Who are the Middlemen and why do they exist?

In my simple definition , middlemen facilitate trade or an economic transaction. As the term suggests, middlemen could be a person who stands between you and the potato farmer . Or for that matter a broker or even a pimp qualify as middlemen.

And then there is this whole world hell bent on eliminating the middlemen. To start with ,middlemen don’t make any economic sense for the rational mind. Most business models of E-commerce start-ups revolve around  eliminating the middlemen. But the conundrum of middlemen is not easy to understand neither it is easy to eliminate the middlemen.

But take a step back and think with a fresh mind. Why do the middlemen exist in different pockets of the economy? the very first reason that we can ponder upon is the inability of the supply side to communicate , bargain and reach the demand side. A potato farmer simply doesn’t want to keep the extra information of price fluctuations and possible stores where he can dump his inventory of potatoes. Or the farmer simply doesn’t know to speak the language of the logistics provider. A owner of the house doesn’t want to bargain and bicker with the tenant to decide on the rental agreement and the rent.

But beyond the obvious, the middlemen have two core assets: Information and set of behaviors to deal with the supply and demand. But in the age of information where information is freely available to all, certain set of “behaviors” happens to be the core asset or core competency (management jargon) of the middlemen. So what are these behaviors?

The very first behavior or value which middlemen compromise on is personal integrity. Personal integrity is the quality of being honest with yourself. Most people find it difficult to do stuff that they don’t believe in. Small things count; right from the ability to say no to someone in dire need or saying yes to someone who is gullible and naive. Saying no to credit takes some serious effort.Then there is this ability to be transactional with people. Being indifferent to how people might feel is also an art. So does acting tough to some and mellow down to some when need arises. Middlemen have the ability to tailor conversations. Talking sweet to the prospective demand and being an asshole when the deal falls apart.

All these capabilities are very difficult for the supply and demand to acquire. Acquiring the behaviors of the middlemen means to unsettle the core values of oneself.

If the only asset to make money is information and set of behaviors then middlemen have to swivel between a range of behaviors while manipulating information for their gains. The set of behaviors and values which middlemen have to adopt are condemned in most societies , geographies and religions. Take for instance the Jews who were largely known as trading community . Jewish merchants and brokers are often stereotyped as dishonest, cunning and greedy. But despite of all the negative traits , middlemen are the necessary evil of the society. They handle all the difficult conversations adjustments and compromise which the supply and demand are not able to have amongst themselves.

Look no further than the pimps. If we take some liberty to objectify the prostitute in a flesh trade industry and treat her as an asset then the pimp happens to be that bridge which connects the prostitute and the demand. The prostitute on her own is ill-equipped  to protect her territory , ensure her safety from the demand (males) and scout for demand.The pimps provided all that needs to the prostitute at some fee. The pimp conducted all those difficult conversations and guaranteed safety for the asset.

In some pockets of our modern economy technology might have replaced the middlemen to an extent. For instance , Tinder the dating app ( hooking app) objectifies and replaces all those difficult conversation you might want to avoid to find a suitable date. There is just swipe right or left. Uber for that matter eliminates the tough conversations and bargaining with the drivers on taxi fares.

But middlemen are here to stay as long as the demand or supply wants that discretionary need of avoiding the difficult or uncomfortable conversations or acquiring the behaviors which are generally not accepted by the society. And for economy to run, the demand has to somehow interact with the supply and reach a win-win for a trade to happen. But that trade or transaction will always come with a fee. The fee of necessary evil: The Middlemen.

 

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