Even though Christmas is now about two weeks behind us, I'm still thinking about gifts and gift-giving.
Some people really love to give gifts – and are really good at it too! But I am by no means a good gift-giver. I often find myself procrastinating until the last possible minute to find a gift for someone’s birthday or for Christmas. And I often struggle to find just “the right gift” for my friends and family.
However, I’ve used one principle to improve my gift-giving, and I call it the cost-effective gift equation.
1. The Equation and How it Works
Here’s the equation:
GCE = (S x T) / P
Confused? Let's break this down, step by step.
- GCE represents the Gift Cost-Effectiveness. The higher a gift’s GCE is, the better.
- P represents the price of the gift (in dollars).
- T represents the amount of time that the recipient will use their gift (in hours).
- S represents the satisfaction (rated on a 1-5 scale) that the recipient will feel over the time that they use their gift. A boring but palatable novel would receive a satisfaction score of 1, and a really delicious chocolate bar would receive a satisfaction score of 5.
This equation isn't solely based on only time or satisfaction, since both factors are important. For example, chocolate bars are delicious but are typically eaten quickly (high satisfaction, low time). And a boring novel would take a while to read, but wouldn't be that interesting (low satisfaction, high time).
2. Choosing Cost-Effective Gifts
You may be thinking:
Great, Nathan, you gave me an equation. But how do I actually use it?
I have a simple answer.
For your gift, maximize the GCE.
Here's an example:
Gifts A, B, and C all cost the same – let's say $20.
- For Gift A, S = 5, T = 1, and P = 20.
- For Gift B, S = 3, T = 3, and P = 20.
- For Gift C, S = 2, T = 4, and P = 20.
Quiz yourself: which gift has the highest GCE?
It's Gift B (with a GCE of 0.45). Even though Gift A has a higher satisfaction variable than Gift B and Gift C has a higher time variable than Gift B, Gift B outranks its competitors because the product of the satisfaction and time variables is the highest.
So for your gift, you should aim to maximize the gift's GCE. If you can find a gift with GCE > 1, it's probably a pretty good gift.
Personally, I frequently like to gift a high-quality deck of cards to my friends. Most people will use a deck of cards at one point or another, and you can get a really cool deck of cards for ~$10.
Unfortunately, there are notable limitations to the cost-effective gift equation.
- You can't meaningfully measure 'time used' for some gifts, like household decor and normal household items. You can't really say that a decorative plant on your bookshelf will have 5+ years of use.
- The satisfaction scale is finicky. According to the equation, if all other variables are equal, a gift with a satisfaction score of 3 will have a GCE 1.5x as high as a gift with a satisfaction score of 2. Most people don't view a satisfaction score of 3 as 50% more satisfying than a satisfaction score of 2.
- Gifts that display thought and attention to detail are typically considered better (by the recipient) than run-of-the-mill, ordinary gifts. The equation doesn't take "gift thoughtfulness" into account in any way.
- Most importantly, it's almost impossible to predict the satisfaction or time variables. You can roughly estimate those variables, but for any given gift, it'll vary from person to person.
4. Final Notes
I sincerely hope you enjoyed reading this article! Hopefully the cost-effective gift equation will help you find great gifts for your friends and family.