On two occasions in which this blog hasexpanded on Chris Durban’s thesis that translation is not a commodity product,readers have chipped in with analogies from commodity markets. One reader, Rob,brought up the example of chocolate in one comment. Another frequentreader, Gueibor, contributed to the comments by discussing the example of Kobe beef on the meat market. As my readerspoint out, even these markets tend to break down along relatively complexspectrums. However, to be more precise, when the commodity analogy is invoked,economists generally assume that within the different niches in an overallcommodity market, differences within the niche itself are not decisive and theproduct is undifferentiated. For example, Saudi and Texan crude is much lighterthan Venezuelan crude, but within the reduced “light sweet crude” category, arefiner doesn’t care whether he is processing Texan or Saudi crude. And afterlight and heavy crudes are refined to make, say, diesel, the purchasing managerfor a chain of gas stations doesn’t care whether the final product comes fromthis company or that company. He will only care about the price, since thedifferent products will pretty much function just as well.
The problem with the chocolate or meatanalogies is that they take for granted the proposition that is beingcritiqued. Chiefly, that translation is a commodity. The interesting thing isthat even in businesses that are pretty ostensibly commodity businesses, valueresides in differentiation.
In general, any player who resigns himselfto the idea that he produces a commodity is condemned to compete solely onprice. And he will also be condemned to charging very low prices and generatingvery thin margins. When very unimaginative people run across this criticism,they generally reply with the world-weary wisdom of the businessman that thisis how “capitalism” or “reality” works and that anyone who believes thecontrary is a doped-up hippie.
Now, I think we can pretty much agree thatWarren Buffett is a successful capitalist, perhaps the most successful capitalistof all time. He tends to trade places with Bill Gates and Carlos Slim everyyear in the competition to see who the richest man in the world is. I think heis far more interesting that the other two. Buffett outshines the other two becausehe is an interesting thinker and also an excellent writer. He is also alower-case “t” tech skeptic. All throughout the nineties Internet bubble, Buffettwas making little jibes about Pets.com and everybody dismissed him as ananachronism of the “Old Economy.” Yet the successive investment bubbles of thepast fifteen years have popped and Berkshire Hathaway is still there, makingmoney for its shareholders while a lot of very bad online investment ideas fellby the wayside.
Buffett has devoted a lot of thinking tothe task of identifying a good business. Listen to this little nugget of wisdomfrom the Sage of Omaha, from a recent compilation of his writings on business: “In a business selling a commodity-typeproduct, it’s impossible to be a lot smarter than your dumbest competitor.”
Buffett, as many know, did not build afortune by creating businesses from scratch. He made it by buying alreadysuccessful businesses and making them even more successful. One of the tenetsof his philosophy is to shy away from businesses that manufacture commodityproducts and have low barriers to entry. The previous two characteristics alsomean that these industries are subject to fierce competition. What wouldBuffett say if he heard David Grunwald, the owner of a machine translationcompany, state the following?:
But Istill maintain that translation is a commodity. If there are 10,000professional English to Spanish translators in the world that are nativeSpanish speakers, that have a CAT tool, and are subject-matter experts, thenone translator is easily replaceable with another. The price for this serviceis set and is within a specific, well-defined range. And that makes it acommodity. Commodities, like pork bellies, gold and corn are traded in the samemanner. And just like in translation, prices go up or down based onavailability and demand.(I once took a course on Saint ThomasAquinas in which the lecturer discussed a two-paragraph quaestio for several months. I could blog for several months juston this paragraph alone.) Note how Grunwald unconsciously conflates the entireEnglish-Spanish market to the profiles on ProZ. That in itself is very telling.The problem is that his pool of potential translators is not really the 10,000 Spanishprofiles on ProZ. It is actually much, much smaller. Grunwald’s pool of potentialcollaborators is actually people who haveprofiles on ProZ and look for work by bidding on ProZ projects. If I wereGrunwald, I would find it hard to sleep at night. From his constant bitchingabout translators recruited over ProZ, I suspect he does suffer from a touch ofinsomnia. Listen to this:
Oneof the bad things about ProZ is that since basic membership is free, and sinceno credentials of any kind are required to join, it attracts many incompetentand unreliable translators. An outsourcer can easily get burned on ProZ.And this:
Anyperson (or animal for that matter, if they can work the Internet) can sign upto Proz.com and claim they are an expert translator or translation vendor. Thismeans that the job poster needs to perform extensive due diligence beforeselecting the translator/vendor; and even then I can tell you from my ownexperience that you can get burned with poor quality and/or missed deadlines.And what recourse do you have? Zilch. You may get an apology from Proz.com butnothing more.All in all, Grunwald’s tone is pretty critical.(I have nothing personal against him and I hope he doesn’t take any of thispersonally. He has said very generous things about my blog and I confess I findhis blog interesting, albeit in the same way you find those Fox shows aboutanimals attacking human beings impossible to not watch.)
Translators who accept a project and neverturn in anything? Really? How frequent is that? If that happened to me even once,I would seriously seek another way to recruit my translators, preferablyoffline. Why would an entrepreneur persist in using this unreliable channel? Answer:because he targets the low-rate area of the industry. Why not pay translatorsmore? Or at least invest in a more careful method of recruitment that requires a higher investment in terms of time and money than the ProZ membership fee?The answer, I suspect, is that the “market” is too competitive and that snootytranslators who demand higher rates are living in Cloud Cuckoo Land. To whichmy response would be: live by the sword, get ready to have your ribcage tickledby a sword once in a while.
Buffett would say that the businessphilosophy condensed in the quotes above would be rational if the product is indeed a commodity. However, he would also 1) notinvest in a business like this, or, 2) if forced to invest in it, he would tryto find some avenue for differentiation. (He would also, perhaps, express some surprisethat a service is being described as a commodity.) If it isn’t a commodity but you aretreating it as if it is a commodity,you are mistakenly condemning yourself to being little more than a roach motellandlord.
In response, the MT Crowd would slap athick layer of l10n mumbo-jumbo on Buffett, crammed with catchphrases like“crowdsourcing” and “disruptiveness.” I imagine he would chuckle his littleBuffett chuckle and go about his business while the cheap providers fight overthe meager scraps of the multilingual Web 2.0. And he would be right. Becauseif technology-driven translation is a commodity service, then you are wastingyour time by going to l10n conferences and making polite little commentsinsinuating to your competitors that they are idiots barking up the wrongengineering tree.
Because if you want to be the King of Cheap Translation, the only road for you is monopolywith a capital “M.” Your only strategy is to get big fast, charge as little aspossible, and then buy out all your competitors or drive them out of businessby any means, fair or foul. You basically have a to buy a biography of John J.Rockefeller and then hire some mean-looking guys from the ´hood to leaveboiling rabbits in your holdouts’ kitchens or hide in bowls of rice in caseButch goes to Indochina. (Incidentally, in commodity markets, technological superiority is irrelevant. Size matters, big time. The biggest competitor, even using worse technology, ends up winning, so it won't be the quality of your R&D and your engineering nerds that will help you win that race.)
Miguel Llorens is a freelance financial translator based in Madrid who works from Spanish into English. He is specialized in equity research, economics, accounting, and investment strategy. He has worked as a translator for Goldman Sachs, the US Government's Open Source Center, and H.B.O. International, as well as many small-and-medium-sized brokerages and asset management companies operating in Spain. To contact him, visit his website and write to the address listed there. Feel free to join his LinkedIn network or to follow him on Twitter.
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