Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of The Odd Lots Podcast.
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, you know what I feel is become a common
Speaker 2: Twitter conversation that I've seen happen a bunch of times.
Speaker 3: Uh, this could be anything, but go on.
Speaker 2: Someone tweets like, oh my god, I just paid, like,
Speaker 2: you know, fourteen dollars for a hamburger and fries at
Speaker 2: the McDonald's and then someone else goes, well, actually, you
Speaker 2: can get it for three ninety nine right now if
Speaker 2: you just use the app. Yes, I've seen this many times.
Speaker 3: Both of them are not wrong, but it is crazy.
Speaker 3: First of all, I'm so thrilled that we're finally going
Speaker 3: to do price Pack Architecture episode. That's basically what this is, right,
Speaker 3: all these different strategies when it comes to how companies
Speaker 3: are actually pricing their goods. But I feel like McDonald's
Speaker 3: has become a very very good example of this particular behavior.
Speaker 3: And at this point, as you pointed out, it is
Speaker 3: well known that if you just roll up to a
Speaker 3: McDonald's and you know, order at the drive through or
Speaker 3: in the store, you are going to be paying a
Speaker 3: higher price than if you used the app and ordered
Speaker 3: on there, And they have tons of discounts. The discounts
Speaker 3: are almost gamified at this point, like you know, you
Speaker 3: check in on different days and you can get different
Speaker 3: things and they're constantly changing. Oh and also they have
Speaker 3: an actual game that if you play, you get loyalty
Speaker 3: points that turn into discounts. But the thing that I
Speaker 3: think is so fascinating about all of this is it
Speaker 3: throws up really interesting questions around fairness. So is it
Speaker 3: fair that people are paying two different prices depending on
Speaker 3: the way that they are actually buying the thing. I
Speaker 3: think the other thing that's remarkable in all the price
Speaker 3: conversations is people seem to think that one person paying
Speaker 3: a higher price is really unfair. But on the other hand,
Speaker 3: everyone likes discounts, y Like if the lower price comes
Speaker 3: in the form of a coupon, people get really excited.
Speaker 3: It also throws up interesting questions about data privacy. So
Speaker 3: the reason McDonald's wants you on the app is so
Speaker 3: that it can collect your data and it gives you
Speaker 3: a lower price in return for that. And then thirdly,
Speaker 3: it raises all sorts of interesting macroeconomic questions. Right, if
Speaker 3: companies are becoming more strategic, more differentiated in the way
Speaker 3: they're pricing their goods, what does that mean for things
Speaker 3: like inflation? What does it mean for traditional interpretations of
Speaker 3: the way inflation works? Is it just you know, unemployment,
Speaker 3: supply demand, that sort of thing, Right.
Speaker 2: Like companies basically just getting better at figuring out the
Speaker 2: maximum price they can charge for something. Wait, I have
Speaker 2: a personal question for your Tracy. I've never asked you
Speaker 2: this before. Are you like a points person, like when
Speaker 2: it comes to hotels and airlines and stuff like that.
Speaker 3: No, I'm not, and I feel like I'm basically too
Speaker 3: lazy to sign up for a lot of things. But
Speaker 3: I will say McDonald's got me, I do have. I
Speaker 3: do have the app, and I have, as a result
Speaker 3: of the app, ended up ordering like insane amounts of
Speaker 3: junk food because I'm just like, Oh, I can buy
Speaker 3: two things of French fries instead of one, So why
Speaker 3: don't I go ahead and do that?
Speaker 2: Yeah, I'm so lazy. I am not a points person.
Speaker 2: I'm not an app person. I've never been a Miles person.
Speaker 2: It seems like I probably should. I don't trouble that much,
Speaker 2: but probably enough that I should like track this stuff
Speaker 2: and have a favorite hotel that I go to in
Speaker 2: every town, or have a favorite airline. All airlines seem
Speaker 2: the same to me. They all seem sort of various
Speaker 2: versions of kind of unpleasant. But I'm not like optimized
Speaker 2: for that at all, But it feels like to some extent,
Speaker 2: what we're talking about is this sort of widespreadness across
Speaker 2: many industries of what the airlines have figured out for decades.
Speaker 3: Absolutely, and also Uber is the classic example with dynamic
Speaker 3: surge pricing. And you can remember earlier this year when
Speaker 3: Wendy's mentioned dynamic pricing in its earnings call, the world
Speaker 3: absolutely went nuts, and then they kind of backwalked on it.
Speaker 3: But I mean my argument is like surge pricing in
Speaker 3: fast food is kind of already there, right, you know,
Speaker 3: the difference in how you're ordering at McDonald's is a
Speaker 3: variable of how much value you place on your time
Speaker 3: and your convenience, and so it's kind of already happening.
Speaker 3: And I think this is such a fascinating topic for
Speaker 3: many many reasons. But I am so so happy that
Speaker 3: we are finally doing this one.
Speaker 2: I am too. I'm going to just lay my cards
Speaker 2: out on the table right here. It's like, I don't know.
Speaker 2: I kind of get surge pricing for food. If a
Speaker 2: bunch of people all jam up at the same time,
Speaker 2: maybe like raise the prices so people spread it out
Speaker 2: a little bit. In this conversation, I will play the
Speaker 2: role of the devil's advocate, who is like, yeah, I'm
Speaker 2: okay with like, you know, differentiating prices.
Speaker 3: Joe, this is stupid. It's stupid. I'll tell you why.
Speaker 3: Because surge pricing was supposed to invite more supply into
Speaker 3: the market. So the idea is that you incentivize more
Speaker 3: drivers to get out on the street if they can
Speaker 3: earn more money. You're not going to get that with fastest.
Speaker 3: Do you think there's going to be in a meaningul
Speaker 3: supply response in Hamburgers?
Speaker 2: But there could be demand destruction, which I do think
Speaker 2: is part of the uber thing, which is that, yeah,
Speaker 2: you can't really have enough cards if everyone all wants
Speaker 2: to take a Uber at twelve oh one New Year's like,
Speaker 2: you have to raise the price such that some people
Speaker 2: like I'll take the subway or whatever. Anyway, enough, what.
Speaker 3: I think we don't have to debate.
Speaker 2: We don't have to debate this. We really do have
Speaker 2: two perfect guests to talk about this topic about how
Speaker 2: companies are getting better and better at personalized pricing, finding
Speaker 2: the absolute most they can charge for something at any
Speaker 2: given moment. We're going to be speaking with Lindsay Owen.
Speaker 2: She is the executive director of the Groundwork Collaborative and
Speaker 2: the author of a forthcoming book called Gouge that will
Speaker 2: be some time out in the future. And we're going
Speaker 2: to be speaking with David Dayan. He's the executive editor
Speaker 2: of The American Prospect magazine, and The American Prospect has
Speaker 2: a full edition of the magazine coming out on June
Speaker 2: third that is entirely devoted to the world of pricing
Speaker 2: and how companies do this in the history, and both
Speaker 2: of us have read the whole edition in the magazine.
