Middlemen Are Eating the World (And That's Good, Actually)

Coordination problems are real problems, and the bottlenecks to global wealth and flourishing

I think many people have some intuition that work can be separated between “real work“ (farming, say, or building trains) and “middlemen” (e.g. accounting, salespeople, lawyers, bureaucrats, DEI strategists). “Bullshit jobs” by David Graeber is a more intellectualized framing of the same intuition. Many people believe that middlemen are entirely useless, and we can get rid of (almost) all middleman jobs, RETVRN to people doing real work, and society would be much better off.

Source: https://www.reddit.com/r/oddlyspecific/comments/1fpmtt8/pig_wearing_clothes_in_a_childrens_book_doing/ (It’s not clear to me why a pig society would have a pork-cutting job. Seems rather macabre!)

Like many populist intuitions, this intuition is completely backwards. Middlemen are extremely important!

I think the last 200 years have been a resounding victory of the superiority of the middleman model. Better models of coordination are just extremely important, much more so than direct improvements in “object-level”/”direct”/”real”/”authentic” work.

What do Middlemen even do?

The world is not, by default, arranged in ways that are particularly conducive to human flourishing, happiness, or productive capacity. Sometimes, individuals try to rearrange the world’s atoms to be better for human goals. Whenever you have an endeavor that requires more than two to three such people, or if those two to three people are not closely colocated, you might need a middleman.

An archetypal middleman job then is trade:

You have surplus wheat. I have surplus beans. But we’re 100 miles apart and don’t know each other exists.

A merchant a) physically moves wheat to where it’s scarce (and valued more), b) physically moves beans to where it’s scarce (and valued more), c) figures out an exchange rate, and d) takes on risks of spoilage and banditry. For her efforts, the merchant takes a fractional cut.

Another archetypal middleman job is leadership or management:

Ten people want to build a bridge. But they face problems: Who works on the foundation vs. the supports? How do we prevent the left side team from building something incompatible with the right side team? When is the foundation strong enough to start building on top? How do we know if we’re on track or behind schedule?

A manager: a) figures out what needs doing and who should do it, b) ensures the parts fit together, c) adjusts when reality diverges from plan, and d) makes calls when the right answer isn’t obvious.

Some historical trends

Source: https://en.wikipedia.org/wiki/Complaint_tablet_to_Ea-n%C4%81%E1%B9%A3ir. The complaint tablet (circa 1750 BC) tells of poor Nanni’s dealings with Ea-Nasir, a copper merchant/middleman of poor repute who has allegedly sold Nanni subquality copper.

Early Middlemen

Agriculture allowed for the specialization of labor and thus the introduction of middlemen.

Early middlemen had relatively simple jobs, like trading goods and supervising labor. As our societies become larger, wealthier, and more complicated, more and more middlemen are tasked with managing the flow of increasingly abstract concepts: information, risk, relationships, and ideas.

Many societies throughout history were suspicious of middlemen. In classical Confucianism, merchants were at the bottom of the social hierarchy, behind scholar-bureaucrats (middlemen who presumably get a pass because they are the ones studying confucianism), farmers, artisans, and soldiers. Similarly, in the West, Christians were often barred from moneylending and some other forms of trading, relegating the less savory middlemen tasks to Jewish and Muslim traders and bankers.

In the last 200 years, however, it has become increasingly untenable to see the middlemen as doing largely superfluous work . As societies become more and more complicated, middlemen jobs became both more complicated and more numerous, and societies that reject them become increasingly outcompeted and irrelevant.

The 20th century: The good middlemen are truly “middle”men

By the 20th century, all the Powers that Be essentially agreed that we needed middlemen to organize our societies. But there’s still dispute on the details: should we have many bottom-up models of coordination, or is it better to have centrally planned economies with a few leaders and mathematical models at the top?

The second half of the 20th century could be seen as a dialectic between the US and Europe against Russia, China, and other orbiters on whether society ought to be economized or centrally planned.

With a few exceptions, the West resoundingly won. Capitalistic economization leads to substantially greater returns and productive capacity than centralized command-and-control, explicitly Communist or otherwise.

The Information Age

Consider now the late 20th century and early 21st century. Compared to 30 years ago, I think many people, particularly in the intellectual elite, have largely lost appreciation of the value of solving coordination problems and the associated veneration of middlemen.

In particular, I think many people in my circles are missing the “middleman great” intuition in part because they work in tech and/are used to tech. Information technology (”software eating up the world”) is in part an alternative way to organize society.

However, while software engineers see themselves as doing “real work”, the real work they’re doing is feeding into coordination tech, not object-level work like robots or something.

Of the big companies, only Netflix is closer to replacing “real work” (well, storytellers). Most other “tech” companies (think Google, Amazon, Facebook, Microsoft, etc) are about reorganizing society through information technology. (Companies like NVIDIA are an intermediate step that feed into software which is primarily coordination tech).

Sometimes the information age solutions are a complement and sometimes it’s a substitute of traditional middlemen.

Takeaways and Future Work

1. Some of my followers are variously in the “Progress Studies” and “Abundance” crowds. To you, I pose a challenge: Many people in the relevant spheres talk of the world in terms of physical capital and “Building.” But most of the modern economy is in coordination. This likely means that the rate-limiting step for future economic progress likely comes from coordination improvements, not “real work” improvements. How can you align your efforts to improve future coordination?

2. What do substackers do? Well many of us are useless, but I like to imagine some of us, in our best moments, try to help facilitate the discovery and dissemination of ideas. What are good coordination-first framings of idea dissemination? How can the middlemen of information dissemination improve our efforts and help the universe discover itself more quickly and efficiently?

3. Many people talk about the “economization” of society. But what, concretely and quantitatively, does it actually mean? I’d be excited to see more descriptive and neutral accounts for the degree to which society is economized today, and in particular attempts at graphs for the fraction of different societies and sectors that have become economized over time.