Nobody Likes a Middleman; We're All Middlemen

You ever read a book, whose fundamental concept you find yourself revisiting year after year?

I have a couple that fall into that category “Competitive Strategy” by Michael Porter, “MCDP- 1” USMC Doctrine, “Skin in the Game” by Taleb, and “The Gift of Therapy” by Yalom are a few that are certainly included on my list.

Another is “The Middleman Economy” by Marina Karkovsky - whose author’s interview I heard on the only podcast I’ve listened to for 10+ years, EconTalk (Russ Roberts).

Krakovsky explores the vital role of intermediaries in the modern marketplace, despite the common perception that technology and the internet have made middlemen obsolete.

Krakovsky identifies six key roles that middlemen play: the Bridge, the Certifier, the Enforcer, the Risk Bearer, the Concierge, and the Insulator, each providing unique value by solving specific problems that arise in transactions between parties.

Here is the quick and dirty description of each value added role, that a middleman can play.

• The Bridge: Connects buyers and sellers who might not otherwise find each other, facilitating transactions across physical and informational gaps.

• The Certifier: Provides assurance of quality or authenticity to buyers, helping them navigate uncertainty about products or services.

• The Enforcer: Ensures that all parties adhere to agreed-upon terms, reducing the risk of breach of contract and maintaining trust.

• The Risk Bearer: Takes on financial or other risks on behalf of others in the transaction, allowing for smoother and more secure exchanges.

• The Concierge: Offers personalized service to clients by handling complex arrangements or providing expert advice, saving time and enhancing experiences.

• The Insulator: Sits between parties who need to be long term friends, but in the short term need to aggressively represent their own interests.

I think about these roles all the time, as I try to generate business opportunities, models, and relationships that benefit all parties involved.

Let’s use the example of “Global Talent” business models - and some of the potential opportunities that can be generated in the following years, as this market takes off.

• The Bridge: This is the obvious one. Connecting global talent across geographies, with western companies. There is more to this than just the introduction of the talent!

  I’d argue a key part of the Bridge’s value proposition is also to bridge the cultural gaps.

  A bridge can also connect buyers and sellers across time - for example, if I keep a graphic designer on my staff full time, who can then be billed out at a higher rate for short term, ad-hoc projects - thus providing the employee with stability, and the company with surge capacity (and in doing so, adding value).

• The Certifier: Everyone says that they do this “We hire top blah blah blah” - but in reality, there is definitely a place for 3rd party training and certification of global talent. Imagine knowing that you were hiring an assistant who went through an objectively high quality training program that I designed, and got a 5/5 in all major categories. Would be objectively more valuable!

  Right now “certification” is bundled with the staffing (but that is a bit of kabuki, that’s like grading your own exams) - but mark my words, 3rd party training & certification of global talent will start to become a thing (we are already working on something like this within Sagan Passport).

• The Enforcer: When I think about enforcement, I harken back to my International Relations days, and consider how to turn a one time transaction, into a multi-transaction relationship (and thus, increase the cost of misbehavior). Cheating when you know you are only doing business once with someone, is different than when you know there are future transactions at stake.

  I can’t think of an independent business for this one - but tooting my own horn here - if one of our members messes around unfairly and refuses to pay their talent (unfairly) - we would undoubtedly boot them out of our membership, thus increasing the costs of cheating.

  Because of this, over time, talent will be more attracted, as the costs of getting jammed by their American employer unfairly, are reduced significantly.

  The Risk Bearer: Deel does this right now with “Deel Shield”, for people worried about overseas compliance on international employees.

  Deel pays the talent as contractors from their company, and they add a surcharge for carrying the potential liability of any issues arising from that status. Deel bears risk on behalf of the American company, in exchange for compensation.

• The Concierge: Lots of people offering unsophisticated versions of this - but as the category grows you’ll see all sorts of new structures that offer simplicity and a single point of contact, in exchange for compensation. You could argue that the staffing markup model (pay talent X, collect X * 200% from American company) is a version of this.

• The Insulator: N/A

I hope these models are as useful to you, as they have been to me over the years!

Sagan Passport Update

We’ve got 61 folks in the community within about two weeks, which is pretty cool.

I think the “soft benefits” of membership are WAY more important than the hiring, but we are all cost conscious SMB owners, so I made a cost comparison table vs the classic 35% of year one head hunting pricing model.

I’d love to have this just be a Matznermind and slang some info products, but then I wouldn’t be able to sleep at night… so we help with the recruiting as well.

If you catch a mistake in my math below, just email me. I’ve been sick, and was a humanities major.

Yallah Habibi,

Jon

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