The Personal Finance Podcast - How Companies Are Quietly Robbing You! With Lindsay Owens

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Starting point is 00:01:05 indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire? This is a job for Indeed sponsor jobs. Why don't you just go and look for the flight in Incognito mode and you'll be able to save yourself 200 plus dollars? So can you kind of talk through this whole situation? What did JetBlue quietly reveal your data being used and the prices could be changing over time and it could be just a huge shift in what you're paying compared to someone else. Is this something that is even legal? Are they operating in a gray area right here? Or what is what are the laws around this? They're just going to get better and better at shifting these prices based on what we are willing

Starting point is 00:01:45 to pay. And I think that's the concern that a lot of us consumers have because if it gets too good, it's going to be one of those things where I feel as though we could be overpaying in a lot of different categories than what we actually originally would pay. And over 250, companies are using these AI pricing models or tools with firms like MasterCard, McKenzie, Accenture, and a bunch of other companies that are out there? So are these tools kind of now everywhere? Are you seeing this across the board with a bunch of different companies? Uber did things like they raised prices on folks who had low battery and orbits raised prices on

Starting point is 00:02:16 hotels for people who, you know, had MacBooks. We just get used to this. Like we get used to dynamic pricing and all of a sudden this becomes a way of life. And then we're on this episode of the personal finance podcast, companies are quietly robbing you. What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.com. And today on the Personal Finance Podcast, we're going to be talking to Lindsay

Starting point is 00:02:52 Owens about why companies are quietly robbing you. If you guys have any questions, make sure you join the Master Money newsletter by going to MasterMoney.com slash newsletter. and don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever podcast player, you love listening to this podcast on it. If you want to help out the show, consider leaving a five-star rating and review on Apple Podcast, Spotify, or your favorite podcast player. Now, today, we're going to be diving into one of the scariest things that I have seen as of recent,

Starting point is 00:03:24 especially for us as consumers, because companies are now using AI-powered tools to charge you a different price then the person standing next to you. And this is going to be based on your own personal data. Now, this is something called surveillance pricing, and it's already been used in over 250 companies across industries like airlines, groceries, ride share, and retail. And JetBlue accidentally just blew the lid off this entire process, where they were charging a customer over $200 more for the same seat,

Starting point is 00:03:54 and they gave him some tips on Twitter on how to avoid those charges. And so today, we're going to be diving, into some of the crazy price fluctuations that we could see over the course of the next couple of years, especially in the day and age of AI. This is getting wackier and wackier. In fact, Walmart has these new pricing price tags that are dynamic in store now that they're going to be testing out on customers. And the weird thing is, a lot of these companies are saying, actually, we're just doing this to help you save money. But in reality, we know these for-profit companies are patenting all different kinds of technology that is going to help them dynamically pricing.

Starting point is 00:04:31 things based on who is actually looking at that specific item. Now, the scary part about this is, all of this is happening legally. And this is a great area that has not cut up to regulators yet. This is why I brought on today's guest, Lindsay Owens, who is the executive director at Groundwork Collaborative and is one of the leading voices and exposing corporate pricing manipulation in America. And she is going to break down exactly what's happening, who is doing it, and what you can do about it.

Starting point is 00:04:57 This is an episode you do not want to miss. It is fascinating. happening across all retailers across the board, including how you shop online. So without further ado, let's welcome Lindsay to the Personal Finance Podcast. So Lindsay, welcome to the Personal Finance Podcast. Thanks so much for having me. Really looking forward to the conversation today. I think there is a ton of great things that we're going to be able to talk through today because there is a big shift in the way that consumers are going to have to think about pricing and some of the the things that are happening right now. And I want to kind of start this off by talking about the JetBlue

Starting point is 00:05:32 incident that just happened over the course of the last week or so, where a customer was kind of tweeting out how they were frustrated with JetBlue and the pricing changes in just one day. And JetBlue kind of responded to that tweet with a comment that said, hey, why don't you just go and look for the flight in Incognito mode and you'll be able to save yourself $200 plus dollars? So can you kind of talk through this whole situation? What did JetBlue quietly reveal? Yeah, this was just an incredible story.

