, then you should buy it.
And here's an even more powerful way to do it... we'll build an EV table assuming a cost of $500.
|Probability of Success||Breakeven Ew (how much you need to make to be +EV)|
Now, here's the genius about this EV table. The tail scenarios are naturally very difficult to judge. You may find it impossible to say with 1% certainty that you'll make $50,000 out of what you learn.
Likewise, you may struggle to have 100% certainty that you'll make $500. That's not a big deal, because the technique can handle it.
If you can find even ONE Ps + Breakeven Ew that makes sense, then you should buy the course. Otherwise don't.
You Still Need To Estimate Your Chance Of Success To Make A Particular Return...
Now obviously this technique still requires you to estimate the chance of success at making a particular income with the help of the course. The mathematics helps you figure out where you are given your assumptions, but it's not going to make those assumptions for you.
So you have to estimate the probability of success when it comes to making a particular income. If the probability of success you estimate is greater than the probability of success you find in the table for that particular income, then you should buy.
Look at what the course helps you to achieve in combination with your current set of skills, and your unique situation. For example, how much is one extra sale, if the course teaches you sales, worth for you? What's your average sale value like? So if the course were to help you get one extra sale, how much would that sale be worth? That's your expected Ew. Then look at the corresponding probability of success, and based on what you know about the course, reviews, feedback, interactions with the course creator decide if the real probability of success is bigger than the one in the table. If it is, then you should buy.
If the course is useful and goes well with your current skillset or the skillset you're looking to develop, but does not help you solve an immediate problem, then assume a chance of success equal to or smaller than 50%
If the course is useful, and will help you solve a CURRENT PROBLEM that you're facing, then look at the value of solving that problem. How much would you have to pay someone to solve it for you? Compare that with the price of the course. If the price of the course is smaller, that's a good sign. Then look at the higher probabilities in the EV table (50% or higher). Will it help you get those kind of returns? If so, you should buy it.
Remember, courses are always more helpful if they help you solve a CURRENT problem you're facing. Then it's much easier to quantify their value.
If they don't help solve a current problem, and they don't help you increase your income directly, then it's more difficult to quantify their value.
But you should still try. Always consider your OWN situation, given your own background and skills when you think about what kind of returns you can get from a course.
Someone running a 10 billion business may get a $5 million return out of a sales course teaching them how to close just one extra sale.
On the other hand, if your average sale is $1,000, then that's your likely return if you assume you'll close just one sale.
So analyse these assumptions that you're making by relating to your own personal situation, and then use the math to check what the effect of those assumptions is, and whether it makes sense to buy or not.
But DO REMEMBER: the math is only useful if you make sensible assumptions. So the quality of your results will still depend upon your assumptions
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