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PAUL SCHINDLER: You say the Internet may not eliminate the middleman; that in fact, the middleman may make a comeback.
PAUL SAFFO: There is a very dangerous term making its way around the Internet right now, and that is "disintermediation." The notion that information technology eliminates intermediaries, middlemen if you will, and that everything will just go directly from the seller to the buyer. That's just dead wrong, because information technology does two things. It lowers transaction costs -- it thus makes possible, transactions that were not possible before. That's what Microcash is all about. It also complexifies the market -- it creates niches for new kinds of players.

So, instead of disintermediation, what we have is "disinterremediation." It is a much more dynamic process. Information technology will eliminate some intermediaries. But they will do it by creating niches for new kinds of intermediaries to occupy, who will displace the old players.

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"Information technology will eliminate some intermediaries. But they will do it by creating niches for new kinds of intermediaries to occupy, who will displace the old players."
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So, it is tumultuous and full of change, but at the end of the day, we are going to have more middlemen than ever.

PAUL SCHINDLER: Who is going to be eliminated? What kinds of intermediaries are going to be created?
SAFFO: The classic example is Amazon.com. Amazon is an intermediary whose role was made possible by the World Wide Web. What they do could not be done in the physical world, all the way down to their affiliates program.

Not only is Amazon becoming an intermediary in the book business, and thus, threatening some more traditional book players, they set it up so that you or I can become an intermediary through Amazon by becoming an affiliate. If I am an affiliate, I have my website. I have my favorite books -- one of them is Paul Schindler, Digital Hugeness. I say, "Great book, get it." A visitor to my site sees that. There's a button that says, "I want it." They push it, it takes them into Amazon.com, they buy the book. The book is delivered to them like Amazon does; I get 6 percent of what they pay Amazon for your book.

What's happened is we've created a situation not only where Amazon is intermediating itself into the process, and thus displacing, in theory, a transaction that might otherwise go through a bookstore. But they are doing it in a way that, if I want to be an additional intermediary on top of them I can.

SCHINDLER: Does this bode well or ill for e-commerce? Isn't the elimination of intermediaries a real selling point for e-commerce?
SAFFO: This is about creating new kinds of commerce with new kinds of players on the Net, that is more efficient and effective than commerce in the physical world for some things.

For example, I can use my credit card to buy 25 cents worth of something on the Net, but I can't go into a store to buy 25 cents worth of something. They'd throw me out. We are creating more transactions and more intermediaries conducting transactions. Even though there are more intermediaries, it doesn't mean it is going to be more expensive or less efficient. C O N T I N U E D . . . 2 of 2
SCHINDLER: Transactions in cyberspace are supposed to be frictionless.
SAFFO: It's a nonsensical term. Oftentimes there are new terms in new fields that are just completely wrong, but they serve as sort of intellectual ablative shields. An ablative shield on a spacecraft is the heat shield that burns away as the spacecraft enters the atmosphere. The whole point is for the shield to burn away and protect the spacecraft.

"Friction-free" is one of those intellectual ablative shields that is wrong, but it helps us keep from losing our minds as we get our heads around what's going on here.

The economy will never be friction-free, but it will be different than what it was before the Internet. This is one of these intellectual prosthetics that helps us get used to it.

I guarantee you that the term "friction-free" one day is going to be as imprinted on the late 1990s as polyester double-knit and bellbottoms were in their age.

SCHINDLER: I was introduced to the term "frictionless" in a Bill Gates speech.
SAFFO: Isn't that a good indicator that it's wrong?

SCHINDLER: His speech sounded plausible. Isn't the economy at least going to experience less friction? Aren't some useless expenditures going to go away?
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"Information technologies always complexify the environment."
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SAFFO: Information technologies always complexify the environment. Not just digital technologies. It turns out that what is going on today is very similar to what went on in the hill towns of Italy in the late 1490s and early 1500s, thanks to the big innovation of that age, which was the printing press.

So, it is really a complexification process and a lowering of transaction costs, which leads to new kinds of transaction forms, and new niches for new kinds of players.

It can be, in some ways, much more efficient than today's economy, but it can also be just as complex as today's economy.

My big objection to friction is that it is a mechanistic term. It is exactly the sort of term an engineer, who still thinks of Newtonian physics , would use.

I think the right metaphors in this world are going to come not from engineering, but biology.

SCHINDLER: What will some of those biological terms be?
SAFFO: I think the most important area of biology to look at is evolutionary biology in general, and symbiosis in particular. It turns out when you talk to specialists in symbiosis, even biologists don't fully understand symbiosis.