Creating a Better Middleman

5 February 2018

They said the Internet promised a new way. That software was eating the world. That travel agents, brokers, and middlemen were a thing of the past.

But, look around us. That’s not what we’ve achieved. Nor are we even close to achieving it. We’ve simply created a better middleman. While it might have brought less friction, it also has a downside, these middlemen are based on algorithms we cannot read and cannot hope to fully understand. Maybe what we’ve achieved is removing the humanity from our middlemen, and not removing middlemen all together.

Just look at Facebook and Twitter in their fake news debate. Both are wielding their power rather crudely.

YouTube and its content farms and dropping support for publishers based on vague and fluid rules.

We’ve seen Uber wield its platform power in questionable ways. There are countless examples.

Maybe creating giant technologies companies isn’t the answer.

My background is in transportation and logistics. We’re a little behind in some ways. The promise of APIs solving most of our problems is still fairly new. Big data, AI, and even Blockchain will take care of the especially pesky ones left over.

But in reality, the publishing of APIs for everything in this space has led to the emergence of a new trusted third party, the API aggregator.

The emergence of APIs in transportation has actually encouraged more centralization and a different flavor of broker (a term for an official middleman). We’re building platforms on platforms on platforms.

One of the reasons that drew me to transportation and logistics in the first place is that there are so many middlemen. I wanted to be a middleman killer. But as I continued to build products in the space, I had this nagging feeling that we were just creating a more efficient, colder middleman, not actually removing them.

The realization I finally came to is that the platform is not the answer. It only makes the ecosystem less efficient in the long run. We run the risk of just a few middleman being able to wield a vast amount of power to back arbitrary decisions benefiting their business, just look at what Facebook has done to the media companies in recent years.

Whether or not they can articulate it or not, executives at the existing middlemen companies can feel the pressure upon them, that they are becoming obsolete. They can’t compete with the algorithms and their existing processes don’t bend to the speed of this new world. They have absolutely no idea what to do about it, and don’t have the guts to actually make a move, so business continues as usual.

Maybe part of this reluctance to act is that the options are kind of terrible. Partnerships are scary because you have to give up data, power, or access. I have yet to see a solution in this industry that doesn’t involve using a new middleman’s platform. Even the Blockchain-based ICOs in the space are just building a new, centralized platform, that hook into Ethereum.

The answer is protocols, not platforms.

We shouldn’t be building platforms without better, higher-level protocols underneath.

What makes the browser such a fantastic platform? It’s the amazingly robust protocols that we’ve built over the years that support amazing apps being built on top of both the protocol and browser.

The highest level protocol most of these platforms use is HTTP, for sending data to your browser.

Sure you can build platforms on top of these open protocols. But the nature of these things is fundamentally different.

The advancement of APIs in the transportation space replaced a technology called EDI. While EDI is brittle, slow, inefficient, and the bane of many developers’ existences, it got the job done. It is also probably the closest thing to a protocol we have every seen in this space.

Protocols change the power dynamic in the transportation space (and every space). They enable permission-less innovation at the edge. And while that might not sound important, we cannot even yet dream of the products and capabilities that can be built on top of an open transportation protocol that enables this sort of innovation.

This is what the web unlocked from 2002–2017. What if we could unlock the same sort of boom in the transportation industry itself?

With platforms, the business running the platform is incentivized to police access and to apply their business strategy to who can and cannot access the platform. This is something much different than permission-less innovation. It’s not like protocols don’t have problems of their own. Developing a good protocol requires not giving in to design by committee, getting many stakeholders (1000s of carriers, brokers, shippers, software makers, etc) with opposing interests to work together, figuring out how to start distributing and using a protocol.

This is what I see as the major opportunity for the Blockchain in transportation: incentivizing these disparate parties to work together instead of fight each other and come up with proprietary solutions. It’s not the low or 0 cost payments (which are nice), not smart contracts, not any of the tech that has been touted, necessarily. But instead, the ability to structure a token distribution that has the capability to get all of these stakeholders with different priorities to work together to financial back the creation of a protocol instead of creating 1000 slightly different versions of the same API. ICOs, tokens, and blockchains have an interesting connotations around them right now, so let me be clear: I am not advocating an ICO to the general public or even investors. I’m advocating for a token distribution to solely the stakeholders in the ecosystem. Potentially a way to lock these tokens up so they cannot be traded away immediately (smart contract). Some mechanism of establishing price would be useful so that stakeholders can see the value increase as they contribute.

This token should be able to be categorized as a utility token, as there should be numerous applications for it in the protocol we are trying to build. This team could function as a startup with a product/research team that dedicated itself to understanding the various internal businesses process that run modern transportation companies.

Ideally there is some mechanism to fund a small team of engineers and researchers to build out the foundation of the protocol and figure out the fundamental trade-offs involved in building any protocol. Ideally this funding is in tranches instead of a lump sum, unlike most of the current ICOs.

I’m a big fan of what is doing with its open bounty product. Paying people for open source contributions, potentially a model similar to this could be used as a way to raise initial or ongoing funding as milestones are accomplished.

In an ideal world this organization that got created would function as a Decentralized Autonomous Organization, DAO, but that might scare some of these more conservative companies off.

I think that this model applies to more than just transportation. Potentially, any market where there are many disparate types of stakeholders. A number of those markets, that aren’t dealing so much in physical goods, might even be better places to deploy this model initially.

Middleman won’t be wiped out entirely in this model, however the power dynamics will likely be changed in a way that gives them less power and incentivizes them to collaborate as well as gives them the tools to be able to collaborate efficiently.

Protocols unlock massive amounts of wealth for all stakeholders in the long term. Platforms unlock wealth for the platform owners in the long term.