Speaker 2: Is fantastic. They've worked together on this. It is a
Speaker 2: really interesting body of work. I think it will be
Speaker 2: important thing that a lot of people read. So excited
Speaker 2: to have Lindsay and David on the show, So thank
Speaker 2: you so much for coming on Outlaws, thanks for having me.
Speaker 4: Thanks for having us.
Speaker 2: Maybe David, I'll start with you, as the editor at
Speaker 2: the American Prospect doing this whole edition of the magazine
Speaker 2: on this topic. But both of you come in, why
Speaker 2: is this something I mean, you know, Tracy and I
Speaker 2: are both interested in this, but why is this something
Speaker 2: that is worth an entire magazine.
Speaker 5: Well, if you look at any poll that is talking
Speaker 5: to voters coming up in this election, inflation is the
Speaker 5: number one or right near the number one issue. So
Speaker 5: we have looked at this for a while. Lindsay obviously
Speaker 5: and her team at Groundwork has done a great job,
Speaker 5: and they came to me and said, you know, we
Speaker 5: really want to put something together that looks at pricing
Speaker 5: kind of in a holistic way. What we know has
Speaker 5: happened is that after the pandemic, there was this inflationary
Speaker 5: episode and markups and margins for companies went up, and
Speaker 5: they kind of stayed there even as inflation has eased.
Speaker 5: So we wanted to try to interrogate why this is
Speaker 5: happening and whether we've hit sort of a new era
Speaker 5: where these pricing strategies for a variety of reasons have
Speaker 5: become more widespread and companies have become more experimental, let's say,
Speaker 5: in trying to engage in this process of maximizing williness
Speaker 5: to pay among their customers, and so we think we
Speaker 5: can come up with kind of a thesis for this,
Speaker 5: and then the issue lays out that framing of why
Speaker 5: this is happening, and then looks at all of the
Speaker 5: strategies that are really being put to bear. You've mentioned
Speaker 5: some of them in the intro, whether it's surge pricing
Speaker 5: or dynamic pricing, or junk fees or using subscriptions to
Speaker 5: kind of we call it the inattention economy, get people
Speaker 5: to sign up to enough subscriptions so that they forget
Speaker 5: that they have them. You know, there's credit pricing, there's
Speaker 5: price fixing through algorithm that we're seeing more and more,
Speaker 5: and then there's this whole kind of next frontier of
Speaker 5: using digital surveillance and isolating customers enough so that you
Speaker 5: can personalize prices, which is really kind of where I
Speaker 5: think a lot of businesses see a lot of opportunity,
Speaker 5: the idea of that my price isn't the same is
Speaker 5: your price. So, you know, we lay out these strategies,
Speaker 5: I think it's important to see, you know, what companies
Speaker 5: are up to, and if it is deemed unfair or deceptive,
Speaker 5: what government, what role they have to play in maybe
Speaker 5: doing something about it.
Speaker 3: So I want to get into everything that you just mentioned,
Speaker 3: especially the sort of data privacy and algorithmic pricing points.
Speaker 3: But before we do, I think there's a tendency on
Speaker 3: this topic when you're talking about the idea of companies
Speaker 3: maybe driving up their prices, maybe that feeding into inflation.
Speaker 3: Lots of people use the word greed inflation here. I
Speaker 3: tend not to do that because the immediate reaction you
Speaker 3: will get, Joe, you mentioned well worn Twitter debates, But
Speaker 3: the immediate thing that happens is, oh, companies didn't get
Speaker 3: more greedy all of a sudden. They were always greedy,
Speaker 3: And so people tend to waive this theory away. But
Speaker 3: could you maybe talk about concrete evidence we have that
Speaker 3: companies are becoming more sophisticated when it comes to pricing
Speaker 3: or more willing to experiment with demand elasticity in recent years.
Speaker 3: Is there concrete numbers that back that up?
Speaker 4: Sure? So, I think one of the most interesting places
Speaker 4: to look here to answer your question is actually the
Speaker 4: burgeoning industry of algorithmic pricing companies and specialists. Right. So,
Speaker 4: you know, there was just this really interesting report that
Speaker 4: dropped last month from the Boston consulting Group, and the
Speaker 4: first sense of the report is retailers are in a
Speaker 4: new age of pricing and they need a new set
Speaker 4: of tools. And when you look through the report, what
Speaker 4: you see is really the consulting group outlining this new
Speaker 4: era of pricing and how companies need to increasingly be
Speaker 4: working with algorithmic data specialists and data service providers to compete.
Speaker 4: And so there's just this flourishing cottage industry of companies
Speaker 4: like Ravionics and Mantec and others who are basically bundling
Speaker 4: up competitors' data using sort of surveillance, targeting and geoanalytics
Speaker 4: to take in competitors' data and then spitting out for
Speaker 4: the retailer's advice and recommendations on you know, how to
Speaker 4: keep prices higher for faster and longer. And so when
Speaker 4: I get a question like this, I really just like
Speaker 4: to go to the quotes from the companies themselves, right,
Speaker 4: So what are they saying that they're selling, what are
Speaker 4: they recommending to these companies? And you know, some of
Speaker 4: the examples that we have I think are quite stark.
Speaker 4: You can go through just a couple of them. You know,
Speaker 4: companies recommending quote faster lasting implementation of price increases, recommending
Speaker 4: that they can help companies ferret out when they inadvertently
Speaker 4: keep prices quote too low for too long, help folks
Speaker 4: quote more quickly react to competitors pricing, and also ensure
Speaker 4: that their price hikes quote stick right. And so what
Speaker 4: you're seeing is a sort of cottage industry of companies
Speaker 4: who's really pushing retailers to go higher, faster, and for
Speaker 4: longer on prices. And I think that really matches what
Speaker 4: Dave mentioned up top, which is that you know, the
Speaker 4: sort of age of cost cutting has maybe hit bone,
Speaker 4: and now we're in this sort of age of recruitment
Speaker 4: and where revenue maximization and pricing is really critical to
Speaker 4: the game. And big data and new technologies has really
Speaker 4: allowed this pricing to go high tech and these new
Speaker 4: strategies to really flourish. And so I don't like to
Speaker 4: make too many predictions, but you know, my instinct here
Speaker 4: is that this is really the very very beginning of
Speaker 4: this new era of pricing. And I think you know,
Speaker 4: the amount of online shopping that folks did during COVID
Speaker 4: nineteen has obviously allowed folks to collect more and more
Speaker 4: data on consumers and I think we're just really at
Speaker 4: the tip of the iceberg here. We're just sort of
Speaker 4: starting to see these strategies unleashed across industries.
Speaker 2: As a journalist, I really like data, and I like
Speaker 2: companies that gather data and publish data on their corporate
Speaker 2: blogs about what's happening with this, and it's been certainly
Speaker 2: nice over the last several years to see more of
Speaker 2: them talk about though, like how this data is actually used,
Speaker 2: because one of the themes that comes up in this edition
Speaker 2: of the magazine is that when the data is out
Speaker 2: there in public, then companies can see more quickly, oh,
Speaker 2: we're actually underpricing or actually everyone else is charging more,
Speaker 2: and we can see this more easily than perhaps in
Speaker 2: the past when companies are trying to get data. Talk
Speaker 2: about this sort of like the role that data aggregators
Speaker 2: have and maybe the specific industries that use this data
Speaker 2: to get better at pushing price.
