I just saw a Piper Jaffray PowerPoint (sorry, I lost the link) that said that time spent on "user-generated content" sites soared from 3 percent in April of 2005 to 31 percent now: a tenfold increase in just two years and a now huge proportion of time spent online.
Banking disintermediation has provoked lots of analysis and writing in certain circles. I still think that Ron Chernow, in his book House of Morgan and his follow-on clarification The Death of the Banker has done the best job of explaining this. Put simply, an intermediary comes into between two people. A banker takes deposits from Jack and makes loans to Jill. Before the information age, the value of knowing that Jack has money and Jill needs it is valuable. Very valuable. After the information, Jack and Jill just might find each other without the banker. Bankers as intermediaries become less important, less powerful. Hence, banking disintermediation, a revolution in finance.
But it suddenly occurred to me that the role of intermediary is eroding everywhere. Bands can now put their music out to the public without using a record label. Individuals can post news or commentary on the web without the sanction of a newspaper or book publisher. It could be that we're witnessing media disintermediation.
What is next? Perhaps corporate disintermediation, a phase of economics when the corporation no longer plays intermediary between the customer and the employee who creates value for the customer. Or perhaps politics that cuts out the politician and is replaced by participatory democracy.
Stage one of the information age has been laying in place the infrastructure and technology that connects everyone with everyone. Stage two of the information age may well be a spate of self-organizing complexity that displaces the old organizational and process structures that depends upon a lack of information and concentration of decision-making.
Wow. I always have marveled at the internet as a communications tool. I guess that process is inevitable when you provide new and improved methods of contact.
ReplyDeleteSorry if I sounded too glib there. I happen to loathe most of the banks I've dealt with and the way they have their policies structured. Most of the time, it's human error I am railing against at those places.
ReplyDeleteThere are privacy issues that need to be resolved before this can occur, no? And how would lenders guarantee payback? And banks are a huge part of society's economic infrastructure…
But then again, I use Ebay all the time, and I rarely have problems, although I deal with small sums. I suppose the user rating system could work and people could work their way up the credit chain, provided there were securities in place for lenders. And even then, you have a sort of intermediary, because there have to be regulations.
[You'll have to forgive me if I sound even half as stupid as I feel today-- I may as well be living in a sauna.]
To the other anonymous:
ReplyDeleteYou would loan only the amount you are comfortable with; say somebody wants $100,000 loan, so 1,000 people are comfortable with loaning $100; when the borrower makes a payment all of the lenders get a pro rata share. This is exactly how insurance companies work to minimize any one company's risk: make many small transactions to make a large income; as financial transaction costs approach zero, the system is quite efficient.
Ah. Of course! LOL! Well that's a lot less risky, but doesn't the involvement of that many people make an intermediary that much more necessary? Or do you think those numbers would make people less concerned about loss?
ReplyDeleteAnons all around on this one.
ReplyDeleteAnon2, yes that is certainly a key function of an intermediary. And as there gets to be better technology for pools of investors to find one another, the relative value of a banker filling that role goes down.
LOL! So many anonymous people, and so little time! I'd be curious to see how technology like that would work.
ReplyDeleteLOL! So many anonymous people, and so little time! I'd be curious to see how technology like that would work.
ReplyDeleteoop! Now there's two of me! Let's make it an even three. See why I never studied economics? :P
ReplyDelete