Lately, many discussions with my friends at West Coast Asset Management have centered on the topics of inflation, deflation, and hyperinflation. But the other night, two hairdressers from my small town engaged me in a conversation about no-flation.

"Customers have just stopped coming," said one anxious stylist.

"Six regular customers cancelled this week," said the other. "That's a lot of business to have suddenly disappear. Lowering my price won't help, because they've just decided not to color or trim their hair as often, or to do it themselves."

A sympathetic neighbor opined that the hairdresser's situation proved that wealth doesn't trickle down, but pain sure does. I don't believe in trickle-down economics as an economic ideology, but I countered that pain merely trickles down more noticeably than wealth, particularly in the fragile service economy. That said, I think "trickle-down" economics actually explains why people have been able to make a living doing things others could easily do for themselves.

Service providers face a special challenge in a shrinking economy, because competitive advantage and elasticity of demand are both impacted by the availability of substitutes.

And for service providers, the most powerful substitute of all is the option to not use a service at all. There are many hairdressers, handymen, and contractors in my small town, but people can color their own hair, replace their own light fixtures, paint their own rooms, and mow their own lawns. Our parents and grandparents did these things all the time.

A friend fixing up his house tells me he is saving 75% by acting as his own general contractor, hiring workers through craigslist. Of course, another friend ended up hiring a painter to fix the mess his craigslist painter created, but people will be taking such risks now, as we slowly relearn the value of a dollar. Many will do the painting themselves, or simply delay the work for another year or two.

As the Do-It-Yourself ethos returns to American life, everyone marketing a service needs to think about competitive advantage. What makes you so special? What is the value equation - in dollars, not marketing BS - that makes you and your service the obvious choice? In the meantime, one of my hairdresser friends took a second job as a bartender to make ends meet.

Here's a thought-provoking quotation from writer Robert Heinlein, which I found at the equally thought-provoking blog, The Art of Manliness:

"A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."

By this logic, has the service economy made us a society of insects?

Dean Zatkowsky, managing partner of Dizzy One Ventures, LLC, is co-author of The Entrepreneurial Investor: The Art, Science and Business of Value Investing, and Two Billion Dollars in Nickels: Reflections on the Entrepreneurial Life.