Starting point is 00:05:59 I mean, by the way, the guy who tweeted was trying to get to a funeral. and was trying to book his flight, obviously, was a must-buy ticket, didn't want to miss this important moment. And, you know, the customer service representative at JetBlue basically tweeting a cold-blooded confession saying, look, if you don't want us to rip you off, try tricking us, right? Try logging out of your browser, going into impugnito mode, clearing your cookies, and then maybe, we will gouge you or overcharge you on the way to a funeral. It was really a stunning admission. Of course, you know, JetBlue saying that the tweet was an error. But, you know, really the only error was that they got caught with their pants down here,

Starting point is 00:06:49 admitting that they use your data in setting pricing. And if you don't want your data used in pricing, you're going to have to bob and weave and duck and dodge and try to figure out a way to hide from there. new pricing software. This has got to be one of those things that for me as a consumer, I just keep looking at this. And it honestly kind of scares me because it's one of those areas where you think about your data being used and your prices could be changing over time and it could be just a huge shift in what you're paying compared to someone else. Is this something that is even legal? Are they operating in a gray area right here? Or what is what are the laws around this?

Starting point is 00:07:25 Yeah. I mean, this is what economists call price discrimination, right? This idea that, you know, you might be willing to pay a little bit more than me, and therefore I should charge you a little bit more than me. Or maybe you are a little more expensive than me, and so I've got to charge you a little more to clear my costs. You know, price discrimination is not new. We're really used to price discrimination in certain settings, right? When we buy car insurance, we know that we're going to get charged more if we're, you know, a bad driver. It used to be the case that health insurance companies could charge you more if you had a family history of illnesses because they thought you were more likely to need more medical care. Of course, during the Obama administration, Congress passed the Affordable Care Act and said, actually, no, we're not going to let health insurance companies charge you more than me if your family history suggests that you're more likely to need medical care than me. So we've had price discrimination in a whole host of industries for a long time.

Starting point is 00:08:27 But what we're seeing now is something really different. We're seeing price discrimination used in all sorts of settings in which there's no plausible business case for it, right? It doesn't cost, you know, J. Crew more to make your sweater than my sweater. They just think you might be willing to pay a little more for your sweater than I'm willing to pay for my sweater. Although, if they're any good, they probably know that you are really good. And I'm probably going to get less, you know, pay less than me, right? But, you know, this is, this is starting to seep into all sorts of commerce areas. You know, it's been with us for a long time that companies used our data in advertising, right? We've all had that experience where we hovered over a swimsuit on Instagram and then the next day, you know, every other ad was the swimsuit being served back to us because they thought, oh, you know, she was really close to buying it. We'll just send it to a swim suit. We'll just send it to a one more time, right? But now it's not just sort of the surveillance advertising where they're tracking what you might want and sending it back to you. They're also tracking what you want,

Starting point is 00:09:34 how much you might be willing to pay for it and sending it back to you at a price point, tailored, bespoke just for you. And so that's really the difference here. And that's the fascinating part about this. It feels like this is the beginning of a shift in the way that things are priced. And I want to kind of talk through some of these scenarios that you're alluding to here, because I think there's some really interesting stuff that's happening that most consumers don't even know is going on in the background right now. And one of them that you mentioned is surveillance pricing. I think surveillance pricing is something that, you know, can you kind of walk us through how this works? Because does someone like Target know that you're sitting in the middle of a parking lot right now and they're going to, you know, shift the pricing based on that?

Starting point is 00:10:13 Or what is surveillance pricing and how does this kind of work? Yeah, put simply, surveillance pricing is the practice of spying on you in order. to better overcharge you. So things Americans love, being spied on, being overcharged. That's why we all hate this. I mean, it really is kind of this intersection of the worst of the worst, right? But the idea is that companies are able to collect a lot of data about us. Sometimes we give it away freely, right?

Starting point is 00:10:40 We log in to the Starbucks app before we buy our Starbucks. And so we're ponying up all sorts of data, our location data, what our favorite items are, that we have a sweet tooth, and so we get a cookie with our coffee at 2 p.m., right? We're giving them our history freely because we're logging in. Sometimes they're partnering with third parties and buying data about us. Sometimes they're collecting data that we don't realize we're giving away freely, like tracking our mouse movements, looking at what we hover over. And they're amalgating all that data and using it to basically create a sort of individualized demand curve for us,

Starting point is 00:11:19 to estimate with some level of precision exactly how much we're willing to pay for an item so that they extract all of what economists call the consumer surplus, right? If you are interested in a sweater and I'm interested in the sweater and you're likely to pay 20 and I'm likely to pay 30, you know, they could set the price at 25 and see if you'll come up to 25. But why on earth would they set the price for 25 for me if they know I'll pay 30? they should go to 30. And so what they're able to do with this data is get closer and closer to finding out exactly how much we're willing to pay for every single item in our grocery cart, every single item we purchase online, sometimes even in store, and then charge us the most possible for each of those items.