Speaker 5: Yeah, I mean, I think we can talk about it
Speaker 5: in a couple different ways. The first is this use
Speaker 5: of what has been called called algorithmic price fixing. So
Speaker 5: we see these aggregators that have arisen and it's not
Speaker 5: a very new thing. Actually, the airline industry has this
Speaker 5: thing called atp CO, the Airline Tariff Publishing Company, and
Speaker 5: it's been around since the I believe, the since deregulation
Speaker 5: in the nineteen eighties. And they collect real time data
Speaker 5: on every fare that's been published in the US and
Speaker 5: around the world, and all the companies who subscribe to
Speaker 5: atp CO can look at that and know when to
Speaker 5: adjust their prices in real time. The Justice Department actually
Speaker 5: looked at this as a collusion operation, but they allowed
Speaker 5: it to go forward in the nineteen nineties. Some of
Speaker 5: this data is proprietary. There's a lawsuit right now active
Speaker 5: between the Justice Department and a company called Agristats, which
Speaker 5: has also been around for quite a while. And this
Speaker 5: company collects real time proprietary data from all of the
Speaker 5: meat packing producers in a given market, whether it's pork
Speaker 5: or poultry, or chicken or turkey, and they put all
Speaker 5: this data in these giant books and they give them
Speaker 5: out to these various competitors, which now have basically a
Speaker 5: setup of everything that their competitors are doing, including their price,
Speaker 5: including their supply, including every single thing part of their market.
Speaker 5: And now they can know that, oh, I can probably
Speaker 5: raise my price because I'm under price relative to my competitor,
Speaker 5: but I won't lose market share because my competitor is
Speaker 5: charging more for this product and it has the tendency
Speaker 5: to ratchet prices upward. We've also seen this in rental
Speaker 5: markets with a company like real Page, which again goes
Speaker 5: out to landlords in a particular area, collects all of
Speaker 5: their pricing data, all of their supply data, distributes it
Speaker 5: broadly among these competitors, and allows them to raise their
Speaker 5: prices in tandem throughout the market. We know that price
Speaker 5: fixing has been kind of a bedrock of antitrust legislation.
Speaker 5: If you have evidence that three people executives have gone
Speaker 5: into a room and said we're going to raise our
Speaker 5: price by X amount of dollars, then the Justice Department
Speaker 5: will step in and they will put a lawsuit on
Speaker 5: those various people and put them in jail. Potentially, if
Speaker 5: you do it through an algorithm, which is the way
Speaker 5: that real Page and some of these other organizations operate,
Speaker 5: it's sort of more of an open question as to
Speaker 5: what the legal system will take from that and actually
Speaker 5: look at prosecuting it. But there's no real difference between
Speaker 5: algorithmic price collusion and in person price collusion, and so
Speaker 5: that is one of the ways by distributing aggregating that
Speaker 5: data across an entire industry and allowing those companies to
Speaker 5: have a window into that pricing. That's one way that
Speaker 5: this gets done. We can talk about the other way,
Speaker 5: which actually interacts with the McDonald's app, which we wrote
Speaker 5: about pretty extensively in this series.
Speaker 3: Go for It.
Speaker 5: So the McDonald's app is put together by a company
Speaker 5: called Plexure, and Plexure works with Ikea, they work with
Speaker 5: seven to eleven, they work with White Castle. And the reason,
Speaker 5: as you correctly said, Tracy, that McDonald's gives discounts on
Speaker 5: the app is because they want to get on your phone.
Speaker 5: They want to get on your phone and be able
Speaker 5: to figure out what you're doing on that phone, where
Speaker 5: you are at particular times of day, what your food
Speaker 5: preferences are, what you're ordering habits are, potentially, what you're
Speaker 5: using to pay for those things, and your financial behaviors.
Speaker 5: Through that, they're aggregating a bunch of data about you.
Speaker 5: And we had one of the slides from this presentation
Speaker 5: that Plexure put together the other that shows how they
Speaker 5: are using this data. And one of the things that
Speaker 5: they were using to make predictions about what people would
Speaker 5: be willing to pay was their payday. So you can
Speaker 5: imagine how you can use this. If the app knows
Speaker 5: that you get paid every other Friday, it might give
Speaker 5: you a three dollars McMuffin on Thursday, but when Friday
Speaker 5: you have some money in your pocket, it might raise
Speaker 5: it to four dollars.
Speaker 3: Right.
Speaker 5: If it knows that it's cold out, it might raise
Speaker 5: the price of hot coffee. If it knows it's hot out,
Speaker 5: it might raise the price of a mcflurry. Often, plecture
Speaker 5: combines this data that's within the app, like what they
Speaker 5: call first party data, with additional data about you through
Speaker 5: what is called an identity graph that aggregates both you know,
Speaker 5: stuff you're doing on the app, with your email, with
Speaker 5: your social media, with your browser, with your subscriptions, with
Speaker 5: your other app downloads, with your travel history, with your
Speaker 5: retail history, all of these other things. And the predictive
Speaker 5: power of that is such that you can pinpoint what
Speaker 5: you're going to buy, maybe before you even know, and
Speaker 5: therefore you can target prices accordingly. So I think we're
Speaker 5: at the beginning of this where they're trying to discount
Speaker 5: things and get people on the app and get people
Speaker 5: used to ordering on the app. But what that has
Speaker 5: the effect of doing is isolating the consumer. If you're
Speaker 5: buying through an app, there is no public price, there's
Speaker 5: just a price for you. And there are other ways
Speaker 5: that you know, through online commerce or through deals that
Speaker 5: are done through a smart TV, where the customer is
Speaker 5: isolated and doesn't really know what other people are paying
Speaker 5: for the same product. Because what personalized pricing is always
Speaker 5: run into is this sense of unfairness. And if it's
Speaker 5: very apparent that I paid three dollars and the guy
Speaker 5: behind me in line paid four dollars, I'm going to
Speaker 5: be mad about that. If I'm the guy paying four dollars,
Speaker 5: why did I pay more than the other guy? But
Speaker 5: if you don't know, if it's through your television, if
Speaker 5: it's through your phone, if it's through your web browser,
Speaker 5: and you don't have any idea what the other person paid,
Speaker 5: you're just not going to know to be upset, right.
Speaker 5: So I think that is the frontier that we are
Speaker 5: in many ways moving toward. And it's a fascinating and
Speaker 5: maybe you know, to some people, dystopian reality.
Speaker 3: I was literally about to use that word.
Speaker 4: Sorry, I just wanted to add I think it's just
Speaker 4: this really interesting period in history as well, because of course,
Speaker 4: this is sort of where we started, right. You know,
Speaker 4: people haggled. There was no set price for a good.
