disintermediation (n) – the elimination of an intermediary in a transaction between two parties.
If mass customization was the hallmark of the last decade, disintermediation defines this one. It is the trend of the age. Whether it’s the Tiny House Movement, growing our own vegetables, self-publishing, or any of the DIY things we do, we are cutting out the middleman. It’s practical, in that it increases your quality of life for less money. I would argue that it is also nominally deflationary, because it takes the middleman jobs out of the economy, where they show up as wages and incomes. Disintermediation does not mean that housing, fresh vegetables, books, or appliance repair are not happening, it just means that–except for materials and internet access for the “how-to” –to a large extent they are not being taxed. There are no payroll taxes on DIY labor, and no sales taxes on home-produced goods consumed at home
As a former New Yorker I would boast, “We (this generation) can get it for you wholesale.” I cannot imagine that our various government taxing authorities are thrilled by the lack of revenue at the eliminated former steps along the way. They no doubt see it as “lack of growth.” But I suspect many of us are beginning to equate continual economic growth for the sake of growth as analogous to cancer, especially if it traps us under a mountain of debt. While bankers are all for making interest income out of out debt, including student loan debt, mortgages on larger-than-we-need houses, we are starting to rebel by living more simply.
Meanwhile. inflation has eaten away a huge percentage of our buying power over the last 100 years.
In 1900, shoppers could buy a 5-pound bag of flour for 12 cents. Round steak was 13 cents a pound, and bacon was a penny more. Eggs were 21 cents per dozen, milk sold for 14 cents per half gallon and butter cost 26 cents per pound. A 10-pound bag of potatoes was 14 cents, and a 5-pound bag of sugar cost the relatively princely sum of 31 cents. Coffee often cost upwards of 35 cents a pound, and a small tin of tea leaves ran between 50 to 75 cents. Chocolate was also relatively expensive, costing around 34 cents per pound.
A properly dressed gentleman in 1900 would have spent between $7 and $16 on his suit, $1 on each of his dress shirts, around $7 on his topcoat and 48 cents for a fine felt hat. Women’s dresses cost between $10 and $12, women’s hats cost 35 cents and shoes for women were approximately $2 to $3 per pair. – Federal Reserve Bank of Minneapolis
Put it another way: a dollar in 1900 would be worth $28 today. I remember three loaves of bread for a dollar when I was a child. Is it any wonder we are cutting out as many costs and middlemen as we can?
Example1. If you build a cob oven in your backyard, you eliminate the factory jobs to make an oven, the transportation to bring that oven to a store or showroom, the sales tax and markup, a delivery service, maybe a plumber or electrician to install it.. Plus it works without electricity or natural gas, removing some of the need for jobs in mining, fracking, drilling, nuclear power plants, coal, power distribution … But consider the fact that there is no pollution from mining, plastics, and manufacturing – and a much smaller carbon footprint. It heats with renewable wood that you might even get for free. And cob–which is a mixture of clay, sand and straw–is practically free as well. Hm.
Example 2. If you grow your own fresh vegetables, you eliminate the jobs of following middlemen: farmers, manufacturers of insecticides and herbicides, truckers, wholesaler grocers, and supermarkets. If you start dehydrating and home-canning your produce, you also cut out middlemen involved in preserving food. And practically-free tomatoes grown from saved seeds even taste better than the $1.99/lb ones in the supermarket. As Ron Finley, the guerrilla gardener, says, “Growing your own food is like printing your own money.”
So, what’s stopping us from doing more for ourselves, and cutting out the expensive middleman? For one thing, time. But that time is spent as a wage slave, or commuting, and it’s time that is very often spent earning money we “need” to buy things we cannot do ourselves because we are so busy.
Another thing that’s been stopping us is shame, and fear of being looked at as a failure. Up until very recently, hand-made gifts were often looked at as “cheap.” Home-sewn clothes had no designer labels, you see, and, oh you’re a housewife? Why don’t you get a real job? (Because I’d make about what the childcare costs?) Many recently laid off people are finding out that disintermediation–cutting out the middleman for goods and services–helps make ends meet. What’s new, and in my opinion extremely cool, is that it no longer carries a stigma: it rates a badge of honor.
Call it disintermediation, or microsecession, or simply developing a more sustainable lifestyle… these ideas are becoming more mainstream, and more necessary by the day. Becoming more independent, or entirely independent in terms of your ability to make food, make stuff, make and store energy, and trade locally is sensible. Paying off debt is sensible… becoming your own central bank with various diversified "reserve" assets like Gold, Silver, cash outside the bank, and maybe even some Bitcoin is more than sensible, it is going to be necessary if you have savings that you want to preserve.
……… What we all need to learn to do is to be more productive with less money – focus on providing benefit rather than money. They can’t tax the vegetables growing in your garden or your home-cooked pie or the service you give to your neighbor fixing their car or computer. If we move away from money, we can achieve the Galt effect right where we live.
Good thread, Wendy.
In the mid-1980's I read Paul Hawken's "The Next Economy". Among other things he covers disintermediation. Although few around me view the world through the lens we do, many individuals I am surrounded by are moving in this direction. Maybe we will collectively get the jellybean count right….
Great post Wendy, thank you. Nice to put a name to something many of us were/are (no doubt) doing subconsciously.
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