The eventual erosion of the middlemen

Recently I had to communicate with a landowner about a potential site to build a solar farm, because yes, thats what I do some times. Because the discussion might involve some technical aspects I am not aware of, I went through the company I have a relationship with to build these things. However, on the other side of the negotiation, the landowner also went through a third party. A land agent.

Many of you have experienced this if you try to move house, and buy a new property. You want to sell your old house, and buy a new one. But you need to talk to an estate agent (or realtor in the US?) to communicate with the people you are selling your old house to, and talk to a second estate agent to buy the house you want. They are also talking to a third middleman to buy their property…

The problems here are massive, not least the fact that all of these people expect some percentage of the cost, but they also are SLOW, because frankly, they are quite happy where they live. Whats the hurry? And also their incentives are misaligned. An estate agent might take 1.2% of the sale price when they sell your home. You get the other 98.8%. If the house costs $300k, They can expect to make $3,600. If they can get a 5% better price by negotiating harder, they get $180 more. But you would get $15,000 more. Of course they don’t give anywhere close to a damn about you getting a good deal as you do…

Of course thats just when things are going ok, and the actual objectives are aligned. So you want to sell your house, and the estate agent has an incentive to sell it too. In theory, the estate agent is on your side. A bit. But a lot of the time, we deal with middlemen who are NOT on our side.

If you have ever bought a non-tesla car, you have probably gone to a ‘dealership’. There is a good reason that the slang term ‘stealership’ exists in the US. These are middlemen. Their job is not to help you buy a car, their job is to trick you into paying as much money as possible for whatever they want to sell you, and their loyalty is firmly to themselves. You may THINK you know what model car you want, but if they get better commission on another model, then they will say ANYTHING THEY LIKE to try and trick you into changing to that one.

And don’t for one minute think once you pick a car its over. They will then try to sell you add-ons, extras, extended warrantees and other crap. The last time my wife bought a (diesel) car, I remember having to warn the dealer that if he even mentioned a single more thing related to optional add-ons we didn’t ask for, we would walk out and abandon the deal. (she is more polite than me).

As you may know, the stupidly-fast-growing car company Tesla, has no dealerships. They have ‘showrooms’ where you can see the cars, but these are rare, the staff there do not push you to buy, and in fact if you decide you do want to buy, they will basically tell you to use the website. They also do not get commission. The cars have long waiting lists. I’ve been waiting for my new one since October, and its expected by the end of this year. A years wait to buy a car direct from the manufacturer…

Dealerships used to serve a purpose. Information. In 1970, if you wanted to buy a new ford, you would have to go to a showroom, and have the staff answer questions like ‘how fast does it go?’ ‘what colors are available’? and ‘how much luggage space is there?’

LOL.

Its 2022, and ever car company has a whizzbang website with videos, multiple images, and online configurators where you can see every possible permutation of how your ideal car would look. Every possible statistic is listed. You could also go to YouTube and watch any of the thousands of youtube channels about cars, where impartial real-world tests are carried out and you get to see exactly how each car handles each situation. You can now be ludicrously informed about a car before even leaving your sofa.The information gap between you and the car dealership has shrunk, maybe even reversed. I suspect I know more about the Tesla model Y (my next car) than most of their staff. They have to know about the whole range, whereas I can be laser focused on the car I want. The entire reason for car dealerships to exist is now gone.

The same is true for estate agents. The role of the estate agent is basically to show you what houses are for sale… and maneg the process of buying the one you want (or selling yours). There IS some hassle involving lawyers and mortgage providers here, but actually not very much. The vast majority of the time, estate agents are doing one of two things.

• Showing you around a house
• Playing telephone tag or email with buyers and sellers

The first of these is patronizing as hell. They open a door to the bathroom and say “this is the bathroom”. I know, I’ve seen one before. We even have one in our own house. Thanks buddy. There is an argument that they need to be there to keep an eye on you, sure, but the extent to which they need to facilitate viewings is now vastly lower than before.

Before we bought this house 12 years ago, we drove a LONG way here to look at lots of options. When we got there, it turned out one of them was right next to a sewage treatment building. The estate agent had not mentioned this, because they are bastards. These days, in 2022, we can all easily browse google street view, and check out dozens of photos, maybe even videos of any potential house and its surroundings before bothering to go ‘visit’ any which we can now tell are non-starters before we even get in the front door.

Again, information has destroyed the vast majority of the power of the middle-man/woman.

In my own file of computer games, this is also happening, but we are currently only half way there. The original business model was bricks-and-mortar stores, where you walk in, pick a video game from a shelf and buy it. That horribly exploitative model collapsed with the internet and buying online. For a few years, people tended toi sell online from their own website, paying very little commission. 5% would be considered a lot, as you are basically just paying credit card fees and chargeback/fraud protection, plus some absolutely trivial disk storage and bandwidth costs. This is still an option today, and you can buy Democracy 4 semi-direct from me, at 5% commission here:

Most people do not do this, because there are super-popular online stores now like Steam, Epic and GoG and Humble. In the mobile realm, this is totally controlled (many would say illegally) by apple and google. The middlemen who facilitate buying something from someone went from physical stores to online, but did not go away. The commission they take dropped from over 60% down to 30%, buts its still very much there.

I actually believe this may be changing. The EU and the US are both currently looking into legislation to combat monopoly practices by tech giants which no doubt include the idea that they can take 30% of every transaction. Personally I believe this is way overdue. The same forces that have started to crumble the car dealership module will eventually force their way into the online realm too.

When I started selling video games online in 1997, one top tip people had was to put your phone number and address on your website (yikes). People would NEVER hand over their credit card over the interwebs, but they would feel much safer if they could use a telephone to speak to a human. People also HAD to have the option of having the product snail-mailed to them on a physical CD as a ‘backup’ in case your fly-by-night website went bust and they had no way to get the game again! For what its worth, My company has been selling online since 1997. Steam was announced in 2002, 5 years later., I’m still here.

Many of the ‘value-add features that game-store-middlemen provide have ben eroded over time. They provide the bandwidth to re-download the game! This costs virtually nothing these days, especially for smaller indie games. They provide an online message board for the games players! but so does reddit, facebook, and a billion other places. They provide hosting for trailers and videos about the game! But so does youtube…

There is definite *value* to customers in having a single place where they know they can find all this, but increasingly the actual ‘location’ of information on the internet is becoming moot. I no longer have to care what the web address of a specific site is (and I remember the days when we laboriously typed h t t p : // on front of every address…). Since virtual assistants became a thing, I can now just yell ALEXA, READ ME REVIEWS OF GAME X, and it can do it. Are those reviews from site X or Y? I don’t care.

Its an interesting time to be in selling games online. There was a brief period of stability where it was established, firmly, that games got sold through the apple store, the google play store, or through steam. That was it. But this may now be changing. Its likely changing in other industries too.

Middlemen need to be absolutely sure they are providing some value that is not just ‘information’. Information is everywhere, available to everyone, trivially, all the time. There is still value in curation, and convenience, but its eroding, and its probably not going to hold its value for much longer.