Direct: The Problem of Middlemen

Kathryn Judge’s debut book is a hymn to short supply chains.

Back in 2007, I published my second short story collection, Overclocked. I was elated; not just because I’d published another book (the thrill of a new book has yet to pale even today, after dozens of books), but because it was a short-story collection, the kind of book I’d devoured as a kid, the mainstay of writers I’d worshiped, from Harlan Ellison to Spider Robinson to Kate Wilhelm. The publisher was Avalon, which had recently acquired Four Walls Eight Windows, the small press that had published my first short story collection, A Place So Foreign and Eight More. Selling a book to Four Walls had been its own thrill, as they were publisher to Abbie Hoffman, another writer I’d grown up on.

But then, something weird happened.

Avalon was distributed by Publishers Group West, a great mid-sized distributor that I’d ordered from many times myself when I was a bookseller. PGW was one of those companies that scouted fantastic boutique publishers, hand-picked their best titles, and combined them in a quarterly catalog that was delivered by knowledgeable sales reps to bookstore owners and clerks like me. For a book nerd like me, being distributed by PGW was almost as cool as being published by Four Walls.

But PGW had a problem. Bookselling was changing, with indie bookstores shuttering all over the world, leaving the retail channel dominated by a couple of massive bookstore chains, and a handful of big-box retailers like Sam’s Club, Wal-Mart and CostCo. These retailers held a whip-hand over their distributors and demanded terms and fulfillment efficiencies that a mid-sized distributor like PGW couldn’t meet.

So PGW got bought out by Advanced Marketing Services, a giant distributor that specialized in servicing these big box stores. AMS had the exclusive bookselling contract for these big stores, and it used that as leverage to squeeze publishers. It operated so viciously that one of its executives was led out of its offices in handcuffs by the FBI in 2003. She was the first of three top AMS execs who’d be indicted.

Shortly a few weeks before my book was published, AMS filed for bankruptcy, taking PGW with it. When PGW went down, it took down a dozen mid-sized presses — all those wonderful publishers that it had handpicked and featured in its catalog. PGW’s excellent taste in publishers meant that the presses that its bankruptcy destroyed were the best of the best.

It was a disaster. I was at a trade-show around then, as part of the publicity for Overclocked and my novel Someone Comes to Town, Someone Leaves Town, and I ran into my editor at Avalon. He wasn’t the editor who’d bought the book — they’d been laid off already. He’d just been given his own layoff notice and had no idea who — if anyone — would be in charge of Overclocked as it appeared on shelves.

For a decade and a half, this experience was touchstone for my understanding of middlemen. These giant retailers — big box stores and bookstore chains — held readers hostage and used them to extract huge concessions from distributors. The distributors were driven to sell out to the most rapacious, least ethical company in the business, because that was the only company that could hold its own against the big boxes.

But the kind of company that could out-bastard the big box stores was also the kind of company run by bastards who’d rob publishers — and screw over writers — and eventually engineer their own destruction.

There’s a reason organized crime has always been so interested in middleman roles, like stocking jukeboxes and vending machines. When you sit in the middle of a supply chain, you are free to steal from both the suppliers and customers who rely on you, in a way that is hard — if not impossible — to detect.

Today, we live in a middleman economy, whose contours, perils — and delights — are laid out in clear, easy-to-understand terms in Direct: The Rise of the Middleman Economy and the Power of Going to the Source, the book debut of Kathryn Judge, a Columbia law prof who specializes in finance law.

Judge is scrupulously fair in her accounting of why middlemen exist. There’s a good reason that societies keep evolving new kinds of intermediaries. Back when I was a bookseller, it would have been impractical for tiny — but great — publishers like Four Walls Eight Windows to dispatch sales reps to my distant store and introduce me to their upcoming titles. Using a distributor made it possible for booksellers — and the readers they served — to efficiently connect with these great publishers.

It’s hard to imagine a world without intermediaries. As anyone who’s ever tried to oversee a home renovation rather than hiring a general contractor knows, managing all the different kinds of specialists needed to do big, ambitious things is a lot of work. Maybe you can find the time to get up to speed on contracting — but can you also be your own real-estate agent, your own retirement savings advisor, your own grocery wholesaler, and your own librarian?

Some intermediation is necessary, but too much intermediation is bad — even catastrophic. From food poisoning scares to the Great Financial Crisis, from supply chain shocks to the PPE shortage of the early pandemic, we keep learning that long, complex supply chains work well, but fail catastrophically.

It’s inescapable: complex, long supply chains are brittle, because a single broken link can shatter the whole chain. They’re also fraud-magnets, because complexity affords many opportunities for cheating. Worse: it’s impossible to know how brittle and fraudulent a complex supply-chain is, because any system with a lot of middlemen won’t just be complex — it will also be opaque.

We need intermediation, but not too much intermediation.

Judge operationalizes this insight, producing both a philosophical hymn to the “problems” of disintermediation — the joys of going direct, even if it means losing some convenience or access to low prices. Citing both her own experience and empirical research, Judge convincingly argues that the longer shipping times, extra effort, and other hassles of going direct are more than offset by the delights of going direct to suppliers, whether that’s buying on Etsy or from your local Community Supported Agriculture farm.

Beyond that, Judge offers specific checklists of advice for us as members of our communities and people of our world — rules of thumb like seeking out shorter supply chains, going direct when possible (but not when it’s impossible), using the fees skimmed by each layer of middlemen as a measure of how important it is to watch what they’re doing (and get rid of them, if possible), and find ways to build direct, non-market, personal relations with others.

Judge calls these “bridges,” and cites the “gift economy” of Lewis Hyde’s The Gift, illustrating this with a story from her own life: one of her children was born with a rare heart defect, one that necessitates periodic, major surgeries through her child’s development. Judge’s searches for more information on her kid’s condition led her to the GoFundMe pages for other parents who were contending with the same problem, and that connected her personally with a community of people whom she continues to give financial and emotional support to. She contrasts this with the failure of P2P lending platforms, which were billed as “people helping people,” but which turned into festering pits of racist usury.

Markets can only take you so far, and the market efficiencies of middlemen can only do so much. Ultimately, we’re not just involved with one another as economic actors, but as people in communities. Intermediaries insulate us from the profound benefits of those relationships, and Judge wants us to understand the price we’re paying for convenience and savings.