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Eliminating the Middleman

Everyone always wants to eliminate the middleman but they can’t because of economic reality. Beyond some point, there are “middlemen” in the channel of getting your goods to the end customer who can perform the next step in the sequence more efficiently and more effectively than you can. At that point, it pays a firm to sell what it has produced to some other channel that can carry on the next part of the operation more efficiently. Oil companies discovered they can make more money by selling gasoline to local filling station operators. When they did, they no longer had the burden of getting their product to the public. It was out of their hands and not their problem. When a product becomes more valuable in the hands of somebody else, that somebody else will bid more for the product than it is worth to its current owner. Go back to the oil companies. The filling station operators see the product to be more valuable to them than it does to the oil companies because the oil companies are in the business of producing oil. The operators are in the business of dispensing it. The owner then sells, not for the sake of the economy, but for his own sake. However, the end result is a more efficient economy, where goods move to those who value them most. Middlemen continue to exist because they can do their phase of the operation more efficiently than others. It should hardly be surprising that people who specialize in one phase can do that phase better than others.
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