Placeholder Image

Subtitles section Play video

  • MALE SPEAKER: Welcome to "Talks at Google."

  • Please join me today in welcoming Bay Area journalist

  • Marina Krakovsky, the author of "The Middleman Economy."

  • Just published.

  • Marina's writing has appeared in "The New York Times Magazine,"

  • "The Washington Post," the "Stanford Magazine,"

  • "Scientific American," "Discover," "Psychology Today,"

  • and "Slate."

  • Marina was also a researcher for Eric Schmidt and Jonathan's

  • book, "How Google Works."

  • Marina has earned a BA in English

  • from Stanford University.

  • Thank you for coming to Google today.

  • MARINA KRAKOVSKY: Thank you.

  • All right.

  • So I'm here to tell you that we are all middlemen.

  • I'm a middleman.

  • You guys are middlemen.

  • And what I will say is why I say that.

  • And also, I'll give you ways to think about how you

  • could be a better middleman.

  • So if we think back to the day when the internet was still

  • in its early years and people were all

  • trying to figure out what's this going to mean for all of us,

  • a lot of people were saying that the internet's radical ability

  • to connect everybody would make middlemen obsolete.

  • Bill Gates actually wrote in his 1995 book, "The Road Ahead,"

  • that the internet itself would become the ultimate go-between,

  • the universal middle man.

  • He foresaw a time in the future when we wouldn't

  • need to turn to middlemen.

  • We would be able to do our own buying and selling directly.

  • But if you look around 20 years later,

  • you see, very clearly, that that actually has not happened.

  • In fact, I'll argue that the opposite has happened.

  • That the internet has made middlemen more prevalent

  • and more valuable.

  • So look at the biggest players on the internet.

  • eBay and Amazon are middleman businesses.

  • Uber and Airbnb are middleman businesses.

  • Google is a middleman business.

  • Right?

  • And I'm not just talking about tech giants.

  • I'm also talking about individual middlemen

  • who are thriving thanks to the tools of the internet.

  • So think about eBay.

  • Anybody can buy and sell directly

  • through eBay being a middleman but most of the trade on eBay

  • actually flows through resellers,

  • through trusted middlemen on eBay.

  • And on LinkedIn, something very similar happens.

  • It's all about the recruiters.

  • Recruiters bring in more of LinkedIn's revenue

  • then all the other LinkedIn users combined.

  • So the internet clearly didn't do away with middlemen.

  • It's actually made them more efficient, and often,

  • more effective at what they do.

  • So I've been thinking for a very long time

  • about what is the deal with middlemen, basically.

  • I mean, it's so strange.

  • Middlemen have been a part of every society that I know of.

  • Throughout history we've had middlemen.

  • And yet, people have often had very strong negative feelings

  • about middlemen, feelings of resentment,

  • anger, contempt, sometimes even disgust.

  • And, at the same time, middlemen are still there.

  • Or to put it another way, if people

  • are so eager to eliminate the middlemen,

  • why have we never been able to do so?

  • These are the driving questions behind my book

  • and that those are the questions that I really tried to answer.

  • So I talked to economists and psychologists and sociologists

  • who think about such issues.

  • But also with ordinary-- or you might

  • say extraordinary-- middlemen, people

  • who I think do a great job and are doing just fine--

  • thank you very much-- in the age of the internet.

  • So it's people that you might expect, like real estate agents

  • and travel agents and car dealers.

  • But also people that it might take you

  • a moment to realize that they are middlemen, too.

  • So, for example, gosh, a wedding planner is a middleman.

  • If you pause to think about that, right?

  • A venture capitalist is a middleman.

  • A person who started a two-sided market, like Open Table,

  • that's a middleman.

  • There are middlemen all over.

  • Gallerists are middlemen.

  • Anytime you're dealing with any kind of broker, dealer, anybody

  • who's connecting two groups of people, that's a middleman.

  • And what's interesting from talking

  • to all these different people is that even though they're

  • from different industries, you start to see patterns.

  • You start to see what they have in common

  • that is making them as effective and successful as they are.

  • And that's sort of what I started to do in my book,

  • is to tease out those commonalities that

  • are true everywhere.

  • And although all the examples that I use throughout the book

  • and throughout my presentation will

  • be of professional middlemen-- people who

  • identify as middlemen in their jobs--

  • I do believe that all of us are middlemen,

  • at least in some area of our work or in our personal lives.

  • So what do I mean by a middleman?

  • I think we all have an intuition about this.

  • And we think of a middle man is the person connecting

  • two groups of people or two individuals, the person

  • in-between.

  • But I want to give you a more useful definition that explains

  • what middlemen actually do.

  • And this definition comes from a man

  • named Mike Maples, Jr. He's a venture capitalist here

  • in the valley.

  • Started a fund called Floodgate that was an early investor

  • in Lyft and TaskRabbit-- middleman businesses--

  • as well as, of course, other start-ups.

  • And he says this.

  • A middleman is the person in a network who

  • connects nodes in the network to increase

  • the value of the network.

  • I think it's a useful definition,

  • and I'm going to talk a lot more about what that means.

  • But I also want to acknowledge that middleman

  • is a sexist word.

  • I realize it's a sexist word.

  • And I'm using it despite that because I really

  • think no other word will capture what I'm trying to do,

  • which is really push against these cultural ideas

  • about middlemen.

  • You know, that word has these strong connotations.

  • We just don't hear people saying,

  • ah, let's cut out the intermediary.

  • It's really about the middleman.

  • So forgive me for using that word.

  • There's a reason.

  • So going back to this idea that middlemen

  • are people who we increase the value of a network

  • by connecting nodes.

  • I do think it's a really helpful start,

  • but it's not a complete definition.

  • And the reason it's not complete is that not all connectors

  • are of equal quality.

  • Right.

  • We know that.

  • And if you think about Metcalfe's law--

  • I would guess everybody in this room knows what that is.

  • Metcalfe's law, this provocative claim

  • that the value of a network grows quadratically

  • with the number of connected users.

  • Well, that may not be true.

  • It may be true sometimes.

  • It's certainly not true for every additional user

  • you add to a network.

  • And if you think about it in terms of middlemen--

  • or if you think of it in terms of any kind of user,

  • actually-- if you have a network that has a certain value

  • and you take out some of those nodes,

  • sometimes taking out a single node

  • will just decimate the network.

  • It'll radically decrease the value of the network.

  • And sometimes taking out a node will

  • have almost no effect at all.

  • And sometimes taking out a node will actually

  • increase the value of the network

  • because some of these connectors are actually

  • having a net negative effect on the value of a network.

  • So if you think about spammers, that

  • would be an example of something like that.

  • So it is really important to think

  • about connectors' quality.

  • But how do you think about connectors' quality?

  • What is it that defines the quality of a connector