---
title: "Is Disintermediation a False Proposition? The Internet Cannot Replace the Role of Intermediaries!"
description: "This article is a reading note on the book 'The Middleman Economy' by Marina Krakovsky, published by CITIC Press. It argues that despite the internet's potential to eliminate intermediaries, they persist and thrive because they provide value through roles such as bridging, certifying, enforcing, risk-taking, concierge, and isolating, which the internet cannot fully replace."
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# Is Disintermediation a False Proposition? The Internet Cannot Replace the Role of Intermediaries!

> This article is a reading note on the book 'The Middleman Economy' by Marina Krakovsky, published by CITIC Press. It argues that despite the internet's potential to eliminate intermediaries, they persist and thrive because they provide value through roles such as bridging, certifying, enforcing, risk-taking, concierge, and isolating, which the internet cannot fully replace.

Click to read the original text for details.
Content source: This article is a reading note on the book "The Middleman Economy" published by CITIC Press, written by Marina Krakovsky from the United States.
Source: Notesman

* Does the internet era still need intermediaries?
* Why do intermediaries still prevail?
* Under what circumstances do intermediaries provide the most value?

Will the emergence of the internet completely eliminate intermediaries and achieve disintermediation?
Seeing this question, you might cheer. However, you may be disappointed. This only shows that you have not truly appreciated the important role intermediaries play.
Marina Krakovsky, a well-known Silicon Valley journalist, analyzes this issue in detail in "The Middleman Economy" and tells you how to be a successful intermediary.
In the internet age, it seems everything is removing intermediaries.
Advertising slogans frequently use the disappearance of intermediaries as a gimmick for high cost-effectiveness, and cross-border e-commerce and second-hand car trading platforms are also deliberately removing the role of intermediaries.
But the "industry" of intermediaries still exists, and even the internet is a tool for expanding business territory in the role of an intermediary. Internet platforms have taken over some of the work of intermediaries, but they cannot replace the identity of intermediaries.
Those influencers who can select suitable items for people and intermediaries who can customize travel have developed better with the power of the internet.
What has been replaced are only those intermediaries who exploit information asymmetry to profit, not those who benefit both buyers and sellers.

**No one likes intermediaries,**
**but most of us are intermediaries**
For jobs where intermediary elements play an important role, playing the intermediary role well will bring significant results:
Both buyers and sellers have certain expectations of intermediaries, and failing to meet these expectations can damage business relationships.
Buyers and sellers generally do not easily voice these expectations unless things start to go wrong.
In every era, new technology seems to herald the end of intermediaries: from railways to aviation, from telegraph to internet and social media, every technology predicts the prospect of direct transactions.
After all, it is common sense that if buyers and sellers can communicate directly, who would use intermediaries?

**Why haven't intermediaries disappeared? The main reason is the need for trust.**
Intermediaries communicate with buyers and sellers more frequently than those who try to bypass intermediaries for direct transactions, so intermediaries are more likely to build trust with both parties.
The internet has shaken the entire industrial system and led to the demise of many intermediary professions, such as stockbrokers who only handled transactions and travel agents who only took orders.
But overall, the development of the internet has promoted the rise of the intermediary class, and economic data shows that intermediaries account for a higher proportion of the social economy than ever before.

**Why are intermediaries still thriving? The simplest answer is that they provide value to both buyers and sellers, which is also the most reliable reason.**
Interestingly and somewhat counterintuitively, the internet provides new opportunities for intermediaries to create value.
What kind of network benefits the most from the presence of intermediaries? What nodes should intermediaries strive to connect? How do they establish connections and strengthen them?
To answer these questions, I have summarized six roles that intermediaries play, and they provide value through different combinations of these roles. The most successful intermediaries switch flexibly among these roles.
Each role solves a specific type of problem—reducing certain friction or lowering transaction costs—without which many win-win transactions would be difficult to achieve.

**Bridge-builder**: Facilitates transactions by shortening physical, social, or temporal distances.
**Certifier**: Separates truth from falsehood, providing reliable information about seller quality to buyers.
**Enforcer**: Ensures that both buyers and sellers go all out, cooperate, and uphold integrity.
**Risk-taker**: Reduces volatility and other forms of uncertainty, especially suitable for risk-averse traders.
**Concierge**: Reduces confusion and helps clients make informed decisions when faced with overwhelming information.
**Isolator**: Helps users get what they need while avoiding the reputation of being greedy, overly self-promotional, or provocative.

An intermediary is not just a simple agent. How do they play these six roles to create value for buyers and sellers?

