Tag Archives: business strategy

An Update on Scarcity

27 Dec

The low cost of production of everything has created a situation where anyone can produce anything. Limitations of capital exist today but this is a recent phenomenon. Technology is still cheap and readily available. The cost of raw materials has even dropped.  The proliferation of production has left us with too much of everything.

Several years ago, Seth Godin wrote a post arguing that there was a scarcity shortage. As an example, he cited the problems faced by mortgage brokers.

“Twenty years ago, most mortgages were written by the local bank. Those banks planted the seeds of their obsolescence when they eliminated judgment from the writing of mortgages….Today, there are an infinite number of brokers to choose from, all offering essentially the same service. The result is that there is no scarcity, and no profit.

The true scarcity in this industry and in most others, as Seth noted, is good judgment. We were once able to measure good judgment by profits or stock performance or sales numbers. Those metrics, at least for now, are out the window.

How do we measure good judgment to make sure that it’s not as scarce as it has been? Do we change the way we reward ourselves, our employees, and our managers? I think in order to do any of these things we must realize that profits are not as easily created or as easily replaced as the $30 DVD player we buy on Black Friday.

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