Friday, March 25, 2011

Products vs. Services

I don't agree with the tradition in economic discussions of separating service and manufacturing into distinct categories within the economy.

A service is a product. And a product is increasingly becoming a service, as superior service is often the only way manufacturers and distributors differentiate themselves. I have said for years that the two are merging, so are really the same thing. (Computer manufacturers sell computer consulting, for example.)

But the two are different in one significant way: lifestyle.

Tangible products can be held in inventory, but services cannot. So you can work really hard during the morning and afternoon, then spend the evening resting and building personal relationships. Services, by contrast, require employees to be available whenever the customer needs to use the product.

This situation is not new, but two trends make it more significant.

 1) Larger portion of population involved in service industries. When most of the 
     economy was engaged in manufacturing, then relatively few people were 
     affected by service.

 2) Service levels are upgrading. The benchmarks are higher.
     When I traveled in Switzerland a few years ago, the shops all closed at 5:00 
     so that people could spend time with their families. In the U.S., I expect 24/7 
     fulfillment. If I am watching television at 3:00 am and want to eat some 
     Dorritos, I can visit a large grocery store and choose from 100 varieties of chips.
    Good news for me, bad news for the mother who must operate the cash register 
    and sleep during the day so I can satisfy my MSG craving.

PROGRESS comes at a cost to individuals.

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