Introduction

Marina Krakovsky, an economics expert and business journalist, shares her insights on the role that the”middleman” has played in expanding product availability to a broader audience for buyers and sellers alike. As Marina explains, middlemen have often been viewed with negativity and distrust through the years – in spite of providing people with essential services.

The Early Origins of The Middleman

I have always been fascinated by middlemen and their impact in a product market. Why do people have such mixed feelings about them when they provide so much value? And, how do you show the true value of the services that they offer?

I grew up in the former Soviet Union at a time when a middleman was running every product market. Everyone seemed to be “wheeling and dealing” and bringing products to people who otherwise wouldn’t be able to get them because the communist economy had collapsed.

There was contempt for middlemen. Not just from the government, but also from the people who were dealing with the middlemen. Everyone had this deep-seated suspicion about middlemen because they weren’t making anything. They were simply “passing things along.”

I have found that the value of middlemen is complicated. There are certainly cases in which middlemen act in a predatory way where they take advantage of their market power or are not providing any real value. However, so much of our economy relies on middlemen, especially with online services). We need to understand the value that they bring to all of us.

Middlemen create value by connecting people to expand the size of the pie for a given product or market. When middlemen do this, they aren’t taking anything away from the trading partners – they’re benefiting by taking a small piece from a larger pie that they helped create.

 

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About the speaker
Marina Krakovsky MarinaKrakovsky.com, Economics Expert Member

Marina Krakovsky is a business journalist who specializes in social science and economics. Marina has written several books - including “The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit.”