Recently, the RIAA won a ridiculous victory in a file-sharing case. An industry with an outdated business model chooses to sue its own customers rather than get with the times. That got me thinking...
Almost every major industry that involves pushing paper vs. actually manufacturing something, is stuck in a similarly outdated business model. And its this that led to the financial crisis, is responsible for the false choices in the health care debate, and is making real progress impossible.
The outdated business model, in the age of the internets, is of course, THE MIDDLEMEN. It's the middle men, stupid... in extended...
A huge sector of the economy is devoted to pushing paper to make a living. Some of this is necessary. However, huge industries have been created that are essentially middle-men, people whose job it is to skim off the top of a transaction. This is fine, a cost of doing business. Many of these middle-men provide excellent services that are well-worth the money. But many do not.
But in many cases, as the economy and technology have made business more efficient, the cost of the middle-man has remained unchanged- meaning huge sectors of the economy, specifically health care and financial services, are built on models where efficiencies are not being passed down to the consumer, and instead continue to be raked off the top.
In financial services, for instance, the cost of managing a financial portfolio used to include an army of accountants and secretaries to do the job now done by spreadsheet. The problem is, for the most part the cost has not gone down- instead, the financial manager or the financial company simply takes what they used to spend on necessary hired help as pure profit. In other words-- what used to be worth an aggregate $200,000 a year in services, is probably only worth $60,000 a year, yet the $200,000 continues to come off the top.
Likewise, in health care, no one has ever discussed what should be obvious:
YOU HAVE TO PAY PEOPLE MORE TO DENY COVERAGE. If you're going to ask an Executive to kill by spreadsheet, you're gonna have to pay him a six or seven figure salary. I have seen no analysis that takes this into account-- how much savings could be accrued in health care if one factors in the idea that most health care execs should make 5 figure salaries and not 6? They're the middle men, seeking to rake off the top their inflated salaries and bonuses, standing between you and your health care.
The music industry comes to mind, because the entire debate comes down to: how much is music worth to you? Today, with greater competition for every consumer dollar, perhaps individual songs are not worth .99 cents, perhaps they're only worth .19? Perhaps the industry can no longer support expense accounts and multi-million dollar executive salaries, when artists can directly reach their fans through a minor marketing effort on the internet?
And perhaps this is the model for what's wrong in financial services and health care: the industries simply cannot support the billions of dollars being paid in inflated salaries to middle men, when efficiencies brought on by tech and the internet make their jobs nearly obsolete.
When an assemply line worker is replaced by a robot or is outsourced we tell them to get "re-trained". It seems there are two industries (financial and health care) full of middle-men who should long ago (i.e. 10 years) been replaced with electronic and other efficiencies that have enough political clout to force the system, much like the RIAA does through its lawsuits, to cling to outdated business models that are no longer sustainable.
And capitalism did its job in the financial sector: the unsustainable collapsed.
As blogs and the internet media have proven, the middle man is becoming increasingly irrelevent. Wanna solve the health care and financial crisis? Get rid of the middle men.