**1. Bridge-builder: Crossing the Gap**
**Bridge-builder**, as the name suggests, builds bridges between buyers and sellers to facilitate transactions.
But in the internet age, do people still need bridge-builders? What special things do bridge-builders have that the internet cannot replace?
Bridge-builders cross unconnected social networks, connecting people who are like isolated islands.
Theoretically, we can freely trade with anyone, but in practice, there are certain restrictions on trading partners.
Geographical differences separate us from others, providing huge potential for trade profits but also creating numerous trade barriers. The huge potential comes from completely different lands producing completely different products.
Physical distance is certainly important, but social distance is even more important. People only a few miles apart may have no connection due to social distance.

> Nuzad became famous in the industry for connecting Dropbox founders with potential investors.
>
> Nuzad treats everyone in his vast social network as a friend, but he does not use his role as a bridge-builder for personal gain.
>
> However, there is no doubt that what he does is what intermediaries do: bridging several startups in urgent need of funds with a group of wealthy and experienced investors, which benefits both parties and indirectly benefits himself.
>
> Nuzad now runs his own venture capital firm, providing entrepreneurs with things many others do not have: free office space and access to his personal vast network without strings attached.
>
> He does not clearly distinguish between his personal and professional networks: his colleagues, business partners, and people he knows in life, such as a football fan, are all friends, and friends help each other.

Circles provide a common model that makes communication and problem-solving more efficient; unfortunately, circles close off information and opportunities because people in the same circle often get the same information.
Young people cluster together so much that venture capitalists have almost no chance to approach them. The differences between the two circles make it difficult for them to connect, let alone build win-win relationships.
Therefore, even when physical distance is short, social distance still requires bridge-builders.
Burt wrote in his groundbreaking book, "Where there are information benefits, structural holes can be crossed."
That is, bridge-builders are transmitters of valuable information between different circles—according to Burt's research, bridge-builders profit by playing the role of information transmitters.

**Successful people are not successful because they are connected to well-connected people, but because their own abilities enable them to build relationships with well-connected people.**
The internet is constantly shortening the distance between people, but people's tendency to cluster and mix in circles is also a feature of the internet age.
Social distance between circles still exists, and intermediaries, by playing the role of bridge-builders, can enable buyers and sellers to communicate, thereby facilitating transactions.
So, how do intermediaries who become bridge-builders profit from transactions? One secret is to provide additional services that buyers and sellers value.

**2. Certifier: Applying the Seal of Approval**
**Certifier** is one of the important roles intermediaries play. The key is that intermediaries have the ability to screen suitable sellers for buyers and possess certain recommendation and certification capabilities in their field.
The certifier is perhaps the most common and useful role intermediaries play.
With solid professional knowledge and hard-earned reputation, certifiers save buyers time and reduce the risk of being deceived by sellers.
So what does a certifier do? This job can be summarized into three steps: searching, screening, and recommending.
**Searching** is like looking for a needle in a haystack, searching for potential products;
**Screening** is using experience to filter out the false and retain the true;
**Recommending** means guaranteeing the quality of the final product presented to the buyer with one's own reputation.
As consumers, we often do not see the effort and expertise required for searching and screening. Searching and screening are things we notice only when they are absent.
To find treasures, certifiers need to spend a lot of time eliminating worthless products.

**Case:**
Hiring managers often encounter recruiters who are either too fast or too slow, either hastily deciding on a candidate after a quick look or wasting time thinking a better candidate is coming, delaying the decision.
Roboy's professionalism stems from recruiting only one type of person, so clients think of him whenever they need that type.
A client came to Roboy saying the company "needs someone to sell natural skincare products, not mainstream skincare—like L'Oréal or Revlon—and not someone who has previously sold personal care products or cough and cold medicines."
This is a very specific requirement, but because Roboy understands the client's industry, this specificity actually helps him find the target candidate faster.
This is only the search stage; Roboy's expertise also plays a big role in the screening process.

> I call a candidate, and it might be our first conversation or we might have known each other for 28 years, but I can determine how they make a living.

