What a Signal Costs: Proof of Work

“Talk is cheap.” “Put your money where your mouth is.”

The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man's preferences; that is, that his preferences are deducible from what he has chosen in action.

Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics, 1956

Two of those are things your dad told you when you were a kid. The third is a 1956 welfare-economics paper saying the same thing in an academic context. It's all the same idea, and it's a corollary of Mises: if value is subjective, then cost is subjective too. The real weight behind a choice isn't the price tag; it's whatever the person had to give up to make it.

So for the marketer, the question is what you're actually asking of your customer. New brand, unknown vendor? Your fee probably isn't the expensive part: the reputational risk of betting on an unproven entity is. Product that's better and cheaper but slower? To a client on a deadline, slow is a cost they can't pay, at any price.

Part 3 looked at the invisibility of value. Here, we're looking at its inverse: the invisibility of cost, and what incurring a cost communicates.

Cheap Communication

2026 is a strange time to be looking for a job. Applicants use AI to generate résumés and fire them at hundreds of postings; employers use AI to screen the flood back out. Both sides automated their half of the conversation, and the cost of sending a signal collapsed to zero on each end.

A résumé used to cost effort, and the effort is what made it mean something. Now it costs nothing, so it means nothing.

This is how a DDoS attack works. In a Distributed Denial of Service attack, a swarm of infected computers sends bunk requests to a server to tie up its resources, so it can't serve real customers. The request is cheap to produce but imposes a cost on the recipient. Spam email is the same idea: trivial to send, expensive to receive at scale.

So what stops malicious hackers and Nigerian-prince scammers from grinding the internet to a halt? Cloudflare uses a simple idea, originally pioneered by British cryptographer and cypherpunk Adam Back: proof of work. Back invented it for Hashcash, an early attempt at digital money; Cloudflare borrowed the concept to stop DDoS attacks. By requiring the requestor to perform a small calculation before being served, a swarm trying to hit a server thousands of times a second incurs a cost that becomes prohibitively expensive at scale. A person who just wants to see the front page of ESPN performs the calculation once, never notices it, and goes on to read about last night's game. A tiny imposed cost cleans up the signal-to-noise ratio.

Consumers are in the same position as HR managers and public web servers: inundated with cheap messages. Spam in your inbox, billboards on the commute, radio spots, YouTube pre-rolls, retargeting ads chasing you across the web. We're all living through a permanent DDoS now — every inbox, every feed, every drive to work, a swarm of signals that cost nothing to send and therefore tell us nothing. The question marketing hasn't answered yet is the one Cloudflare answered for servers: what's the proof of work? Put your computation where your mouth is.

The Cost Is the Signal

Peacocks are probably the most archetypal example of a costly signal: that gigantic, colorful plume is a genuine handicap to its survival, which is precisely the point — it implies the bird is so physically fit it has fitness to spare, and must therefore be genetically superior to its competitors and the more desirable mate. The concept is called the handicap principle, the biological equivalent of proof of work, proposed by Amotz Zahavi in 1975.

Human beings do this too. Rodeo Drive in Los Angeles is a great place to watch anthropology in action: flashy sports cars, jewelry, and fashionable labels, all costly signals meant to communicate social status. What most of us also know is that these signals can be faked — knockoff products and crippling credit card debt are often fronts for wealth and status that isn't there. The signal of cost can be counterfeited, which puts the burden on whoever's evaluating it to tell the real thing from the bluff.

Often these signals seem dumb. Why pay thousands for a designer handbag when an artisan bag from a no-name leatherworker in Idaho might be higher quality at a lower price? Because, like the peacock's plume, the cost is the point. Displaying the expense is what strengthens the signal. Does a dress worn to the Golden Globes need to cost $100,000? Absolutely not. Does it cost $100,000 to tell the world you've got money to spare? It sure does.

But money is the most counterfeitable signal there is: the knockoff, the lease, the maxed-out card all exist to fake exactly this. It's also the most uneven: the same hundred grand that would bankrupt one person is a rounding error to another.

The question was never really how much did it cost. It's what did it cost, and to whom — because cost, like value, is subjective.

The same price tag is a different sacrifice for every person who pays it, and that's where the real signal lives.

Cost Is Subjective

Picture a hedge fund manager shopping for a weekend ski trip. He's worth studying, because his weekend is the whole principle in miniature: the cost that signals isn't the one with the biggest price tag — it's the one he can least afford to spend. We've also explored what a price really is: the market communicating scarcity. The hedge fund manager's scarce asset isn't money. It's time and energy, and that's what's being priced in.

So the question becomes: what, exactly, is scarce for your customer? Where's the value? It's the marketer's job to communicate the worth of a product or service within the context of what the customer actually values.

The cat tells you which milk is good.

Which is why discounting the trip for the hedge fund manager won't make the sale. The cost in dollars was never the issue. Assigning a concierge to coordinate travel for him and his family, or rearranging the logistics so his return flight is faster and cleaner — that moves the needle in ways dollars and cents can't. You're offering him the currency that's in short supply for him specifically.

But sometimes you're not asking for money or time at all. You're asking for the most expensive thing a person has: their identity. At first glance a $5 hamburger isn't a big ask. But ask a vegan to eat one, and you're asking them to participate in what they regard as killing. $5 wouldn't do it. Neither would $500. Nothing about the burger is expensive; the ask is nearly impossible, because the cost was never in the food.

And here's the part most marketers miss: when the cost is identity, the most valuable thing it tells you is who your customer isn't. The vegan is not a hard sell to be cracked with a better coupon: the vegan is not your customer, and no reasonable amount of effort will change that. Identity is so expensive to move that trying to move it is almost always a waste. The discipline isn't persuading the people whose identity your product offends; it's recognizing them on sight and spending nothing on them, so you can spend everything on the people for whom your product confirms who they already are. If you're putting out milk and they're not drinking — maybe your customers aren't cats.

Pay the Right Price

Walking around Germany with Chinese yuan is probably not going to get you very many schnitzels, and in the same way, marketers need to pay in the currency their customers are selling in; we need to know if the cats want cream, half-and-half, or goat's milk. Discounting a steak dinner to a vegan is not going to make the sale. Let that same customer know that your handbag is made from a soy-based product blessed by Tibetan pacifist monks? You can raise your prices 200%.

Seth Godin's axiom “price is the greatest indicator of quality” holds here for communication too. There's a reason heavy-weight cardstock and embossed letterhead are reserved for big deals and weighty contracts. The price is the point, and you're communicating that you're taking the deal seriously. So seriously that you'll spend extra time and expense on paper.

And why is a text message the lamest way to break up with someone? Because if the relationship was important, you'd spend the effort to do it properly. A text sent from the toilet communicates the interaction is low value, which is exactly why it's so offensive. It might as well be bot-spam. A good marketer makes the customer feel heard, and that can't be faked. The only way to produce it is to actually understand what they need, fear, and value. That understanding is the plume the peacock can't fake.

Attention is the one currency a spammer will never spend, which is exactly why paying in it is your proof of work.

So it all comes back to Mises: value is subjective. Marketers need to use communication to pay in the right currency and pay at the right time. Do the work and prove it.