Starting point is 00:12:06 And that's really what the kind of future, the dystopian future of surveillance pricing, you know, really suggests. By the way, you know, a long time ago, thousands of years ago, this was sort of common practice as well. We haggled, right? We went to the marketplace and the, you know, the guy decided to sized us up and said, oh, like, she's in a nice tunic and some gold sandals will charge her a little more, right? But, you know, for 150 years now, we kind of cut that shit out and we got a price tag, right? And the price tag was a posted transparent price that was fair. And you and I paid the same. same amount if we bought the same thing at the same time, right? You know, absent a coupon, we basically paid the same amount. And that really, you know, there was no law that required it per se, although, I mean, there's some laws around posted prices, but no law that required us each to pay the same. But it was just sort of a norm in the marketplace, the norm in our society. And it is really, I think, unsettling and creepy that it seems to be eroding right before our very eyes. It truthfully is. And I think that's the fascinating part, especially in the age of

Starting point is 00:13:17 AI, they're just going to get better and better at shifting these prices based on what we are willing to pay. And I think that's the concern. I mean, a lot of us consumers have, because if it gets too good, it's going to be one of those things where I feel as though we could be overpaying in a lot of different categories than what we actually originally would pay. And I think this is something that's interesting that has been talked about a couple of times. But the FTC just kind of found out that over 250 companies are using these AI pricing models or tools with firms like like MasterCard, McKenzie, Accenture, and a bunch of other companies that are out there? So are these tools kind of now everywhere?

Starting point is 00:13:49 Are you seeing this across the board with a bunch of different companies? Or there are certain industries that you see this more often and maybe others? Yeah. Well, look, in e-commerce, it is easy as pie to set up a scenario in which you and I are charged differing amounts for different items. There are a few reasons for that. One, you know, if we were standing in line together as we were checking out with the same item and you were charged more than me.

Starting point is 00:14:14 And, you know, I was sort of, you're sort of bagging your groceries and you see that the ticket rings up lower for me. You'd be like, what the hell, right? And I actually would probably be mad on your behalf, too. We would look at each other and we'd look up at the cashier and say, hey, you made a mistake here. You overcharged him. But of course, when we're atomized, isolated alone, it's very easy for them to charge us different amounts because I have no idea what you're being charged for any given item, right? So e-commerce is easy. It's also really easy in e-commerce settings for companies to run experiments to sort of A-B test different prices and sort of calibrate exactly how much they can charge for any given item.

Starting point is 00:14:55 My organization participated and ran an experiment that exposed the fact that Instacart was running experiments on American grocery shoppers online, testing out different prices. And the result was that some shoppers were being charged up to 20,000. 3% more for the same item as other shoppers. And it was just Instacart kind of treating us all like, you know, lab rats in their giant, you know, online maze, right? And testing exactly what they could get away with pricing wise. So yeah, I mean, I think it is really widespread. The question to me is really, you know, how many companies are doing this without our knowledge? How much is this happening that we're unaware of? Because it's hard for us to track. It's not illegal yet in many settings. And so, you know, it's hard for us to know when we're being, you know, the victim of different forms of experimental pricing or surveillance pricing.

Starting point is 00:15:53 It's so true. And I even see it across the board sometimes where I will try to kind of play with different platforms that I go on, whether it's Amazon or Target or Walmart or wherever else. And I would kind of see online that the pricing shifts over time for certain items. And I've tried to use tools like Camel, Camel, or there's other tools out there like Keepa where you can kind of figure out what the pricing is, you know, previously on Amazon. Amazon and what the pricing has been for other folks, but it still isn't as accurate as I would like it to be. But I can kind of see this even happening across the board with many retailers online in my own experience. And so you've got all these companies doing this, companies from airlines to groceries. We've seen it across from ride sharing to travel booking. Are there any industries that aren't doing this that you've seen in your research? Had, you know, I don't know that I've come across a ton of companies that aren't using data, right? And increasingly, you know, even brick and mortar

Starting point is 00:16:44 grocery stores like Kroger, a big book of business for them is actually selling your data. Kroger's data arm is, you know, very, very revenue positive because people use loyalty programs at companies like Kroger, you know, they collect a lot of data on you and they sell it. So, I mean, online brick and mortar happening everywhere. You know, I recently wrote a book about this topic, and I forced myself to think through some of the better actors in this space. And I came up with a couple of examples. Not very many.