Speaker 4: You went to the bazaar, you went to the market,
Speaker 4: and you know, they took a look at you and
Speaker 4: maybe looked at your shoes, and depending on what they
Speaker 4: ate for breakfast that morning, they decided what to charge you.
Speaker 4: And in the United States context, you know, there were
Speaker 4: a few people who didn't think that was right. You know,
Speaker 4: the Quakers in Philadelphia felt that this type of price
Speaker 4: discrimination violated their religious principles that sort of every man
Speaker 4: was equal under God. And John Wannamaker, the Philadelphia department
Speaker 4: store owner, similarly had concerns about this. And by the way,
Speaker 4: a business case in a large department store, you know,
Speaker 4: haggling takes a little time, right, Like you want to
Speaker 4: move people through, like pick up your scarf, pick up
Speaker 4: your lipstick, get in line and check out. And he
Speaker 4: started the price tag, right. His sort of credo was
Speaker 4: one price and goods returnable. He also sort of invented
Speaker 4: the money back guarantee and allowed folks to start returning
Speaker 4: goods that they weren't satisfied with. And so, you know,
Speaker 4: for a long time, we've lived in a world throughout
Speaker 4: all of the twentieth century where there was by and
Speaker 4: large one price for goods. You know that was sometimes discounted,
Speaker 4: sometimes marked up. But you know, you went into the
Speaker 4: supermarket or the department store, and you know, unless you
Speaker 4: got there on the wrong day before the sale, like
Speaker 4: you the same amount as your friend did for the
Speaker 4: same good. And we're really in some ways returning to
Speaker 4: the bizarre the marketplace because of new technologies that are
Speaker 4: enabling companies to more aggressively tailor price discrimination.
Speaker 3: So this raises points about fairness and also privacy data
Speaker 3: privacy specifically, And David, you mentioned the word dystopian there,
Speaker 3: and I was thinking back to I used to cover
Speaker 3: the banks at the Ft and I wrote a piece
Speaker 3: back in twenty fifteen about exactly this theme. So the
Speaker 3: idea of financial companies using new types of data, new
Speaker 3: technology to basically build proxy profiles of their customers. And
Speaker 3: I remember I was out in San Francisco. I was
Speaker 3: talking to this new startup lender. They don't exist anymore,
Speaker 3: so I think I can tell the story, But they
Speaker 3: were talking about the types of data that they could
Speaker 3: collect from their customers, and I really think people don't
Speaker 3: understand the extent of what is available to companies. But
Speaker 3: they were talking about how if someone was applying for
Speaker 3: a loan on their website, they could use a sort
Speaker 3: of slider to decide what amount of money they were
Speaker 3: asking for, so anything from I don't know, one hundred
Speaker 3: dollars to like ten thousand dollars something like that, and
Speaker 3: the company could track how fast they were moving that slider,
Speaker 3: and it was supposed to be an indication of how
Speaker 3: sort of what's the word impulsive the customer was. So
Speaker 3: if you move the slider really fast, you're probably not
Speaker 3: a very good credit risk. But if you're sort of
Speaker 3: like considerate, or you immediately move it to one point
Speaker 3: and leave it there, maybe you're a better risk. And
Speaker 3: then in addition to that, when it comes to finances
Speaker 3: and extending credit, there are obviously protected classes out there,
Speaker 3: so you know, race, gender, I think age as well,
Speaker 3: that companies are not allowed to discriminate against. But when
Speaker 3: you have all this data, you can basically build proxy
Speaker 3: profiles of people, and there are certain you know, indicators
Speaker 3: of whether or not someone is white or black, depending
Speaker 3: on like what type of browser they're using, what type
Speaker 3: of phone, where they are, et cetera, et cetera. How
Speaker 3: does our current legal system view some of this personalized pricing?
Speaker 3: What's that discussion like at the moment?
Speaker 5: Yeah, I mean I talked to Lena Khan for this issue.
Speaker 5: She's the chair of the Federal Trade Commission, and you know,
Speaker 5: she said that there was one point in which this
Speaker 5: idea of personalized pricing or what you know some people
Speaker 5: that I talked to called surveillance pricing, that it was
Speaker 5: just sort of a theoretical exercise. It was something that
Speaker 5: economists liked to take a look at to see whether
Speaker 5: it created surplus value or not. And now we're reaching
Speaker 5: this kind of terrifying reality where actually you collect enough
Speaker 5: data that you can do it. One of the more
Speaker 5: disturbing things that we saw in this in going through
Speaker 5: the research for this issue, was to study out in
Speaker 5: Belgium where they looked at uber prices and they took
Speaker 5: two people in the same place going to the same destination,
Speaker 5: and it noticed that it charged more if the individual's
Speaker 5: phone battery was low. And what the surmise is is
Speaker 5: that that's a proxy for you're desperate, you need a
Speaker 5: ride pretty much right now because your battery is going
Speaker 5: to run out, and so we can charge you more
Speaker 5: on that point. And you know, I've talked to a
Speaker 5: University of Chicago economists that said, well, that might be
Speaker 5: a proxy for it's late in the night, but that's
Speaker 5: not the way that they designed the experiment. It was
Speaker 5: two people at the very same time. One had eighty
Speaker 5: four percent on their battery and one had twelve percent,
Speaker 5: and the twelve percent person was charged more from the
Speaker 5: same location going to the same place. So this kind
Speaker 5: of stuff just wasn't available a while ago. And one
Speaker 5: question is what the legal system is going to do
Speaker 5: about this In terms of court cases. Talking about the
Speaker 5: algorithmic surge pricing that I mentioned, there was a quirk
Speaker 5: case over a company called rain Maker, which was working
Speaker 5: with Las Vegas hotels and once again aggregating prices, showing
Speaker 5: these particular casino hotels a picture of the market so
Speaker 5: that they could raise their prices, and the judge throw
Speaker 5: out the case because he said, well, they were only
Speaker 5: recommending certain prices, they weren't mandating it. Even though the
Speaker 5: statistics that rain Maker even submitted say that ninety percent
Speaker 5: of the time the recommendation has taken and that they
Speaker 5: strongly encourage people to take the recommendation otherwise they cut
Speaker 5: them off the service. So how the legal system is
Speaker 5: going to react here as an open question. But lawmakers
Speaker 5: and policymakers do have tools here. There are tools against
Speaker 5: unfair and deceptive practices that the FTC has and also
Speaker 5: you know agencies like the Department of Transportation has with
Speaker 5: respect to the airlines. There are other various anti price
Speaker 5: gouging tools and things of that nature, and there are
Speaker 5: also anti trust tools. Because the one secret sauce here
Speaker 5: is market power. The idea that you can just sort
Speaker 5: of willy nearly raise your prices in a competitive market.
Speaker 5: That's going to create a situation where a competitor is
Speaker 5: going to undercut you because they know that you're charging
Speaker 5: too much. In the market will sort of rebalance itself.
Speaker 5: If you have a tremendous amount of market power and
Speaker 5: therefore pricing power, you have the ability to continue this
Speaker 5: without kind of worrying about whether your customers will go away.
