The Disintermediation Of Everything

Up until five years ago, I had never used the word disintermediation. In fact, if it would have come up in casual conversation, I would have had to pick my way through its bushel of syllables to figure out exactly what it meant.

Today, I am acutely aware of the meaning. I use the word a lot. I would put it up there as one of the three or four most important trends to watch, right up there with the Database of Intentions, which I talked about last week. The truth is, if you’re a middleman and you’re not dead already, you’re living on borrowed time.

Why is the Middle suddenly such a bad place to be? A lot of people have made a lot of money in the Middle for hundreds of years. The Middle makes up a huge part of our economy, including a lot of middle-class jobs. Systematically eliminating it is going to cause a ton of grief. But the process has started, and there’s no turning back now.



Three big shifts are driving disintermediation:

The Democratization of Information

The Middle exists in part because we didn’t have access to what, in game theory, is called perfect information. Either we didn’t have access to information at all, or the information we had was not reliable or useful to us. So, in order to function in the marketplace, we needed a bridge to what information did exist.

Think of travel agents (which for the majority of us, is someone we probably haven’t spoken to for a few years). Travel agents were essential because we were walled off from the information we needed to arrange our own travel. We had no access to the latest airfares, hotel availability or room rates. If you had asked me what was the best hotel in Istanbul, I would have had no clue. We used travel agents because we had no choice.

Today, we do. The travel industry was one of the pioneers in democratizing information. The result? The travel marketplace is infinitely more efficient than it was even a decade ago. The average person can now put together a six-week multi-stop vacation relatively easily.  The middle is being eliminated. In 1998, there were 32,000 travel agencies in the US. Today, through elimination and consolidation, that number is closer to 10,000. Disintermediation has cost thousands of travel agents their jobs.

The Improvement of User Interfaces

When’s the last time you spoke to a bank teller? If you’re like me, it’s probably the last time you had to do something that couldn’t either be done through online banking or at a local ATM.  99% of our banking can now be done quicker and easier because banks have invested in creating platforms and interfaces that enable us to do it ourselves.  It’s better for us as customers, and it’s much more profitable for the banks. Disintermediation in banking has created a more efficient model. Ironically, unlike travel agents, bank tellers have not lost their jobs. They’ve just changed what they do.

The Overcoming of Geography

The final factor is the problem of distance. When mass manufacturing became possible, the distance between the factory and the market started to grow. Suddenly, distribution became a major challenge. Supply chains were born, making a lot of people very rich in the process. Becoming big became essential to overcoming the problem of distance.

But technology has made physical fulfillment much more efficient. Getting a product from the factory floor to your front door is still a challenge, but our ability to move stuff is so much better than it was even a few decades ago. The result? Massive disintermediation. And this particular trend is just beginning.

So What?

Much of what we’re familiar with today is part of the Middle. Just like travel agents, video stores and bank tellers, every year something we have always taken for granted will suddenly disappear. Huge swaths of the economy will be disruptively eliminated. That’s the bad news. The good news will have to wait till next week’s column.

11 comments about "The Disintermediation Of Everything".
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  1. Durk Price from eAccountable, October 4, 2012 at 11:41 a.m.

    Disintermediation, what a beautiful and scary word. If you aren’t sure what disintermediation means, just substitute the word “AMAZON”. Yep, that’s what “Giggles” Bezos is all about.

  2. Pete Austin from Fresh Relevance, October 4, 2012 at 11:53 a.m.

    Totally disagree. Re: "The average person can now put together a six-week multi-stop vacation relatively easily." Yes, but it takes me a day to do it properly, compared to 5 minutes back when a travel agent did the job. The problem is imperfect information (a) most companies lie about their costs and room availability on comparison sites, so you only find the true details when you go to their individual sites and (b) the only way to judge hotel quality is to read through a mass of consumer reviews. Re: "99% of our banking can now be done quicker and easier". Yes, but the other 1% is a real pain. The problem is that automated systems have to be more complex so, e.g. when a bank blocks your account for no reason (in my case, because of them mis-typing an account number and so entering inconsistent data) and you waste hours phoning and writing letters before you manage to contact the one real person who has access to all the systems and fix it.