Starting point is 00:17:17 It was tough. One example I like to use is the Savannah Bananas, which is, you know, kind of a fun, family-friendly baseball league. They have said kind of outright that they have a fans-first. kind of flat pricing model, no junk fees, no add-ons, no dynamic pricing, right? If you don't pay five times as much for a Savannah Banana seat if you get the last ticket, right? The lottery off tickets and everyone has an equal chance of getting a ticket at a good price. Another company that I like is Costco. I think, you know, they have a cost plus pricing model, right?

Starting point is 00:17:57 This idea that they keep the plus part of that. They cover their costs, of course, for selling the items. but they keep the plus to, you know, try to keep it to 15% or less. So that's a company that I like. Although they do have some variable pricing in their membership model, although at least it's transparent, right? You know what you're getting if you pay for the premium membership. Yeah. But yeah, I don't have a lot of good examples, sadly.

Starting point is 00:18:22 Those are some great ones. And I've even seen like the Savannah bananas founder kind of talking through that. I think they eat a bunch of taxes and stuff like that, too, just from the way that they sell their tickets. So it's a really interesting model. And I've heard of saying, we lose hundreds of billions of dollars every single year. And it's still one of those things that we are willing to do because we want to put our fans first, which I think is very cool. And one of those things that is a very cool story.

Starting point is 00:18:45 Now, another thing I want to talk through is Walmart and this digital shelf idea because I want to think through kind of this is kind of, this is one of those areas that I heard you talk about this. And it just blew my mind because I never heard anybody else actually kind of talk through some of this stuff. So can you kind of explain what the digital shelf is first for listeners who have never heard of this? Yeah, so digital shelf tags, electronic shelf labels are relatively new to the United States, but they've actually been in Europe for a really long time. And basically it's just, you know, an electronic price tag that's on the shelf in front of the item, just a little sort of pixelated screen, where the company can, you know, change the price effectively remotely, right? HQ can set a price and send it to any Walmart store in the United States. And,

Starting point is 00:19:38 you know, companies use electronic shelf labels for a whole host of reasons. One reason is to save on labor costs, right? It's cheaper to automate pricing than it is to have humans doing pricing. Another reason that they might use electronic shelf labels, and this has happened in Europe, is to cut down on food waste, right? To say, okay, we've got a bunch of bread that expires tomorrow. Let's lower the price quickly to see if we can get as many loaves sold tonight, so we don't have to throw them away, right? So there are some good reasons or maybe some business reasons to use electronic shelf labels in stores. But of course, the flip side of discounting that bread right before expiration date is they could also hike up the cost of the ice cream when the temperature hits night.

Starting point is 00:20:28 degrees and they know people are going to be coming in for for popsicles and ice cream and ice cold Coke, right? And so it really does build the sort of back end infrastructure to be able to deploy a dam at pricing in brick and mortar stores at scale. And when Walmart announced that they were going to be moving in this direction and electronic shelf labels in every Walmart store by the end of the year, I think, you know, consumers rightly started to get really worried about this. And, you know, Walmart swore up and down that they wouldn't do dynamic pricing. But, you know, when you interview people like supermarket guru and folks like that, oh, it's only a matter of time before they unwind that promise. And, you know, the other thing we know is Walmart has been

Starting point is 00:21:14 building all sorts of near dynamic pricing technologies, applying for patents on those dynamic pricing technologies, and receiving patents for those dynamic pricing technologies. So for me, Personally, I'm very skeptical that that's not where we're headed here with stores like Walmart. And I think it's sort of beggars belief that they're deploying a technology like this, patenting systems to exploit a technology like this, and then saying that they don't actually plan to use a technology in this way. If history ever repeats itself, we know they're going to just slowly start to shift that over time where we all forget that promise that they made and there's going to be just a shift in some of this pricing.

Starting point is 00:21:53 So I agree with you. I think that's one of those areas where it's, It's hard to be optimistic about them keeping that promise long term, especially, you know, someone like Walmart who has been a powerhouse for so long. So the way that this works is basically, hey, we have these labels on the shelf. And do they adjust? Like, for example, like if I went and bought something, you know, and then you came along five minutes later and bought the same loaf of bread, the same example, would you pay a different price than I would based on this dynamic pricing? And especially if they're using things like AI, would this kind of just shift in real time? Yeah, I mean, look, we don't know exactly how this is going to play out, but I'll give you some hypotheticals. You know, the first thing that I think is really interesting is a lot of this price adjustment could happen with no human intervention at all, right? You can create a model, an algorithm that says, hey, when there are four cans of soup left on the shelf and it's a snowstorm, juice the price by X percent, right? when it reaches 90 degrees, juice the price of ice cream by X percent, right? You could do all of that remotely.

