Re: Commoditized

Fascinating read. Here are some of my thoughts. I think you do a nice job summarizing theoretically the utility flows in any set of transactions. Your points about new products being commodizied through lower frictions and increased market entry are for the most part valid. The industry has seen explosive growth in derivative products and as people have become more comfortable with more complex and exotic products, the more they are traded... which enhances liquidity... which in the end commoditizes the product.


THe key in my opinion is to sell services and not products. Like you say, it won't be long before others can accurately price even your most exotic structures and start competing. What is much harder to replicate is the client relationship side of the equation. Salespeople are not brokers... they have to really understand a) what their client's needs are and b) what's happening in the market.


Your comment about cornering the inputs is also quite interesting. THis would certainly be the ideal solution but what you have to realize is that the inputs are people... the traders, salesmen, strategists, etc. You could have the best models, the best software and the best informatiion, but if i come in and hire your top talent, within a few months i'll be competing in all your markets and within a few years i'll be way ahead of you.


In short, yes, products are increasingly becoming commoditized but the nature of the game has changed from selling products to selling services(expertise) and if anything, i think this will be a harder market to corner.