Speaker 5: You've created a moat around your business. So that's a
Speaker 5: key facet of this as well. If you know, competition
Speaker 5: policy moves towards a place where these markets suddenly have
Speaker 5: more choices for customers, then these pricing strategies lose a
Speaker 5: little bit of their power.
Speaker 4: One thing I would just add is, I think we're
Speaker 4: really in a new legal frontier when it comes to
Speaker 4: personalized pricing and price discrimination and protection of protected classes.
Speaker 4: You know, as you point out, any set of pricing
Speaker 4: that relies in whole or in part on geography in
Speaker 4: the United States, given the extraordinary segregation in the United
Speaker 4: States by geography, is ultimately going to have a racial bias,
Speaker 4: intended or unintended, right, And so you know, there have
Speaker 4: been some really interesting studies. There was a study of
Speaker 4: uber and lyft rides in Chicago and they looked at
Speaker 4: like over one hundred million rides, I believe, and what
Speaker 4: they showed is that, you know, if either the destination
Speaker 4: or the pickup point had a higher percentage of non
Speaker 4: white residents, low income residents, or low income residents, you
Speaker 4: saw higher fares. Now, of course, supply and demand can
Speaker 4: play a large role in that, but these overlays around
Speaker 4: geography are going to be interesting to consider. And the
Speaker 4: next thing I would just say on this point is,
Speaker 4: you know, when you think about surge pricing, right and
Speaker 4: you think, okay, well, in an area, you know where
Speaker 4: there's sort of less supply, you might want to ration
Speaker 4: by price. If you're in a low income area where
Speaker 4: there's only one store and there's not a lot of competition,
Speaker 4: surge pricing is going to hit that space harder because
Speaker 4: there's just going to be low supply and that's likely
Speaker 4: to be a low income area, a minority or a
Speaker 4: black or brown area as well. And so I think
Speaker 4: the overlay of sort of the geography of concentration in
Speaker 4: the United States, the geography of segregation in the United States,
Speaker 4: and personalized pricing is absolutely going to create some winners
Speaker 4: and losers. And I think the question is whether or
Speaker 4: not existing law is up to the task, or whether
Speaker 4: or not new laws will be required to protect consumers
Speaker 4: from discriminatory practices in tracing.
Speaker 2: You know, I mentioned by the way that I'll play
Speaker 2: Devil's advocate here and I'll just say, if my battery
Speaker 2: on my phone was about to die, I'm fine with
Speaker 2: paying a few extra dollars to get the car over
Speaker 2: the other guy. I'm I'm just gonna throw that out there.
Speaker 2: But actually, lindsay, I want to follow up on this
Speaker 2: point because you're leading to something that I was going
Speaker 2: to ask about, which is that you know, one of
Speaker 2: the things we're sort of talking about is a time tax, right,
Speaker 2: Like some people are going to just roll up to
Speaker 2: the McDonald's, and some people are going to take the
Speaker 2: time to download an app and put in their data.
Speaker 2: I am not one of those people. I'm not very
Speaker 2: well organized, et cetera. But I probably in theory if
Speaker 2: I really cared, like, would have you know, the time
Speaker 2: to like set all these things up and do the
Speaker 2: miles and everything. Talk to us about like the disparate
Speaker 2: impact of basically, yes, there are better prices out there
Speaker 2: if you're willing to jump over these hurdles and take
Speaker 2: that time and be fully just like aware of all
Speaker 2: of the different availability. It seems like difficult to me
Speaker 2: because I'm disorganized, but basically like targeting different sets of
Speaker 2: populations based on how informed they are and the capacity
Speaker 2: that they have to deal with all of these different
Speaker 2: rewards programs and things like that.
Speaker 4: Yeah, I don't even have airline points because I'm too
Speaker 4: disorganized to keep up with accounts for Delta and America
Speaker 4: and things like that. So I hear you one hundred
Speaker 4: percent on that point. Look, I think it's a really
Speaker 4: interesting question, right. There is this temptation to sort of
Speaker 4: figure out how you can hack personalized pricing, or use
Speaker 4: a VPN to get around dark patterns, or how can
Speaker 4: I beat AI and get a good discount. But I
Speaker 4: think really what the issue that we put out of
Speaker 4: the prospect shows is that increasingly in almost every area
Speaker 4: of your life, right, if you look at your household
Speaker 4: budget and the rental market, where Real Page is helping
Speaker 4: landlords fixed prices, in the grocery store for your family vacation,
Speaker 4: where you're having to deal with algorithmic price fixing in
Speaker 4: both airline class as well as hotels, you're up against
Speaker 4: the machine here, right, And I honestly don't know that
Speaker 4: even consumers with considerable time are able to coop on
Speaker 4: clip their way out of this one, right. I mean,
Speaker 4: imagine a world in which you hear from your friend
Speaker 4: that there's a discount on I don't know, cheerios. I'm
Speaker 4: buying a lot of those from my toddler right now
Speaker 4: at the Kroger down the street. But you know they've
Speaker 4: installed electronic price tags on the shelves. You know, by
Speaker 4: the time you get in your car and drive up
Speaker 4: to the Kroger, like, the price of ceios has already changed, right,
Speaker 4: And so I think this is not a space where
Speaker 4: even folks with sort of like a lot of time,
Speaker 4: you know, who used to sit down and get the
Speaker 4: Sunday papers and pull together three sets of coupons and
Speaker 4: organize them in a book and go to three stores
Speaker 4: to get three different deals. You know, even that is
Speaker 4: starting to look a little quaint and antiquated in a
Speaker 4: space with real time pricing, and in a space where
Speaker 4: there are companies using you know, predictive AI to move
Speaker 4: prices you know, instantaneously, right, I just don't know that
Speaker 4: the consumer is going to win this one. I think
Speaker 4: we ultimately have to decide which pieces of this we're
Speaker 4: not happy to deal with but we think they're legal,
Speaker 4: which pieces of this are illegal and we should go
Speaker 4: ahead and enforce the law, And then honestly, which pieces
Speaker 4: of these items are unfair and we just don't like it.
Speaker 4: And maybe if enough of us are focused on how
Speaker 4: unfair they are, we'll see the next Wanta maker coming
Speaker 4: back in and saying, hey, guys like I have the
Speaker 4: ability to use dynamic pricing, but like you know, what
Speaker 4: you get when you come to Lindsay's store is like
Speaker 4: one frickin' price. It may not be the lowest price,
Speaker 4: but like I promised you, you and your neighbor will
Speaker 4: pay the same price. Right. So I think there are
Speaker 4: a number of ways that this unfolds. But you know,
Speaker 4: I think that some of it is absolutely already illegal,
Speaker 4: some of it probably should be illegal, and some of
Speaker 4: it is just maybe unfair and uncomfortable. And I think
Speaker 4: it's okay for consumers to to think things are unfair
Speaker 4: that are legal. That's an opinion and a belief and
Speaker 4: a value we can all hold, and we can try
Speaker 4: to push for shopping to look different.