Starting point is 00:22:56 It wouldn't even require, you know, human intervention, right? You've got a computer algorithm. It's checking the weather. It's keeping up to date with supply in the store. It has a good sense of how much supply there is in each location. It adjusts accordingly. Of course, it doesn't have to operate that way. We know in some of our European examples that there are

Starting point is 00:23:19 companies that don't adjust prices dynamically using electronic shelf labels during the day. They only adjust it at night when the store is closed so that, you know, shoppers won't experience what you just described, this idea that you and I come in, you know, like I get stopped at a red light and you don't. And all of a sudden, your basket of groceries is $20 less than me. I mean, that feels really like vexing just the idea that it is so out of your control, right? Just like by mere minutes you missed a deal and I got screwed, right? So, you know, doing something overnight, I think is one way to avoid that. We also know there have been proposals for, you know, suggesting that when we do use dynamic pricing technologies, we do them in a really transparent way.

Starting point is 00:24:03 So we only adjust the price once a day and we, and every store does it at 6 a.m. And then, you know, for the next 24 hours, the stores have to compete against each other based on who put the lowest price up at 6 a.m. right. So I think there's a whole host of ways we could see this going that that maybe is less frustrating. But yes, I think the possibility for pricing to shift at a moment's notice is real. And I mean, I think that even weirder possibility is that the price changes like while you are standing in front of the shelf, right? You're sort of choosing between the Campbell's soup and the Rouse soup and all of a sudden the Campbell's price ticks up and you take the Rouse or something, right? So it's, you know, it feels like you're in a sort of perverted

Starting point is 00:24:44 nightmarish game of the prices right or something. And Bob Barker is like, you know, behind the refrigerator door with a cigar, just kind of like messing around, messing around with the prices, right? It is a really scary thought. It is. And it makes me think of a couple. And another funny scenario with that is like, what if you pick up the item, the price is one thing?

Starting point is 00:25:04 And by the time you get to the register, it's already shifted by the time you can ever start to check out. I think that's another interesting part of the dynamic. And it also makes me think about, like I live in Florida, for example. So here when we have hurricanes coming, people, have a mad scramble towards food and towards water and those types of things. It reminds me of also like COVID. We had some weird toilet paper raid for some reason that the whole country kind of went after

Starting point is 00:25:23 toilet paper. They could dynamically price some of that stuff. And that stuff could be really expensive and people just kind of panic by in some of these situations. And so it's a very interesting thing to kind of see what is going to happen going forward with some of this stuff. What are some of the regulations going to be or how are stores going to make sure that, you know, people don't just freak out or get, you know, frustrated based on some of these prices changing.

Starting point is 00:25:43 I think that's going to be a very interesting thing to watch. So how does Walmart kind of justify some of these new technologies? And, you know, is this something that they're using right now? Are they already using dynamic pricing on some of their shelves right now? Yeah, look, we don't know a ton about what's happening under the hood at Walmart, right? We're piecing this together from public announcements, from our analysis of their patent applications and the patents that they've been granted. And we also listen really closely in on their earnings calls. right? And often, you know, CEOs tend to be a little too loose lift on earnings calls, I think, for their own good. They're often sort of boasting to investors and shareholders because, you know, they like to juice their stock price on earnings calls because their compensation is often tied to the stock price. But then sometimes they say things that consumers aren't so excited about. We were listening in on the most recent earnings call at Walmart and they were really crowing about how much revenue,

Starting point is 00:26:43 Sparky is driving. Sparky is the new kind of AI bot embedded in the Walmart website and app where you can ask Sparky questions. And, you know, it sounds like Sparky is getting really good at closing deals and making sure you check out with everything in your cart. Right. And so they're saying, you know, 30%, 35% boost in revenue for shoppers using Sparky compared to shoppers who are not using Sparky, for example, right? But look, you know, we don't know exactly what they're doing. doing, but when we study these patents, you know, look, they are building a machinery to collect legions of consumer data. And they also have a data side, just like Krober, that is very lucrative. I think it's called Sintilla, is their data arm at Walmart. And they're collecting data from browsers on walmart.com and in the in-store app. They're collecting data about what you put in your cart and don't purchase, what you hover on and don't click on, what you buy together at the same time. People who buy X also buy Y, right? All of those things. They have your geolocation because when you're logged in an app, you're often, you know, they're often

Starting point is 00:27:55 tracking your location. Similarly, your IP address when you log in on the website. All of that is being used. They're saying, and some of the patents that it's being used to predict, you know, sort of demand, like how much they should be, you know, using it for basically supply chain management, right? How much they should be stocking for any given item. But it's not hard to see a world in which that will be ported over and used for pricing. They're also saying right now that they're primarily using it for personalized offers or discounts. This is really interesting because it's something that companies, when they sort of get caught in the surveillance pricing, you know, when consumers catch them doing surveillance pricing, they often say, oh, it's just

