P01 · Lesson 1 of 2 · 10 min · 4 hands-on tasks

What a Business Really Does

Every business is a machine that creates value for customers and keeps a slice of it. Here's how to see that machine.

🎬 Situation

Maya just quit her office job to open a coffee cart outside a busy train station. Her friends ask: "So how will you actually make money?"

She says "I'll sell coffee", but that's not quite the answer. To understand any business, from a coffee cart to Apple, you need one simple picture.

🎮 Play

This is the value stick. Move the sliders and watch who gains what on every latte Maya sells.

One latte at Maya's cart
  • Customer's gain: $2.00
  • Your profit per latte: $2.50
  • Supplier's gain: $0.75
  • Total value created: $5.25

Everyone wins: the customer gets more than they pay for, and you earn a profit.

Try it: push the price above what customers would pay. Then make the coffee better (raise the top) and see the whole stick grow.

Notice three things:

  • When the price goes above what the customer would pay, the sale disappears and nobody gains.
  • Moving the price only moves value between Maya and her customers.
  • Raising the top (better coffee) or lowering the cost grows the total.

🏷️ Name it

Business schools call this the value stick, and it explains every business in the world:

Part of the stick What it means For Maya
Willingness to pay The most a customer would pay $6
Price What they actually pay $4
Cost What it costs to make $1.50
Supplier's minimum The least suppliers would accept for their part $0.75
  • Value created = willingness to pay − cost. This is the size of the pie.
  • Customer's gain = willingness to pay − price. This is why people buy.
  • Profit = price − cost. This is the business's slice, the value it captures.

So the job of a business is to create value and capture some of it. Great companies do both: their products are worth far more to customers than they cost to make, and enough of that value comes back as profit to keep improving.

🖍️ Like you're five: you make a lemonade that your friend thinks is worth 5 stickers. It costs you 1 sticker of lemons. You trade it for 3 stickers. Your friend is happy (they "saved" 2), and you're happy (you earned 2). You both won, because the lemonade was worth more than the lemons.

Real life: some famous companies choose to give most of the value to customers. A warehouse store with rock-bottom prices keeps a thin slice per item but sells huge volumes, and customers keep coming back. A luxury brand does the opposite: it raises willingness to pay so high (through design, status and story) that a big slice is left over even at a high price.

🔨 Do it: 4 tasks

0 / 4 done

Task 1 of 4 · The customer's gain

A commuter would happily pay up to $6 for Maya's latte. Maya charges $4. It costs her $1.50 to make.

How much does the customer gain on each latte?

🧩 Case: A rival cart opens across the street

⭐ VIP

Maya's latte sells for $4, costs her $1.50, and regulars say they'd pay up to $6. On Monday a new cart opens across the street selling lattes for $3.50. Its coffee is fine, but not as good as Maya's.

What's your first move?

What would you do? VIP members make the call, see what happens next across 2 decisions, and get the expert debrief.

🔁 Remember it

  1. What is the total value created by one sale?

  2. If a price is higher than what a customer would pay, what happens?

  3. Raising your price by $1 (and still making the sale)...

A business creates value (what customers would pay minus what it costs to make) and captures part of it through its price.

📅 Use it Monday

Pick one thing you bought this week. Estimate three numbers: the most you'd have paid, the price, and roughly what it cost to make. Where's the value going: to you, or to the company? Then try it on your own work: what could make customers willing to pay more?

Create a free account to track your progress.