Commodity or Brand: The Test Every Founder Should Take
Updated
Knowledge on this page was mainly distilled from Every Venture Is Either a Commodity or a Brand.
Every venture, since the first merchant set up a stall, has been one of two things: a commodity or a brand. A commodity competes on price, speed, and features. A brand competes on trust, taste, and identity. There is no third category. AI didn't create this split. It just burned away the building difficulty that let founders ignore it.
The Strip-It-Down Test
Remove your product's features, speed advantages, and pricing. What's left? If the answer is "nothing," you're a commodity. That's not a death sentence. Walmart and most of cloud computing are commodity businesses, and they're enormously profitable. The strategy is clear: optimize relentlessly, scale hard, win on cost.
If something remains, a point of view, a specific audience that identifies with what you represent, a way of solving the problem that some people love and others genuinely don't get, you might have a brand. Different strategy: deepen the conviction, attract the right people, let the wrong ones leave.
The Coca-Cola Paradox
Intellectual property can blur the line. Coca-Cola has guarded its formula for over a century, yet Pepsi routinely beats it in blind taste tests. The two colas are practically indistinguishable in the lab. Coca-Cola dominates the market anyway. That gap between the tongue and the wallet is pure brand. IP slows down replication. Brand makes replication irrelevant.
Q&A
What are the three diagnostic questions for commodity vs. brand?
First: if a competitor replicated every feature tomorrow, what would your customers miss? Second: can you describe your approach in a way that would make some people disagree? Third: would your best customers recommend you even if a cheaper alternative existed? Three "nothings" means commodity. Something specific and opinionated means you have the seed of a brand.
Why is being a commodity that thinks it's a brand the most dangerous position?
You end up with the cost structure of a brand (higher overhead, slower iteration, brand-building spend) and the defensibility of a commodity (easily replicated features, price-sensitive customers). AI doesn't just expose this mismatch. It collapses it, because AI-native competitors can match your features at a fraction of the cost while genuine brands hold their audience through trust and identity.
Can a commodity business be successful?
Absolutely. Walmart, Amazon Web Services, and most cloud infrastructure are commodity businesses that are enormously profitable. The key is knowing you're a commodity and executing accordingly: relentless optimization, aggressive scaling, and winning on cost. The danger is only in misidentifying yourself and pursuing the wrong strategy.
How did AI dissolve the 'building difficulty' moat?
For decades, the act of building software was hard enough that shipping something functional was itself differentiation. The effort required to replicate a product served as a shield. AI-driven development made building drastically cheaper, and for anything straightforward, approaching free. Competitors can now replicate core features in days, revealing which ventures had genuine brand differentiation and which were just hard to copy.
What does the stock photography collapse teach about commodity vs. brand?
Stock photographers sold generic imagery that anyone could produce given enough tools. They were commodities. When AI image generation arrived, that market collapsed in the middle. Meanwhile, fine art photographers with distinctive styles are doing fine or better than ever. Nobody hires a portrait photographer for generic output. They go for a specific vision. AI didn't invent the split; it made pretending impossible.
Does intellectual property make a venture a brand?
Not on its own. IP like patents, trade secrets, and proprietary processes slows down replication, which protects the commodity layer. But brand is what makes replication irrelevant. Coca-Cola's secret formula is IP; the reason people reach for the red can over Pepsi despite near-identical taste is brand. The strongest position combines both, but IP without brand is a temporary shield.