Speaker 3: Right. And also, I mean it's pretty obvious to me
Speaker 3: that if you are a poor single mother working two jobs,
Speaker 3: you are going to have less time to try to
Speaker 3: game the system, and so you're not going to be
Speaker 3: able to find the types of deals that maybe other
Speaker 3: people with oodles of spare time can find. But there's
Speaker 3: another aspect of unfairness here which we haven't really discussed
Speaker 3: just yet, which is in addition to seeing different prices.
Speaker 3: And actually I would love to know why. It seems
Speaker 3: that like people that are coded as poor by algorithms
Speaker 3: often end up being charged higher prices. So I'd love
Speaker 3: to ask you that, first of all. But then secondly,
Speaker 3: it feels like all these proxy profiles of customers where
Speaker 3: you can see their past behavior, you can see certain
Speaker 3: demographic info that also feeds into advertising. Right, So the
Speaker 3: world that a poor person might live in, based on
Speaker 3: the ads that they are seeing around them, is very
Speaker 3: different to the world that a wealthier person is seeing.
Speaker 3: So the poor person is probably going to see things
Speaker 3: for payday lenders or you know, buy now, pay later
Speaker 3: type stuff, and the wealthy person is going to see
Speaker 3: ads for I don't know, brokerage accounts or luxury waterfront property,
Speaker 3: and that ends up feeling very unfair to me as
Speaker 3: well and perhaps exacerbating inequality problem that we currently have.
Speaker 5: Yeah, I mean, the first really comprehensive study on why
Speaker 5: this phenomenon of poorer Americans paying more happens was published
Speaker 5: in nineteen sixty three. This is nothing really new, and
Speaker 5: we see it in some of these personalized attitudes. There
Speaker 5: was a story several years ago about staples on their
Speaker 5: online products offering different prices in different geolocations based on
Speaker 5: the IP address and the areas that saw that discount
Speaker 5: prices had higher average income. And you know, ability to
Speaker 5: pay and willingness to pay are two different things, and
Speaker 5: I think that's an important concept to know here because
Speaker 5: sometimes they get conflated. Sometimes economists say, well, actually, personalized
Speaker 5: pricing is a great thing because poor people will be
Speaker 5: able to access goods that if there was one fixed price,
Speaker 5: they wouldn't be able to access. And they're making an
Speaker 5: assumption that it's all based on ability to pay. That
Speaker 5: the way that a personalized price will go is that
Speaker 5: you'll be charged more as you go up the income ladder.
Speaker 5: But that's not really how it works.
Speaker 3: You know.
Speaker 5: It could be desperation, as Joe just assented to, that
Speaker 5: causes your higher price. It could be other factors like
Speaker 5: this being a basic necessity that determines the higher price,
Speaker 5: and so the willingness to pay is calculated under a
Speaker 5: number of different factors. It could be that the algorithm
Speaker 5: knows that you only have an hour between jobs or
Speaker 5: while you're going to school to grab some lunch, and
Speaker 5: so they're going to send you or serve you and
Speaker 5: offer that is more in that time of day when
Speaker 5: they know that you have to eat and you're out
Speaker 5: and about and that's where you're going to spend your dollars.
Speaker 5: So there are a whole number of ways where this
Speaker 5: does not look like you just pay more if you
Speaker 5: have more resources. Willingness to pay is a very different concept.
Speaker 4: One interesting thing about the Staple study that Dave mentioned
Speaker 4: that I think raises an important sort of macro point
Speaker 4: about this entire world of pricing strategies and tactics is that,
Speaker 4: you know, corporate concentration and consolidation undergirds at all and
Speaker 4: facilitates and accelerates it all. And so the reason that
Speaker 4: rich people who could afford to pay more for things
Speaker 4: at Staples right, I mean, as a percentage of your
Speaker 4: budget office supplies is not large if you're wealthy, the
Speaker 4: reason they were getting better deals is because there were
Speaker 4: more competitors to Staples in wealthier geographies, right, Whereas lower
Speaker 4: income folks, we're paying more at Staples because Staples knew
Speaker 4: they had them over a barrel, right. And so the
Speaker 4: corporate concentration overlay is key here, and it is key
Speaker 4: in one other way as well, which is really featured
Speaker 4: prominently in the issue, which is that increasingly the business
Speaker 4: case for mergers is data. So, you know, we highlight
Speaker 4: the example of Walmart buying Visio. Why is Walmart buying
Speaker 4: a TV company? Well, they're not buying a TV company,
Speaker 4: it's a smart TV manufacturer masquerading as a media company. Right.
Speaker 4: They're buying streaming data so that they can type Walmart
Speaker 4: advertisements into your home, and so they also can collect
Speaker 4: data on sort of what you're watching and what you're
Speaker 4: clicking on. Smilarly in the piece, you know, there's considerable
Speaker 4: speculation that one of the major motivations for the Kroger
Speaker 4: Albertson's merger is the consumer data. And you know, the
Speaker 4: grocers are making just as much money selling your data
Speaker 4: at the highest bidder as they are on selling you cerios, right,
Speaker 4: And so I think the data, the value of the
Speaker 4: data for companies, and the interlay with consolidation, both as
Speaker 4: a motivator for consolidation but also as something that you
Speaker 4: can just do more aggressively if you aren't worried about competition,
Speaker 4: is a key piece of why pricing looks different today.
Speaker 2: That's really interesting about the Kroger Albertsons. It's come up
Speaker 2: a few times because now, of course with AI, like
Speaker 2: all these companies are just desperate to get any fresh data,
Speaker 2: and people have legitimately made the case actually Kroger's is
Speaker 2: an AI play because it just has so much unique
Speaker 2: data that no one else has, so that that makes
Speaker 2: a lot of sense. I have one more big question,
Speaker 2: which is you know, I started we mentioned in the
Speaker 2: intro the one industry it has been doing this forever,
Speaker 2: or it seems like, is the airline industry. And both
Speaker 2: of you mentioned some of these third party consultants that
Speaker 2: are sort of bringing some of those practices to other industries.
Speaker 2: Can you talk a little bit about that further? How
Speaker 2: direct or how bright is the line between what the
Speaker 2: airlines have been doing with frequent fire miles for decades
Speaker 2: and then that sort of migrating over through consultants, etc.
Speaker 2: Into other industries realizing that they can more or less
Speaker 2: do the same thing.
Speaker 5: Well, it's really interesting because we had you know, a
Speaker 5: number of different authors right these different pieces, and you know,
Speaker 5: I was the editor, and they all came in and
Speaker 5: it seemed like every single piece went back to the
Speaker 5: airlines initially as kind of the originator of a lot
Speaker 5: of these strategies. There is a consultant called Idea Works
Speaker 5: Company and they've been around for a while. The guy
Speaker 5: who runs it is named Jay Sorenson, and for one
Speaker 5: of these articles we actually talked to them. And it's
Speaker 5: not only that Idea Works Company presents these reports and
Speaker 5: research mostly about junk fees or about ancillary revenue is
Speaker 5: what they call it. They even pulled this thing called
Speaker 5: an ancillary Revenue Masterclass, which literally is a junk fee
Speaker 5: boot camp that explains they bring in executives and they
Speaker 5: tell them, here is how you can raise money by
Speaker 5: adding different various fees onto things that used to be
Speaker 5: bundled with the ticket fare. And so now we have
Speaker 5: baggage fees, and we have change fees, and we have
Speaker 5: fees if you want a better seat with more leg room.