**Time is money for everyone, but for professional and busy certifiers, it is even more an opportunity cost.**
**Why do certifiers get paid for being experts?**
Economist Gary Biglaiser gave a concise explanation as early as 1993, observing that "an intermediary buys more than an ordinary buyer."
For a buyer, learning new knowledge and skills for something used only once is a waste of time.
Intermediaries are different; they buy the same type of item repeatedly, and they have "the incentive to make large investments in themselves, hoping to acquire the ability to discern the quality of such items."
Honest sellers (who cannot prove their credibility) cannot sell their products at good prices, so some exit the market—this leaves the market full of sellers with no credibility, further eroding buyers' trust and willingness to pay. This vicious cycle is called "adverse selection."
The earliest paper on adverse selection, "The Market for Lemons," analyzed used cars as a case.
The lemon problem explains why intermediaries often appear in second-hand goods markets:
> **They not only have the ability to judge quality but also can provide a guarantee with their own reputation.**
In fact, we need intermediaries not only when dealing with second-hand items to filter out defective products, but also in any situation with hidden information.
There is a common view about intermediaries that they are gatekeepers, preventing buyers from directly contacting excellent talent or good products. Especially in the cultural industry, where opinions are very subjective, disparaging intermediaries is common.
But now you should understand that gatekeepers must carefully select to provide value to both buyers and sellers, which for buyers means blocking people and products they do not want to see.
If you work diligently like a certifier, you will eventually become a respected certifier, and both buyers and sellers will be satisfied with your efforts.
Unfortunately, this does not mean you will be successful in business, because people want to do more than just create value; they also want to make a profit.
If your goal is profit, being a respected certifier is not enough; you also need to pay attention to the costs of what you do to create value. In every transaction, costs affect profits.

> You spend time and effort searching for the products and services buyers want. The more time you spend and the further you go, the more likely you are to find what buyers want—but will the final gain cover the costs?
>
> **You must ask yourself this question.**
Because in the real world, your labor does not all convert into value.
When intermediaries play the certifier role, reputation and ability are key to selecting and recommending suitable products for buyers. Their rich experience is a guarantee of certification, saving both buyers and sellers time in selection.
But cost considerations are also something certifiers need to think about.

**3. Enforcer: Ensuring Everyone Acts with Integrity**
An intermediary who wants to ensure the transaction proceeds also needs to become an enforcer, ensuring the deal is completed, because only when the transaction is completed can value be produced. Otherwise, it is just wasted effort.
Certifiers can uncover hidden information about sellers, but they cannot protect buyers from deception or from facing a situation where there is no one to hold accountable; these problems arise after the buyer signs the contract.
Such problems are diverse and are collectively called moral hazard, post-contractual opportunism, or hidden actions.
As long as there is a continuing relationship between the parties, and the future value of that relationship is higher than the cost of cheating and shirking responsibility now, such problems can be avoided. If such a relationship is lacking, it gives people an opportunity to take advantage.
One of the necessary requirements for an intermediary to become an enforcer is the ability to maintain a stable relationship with sellers, which helps filter out honest and reliable sellers.
Intermediaries are certainly neither omniscient nor omnipotent, but when it comes to supervising transactions between buyers and sellers, they do it better than either party.

**Case: OpenTable**
An excellent example of an intermediary company that prevents bad behavior is OpenTable (currently a leading online restaurant reservation platform in the US), which completely changed the model of restaurant reservations.
Through OpenTable, diners no longer need to call restaurants one by one to ask if there are tables available; they just log in, enter the number of diners and the time, and see which restaurants have availability.
Of course, it is not free; restaurants pay a monthly fee and also a small fee for each reservation made through OpenTable.
But diners who reserve tables and do not show up are a pain for restaurants: reserved seats that are not used are wasted, and these seats could have been given to walk-in customers. In this way, no-show diners lose nothing, while restaurants get nothing.

