Back in 1999 I coined the term “scissors economy,” which threatens to snip the middleman out of nearly every transaction. An article in Sunday’s Korea Times applies the scissors economy to artificial intelligence. Here’s the text of “AI Invigorates Scissors Economy” by Yoon Sung-won:
The introduction of technologies from internet to artificial intelligence (AI) is accelerating changes to the roles of middlemen and even their existence, according to industry sources, Sunday.
As renowned U.S. economist Todd Buchholz first described in his 1999 book titled “Market Shock” through a concept he called “scissors economy,” middlemen have already been losing ground in industries, replaced by technology.
In the 1990s, the internet was rapidly penetrating not just into businesses but also all aspects of life. Online technologies triggered and boosted e-commerce, enabling manufacturers and providers of services and products to reach end-users directly.
“Technology has permitted Americans to cut out the middleman from many purchases. Who needs a stockbroker or an insurance agent if the internet allows people to comparison shop? You can buy a sockeye salmon direct from Alaska within seconds or an airplane ticket to Timbuktu,” the economist wrote in his 2007 book, “New Ideas from Dead Economists: An Introduction to Modern Economic Thought.”
“Consumers have more control than they have ever had before. Even the old monopolistic utilities have broken down, as cable, satellites, fiber optic and wireless technologies compete for your television, telephone and computer business.”
As Buchholz said, stockbrokers at securities firms were among those affected most by the arrival of the scissors economy. In the past when there was no internet, people usually called stockbrokers or directly visited securities companies to trade stocks. But now they can access home trading systems provided by securities firms to sell or buy stocks, saving on paying commissions.
Similarly, the role of the middleman has retreated rapidly in diverse areas such as insurance product sales and travel sales as well as the book industry.
“Almost all transactions can be done on online platforms. First it was the internet and more recently e-commerce is all about mobile,” an industry source said. “In the process, enterprises don’t need human middlemen to sell their products and services to customers. Instead, they need engineers, network technology experts and online marketing strategists to run their connected marketplace.”
Expectations are that the phenomenon of the scissors economy will gain more strength as industries expedite introducing AI technologies in actual businesses.
For instance, financial institutions such as banks, brokerage houses and insurance companies have started to use AI-based technologies not just to recommend optimal financial products to their clients but also to make decisions such as whom to grant loans to and where to invest. In the process, less and less human intervention is needed.
Online shopping malls are also rushing to adopt new type of services, also based on AI technologies. Upon the customers’ agreement, online shopping platform operators collect information on their preferences to recommend products for customers to purchase. Internet and gaming service providers also use AI technologies to analyze their users to understand consumption patterns.
Advanced medical institutions such as cancer centers are also tapping into AI technologies. In Korea, multiple hospitals including Gachon University Gil Medical Center have introduced IBM’s Watson AI system to give medical advice.
“Not many industries have started firing employees to replace them with AI systems yet. But it can only be a matter of time as it did with the introduction of robots in manufacturing industries,” an industry source said.
“What is more concerning is whether we will be able to understand the work AIs do and the decisions they make once humans who work as middlemen in diverse areas lose their ground.”