Speaker 5: And all of this comes from sort of the brainchild
Speaker 5: of Idea Works Company, which sends these reports that cheerlead.
Speaker 5: When ancillary revenue numbers go up, it's become a huge
Speaker 5: business for the airlines to unbundle their tickets and add
Speaker 5: all of these extra fees, basically making your situation in
Speaker 5: air travel miserable unless you pay your way out of it.
Speaker 5: And so we've seen that there. We see it an
Speaker 5: algorithmic price fixing. And all of these strategies started with
Speaker 5: the airlines, or at least some of them, but they've migrated,
Speaker 5: they've moved on, like in the junk fee example. One
Speaker 5: of my favorite things in the issue, there's this company
Speaker 5: called Suburban pro Pain obviously, as they sell propaine to
Speaker 5: various people, whether they use it in camping or whatever
Speaker 5: they use it in, and they have a fee schedule
Speaker 5: on their website, and I'm just going to read what
Speaker 5: the fees are. They have a safety practices and training fee,
Speaker 5: a tank rental fee, a transportation fuel fee, a restocking fee,
Speaker 5: a tank pickup fee, a minimum monthly purchase fee, a
Speaker 5: system leak test fee, a reconnect fee, a wheel call fee,
Speaker 5: a forklift minimum delivery fee, a diagnostic fee, an installation fee,
Speaker 5: an early termination fee, an emergency special livery fee, a
Speaker 5: late fee, a return check fee, and a meter account
Speaker 5: maintenance fee. And I'd like to say that was an outlier,
Speaker 5: but I'm not sure it is. Like we are seeing
Speaker 5: these add on fees in all sorts of industries. It
Speaker 5: originated in the airlines and now it's gone everywhere. And
Speaker 5: you see the Biden administration actually taking this up as
Speaker 5: a cause. The term junk fee was kind of invented
Speaker 5: or coined by ro Hit Chopra, who's the director of
Speaker 5: the Consumer Financial Protection Bureau, and they're trying to attack
Speaker 5: this issue. The Federal Trade Commission has put out a
Speaker 5: kind of ban on junk fees, which is more of
Speaker 5: a disclosure rule saying you have to do all upfront pricing,
Speaker 5: and the CFPB has tried to ban or cap credit
Speaker 5: card late fees, for example. We're seeing now kind of
Speaker 5: a politics being created out of these different pricing strategies
Speaker 5: and attempted pushback on them.
Speaker 3: I have just one more question, which is going back
Speaker 3: to the introduction and the conversation between myself and Joe
Speaker 3: and the implications that this has for macro economics. If
Speaker 3: we think that companies are becoming more sophisticated in their pricing,
Speaker 3: if we think that we're seeing I guess late stage
Speaker 3: capitalism meet a technological revolution that creates the ability to
Speaker 3: have more sophisticated pricing. What does that mean for inflation?
Speaker 3: If maybe prices become more about data and algorithms rather
Speaker 3: than a function of supply demand or the Phillips curve.
Speaker 3: How do economists and central bankers actually handle that particular problem.
Speaker 5: I think it's a terrific question, and I'm not sure
Speaker 5: it's one that the central Bank really is willing to
Speaker 5: handle just yet. You know, one of the things we
Speaker 5: put in our introduction is this colic between Sharet Brown,
Speaker 5: who's the chair of the Senate Banking Committee, and j
Speaker 5: Powell when he was doing a semi annual report and
Speaker 5: Sharet Brown was asking Powell about these pricing strategies, and
Speaker 5: Howell seemed very very uncomfortable. He didn't really want to
Speaker 5: talk about it. He said, well, you know, search pricing,
Speaker 5: maybe it works out even for the consumer. It doesn't
Speaker 5: have an inflation impact because if they're not that many
Speaker 5: people in the story, you get lower priced, and if
Speaker 5: there are people in the story, you get a higher price.
Speaker 5: But what he ended up on was saying that pricing
Speaker 5: is incredibly important and we have to give companies the
Speaker 5: freedom to do it. So he really sort of disassociated
Speaker 5: himself from this issue. And I think it's a fascinating
Speaker 5: question that you raised, Tracy, that if we see supply
Speaker 5: and demand and the usual kind of reasons for pricing
Speaker 5: become a little bit less. I'm not saying it's going
Speaker 5: to be completely less, but a little bit less of
Speaker 5: a factor. And we see sort of pricing get a
Speaker 5: little bit unmoored from those traditional factors, Then what does
Speaker 5: that mean for how the central bank operates? And I
Speaker 5: think our answer, and Lindsey can speak to this more,
Speaker 5: is that it has to mean that we need more
Speaker 5: of a whole of government approach to these particular issues.
Speaker 5: And for many years we've kind of outsourced any question
Speaker 5: about inflation to the central bank and to monetary policy,
Speaker 5: and I think policymakers have to understand that that might
Speaker 5: not do the whole job anymore, and that there are
Speaker 5: other factors and there are other agencies that can be
Speaker 5: brought to bear here.
Speaker 4: Yeah, policymakers are going to have to actually study individual
Speaker 4: firm behavior, industry level behavior, really start to get up
Speaker 4: to speed on new pricing strategies and tactics if they
Speaker 4: really want to understand what's going on in the economy.
Speaker 4: I think for many Americans, part of the reason why
Speaker 4: you know, we haven't seen folk supplotting inflation headed back
Speaker 4: to two percent is because the word inflation doesn't really
Speaker 4: capture everything. People are experiencing in this economy. Right, Sure,
Speaker 4: inflation is a piece of it, but there's also just
Speaker 4: like plain old price gouging, there's also junk fees, there's
Speaker 4: also dynamic pricing. All of these different ways people are
Speaker 4: experiencing the economy when it comes to pricing sort of
Speaker 4: isn't captured, I think fully with the word inflation. I
Speaker 4: think it's why people are so unhappy with the economy today.
Speaker 4: There's a lot underlying this shift. You know, of course
Speaker 4: these techniques proceeded inflation, but they do seem to have
Speaker 4: been unleashed and hypercharged during this period of high inflation.
Speaker 4: And it'll be interesting to see sort of what happens
Speaker 4: in the future. But it sure seems like the genies
Speaker 4: out of the bottle here. And I think we're just
Speaker 4: going to see more of this type of activity rather
Speaker 4: than less. And I think that's why you're seeing this
Speaker 4: burgeoning sort of cottage industry of racing data firms, right.