Starting point is 00:28:38 going to be for discounts or when they are doing, like when Wendy's rolled out of electronic shelf menu boards at the drive-through. They said, oh, we're just going to do discounts. But, you know, the truth is, like, if you get a discount and I don't, I got charged more than you. That's price discrimination, right? That's surveillance pricing. And if they're using that information to say, hey, I think she's a sure thing. Let's make sure we don't send her a discount. And you're offered a discount. You know, we're paying different amounts. And so there really is kind of a distinction without a difference here, whether or not they're using the surveillance pricing for discounts or for upcharges. And the truth is, anyone who's using surveillance pricing for

Starting point is 00:29:19 discounts is probably mere minutes away from flipping the algorithm in reverse and seeing what they can capture on the upcharge side as well. So this is what we know they're up to. This is what they're applying for patents for. And, you know, the other thing I'll say that these patents suggest is that they're getting, they're spending a lot of time on building new technologies for pricing, right? And this is a big book of business for the company. And, you know, they're not just spending time designing these systems. They're patenting them. They're protecting their intellectual property, which to me suggests that they see that it could be quite lucrative for them. Exactly. And it's just one of those areas where, you know, you have one bad quarter or something

Starting point is 00:30:00 like that. And this is an easy switch to flip on where you can have that dynamic price and increase revenue dramatically. So I think it's a huge, huge thing that we see loominging overhead for sure. and I think it's one of those areas that we just got to keep thinking through. Is there anything based on some of the research you've done or what you've seen thus far that you think consumers can do to avoid being ripped off by some of this dynamic pricing? Or is this just one of those things that our hands are kind of tied and we just can't really shop at that location if we don't want to be dealing with dynamic pricing? Yeah, I think there are three things. The first thing I'll say, I always say when I get this question and it's not meant to be a punt.

Starting point is 00:30:33 But from the bottom of my heart, I do not believe that it should be each consumer's job. to bob and weave and duck and dodge and figure out how to beat the machine to not get ripped off. I think markets work better when they are fair and honest, when prices are transparent and predictable, it allows for comparison shopping, it keeps prices competitive, it allows for budgeting, and I think lawmakers should step in and kick this shit to the curb before it gets any more widespread. The second thing I'll say is one important thing consumers can do is blow the whistle. These companies do respond to consumer backlash. And we have seen a number of times over the last few years when companies got caught engaging in these practices and consumers bought, they rolled these practices back or put them back on the shelf.

Starting point is 00:31:25 And throughout history, consumers have actually been a really good bulwark against some of the worst excessives of corporate pricing practices. And I'll give you my favorite example, which is in the 1990s, the CEO of Coke, the Coca-Cola company, his name was Doug Avestor at the time, gave an interview to a Brazilian news outlet in which he said Coke was piloting, installing thermometers on vending machines so they could hike prices of coax on hot days. And this was before things went viral on TikTok. And still, it was the shot heard around the world. It was on the front page of every major newspaper from Honolulu. to Philadelphia to the Wall Street Journal, not exactly a consumer, you know, paper, right? It's really usually on the side of business saying, this is outrageous. I can't believe this happened.

Starting point is 00:32:18 And Pepsi weighed in and said, we would never do that. We're in the business of quenching thirst, not exploiting it. And Coke had to very quickly walk back their plans. Oh, we were just, it was just a hypothetical. We're not actually working on this. we would never do this, right? So I do really think, you know, shows like this, people who pay attention to shows like this, who weigh in on issues like this, that is just actually a really important part of the process, like in the absence of laws in the space which we need, that's a good option.

Starting point is 00:32:52 You know, so short of calling your lawmaker, what can you do? You know, offer two kind of tips. Again, I wish that you didn't have to do this, but, you know, here we are. The first is I would say just kind of update how you think about what it means to comparison shop. So it used to be that when you comparison shop, you picked out something you wanted like a TV and you looked at store A and store B. You compared across stores or you compared two TV types. Now you also have to comparison shop sort of within stores. So look at how much it costs in a brick and mortar store. Look at how much it costs on the website. Look at how much it costs on the third party website. Look at how much it costs if you log into your app and purchase it. Ask your husband to log in and see if he gets a