**To attract both buyers and sellers, intermediary companies need a code of conduct.**
The first rule they came up with was simple: the reservation system does not allow diners to make reservations that are impossible to fulfill.
Another simple measure by OpenTable is sending a reminder email the day before the reservation. The smartest thing it does is after the meal.
Effective enforcers monitor the behavior of both buyers and sellers, but being a monitor is too costly. OpenTable lets diners and restaurants monitor each other, and only intervenes when there is a dispute, greatly reducing monitoring costs.
As an enforcer, OpenTable has built a good reputation: if a restaurant reports a no-show, OpenTable sends the diner a tactfully worded email explaining the impact of not showing up for a reservation and reminding them to notify the restaurant to cancel in advance if plans change.
After this email is sent, if the diner really does not show up, they will think twice next time they make a reservation. If a diner has 4 no-shows within a year, OpenTable terminates the account.
Every diner and every restaurant builds their own reputation through OpenTable, and reputation is an effective driver of good behavior. Diners worry about being banned from the service, so they try to avoid no-shows, and diners' complaint records prevent restaurants from deceiving OpenTable.
Many real-world transactions are repeated games, which can generate high levels of trust and cooperation, and this also applies between companies.
Of course, there are also one-shot games. It is precisely because transactions between buyers and sellers can be one-shot games that it is crucial for intermediaries who engage in a certain field for a long time to become enforcers with a good reputation.
For example:
> A bride can provide customer resources to suppliers and tell her friends whether the photographer she hired was good or bad, but most brides can only tell a small group of people.
> However, a wedding planner can provide such advice to brides every day, recommending photographers, florists, cake makers, and wedding dress designers.
> As an intermediary between brides and suppliers, the long-term relationship between the wedding planner and suppliers can turn one-shot games into repeated games between them.
"In the context of game theory, we can talk about changes in payoffs brought by incentives." By linking present actions to future outcomes, future payoffs can be changed.
Researchers have found that as value grows, intermediaries capture a large portion of the income growth of workers, which is beneficial to intermediaries, but it is not enough for partners to benefit; intermediaries must create value for both buyers and sellers, and they also profit from it.
Both certifiers and enforcers protect buyers from risk, but that is not all there is to managing risk.
The role of enforcer is indispensable for intermediaries because both buyers and sellers come to intermediaries to avoid the risk of transactions not being completed.

**The role of risk-taker is also one of the essential roles for a successful intermediary.**

**4. Risk-taker: Reducing Uncertainty**
Every businessperson has to face risk, but intermediaries are in a unique position to profit from risk. To play the role of risk-taker well, you must first understand the risks of this job.
When you think of intermediaries and profiting from risk at the same time, you might imagine an intermediary who sits back and enjoys the benefits unscathed, a "heads I win, tails you lose" risk-taker, obviously not taking any risk.
If you are an intermediary in a highly volatile market like contemporary art and do not know how to handle risk, you probably will not survive long in the industry.
Art is the most discretionary consumption category; when people lose jobs or investments plummet, art is the first to be sacrificed. Even very wealthy people tighten their belts.
The 2008 economic recession forced Horesh to lay off employees, and several local galleries closed. Galleries cannot buy insurance to protect against economic crises, so Horesh had to rely on the family as an informal guarantee.
Most people do not see such risks, including artists who often complain about high gallery commissions. Horesh says inexperienced artists often complain about commissions, while artists who have sold their own work understand the effort and challenges required to close a deal.
All those who depend on clients want to show success, not failure, even if the failures are not their fault. Potential partners judge by results, and intermediaries do not consider whether the outcome was due to luck or ability.
Intermediary work is risky, but intermediaries can bear more risk than their partners. They have more contacts than buyers and sellers and are better equipped to handle certain risks.
As Horesh said: "It is hard to imagine a market riskier for artists than the art market."
He empathizes, knowing his career is closely tied to artists, and always encourages artists to diversify as much as possible.
Artistic taste is quite subjective, and even for already successful artists, sales are unpredictable.
In this industry, diversification not only helped him but also reduced the risk for trading partners to some extent.
Without gallery owners, artists would have to pay rent and other market costs themselves, and it would be unclear when they would recoup their costs. Most artists cannot afford such a gamble.
This is true across many industries, especially when risk is unpredictable.
On the one hand, poor judgment or lack of effort by one party can cause problems; on the other hand, natural uncertainty is also a factor, which lawyers call "force majeure."
Risk-takers help buyers and sellers smoothly handle all the movements that can occur in a transaction.
Why should intermediaries take risks?
> On the one hand, they are better able to diversify risk than their trading partners, so that income can cover losses. Gallery owners sign dozens of artists, and although they cannot avoid all risks, they can still diversify many.
> On the other hand, intermediaries can bear risk and profit from it by charging a risk premium. The more risk-averse a party is, the more willing they are to pay a risk premium to reduce risk.
In the era of internet self-media, MCN (a multi-channel network product form) institutions caught my attention. They absorb a large number of high-quality self-media creators, provide them with sufficient resources, support, and exposure, and the creators produce high-quality content.
If intermediaries promote works on a revenue-sharing basis (based on clicks, views, visits), they will encounter the same problem as sales managers who earn commissions:
They have to pay more (on average) to get risk-averse creators to take risks, perhaps paying one dollar per page view instead of a few cents.
If intermediaries do not offer a high enough risk premium but only want them to take risks, they are pushing away the very creators they most want to attract.

**If internet intermediaries want to attract excellent creators, they must be good certifiers, select potential winners, give them generous compensation, and promote them strongly.**
Content is not a lottery. Intermediaries select better than random selection, which benefits intermediaries, creators, and audiences alike.

