Disintermediation of a new, more connected world
On Monday, one of the by-products of disintermediation hit me with the force of a…well…a hurricane, to be exact. We are more connected globally than ever before.
This Monday and Tuesday, three different online services I use went down because of Sandy. They all had data centers on the east coast.
Disintermediation means centralization, which means that we will have more contact with people and businesses that spread across the globe.
The laptop I’m writing this column on (a MacBook Pro) was recently ordered from Apple. I was somewhat amazed to see the journey it took on its way to me. It left a factory in China, spent a day in Shanghai, then passed through Osaka, Japan on its way to Anchorage, Alaska. From there it was on to Louisville, Kentucky (ironically, the flight path probably went right over my house), then back to Seattle, Vancouver and then to my front door. If my laptop were a car, I would have refused delivery – it already had a full year’s worth of miles on it before I ever got to use it.
A disintermediated world means a more globally reliant world. We depend on assembly factories in Taiyuan (China), chip factories in Yamaguchi (Japan), call centers in Pune (India), R&D labs in Hagenberg (Austria), industrial designers in Canberra (Australia) and yes, data centers in lower Manhattan. When workers brawl, tsunamis hit, labor strikes occur and tropical storms blow ashore, even though we’re thousands of miles away, we feel the impact. We no longer just rely on our neighbors, because the world is now our neighborhood.
This adds a few new wrinkles to the impacts of disintermediation, both positive and negative.
On the negative side, as we saw forcefully demonstrated this week, is the realization that our connected markets are more fragile than ever. As production becomes concentrated due to various global advantages, it is more vulnerable to single point failures. One missing link and entire networks of co-dependent businesses go down. This lack of redundancy will probably be corrected in time, but for now, it’s what we have to live with.
But, on the positive side, our new connectedness also means we have to have interest in the well being of people that would have been out of our scope of consciousness just a mere decade ago. We care about the plight of the average worker at Foxconn, if for no other reason than it will delay the shipment of our new Mac. I exaggerate here (I hope we’re not that blasé about human rights in China) to make a point: when we have a personal stake in something, we care more. When you depend on someone for something important to you, you tend to treat them with more consideration. Thomas Friedman, in his book The World is Flat, called it the Dell Theory of Conflict Prevention:
“The Dell Theory stipulates: No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other as long as they are both part of the same global supply chain.”
To all of you who weathered the storm, just know that you’re not alone in this. We depend on you, so feel free to depend, in turn, on us.