What Is Commoditization?

I use this word a lot, because I find it to be the best single word to describe a massive problem that ails America today.  The problem with the term, however, is that it is not well understood.  So, more than a word is needed to explain what I mean when I use it.

Commoditization has a technical definition that anyone can reference.  In a nutshell, it describes when things that are unique or special lose this distinctiveness and become commonplace and meh.

But what commoditization really means is cheapening the work and worth of human beings.  (Is this too great a leap?)  Well, let’s think about this.

What goes into the price of anything at all that you can buy?  Take a laptop computer for instance — is most of the price in the materials on your lap?  The possibly surprising answer is no.

In relative terms, the raw materials in that laptop are dirt cheap.  Most of the price is the labor of people to conceive & create the concept of the laptop; years of effort of tens of thousands to design and develop all of the intricate parts; the work of many others to build the factories, develop the machinery & tools, produce, test, distribute, sell and deliver the product.  Price is almost synonymous with people.

So when things get cheaper, what is being removed from the cost of production?  If you are following me, then you have guessed correctly — it’s people and their work.

There is a lot to say about commoditization and its effects from here that I have been studying, writing and speaking about for years.  It is a heady subject for most, not because it is difficult to understand, but because it challenges the assumptions many of us make about marketplaces, jobs (including our own paychecks), what things should or actually cost, and even our overall quality of life.

But I won’t be afraid to explore these things if you aren’t!

Jeff