Traditional economics tells us that disintermediation is the free market removal of intermediaries in a supply chain, often explained with the phrase, "cutting out the middleman". It is a natural course of free markets seeking the lowest cost overall and the most efficient use of resources. Ecommerce has empowered firms that create products and services at the source of the value chain to directly sell to customers, thus eliminating the need for costly intermediaries. In theory, the competitive firm will pass part of these costs savings on to customers in the form of lower prices, thus retaining and attracting new customers.
Technology providers talked about friction-free capitalism back in the 1990’s as the internet was getting traction. It’s the idea that ubiquitous and equal access to information will create the closest thing yet to Adam Smith's perfect market.
Friction has been decreasing for some years now. Affordable air travel, overnight delivery and improved communications have shortened distances. Credit cards and the internet have spawned home shopping from sources across the world. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor.
Not all friction is bad. Ecommerce opens more doors than it closes to intermediaries who understand it, grasp it and build business around it. Keith Savino has been an evangelist for modernization, technology and industry standards from the outset. He is an industry leader representing the brokerage community and passionate about debugging legacy thinking. He likes to say “It’s about the business.” You’ll enjoy his perspective.
If they break this link over time, you can look at the Insurance Day Section of this website where I archive all these Op/Ed features.