Business

The hidden costs of the intermediary economy

Live: The Rise of the Middle Economy and the Power of Going Back to the Roots

by Kathryn Judge (HarperCollins, 2022)

What is the cost of lower cost? A lot, if you follow the argument in Kathryn Judge’s new book Straight. In this fascinating context of a emerging threat in today’s economy, Judge, a law professor at Columbia University, points to both the hidden and overt costs that consumers pay in what she calls the middle economy.

Judge’s audience is digital and e-commerce platforms that act as wholesalers, retailers, and brokers between customers with the products and services they purchase, and the massive increase due to rising global demand and increasingly complex supply curves. While middlemen are needed in some ways, her warning is clear: the habit of buying from global middlemen has blinded us to the benefits of economies. more local and friendly.

Judge writes, “The very attributes that make intermediaries so well connected also give them overwhelming power. Over time, this allows them to expand their field, capture demand for their services, further consumer decision-making, and otherwise advance their interests at the expense of others. that they have to serve. “

Middleman costs are multiplying and popping up in places we might not expect, including higher fees paid to a realtor to sell a home. But for Judge, the cost goes beyond mere economic hazards and represents an artificial intermediary that reduces the integrity of a direct exchange. In more forceful passages, she accuses the most dominant intermediaries of contributing to loneliness, isolation, and a lack of “human development” around the world.

Judge, whose academic work demonstrates a keen interest in finance and regulation, writes in a clear and insightful voice, drawing painstakingly from scholarly journals and sources including includes reports from the United States Department of Agriculture, research from the National Bureau of Economic Research, and the United States. The Federal Reserve, as well as detailed accounts from public posts by members of community-supported agriculture (CSA) groups, allows consumers to buy directly from local farmers. . She also frequently taps into personal experience, comparing the process of buying fresh produce as a CSA member to buying the same items at a large cannery. Such examples help her argue while revealing her bias towards local (aka direct) commerce. As such, the book has nuances of EF Schumacher Small is beautiful and Lewis Hyde’s Presentstaste with By Christopher Mims Until today– her argument shines when her material is tied to emerging and immediate economic trends.

She writes that e-commerce has evolved into a market where “dominance is often the norm,” where major players have gradually established platforms that allow them greater control over multiple roles. their representation. Today’s dominant retailers have aggregated their size and emerging assets (such as the production of private label goods) to deliver the particular benefit of lower prices and greater convenience for consumers. consumers. “Each node does a little bit – what it can do for the cheapest price – until the whole concept of creation is so isolated that no company, much fewer people, can be considered. producer of any finished product.”

But she also shows that giant middlemen and long supply chains are two sides of the same coin. In short, for better or worse, we still need middlemen to help negotiate global demand, and sourcing is more geographically and logistically complex. “Each prop increases and draws momentum from the other, leading to even larger middlemen and even longer and more complex supply chains.”

Middleman costs are multiplying and popping up in places we might not expect, including higher fees paid to a realtor to sell a home.

“The middleman is not the problem…, the middleman economy is what it is,” Judge writes, as she makes a structural argument against fenced ecosystems. In one example, taken from sources like the wonderful book by Charles Fishman The Wal-Mart EffectShe tracks how the retail giant has transformed from a major player in retail to an economy of its own, partly because the company has leveraged unique strengths into advantages. next level like upselling, customer retention and intelligence.

The judge mocked major players like the National Association of Realtors for handling what she considers excessive commissions. She targeted major financial players for creating weird and unnecessary financial products that (indirectly) helped cause a massive bankruptcy in 2008. But she launched her own setup. its strongest argument against e-commerce heavyweights, who use their dominant market position to undercut competitors on price and lure customers with conveniences like Free shipping.

Furthermore, third-party seller hosting platforms in addition to their own brands have allowed the biggest players to turn into both table and house gamblers that guarantee the cat cut. The strength this consolidation brings is considerable in a market with tight margins. Smaller players are faced with what seems like a well-defended fortress, unable to compete on all fronts simultaneously.

Finally, the reader is challenged to consider the human values ​​that direct purchases can provide. Judge offers many examples of ways consumers can buy directly from local organizations and store ventures (consider your local bookseller!). She believes that face-to-face exchange fosters connection and community while fostering a more equitable, resilient, and accountable economic system, and she shares tangible steps to realizing her vision. look this. Direct is a captivating reminder of the hidden costs that often compound into small profits and the human benefits of buying locally.

Author profile:

  • Tom Ehrenfeld is a freelance writer and editor based in Cambridge, Mass. Formerly a writer/editor with Inc. magazines and Harvard Business Reviewhe is also the author of Startup Garden. He has written extensively on lean business; Nine books he has edited have won the Shingo Publishing Award.

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