A Future Thinker Looks at Mid-Life Career Change, #03: Forces that are Reshaping the Work Place: Disintermediation

Disintermediation is one of the most powerful forces affecting the world today. In this column I will explain and explore this force that is reshaping the workplace. To think about making a career change without a full understanding of this force would be folly.

The quick definition of disintermediation is "the undoing of the act of intermediating or the removal of the intermediary person or entity."

There have been many professions that have grown up around the concept of intermediaries or middlemen. One example would be the retail stock brokerage business where brokers placed stock trades for individuals and took a commission as payment for this service. Another would be the travel agency business where an agent purchased an airline ticket for you and took a fee, usually from the airline for this service. I mention these two for the obvious reason that since the late 1990s both of these businesses have undergone extreme structural reorganization due to the Internet (and that was just Internet 1.0!).

Think about it. Fifteen years ago if you wanted to buy a stock you made a phone call to a broker. The broker looked up the latest price for that stock and you made the decision to buy or not. If you made the decision to buy, the broker would place the order and then, hopefully, would call you back the same day to confirm your purchase. Then a couple of days later you received the transaction confirmation in the mail. For this service you paid a commission to the broker that was usually a single digit percentage of the transaction. Compare that to today when you can open an on-line brokerage account, and once open, use that account to buy stock within seconds and also receive confirmation of the transaction shortly thereafter. Furthermore your transaction cost is now $12 or less per trade, regardless of the amount of the transaction. So this is faster, cheaper, more efficient and and leaves little for the middleman.

Fifteen years ago if you wanted to buy an airline ticket you called a travel agent, told them what you wanted and then in a short time they would call you back with the information needed to make the decision. Then a paper ticket was mailed to you before your trip. For this service the airline usually paid the travel agent a fee. Today, you go on-line, either at a specific airline site or a comparative travel site, and shop for the best deal. Because all information is available there is downward price competition. Since you can do this yourself, the airline no longer pays the travel agent a fee, because they don’t need to.

What if it was 1990 and you were making a career change and you had chosen to become a stock broker? You would have had a nice career that lasted all of 5-10 years. Same thing if you had become a travel agent. Another obvious industry that has been disintermediated by the Internet and the computer is the record business. Due to Napster and other file sharing sites it quickly became a widespread experience to download music for free. On top of that, if you either downloaded the music, or actually purchased a CD you could make unlimited copies of the music for your friends by burning CDs on your computer. There is probably not a single person reading these words that has not either downloaded music for free or burned a CD for a friend.

The executives in the record industry were so clueless to the historically inevitable force of disintermediation that they compounded their problems, by first raising prices of CDs to try to make up for the lost revenue, and, when that failed, they actually started to sue their own customer base. Once again we observe an industry that, if you were in a career changing stage of your life in the 1990s, would not have been a good choice due to transformative historical forces.

I know that to some of you all of this may be of less interest than more practical advice about finding ways to create a new career around your passion, but as stated in my first column, this site already has so much wonderful practical and empirical advice about ways to make a successful career change that I would focus on the historical rhythms, the current forces and the coming trends that have, are and will reshape the workplace and the marketplace. You must focus on the micro aspects of making a career change, but if you take no account of the macro forces at play in the world you may become a victim of them.

Next week: a discussion of why disintermediation is currently such a powerful force, and some more specific descriptions of what it will do to industries, and what those industries, and perhaps you, must do to stay in business.

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Noted futurist David Houle blogs at Evolution Shift.