Starting point is 00:33:38 better price, right? So I think just sort of updating your model of comparison shopping is one good option. And another good option is kind of, you know, they figure out what you're willing to pay by experimenting on you. You know, one option you have is to try to experiment a little bit on them, right? you know, get a few friends in a room before you order an Uber, figure out who gets the lowest price, go with them, right? So there are sort of, I think, ways to try to at least get a little bit better data yourself about where better pricing might be. And then look, you know, you can try all of the things that you mentioned. You can try incognito mode. You can try, you know, creating a kind of dummy account and coming into a shopping scenario fresh, right? So you don't have, so there's not sort of a paper trail. And you know, you duck, duck go, different types of browsers that offer more protection. But it's really tough out there for consumers. And I don't think it should be. And it's one of those things, too, as you think through this, that a lot of consumers right now, you know, you have the JetBlue example that just happened, where a lot of folks were in uproar because, you know, this happened on X.

Starting point is 00:34:46 It happened, you know, in front of people, they could actually see the response. Yeah. And in reality, a lot of people kind of pushed back on that. They did not want this to happen. And the fear that I guess have is that over time we just, this muscle, we just get used to this. Like we get used to dynamic pricing and all of a sudden this becomes a way of life and that we're all standing here. So this is why I think it's really important to spread this message now is as this is currently happening, we kind of have to, you know, make our voices be heard early on in this process.

Starting point is 00:35:13 Otherwise, everyone's just going to kind of get used to this. And we may just be, you know, in this new world of dynamic pricing that we have to kind of figure out how to navigate through. And I completely agree with you. I feel as though, you know, markets who have fair pricing, you know, are transparent about that pricing. And I think this is something where, you know, we really do have to think through this process and make sure we make our voices heard. So I think it's really, really important. And an example, another thing we were talking about earlier was Instacart. And now Instacart was changing prices for other people and they had this dynamic pricing where some people were paying over 1,200 bucks more in a given year than other folks who were ordering through Instacart.

Starting point is 00:35:50 And so if folks are kind of quietly going through this process, they're quietly being bled through every single purchase, is there any way that they can calculate what the difference is? Or is this just something that we have to kind of continue to see what happens first? Yeah, look, I will say one of my biggest frustrations, well, two big frustrations about this type of pricing, aside from the obvious, you're getting ripped off, you getting spied on, that's ridiculous. But I have two additional concerns. One is bargain shoppers are good for the economy, right? They play a really important role in keeping businesses honest, in keeping prices competitive. And so when we can't comparison shop, and in particular when the army of people who are extra good and extra focused on comparison shopping can't maneuver and can't do their thing, we all lose, right? because the mechanisms for keeping pricing competitive fall away.

Starting point is 00:36:48 The other thing that's really frustrating, which I think gets to your question here, is not having posted prices, predictable prices, stable prices, undermines our ability to budget. And look, you know, it is one thing to not know how much income you're bringing in in a given month. A lot of us are lucky enough to have a salary or a guaranteed number of hours. We have some sense of how much income we're like, to bring in or minimum amount of income we're likely to bring in month to month. But increasingly, it is very difficult to discern how much money you're going to have to spend, how much money is going to go out months a month when prices are fluctuating. Obviously, inflation played a role

Starting point is 00:37:28 here. But now, dynamic pricing, surveillance pricing has sort of up to the level of complexity and such that you can't actually know what you're likely to spend on something as basic as groceries is from one week to the next. How can you budget? How can you know if you're going to bring in enough money to cover your outlay is if you don't know how much something is going to cost from one week to the next? Agreed. I think that's the most difficult part about this is it's very hard to kind of, hey, you set up this grocery budget ahead of time and you're trying to make sure that you are doing the right things with that. Then all of a sudden the prices shift and your budget gets all out of whack. I mean, it's very difficult for consumers to kind of navigate some of this stuff.

Starting point is 00:38:07 And so I think you're completely right. It's one of those things that we're going to have to kind of see what happens here and create some sort of, some sort of voice, some sort of fair pricing model that we're talking about here. And I think, you know, we've talked, you've talked through some of these companies and some of the things that they were doing. One of the interesting things that I saw also is that Uber did things like they raised prices on folks who had low battery and orbits raised prices on hotels for people who, you know, had MacBooks. So what are some of the data points, I guess some of these companies are looking for? Is there a through line here? Is there something that they're actually looking for? Or is it just, hey, MacBooks cost more than a Windows

Starting point is 00:38:41 PC. And so overall, they're just going to charge more because they know that person may have more disposable income than someone who doesn't. Is that kind of what they're looking at? Yeah, I think of this is happening in kind of three waves. The first wave was the sort of old school surveillance data, right? So they were looking at things like your zip code and using that as a proxy for how much income you might have, looking at things like what kind of. of computer you had, if you're a Mac or PC user, using that as a proxy for how wealthy you are or how price sensitive you are. Then over time, now consumers can, or companies can collect, you know, real data about your spending purchases, right? You log in using a loyalty program.