Speaker 4: I mean, the handful of CEOs who thought they were
Speaker 4: just selling groceries, you know, need a firm to help
Speaker 4: them realize they're actually supposed to be selling data, and
Speaker 4: they need a firm to help them think through how
Speaker 4: to maximize pricing in a world where cost cutting is
Speaker 4: hit bone and shareholders expect more and more returns. Like,
Speaker 4: there's got to be a revenue play too, right, And
Speaker 4: a revenue play is going to be in part a
Speaker 4: pricing play. So I think we're in a new world
Speaker 4: here when it comes to pricing. And the Federal Reserve
Speaker 4: is not known for being numble or fast moving or
Speaker 4: particularly innovative when it comes to thinking about the economy.
Speaker 4: They've been sort of running a same playbook for a
Speaker 4: long time here, right, So I think only time will
Speaker 4: tell whether or not they catch up.
Speaker 2: By the way, I checked out the sample two day
Speaker 2: agenda of the Idea Works Company and Cellary Revenue Masterclass,
Speaker 2: and it really is a boot camp on charging more
Speaker 2: ten fifteen Coffee Break ten thirty, Top ten things you
Speaker 2: need to know about ancillary revenue in airlines eleven, Antilia
Speaker 2: revenue boost the bottom line twelve Like it's really amazing.
Speaker 2: David and lindsay, that was so fantastic. Really appreciate you
Speaker 2: both coming on odd lots. Everyone should check out the
Speaker 2: June third edition of The American Prospect. Really fascinating stuff
Speaker 2: on a range of topics. Great chatting with both of you.
Speaker 4: Thanks thanks for having us.
Speaker 2: Tracy. I thought that was fantastic and there us a
Speaker 2: lot there, actually, I thought Lindsay's point at the very
Speaker 2: end I thought was a really great one, because obviously
Speaker 2: people don't like higher prices, and the inflation data, probably
Speaker 2: for better or worse, captures the general rise in prices
Speaker 2: over the last several years and the disinflation over the
Speaker 2: last couple of years. But then this idea that there's
Speaker 2: something else out there that's really annoying. Maybe it is
Speaker 2: a sort of polite way to put it, or like
Speaker 2: aggravating about this economy and this sort of psychological and
Speaker 2: feeling that to get the optimal price you have to
Speaker 2: like download an app and all of this stuff that
Speaker 2: I think sort of compound the aggravation of higher prices themselves.
Speaker 3: No, absolutely, and also just the point about, well, the
Speaker 3: genies kind of out of the bottle, and maybe we
Speaker 3: are moving from an age in which it was all
Speaker 3: about driving costs lower and building factories in places like
Speaker 3: China or Vietnam or wherever in order to lower your
Speaker 3: cost of production. But the thing that we saw from
Speaker 3: the pandemic was that a you have supply chain issues
Speaker 3: and so that production facility can close, and then b
Speaker 3: you can also make money by raising your prices and
Speaker 3: selling less of your stuff. And this has been an
Speaker 3: ongoing theme on all blots, and we spoke with Samuel
Speaker 3: Rans about this, of course, and you can see the
Speaker 3: strategy going back to Lindsay's point at the beginning of
Speaker 3: the conversation on the earnings calls. This is something that
Speaker 3: CEOs very openly discuss and talk about totally.
Speaker 2: By the way, our producer Kale came through the reference
Speaker 2: the nineteen sixty seven book The Poor Pay More by
Speaker 2: David Keplovitz looks really interesting and it hadn't really clicked
Speaker 2: to me. David's point, which is that there is sort
Speaker 2: of ability to pay. And yes, you know, the rich
Speaker 2: in theory in practice have the ability to pay more,
Speaker 2: but then the sort of willingness to pay about like, Okay,
Speaker 2: you're in a desperate situation you need this, or as
Speaker 2: Lindsay's point, like you may only have in your area
Speaker 2: one competitor or wherever it is. And so the idea
Speaker 2: that ability to pay is the only measure by which
Speaker 2: a company would set a price is clearly wrong. For
Speaker 2: some reasons that are obvious once you hear them.
Speaker 3: I think that's such an important distinction. And then the
Speaker 3: other thing I would just tack on to that is
Speaker 3: going back to the advertising point. So you know, depending
Speaker 3: on whatever proxy profile the algo is building about you,
Speaker 3: all the prices that you're seeing, all the offerings might
Speaker 3: be very different to someone who is better well off,
Speaker 3: And so you never even maybe if you're living in
Speaker 3: a certain zip code and you have certain demographics attached
Speaker 3: to you, or certain buying patterns, or certain credit scores
Speaker 3: or whatever, maybe you never even get ads for brokerage services, right,
Speaker 3: And so the idea of building wealth through the stock
Speaker 3: market is just something that you never encounter, and so
Speaker 3: all of that inequality becomes sort of codified. God, I'm
Speaker 3: depressing myself as I talk Joe. This is depressing. Wait
Speaker 3: are you a little bit less relaxed about some of this?
Speaker 1: Now?
Speaker 3: Please tell me you are.
Speaker 2: I still kind of think. I still think I would
Speaker 2: be happy to pay more for an uber if my
Speaker 2: phone were going to run out. But there are many
Speaker 2: aspects of this that I find uncomfortable. Surge pricing does
Speaker 2: not bother me the same way other things do. I
Speaker 2: do want to attend an Ideal works Company ancillary revenue
Speaker 2: master class. Maybe we could do that one day.
Speaker 3: I do not let me just throw that out there, No,
Speaker 3: I mean that list of junkxies that David was reading
Speaker 3: where like a hair away from them basically charging for
Speaker 3: oxygen in order to breathe. Right, Like, we're almost there.
Speaker 2: That seems successive on the plane. It's like, does that
Speaker 2: thing fall out?
Speaker 5: Yeah?
Speaker 2: Do you pay extra, pay extra to make sure that
Speaker 2: the thing fall will fall out?
Speaker 3: Yeah?
Speaker 2: Well.
Speaker 3: The one other thing I was going to throw in
Speaker 3: is I know they talked about the Federal Reserve being
Speaker 3: slow to approach this and to some extent, you know,
Speaker 3: it's such a thorny issue. As soon as the word
Speaker 3: greedflation comes up, people immediately start arguing about it. Maybe
Speaker 3: you could couch it in different terms, you know, price,
Speaker 3: pack architecture, more sophisticated pricing, personalized pricing, and all of that.
Speaker 3: But I will say this is something that has come
Speaker 3: up in our conversations with Richmond Fed President Tom Barkin,
Speaker 3: where he talked I think he might have even used
Speaker 3: the idea of genie out of the bottle, which is
Speaker 3: one thing that companies have learned from the past couple
Speaker 3: of years is that they can push price and experiment
Speaker 3: with demand ealisticity.
Speaker 2: That's true, I think to David's point, what it says
Speaker 2: is that some of these things are like a whole
Speaker 2: of government approach, and so the idea is like also,
Speaker 2: it's like the FED does not have like tools to
Speaker 2: go after like junk fees or whatever. But yeah, I
Speaker 2: thought that was fascinating.
Speaker 3: Shall we leave it there.
Speaker 5: Let's leave it there, all right?
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