The Coming Disruption

Since the beginning of commerce, anyone wanting to do business, whether on the supply side or the demand side, needed to find the right middleman. Middlemen took many forms: newspapers for news, retailers for all types of household and clothing goods, brokers for businesses and trade, and banks for capital.

Middlemen gained their power because they had connections on both sides of the transaction, which neither side on their own possessed. The middleman was uniquely able to bring the two sides together to get their needs filled.

In a world where the middleman is crucial to business, the middleman is a kingmaker. Think about the media. Not so long ago, to be on TV or in the newspaper, a journalist, editor or producer needed to agree that you were talented or influential enough for others to pay attention to you. Content in the newspaper and TV was highly curated and selected by middlemen.

Social media has changed all of this. Now people curate the content they consume and bypass the middleman entirely. Thus, the creator economy has been born, and on platforms such as Instagram and TikTok, the end consumer decides directly to whom they pay attention.

In commerce, companies such as eBay and now Amazon allow peer-to-peer retailing where individuals sell directly to the consumer. Fiverr and Upwork have allowed this for freelances, and Airbnb and Turo have done the same for travelers and hosts.

Writing in the 1960s, Post-Modern philosophers foresaw this trend. They called it de-centering and post-structuralism. It has come to fruition in many parts of the economy, where the middleman has become virtually irrelevant. Facebook, Twitter, Airbnb, and many others facilitate peer-to-peer interactions and transactions directly, and their success hinges on facilitating without imposing.

One area where de-centering has yet to take hold is in finance. Cryptocurrencies are making a valiant attempt to do this and are succeeding in many ways. But the power of the central bank, taxation as well as regulations are making this challenging.

In my view, the disintermediation of the middleman in finance (read: banks and bankers) will happen when the platformzation of financial services occurs, which will almost certainly take the form of peer-to-peer marketplaces for capital and investments. Instead of putting money in a bank that pays a pittance in interest, marketplaces will allow individuals to choose where they invest their money. The platform will allow individuals to invest in private businesses, residential real estate as well as other new asset classes yet to be born. The platform will empower the individual to decide the risk they are willing to take, and the returns they would like to make.

Platforms will also facilitate the ability for individuals to offer investments in their homes, businesses, creations and their future income, directly to consumers. The disintermediation of the middleman is more significant than a specific technology; it the evolution of society itself. This post-modern trend will revolutionize commerce and finance in ways that few people can see today. To be sure, the most significant disruption to be brought about by decentralization and platformization is yet to occur.