**Intermediaries earn from risk premiums, and an intermediary who can manage risk is a good risk manager and also succeeds in transactions.**

**5. Concierge: Making Life Easier**
When guests can find everything they want on their phones, what is the value of a concierge? How long can hotel lobby concierges last? How can concierges prove their role and achieve a sense of presence?
Aebling does not resist technological change; she embraces the internet and sees iPads and similar tools as aids to her work, not career threats.
Devices enhance human skills, enabling people to do more work.
"If I were a travel agent," says Otter,
> I would need the ability to quickly access information and also 'know clearly' where is worth going, what activities are available, the local environment, and the client's situation and preferences.
> Taken together, the cheaper information retrieval becomes, the more value a travel agent can add.

**When faced with a large amount of information, clients need concierges more than ever.**
"The abundance of information creates a poverty of attention." Information is often intangible and free, but in fact it consumes resources. "Where there are many rabbits, there is little lettuce, and vice versa," Simon explained.
One resource being abundant causes another to be scarce. Information is like this; it consumes attention. It is best to measure information in terms of individual time, a psychological concept Simon summarized.
Thinking this way, making a decision requires two steps: **collecting information and processing information**.
The more information collected, the more time is needed to process it, which is why collecting information on the internet is almost free, but processing it is still costly.
In fact, for some people, the cost of making decisions in the face of a large amount of free information is higher than ever because the cost of processing information has increased significantly.
In every industry that is not precise enough and overpriced, customers feel frustrated and frantic, and in such cases, concierges have the opportunity to play a role.
In transactions with complex information, intermediaries acting as concierges clear a bright path for transactions through the pile of complex information between buyers and sellers.

**6. Isolator: Bearing the Blame**
A good intermediary can play the role of isolator well.
Many situations require an isolator, such as recruiting employees. Usually, excellent job seekers work at other companies in the same industry, such as competitors, clients, or suppliers. However, it seems unethical for a hiring manager to poach employees from competitors.

**In morally gray areas and social dilemmas, there is a great need for intermediaries who act as isolators.**
As our agents, isolators can preserve our image of integrity and courage and maintain important business relationships. Bridge-builders connect two people who do not know each other, while isolators separate the parties at the best time.
Interestingly, even if everyone knows who is behind the scenes, intermediaries can still be successful isolators.

**As an isolator, to increase your value, you must match the isolation you provide with your fees.**
Intermediaries who understand the value of isolators can also profit from playing this role. In real life, intermediaries choose to create different names to play more positive roles.
Building a reputation for being tough and difficult is meaningful, even if it means being considered a bad guy.
Generally, in such cases, clients show the other party in a credible way that they are going to transact, and they will not compromise as easily as they would in direct negotiation. Thus, the intermediary becomes what economists call a "commitment device."

**The essence of being a good isolator is to achieve for clients what they cannot achieve themselves.**
Representing clients also means you can make demands. "If you negotiate on behalf of a client, you do not have to play the bad guy or appear cheap; you are acting in the client's interest."
We work harder when representing others than when representing ourselves.
Find a career you want to do, set a goal, and it will help you become a more attractive isolator. Whatever role you play, imagine yourself as a hero, and perhaps that will give you energy to play the role better.
The isolator is a role we know less about because it often happens where we cannot see. If you keep your eyes open, you will see the need and opportunity for isolators everywhere.

**Intermediaries Always Invest Patiently in the Future**
In many cases, the internet is an ally of intermediaries. Because intermediaries who once did business on their own (limited to their geographical area) can now reach customers around the world and share information with them faster and more conveniently than ever.
Often, intermediaries give information-poor, vulnerable participants more knowledge and power, not only acting as a link connecting both parties but also as an indispensable fulcrum for both sides. They always need to maintain balance between the two sides.
Whether it is a talent agent, a used car dealer, or a venture capitalist, successful intermediaries know that serving only one side is not enough; to survive, they must provide value to both sides and treat both sides well.
The most respected intermediaries attract the best buyers, which in turn attract the best sellers, which attract more good buyers, and so on.
Although two-sided markets are not perpetual motion machines, intermediaries must continuously strive to keep their strategies, attitudes, and prices serving the needs of both sides.
Intermediaries who seek stability rather than quick wins always play the long game, sacrificing short-term gains for larger future returns. They invest patiently in the future.
Compared to serving buyers and sellers once or twice, this investment brings intermediaries longer-lasting and richer returns.

This article is a reading note on "The Middleman Economy" published by CITIC Press, original author: Marina Krakovsky, USA.
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