Tag: Business

The ridiculousness of absolution through algorithms

“We are not setting the price. The market is setting the price,” he says. “We have algorithms to determine what that market is.”

Co-founder and CEO of Uber, Travis Kalanick, in the article 'Uber Boss Says Surging Prices Rescue People From the Snow' from Wired Business.

1. v.i. (seek to) make excessive profits out of others' needs, esp. in times of scarcity.

The Australian Concise Oxford Dictionary of Current English, Oxford University Press, 1987, Edited by JB Sykes

Algorithms are good for models but they are not good for markets that are supposed to reflect actual human need.

I've used Uber quite a lot in Melbourne and a few times in New York. It's a useful service for times when taxis are hard to find and people are willing to pay a premium. Uber has also provided in-kind sponsorship to our live Nudge events.

The structure of Uber's surge pricing model is simply exploitative at worst and represents the most heinous part of capitalism: the removal of human responsibility for "the market".

Blaming the algorithm does not absolve anyone of poor humanity. A human created the algorithm. It is by design.

Mike Monteiro gave an excellent talk at Webstock last year in which he explained how designers ruin the world.

While in New York I saw surge pricing on the Uber app while there were still, clearly, plenty of cars available. The first thing one sees when opening the app is how many cars are available.

From a customer's point of view, it seems like price gouging. One would only expect the price to surge when there were not plenty of cars available.

The fact that prices can surge to higher than seven times the standard fare favours privilege over service. But it's also a sign that a business is out of step with reality and economic history.

A 700% increase in prices based on an algorithm shows only that the algorithm is flawed; prone to hyperinflation.

There's an argument that increasing prices will entice more drivers to go out during high demand times. Surely this is also exploitation. The 700% increase in price was during heavy snow in New York. It's a dangerous time on the road and Uber is asking drivers to risk their own safety because the financial reward might be worth it.

That being said, Uber car availability is not a right to anyone with a smart phone. It is a business and it's going through some pricing teething problems.

The algorithm is currently poorly designed, but Uber, as a group, has never suggested that it is the final version. If they are smart, and I think they are, they'll continue to tweak their service.

The biggest error here is for Kalanick to stand firm, telling the world that Uber is doing the right thing rather than admitting that work still needs to happen to make the service behave better.

There's also a problem here in the economy of outrage. When Uber pricing is high, by all means people have the right, and sometimes even an obligation, to alert/warn others and let the organisation know that it is unacceptable.

However, reasonability is not the default position of the outraged. A lot of the time the anger in tweets about Uber surge pricing just reads as people being upset that they've discovered they're not as privileged as they originally thought.

I'm sure Dr Seuss wrote a book or two about that.

Unplanned Obsolescence

Blockbuster’s thirty-year story encapsulates the dangers of resting on prior models of success in a changing industrial landscape; by the time you realize your own obsolescence, it’s too late.

From LAST BLUES FOR BLOCKBUSTER in the New Yorker blog.

I worked in a video store as a teen. Movieland in Caulfield was a perfect job for a young cinephile burning with a passion for independent learning.

It was a place where I made some wonderful friends and learnt about people, their tastes, and began to develop my own sense of criticism.

It was owned by a couple of businessmen who didn’t care about movies but saw the franchise as an opportunity for some good cash profit. They also recognised the right time to get out of the business.

They sold it months before a Blockbuster opened 75 metres away. The man who bought it, also as a side investment, didn’t know how to run it and maintain competitive advantage. His manager was not clued in to the needs of the customers.

The store closed a couple of years later. I had already been fired early in the new regime; the manager desperate to have people who wouldn’t question her decisions. Riding my bike past the empty store, I experienced my first feeling of professional Schadenfreude.

The Blockbuster lasted about 10 more years but has been gone for just as long now. It was the first sign, for me, that short term growth would be favoured in the market over sustainable practices that cost a little more.

That I was vindicated in my early economic assessment is little comfort, though. Recommendation is performed by an algorithm now, which gets it right a lot of the time, so people, movie renters, don’t miss the store experience. But the skill of empathy required to recommend a film to someone is the great loss to the world from the death of the video store.

It was a place where the staff would speak to the customers regularly, get to know them and their tastes, and be able to provide a truly personal service. I love my Netflix subscription but it’s anything other than personal. Blockbuster started designing its own tombstone when it removed passion from the process. Netflix just took over the reins. Sunrise, sunset.

Thanks to Daniel for sending me a link to the original blog post.

Business and money

This is business. We make a thing, and we sell it at a profit. The money we make enables us to continue to create something that people want, and to support our customers as they use our product.

Rachel Andrew on ‘the Business of Web Dev: The Local Shops of the Web’ from A List Apart

The other day I was speaking to my boss about the reasons for being in business.

At the very basic level, a person is in business because he or she can provide a product or service to society that proves valuable to that society to the point that other members of that society are willing to trade their own services or products for what the first person can offer.

This is not about making money. This is about survival. We seem to have forgotten that.

Money, however, is how we measure value in our society. So we try to make as much of it as we can to prove our value.

But sometimes we cheat.

Remember when the teacher at school used to say “if you cheat, you’re only cheating yourself”? You thought that was bullshit, but it’s not.

When you’re cheating at business you’re pretty much pretending that your value is higher than it is. At some point people are going to realise that they've been duped and your value will drop to even lower than before.

If you want to not cheat, you have to work out how you can best be valued. That part is difficult because it takes honesty, time and humility.

A problem I’ve had with people building businesses just to flip them is that it implies that they are not committed to the product they’re making.

Where I work, we create things to improve other businesses. We help people achieve their real value. Those people show us their appreciation of our value by giving us money and we use that to show the value of employees and help improve our own business.

We’re not in business to make money. We make money to stay in business.