HBR IdeaCast The Pros and Cons of Our “Middleman Economy”
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Jun 7, 2022 Kathryn Judge, a finance professor at Columbia Law School and author of "Direct," discusses the growing role of intermediaries in today's global economy. She reveals how these middlemen provide convenience but also introduce challenges like supply chain opacity. Judge emphasizes the need for more transparency and social value from intermediaries. The conversation touches on direct-to-consumer models, the role of policy reform in enhancing competition, and how companies must navigate trade-offs in their reliance on middlemen.
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Middlemen: Essential, Yet Costly
- Middlemen are essential connectors in the modern economy, facilitating the flow of goods and services.
- However, the middleman economy has evolved, with large, powerful intermediaries and long supply chains creating unappreciated costs and risks.
Hidden Costs of Efficiency
- The middleman economy's structure prioritizes short-term cost reduction and disaggregation of production.
- This leads to opacity, lack of accountability, fragility, and hidden costs like environmental impact and worker treatment.
Real Estate: A Middleman Example
- Real estate agents, for example, created the MLS, which makes home searching easier.
- However, they also entrenched a system requiring two expensive agents, impacting consumers' finances.
