Even after people get why third parties can be helpful and even necessary, they sometimes wonder: aren’t non-human middlemen (like Uber, Google, and Blockchain) taking over and making human middlemen obsolete?
No, not as often as you’d think! To understand why, you need to realize two things. One: tools are created by and for humans. And two: third parties (middlemen) use tools, too! Let me explain these ideas one at a time.
Guess what? Middlemen use the Internet, too.
Technology doesn’t create itself (tools are created by and for humans)
Behind every tool is a person or a company: people created the tool to help users, yes, but also to make a profit.
Take Google, a tool we all know and most of us use daily. The search engine has made finding information fast, easy, and largely free—and, on the other side, has lowered the cost of advertising by targeting audiences more precisely and efficiently than, say, print magazines had been doing. But the search engine didn’t spring forth from nothing: someone had to create it, and an army of people continue to develop it. This hugely successful product (really a set of products) has also made its creators and its largest shareholders immensely wealthy. In trying to serve users, the people behind Google have cut out one type of middleman, such as the magazine publishers, but the middlemen didn’t disappear; rather, Google itself became a middleman (between users and information and between advertisers and users). If Google’s products are tools, well, so are the magazines that Google has displaced.
Most tools are like that—they are created with someone’s profit in mind, and they require people to design, maintain, and continually improve them. When you see a little app icon on your smartphone (such as for Uber, if you haven’t deleted it, or Airbnb, or so many other apps that connect one set of users with another), it’s easy to think “technology” or “just an app.” But remember that behind that deceptively simple user interface are usually teams of engineers and user experience professionals and product managers implementing deliberate design decisions. As of this writing, Airbnb has more than 12,500 employees! (This number doesn’t include the network of hosts and guests who use the platform.) Clearly, there’s a lot going on behind that one little app! The app is designed to serve users’ needs with the goal of making a profit for the company and its investors.
All this is to say that there’s a lot of human activity behind the tools we use. A tool doesn’t sit in a vacuum—it serves its users and its owners and its creators every bit as much as a human third party does, although often more efficiently.
So when someone says that some app helps users bypass the middleman, remember that the app is usually a middleman, too—a digital middleman. And the people who design and run the app must work to solve the six common problems between two parties, very much like middlemen without tools do.
Middlemen use tools, too!
The second reason technology doesn’t automatically eliminate middlemen is that all technology, from the simplest to the most advanced, has two simultaneous effects: it replaces people in some service jobs, while making people in other service jobs more efficient.
Let’s look at a simple tool, the hammer. If you don’t have a hammer and you want to hang up a picture, you might need to call up someone who has a hammer and nails. (Or you could, like Marie Kondo, use a frying pan to hammer in the nail yourself, but of course that frying pan is serving the same function in its own, kludgy way.) The point is that without a tool, it’s hard to perform a simple household task. So you buy a hammer, and now you don’t have to call a pro with a toolbox every time you need to hang up a picture. You with your hammer have effectively cut out the handyman, at least for yourself and for this particular task.
But now suppose you want to build a custom bookcase. You still have your hammer, and you might also own a saw and a bunch of other woodworking tools—but unless you’re a trained carpenter, you probably don’t want to tackle this job yourself. Hiring a carpenter will certainly cost you, but you’re much more likely to end up with a nice bookcase than if you went all DIY on it. That same hammer is a lot more useful in the hands of a pro. The availability of hammers doesn’t put the carpenter out of work.
All tools are like that. They can be substitutes, replacing jobs (like for the picture-hanging handyman) or they can be complements, making some professionals more valuable and efficient (the highly skilled carpenter).
And that’s why technology doesn’t automatically eliminate middlemen: its effects on middlemen depend on what service the middleman provides. For example, in the Internet’s early days, it was common to hear that this revolutionary technology would make middlemen obsolete because we could all use the Internet to conduct our own transactions. Bill Gates, in all his wisdom, predicted that the Internet would itself become the universal middleman. But guess what? Middlemen use the Internet, too, and they can often use it to do their specialized jobs more efficiently than the rest of us can. That is why some middleman jobs have all but disappeared (think of the travel agent or stockbroker who just takes your order and executes it)—while other middleman professionals have continued to thrive (like the travel agent who uses her expertise to help you plan a complex itinerary in a foreign land or the investment advisor who helps you decide how to achieve your financial goals).
These days, I am hearing the same prediction about blockchain that we used to hear about the Internet: that it will eliminate intermediaries. Although I don’t claim to be an expert in blockchain, I’d say that’s not likely to happen, at least not in a wholesale way. What seems more likely is that blockchain will eliminate some middlemen, that it will make other middlemen more efficient, and that it will create a whole new set of middlemen who, like the Googles and Airbnbs of the Internet age, know how to harness the underlying technology for the benefit of customers and themselves.
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About the Author
Marina Krakovsky is the author of The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit (Palgrave Macmillan). She is also co-author, with economist Kay-Yut Chen, of Secrets of the Moneylab: How Behavioral Economics Can Improve Your Business (Portfolio/Penguin). In her writing, speaking, and consulting, her main focus is on the practical application of ideas from psychology and economics. Her articles and essays have appeared in Discover, the New York Times Magazine, Scientific American and Scientific American Mind, O (The Oprah Magazine), Psychology Today, Slate, FastCompany, the Washington Post, Wired, and more.
A version of this article originally appeared on LinkedIn.