  3. Steven Threndyle from media tent, October 4, 2012 at 11:58 a.m.

    Yes, that's the scariest word in the English language right now. And all of you freelancers and e-lancers out there? Don't trip over each other on the race to the bottom. See you in gasfitter/millwright school.

  4. Paula Lynn from Who Else Unlimited, October 4, 2012 at 1:19 p.m.

    $9/hr bank tellers haven't lost their jobs as well as many other bank customer service positions ? Financial institutions have let people go in the thousands and thousands.

  5. Gordon Hotchkiss from Out of My Gord Consulting, October 4, 2012 at 4:35 p.m.

    Pete...nothing will ever be perfect, but it is possible (in both the examples you cite). That's more than you can say if you look back even 20 years.

  6. Joel Snyder from Valpak of San Francisco, October 4, 2012 at 4:53 p.m.

    The wost casualty is relationships and people skills. As consumers circumvent middlemen, they become harder to deal with. As merchants become more automated, customer service people have less power and less skills (and lower pay).

    I prefer to find a way to put "personal" back in front of service, build value vs. savings into your brand, and protect your client's time by demonstrating care and support.

    Automation has made consumers dumber and ruder than ever before, with entitlement issues, and ease of price pressure with the push of a button.

    I prefer going into the bank and asking the teller to organize my deposit, hand my cash back and credit the three accounts we use. I prefer calling my travel agent and then going back to my coffee. I enjoy an informed retail agent, and if I am discount shopping...I expect bad service from the e-tailer when I need to get information.

    Easy is easy and I get it, the flow of immediate and relevent information is key to decision making, but to allow it to collapse the human side of any business is short-sighted.

  7. Durk Price from eAccountable, October 4, 2012 at 5:14 p.m.

    Without disintermediation I wouldn't be able to book a week in Paris overlooking Notre Dame cathedral for less than renting a room at a marginal hotel. Without disintermediation in the rain in NYC I wouldn't be able to Uber a black car and have it pick me at a designated place and time (and for only a few dollars more than a regular taxi). The list is endless: GrubHub, OpenTable, Yelp, SoundHound and etc.

    And at the restaurants I visit after using OpenTable they are just as nice to me as always and I would definitely say the Uber drivers in NYC are friendlier than the typical cabbie. Good relationships still abound with well run companies and products.

  8. Cece Forrester from tbd, October 4, 2012 at 5:26 p.m.

    Disintermediation doesn't just let consumers be rude. It also lets organizations treat their customers rudely. For instance, before you can complete your transaction in a store, you may be required by that little swipey push-button thing to take the time to answer several leading questions that have no bearing on your transaction but are intended to sell you something else. You are supposed to think it is OK for machines to make you jump through hoops, and you are supposed to be unaware that the machines were told what to say by humans who ought not to be hiding behind them in order to get away with rudeness pretending to be engagement.

  9. Lois Wingerson from United Business Media, October 5, 2012 at 9:10 a.m.

    I've been thinking a lot about the value versus the threat of disintermediation in health care information. Some pundits say that crowd-sourcing may gradually take over the role of peer review in published medical information, but is the most popular article by a group of doctors also the most accurate? The public can access a vast amount of medical information on the web, but how much of it is nonsense -- and who can tell us the difference? (My doctor may appreciate my bringing along an article about my latest problem, but will she even know about it yet or have time to read it?) We will always need our medical interMedDiaries (doctors), but they are increasingly overwhelmed by information themselves.

  10. Paula Lynn from Who Else Unlimited, October 5, 2012 at 9:09 p.m.

    A rather country club mentality Durk where most people lack credit-ation.

  11. Robert Gilmour from Innfinite Hospitality Ltd, October 7, 2012 at 7:15 a.m.

    One day I might wake up and discover that there is meaningful disintermediation in hotel and travel bookings. the on line travel intermediaries have the prevention of this at the very core of their strategy, and hotels are bullied and threatened by the OTC's if they attempt to break the mould, so this two pronged approach will guarantee that third party intermediaires in travel are here to stay i'm afraid.

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