Disruption or Disintermediation? The Nature of Change of Our Changing Nature.

The use of the word ‘disruption’ to describe the changes brought about by the ubiquity of computational devices and connectivity to the internet has become cliché.

The term is useful in that it provides a rhetorical safety net by simultaneously describing everything and nothing, but its lack of precision inhibits technologists from achieving the goal of articulating an accessible vision of the future. By failing to accurately describe what changes the world is undergoing, technologists not only fail to put out the fires of panic lit by those with an anchored interest in maintaining the status-quo, they inadvertently end up stoking them.

A more useful term then to explain the multi-sectoral patterns of change we see unfolding before us is ‘disintermediation’. To disintermediate, as defined by Merriam-Webster, is the elimination of an intermediary in a transaction between two parties.

Even this definition, however, does not do full justice to what tech. companies and social entrepreneurs alike are trying to achieve: after all, eliminating the intermediary is not always the goal.

In some cases the objective is to replace a human intermediary or proxy with software. In other cases the objective is to make the intermediary more malleable so that it can react to surges of human input while continuing to operate with limited input under normal conditions.

To make this argument more tangible, think of it another way: much of the world as it is currently designed is based on a series of proxies meant to specialize and serve the will of those they are meant to represent. Such a system of specialization is supposed to free up resources and enable the most educated individual on a topic make decisions for the masses.

For example, parliamentarians are elected to ‘represent’ the will of a constituency, or at the very least the will of a majority of a defined constituency.

Record label executives are proxies for the musical tastes of music fans.

Traditional media outlets are proxies for the interests of their audiences.

Venture capitalists are meant to be proxies for both the investors they represent as well as consumer demand.

In each case we assume that the expertise and specialisation of the proxy serves the best interest of the will of the represented.

Changing Nature

Though this system has arguably served us well throughout the 20th century when mobility and communications were limited by the technologies of the day, the tools of the 21st century are calling into question the continued relevance of the proxy-reliant systems, or at least the role of the proxy.

The fundamental problems of outsourcing to experts are threefold: first, over time our representatives develop their own agendas that diverge from the best interests of those they are mandated to represent.

The recent financial crisis is one example of this: perverse incentive systems that rewarded short-term gains over long-term stability ultimately manifested themselves through the creation of derivatives designed to deceive rather than create value.

As the subsequent continued economic woes can attest, though institutional investors may have benefited from the ensuing market correction, society at large is still quite literally footing the bill. The trusted representatives mandated with creating value thus let us down.

The second problem with systems of representation via proxy is that they tend to be fairly static and do not account for times when individuals want to bypass their proxies and re-assume agency.

No clearer example of this exists than government.

If you happen to feel passionately about an issue and your elected representative feels the opposite you are unfortunately fresh out of luck.

Your voice is limited to expressing yourself through analogue inputs, none of which have actionable consequences unless you can rouse millions to your cause. The representative in this case is only open to input once every so many years. He thus fully represents the will of his constituency in lock-step with their wishes until the moment when he doesn’t. Then it’s wash, rinse and repeat.

Finally, when we represent via proxy the proxies have the incentive to appeal to the widest base possible, and in doing so relegate niche content to the fringes.

The stale air that characterizes commercial radio is but one example. Radio stations use sophisticated algorithms to ensure that the new song you hear is familiar enough to prevent you from changing stations, thus reducing the potential that you might hear something that might surprise you.

Similarly, traditional media’s emphasis on banal stories void of analysis is symptomatic of an industry where the quest for the lowest common denominator eliminates any coverage that might challenge us beyond our most instinctual and emotional understanding of the world.

The Nature of Change

The wide-scale disintermediation we are seeing, therefore, calls into question the representation via-proxy model by attacking  the assumptions imbedded in the aforementioned vulnerabilities.

Crowd-funding platforms such as Kickstarter and Kiva are examples of where venture capitalists and professional philanthropy organizations are bypassed so that individuals with a passion to build something can easily connect with individuals eager to buy or support something. The human intermediary whose expertise was meant to connect supply and demand is overlooked and instead replaced by software that facilitates the transaction.

Though additional effort is required on behalf of the demand side to make the transaction take place, the effort is minimal compared to the reward that comes from participating in communities often built around niche interests.

In other words, connectivity makes it easy for niche audiences to become masses and express their true authority and influence accordingly.

What’s Next?

If we see examples then of where proxies are bypassed and replaced by the consumers, voters, investors, etc., they are meant to represent, is it just a matter of time before representation by proxy mechanisms disappear completely?

Not really.

The GodFather of media Marshall McLuhan wrote that rarely does one medium ever fully overtake another: T.V. did not kill the radio star, nor did planes make trains obsolete.

Instead, new mediums tend to expand the markets they disrupt before the old systems and the new systems learn to accommodate each other in different proportions. Following the Darwinian nature of modern capitalist economics, the weakest players in a market will disappear whereas the industry itself often remains stronger.

For example, regardless of how responsive our democratic systems become through direct democracy mechanisms it is unlikely that every citizen will want to vote on every bill that appears before a nation’s parliament, thus necessitating the existence of elected representatives.

Similarly, venture capitalists will continue to compete with crowdfunding, offering competition for both entrepreneurs and investors. So long as VC firms continue to produce a return they’ll continue to exist.

The same can be said of traditional news media companies: though some will fail to transition from the analogue world to the digital world and will find themselves overtaken by social media, others will re-invent themselves in the new world order by successfully navigating the process of translating their trust and relationships into new economically viable products and services.

Conclusion

 Whether we’re speaking of disruption or disintermediation, ultimately what we’re speaking of is a massive change in how different groups of people express their will and the ensuing adjustments that accompany the change. What is ultimately under question then is the assumption that we always want decisions made by experts, when the truth is we sometimes want to represent ourselves.

The proof of this change can be found whenever someone chooses to fund a Kickstarter project; share indi music amongst friends; sign an online petition or re-tweet information we want others to know.

 Though we see this change happening, it’s still not clear whether the movement of self-representation underfoot will prove as transformative as the industrial revolution or something with a much more natural inflection point, similar to green movements around that world that took off in the 70s and then whose growth has slowed to a less rampant but still highly effective pace.

In the meantime, however, while some will continue to debate the merit of the shift in the balance of power, others will choose to focus their energies on designing the systems that both enable the expression of collective will whilst taking into account the need to mitigate certain risks including abuse.

Whereas markets responding to demand will likely to adjust fast barring excessive regulation, more conservative institutions, such as government, will take longer and require more experimentation before individuals feel entirely comfortable modifying how decisions are made. Just as we saw online commerce take off once people experienced a few successful transactions, so too might the pace of change quicken once a few pilot projects prove that the benefits of the new systems outweigh the risks.

What is clear is that wide-scale change is underway, whilst what is unclear is how much time and effort will be required for the exception to become the rule. Helpful to this process will be a better vocabulary with which we proponents of a more participatory, inclusive, transparent and representative world can convert others to the cause.

Change is by no means inevitable: as history has shown, suboptimal systems sometimes prove themselves to be surprisingly resilient. The test then is not whether we will succeed or fail, but for how long are we willing to fail before we succeed.

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About Matthew Carpenter-Arevalo

A former Google and Twitter manager, Matthew Carpenter-Arévalo is the founder and CEO of Céntrico Digital, Ecuador´s foremost boutique digital marketing agency.

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