Disintermediated? Think Again. The Rise of the Digital Gatekeeper

A few nights ago, while lazily watching Amazon Prime Video, two things became apparent. First, an abundance of content that held no interest for me. Second, and more irritatingly, ads. Lots of them. Curiously, both observations are inextricably tied to the same concept: the broker.

Different people, as we know, value different things. Browse through Prime’s endless scroll, I pondered why such a vast ocean of content existed, much of which I’d never even cursorily click on. Then it hit me. That content, however irrelevant to my tastes, exists because somewhere, someone, finds it profoundly worthwhile. It has a market.

Why do markets exist at all? Among other reasons, because preferences diverge. If everyone possessed identical tastes, marketplaces would be far less diverse. And who greases the wheels of these exchanges? The broker. In this specific digital instance, Amazon Prime itself.

Markets Will Find a Way

In his fascinating paper, "The Economic Organisation of a P.O.W. Camp," Richard A. Radford recounts how markets sprung up even amidst the bleakest circumstances of World War II, inside a prisoner-of-war camp.

Every POW received identical Red Cross parcels: biscuits, canned meat, chocolate, cigarettes. On paper, a perfect gift economy. Yet, within days, trade emerged. Smokers, naturally, craved more cigarettes. Others, less inclined to nicotine, preferred chocolate. The goods themselves didn't change. What shifted was how desperately people valued them.

Soon, brokers, in their most rudimentary form, stepped in. Some acquired cigarettes from non-smokers and then sold them at a premium to desperate smokers. Everyone gained from this exchange, a testament to the efficiency of trade. The broker, by enabling the transaction, simply gained more. Was it fair? Yes, because they facilitated a trade that might not have otherwise occurred.

Crucially, not a single new item was produced within the confines of the camp. Yet, a robust market, complete with fluctuating exchange rates, spontaneously emerged. Radford vividly writes:

"At once, exchanges, already established, multiplied in volume. Starting with simple direct barter… more complex exchanges soon became an accepted custom. Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes… rough scales of exchange values came into existence… A tin of jam was worth one-half pound of margarine plus something else; a cigarette issue was worth several chocolate issues, and a tin of diced carrots was worth practically nothing."

This isn't merely a wartime anecdote, it's a case study in how markets function. Brokers, often maligned, are the lubricant of trade. They leave both buyer and seller better off, ensuring resources find their highest valued use.

The Promise (and Myth) of Disintermediation

In the nascent days of the internet, everyone championed the idea of getting rid of the middleman. Craigslist. Napster. eBay. Uber. All were touted as peer-to-peer initiatives, proudly anti-broker in their ethos. The very term "uberisation" came to signify any tech-powered disruption that supposedly cut out the traditional intermediary.

But here’s the twist, a plot development as predictable as it is ironic: the "middleman" didn't disappear, it merely transformed. Uber, Spotify, and Amazon (among others) became the new brokers, aggregating demand and supply on their own terms. And yes, those once ad-free streaming platforms that promised direct access now sneak in not one, but three back-to-back unskippable ads.

Do the ads annoy you? That's precisely the point. They're designed to irritate you just enough so you'll eventually pay more to make them vanish. First, these platforms monetized your attention. Now, they're monetizing your desperate desire to escape that very monetization.

From Broker to Gatekeeper

Today's middlemen don't just connect supply and demand. They often own the marketplace itself. They dictate what you see, how much it costs, and who gains visibility. This evolution is critical: we've moved beyond the neutral broker who merely facilitates exchange. We now contend with gatekeepers.

Imagine a restaurant listing app that not only lists restaurants but also owns a chain of its own. Imagine the immediate consequences when it decides to bury its competitors in search results, effectively choking off their visibility. We’ve transcended the realm of the impartial broker. We now face entities that control the very flow of information and access.

So, Where Does That Leave Us?

Brokers aren't the enemy. They emerge organically when people value things differently. They fundamentally make trade possible. They’ve existed in POW camps, in bustling bazaars, on the high-stakes floors of Wall Street, and now, intimately, inside the apps we tap every day.

But when brokers evolve into gatekeepers, when they start to actively distort the market they once merely enabled, it's a cause of concern. 

Especially when that skip button disappears!