Tuesday, July 21, 2009

Disintermediation


After reading "Is Amazon Taking Over the Book Business?" by Time Magazine I was left thinking a lot about how the economy is changing and where it might be going.

Historically, the book industry would be a long supply chain. In order for a book to be published there used to be a myriad of roles involved: agent, editor, publisher, printer and bookstore.

Now, we're seeing Amazon, the clear market leader in their sector, starting to absorb more and more of those roles. In Time's article words: "Amazon could become the LiveNation of the book world, a literary ecosystem unto itself: agent, editor, publisher, printer and bookstore. It probably will."

My first reaction usually is to try to extrapolate, and so I did. And my next question was: Are we witnessing the disintermediation of the economy as we become digital? Disintermediation defined by wikipedia as "the removal of intermediaries in a supply chain: 'cutting out the middleman'".

I believe this is a trend that will continue. For the music industry this Harvard article around Michael Jackson's story does bring up the point of how the music industry is broken. It actually refers you to a video on the Zombieconomy which is pretty cool and describes how capitalism itself is broken. An the reason it's basically broken is that capitalism is based on intermediaries under-counting (and minimizing) costs and over-counting (maximizing) benefits.

From this perspective, disintermediation seems good. Now, can things begin looking better as the industry is shaping towards giant almost monopolistic software companies aggregating markets? I believe they do. How? The way I see it, there are two advantages to how in the long term disintermediation (even if monopolistic) induces a new economy:

1. It's easier that it becomes more obvious to people the fact that one unique company is holding the holly grail for a hole vertical market.
2. It's easier to reproduce this model by the people itself by launching open source software cooperatively operated counterparts.

The way I see the future going is that disintermediation is the natural evolution of capitalism in the digital era and it paves the road for "massintermediation" (would that be the right name?) which would be the people for the people cutting off the intermediaries up to their last chain's link.

It's specially interesting to see what will happen when you threw in other digital era properties such as the net's transaparency that would allow for cooperation in a clear fair way.

There are already out there organizations such as Free Software Foundation founded by MIT professors working their way into open source software with new ethics.

I'm probably projecting too far away and I'm not saying this will happen tomorrow. Just thoughts in the collective mind ...

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