Stuck In The Middle With You

The world is full of middlemen.

In a very oversimplified view of the world, for every product or service there exists the person who provides it and the person who consumes it. And then there are a bunch of people in the middle, sometimes.

Wildly reductive, but true enough in many cases. I don’t buy my eggs (most of the time) directly from a farmer. I buy them from a grocery store – so the grocery store is a “middleman.”

While not always the case, often the term “middleman” is used in a pejorative way; whether it’s commercials for companies who “cut out the middleman, and pass the savings on to YOU” or folks who simply curse their existence and blame them for every inconvenience. And the fact is, many middlemen are parasitic rent-seekers. But others are so incredibly helpful that you’d be crazy to “cut them out!”

Take the grocery store example. What a glorious middleman! Imagine going to the store and picking up twenty items. Relatively simple errand. Now imagine that instead, you had to go to the factory or farm where each of those twenty items was produced in order to buy it. Ugh!

The good kind of middleman collects, organizes, and bundles for you. They reduce the space in the middle! They aren’t adding one step to a process; they’re removing 19.

So what’s the bad kind?

Picture ticket scalpers. Here’s a concert venue with five thousand tickets to sell for an upcoming show. They can sell to you directly, and in fact, would like to do so. But before they get the chance, an unscrupulous person buys all five thousand tickets the second they go on sale. Then they turn around and re-sell them at a much higher price than the one originally set by the venue.

This is the bad kind of middleman – someone who creates more middle solely for the purpose of extracting some value for themselves. They aren’t providing any actual benefit to either side (unlike grocery stores, which provide tremendous benefit to both the consumers of the products and their producers). They’re just parasites.

Grocery stores and ticket scalpers are obvious. They’re easy to spot for what they are. Not so with all middlemen. Especially as you get deeper and deeper into niche industries, there can be some weird examples of different steps in the long process between original producer and end consumer. It won’t always be so obvious which ones are adding value and which ones aren’t, because they’ll almost all have a story for why they’re the former and not the latter.

So here’s a quick mental check: say “if this person didn’t exist, would it be easier to get what I want or harder?” Follow this question for grocery stores (way harder) or ticket scalpers (way easier – mostly; there’s a case to be made that some level of scalping just helps shift goods from time-preference to money-preference but that’s a different subject altogether). Now you can run that basic check on any proposed service someone tries to sell you. Usually you’ll be happy you did.

See, I helped you get closer to your end goal – and I didn’t even charge you. Praise the middle!

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