Starting point is 00:39:23 They know exactly what you like to buy every week, what kind of cereal you buy, things like that, or they buy third-party data that is specifically pegged to you as a consumer. So they know a lot about your purchase history. They're less reliant. on these sort of big proxies like zip code and getting more and more granular to you particularly. But all of that data is behavioral, right? It is proxies for your likely future shopping based on your past shopping or things that we know about you demographically. Now we're entering this kind of third wave or sort of third set of data that is, I think, the creepiest and the scariest, which is this idea and, And this gets back to our point about our good friend Sparky, this idea that now, because of

Starting point is 00:40:12 conversational LLNs and chat thoughts, instead of just relying on behavioral data about you, they can just ask you what you want, right? And then use your answer in their price setting, whether you give that freely within an app like Walmart and Sparky or whether you're, you know, a big part of the AI race is how to monetize AI and shopping and commerce will be a big part of that. And we know, you know, Google earlier this year announced their universal commerce protocol for shopping in Gemini. And they're planning to try to be, you know, the first mover and the big mover in the commerce setting. So the idea would be you would fire up Gemini and you would ask your chat bot to go shopping for you, basically. That's a place where they can, you know, ask you quite a few questions about how much you really need to buy something, what your intentions are and things like that.

Starting point is 00:41:01 So we have kind of crude kind of guesstimate behavioral data. We have really fine-grained behavioral data because we're tracking you closely. And now we actually have data on your intentions potentially because we can just, you know, technologies can just ask you what you want and then exploit that. It kind of reminds me of like a way more advanced, you know, process where like if you go into a car dealership to buy a car, what is the first person thing that the car salesman at? The car salesman asks as they ask, hey, how much can you afford every single month to pay for this car? And if you give them that information, you are already losing the battle of this negotiation, usually when you're having that conversation. And it kind of reminds me of that, like when you're talking to these LLMs and having these conversations, it's going to be one of those things where you've got to kind of be very cautious about how you're answering some of this stuff if you do go that route, because it is one of those things. If you give too much information, they could take you down a rabbit hole, is the wrong direction that you want to go in, which I think is very interesting. Who gets hurt the most in these situations? You know, I think about folks who are lower income, who are just trying to get by. Is this?

Starting point is 00:42:01 type of pricing sensitivity, does this kind of try to squeeze every single dollar out of folks like that? Or who do you think maybe in your opinion would get hurt the most by some of this pricing? Yeah, I mean, look, I think there is this kind of nice fantasy that price discrimination in its purest form could have a sort of Robin Hood effect, right? You can overcharge the, you know, the rich asshole who always flies first class and use it to subsidize the, you know, kids who are really wanting to go on spring break, right? You know, who don't have any disposable income, right? But, you know, in my experience, the American economy doesn't really work that way. Yes. There sort of end up being a lot more kind of robber barons than Robin Hoods, right? And the truth is often, as we know from the credit market, you know, the poor pay more

Starting point is 00:42:58 are in part because they're desperate, right? So they have to take on credit at usurious interest rates or, you know, they shock week to week, right? So they don't have the opportunity to, you know, they only can afford to buy food for one week. And so the next week they have to buy food. They can't wait if the price has gone up, right? They've got to buy food again, right? So I think, you know, there's a nice kind of fantasy about, you know, overcharging people. people who are less price sensitive. And surely that will absolutely happen. People who are not

Starting point is 00:43:32 price sensitive, if these algorithms are working well, you'll get hosed. But I don't know that, you know, poor people will always benefit because I do think, you know, one thing that these algorithms will be able to take advantage of is desperation, right? How much you need something. And, you know, this takes us back to this jump blue example where this guy was really frustrated that the price had skyrocketed $200 overnight, but he was desperate because he's going to a funeral. And so it, you know, seems like you would pay it, right? And as they know more and more about how much you need to buy something, that will factor in as well. Yeah. And so you've been kind of fighting, you know, all of this at the policy level for years. And while we're kind of

Starting point is 00:44:14 thinking through and waiting for regulation, is there anything that the individual can do to kind of help some of the things that you're doing right now? Or is there anything, is this kind of waiting for some of these policies to go through? There are some amazing state efforts happening. across the country. New York State is on the verge of passing a ban on surveillance pricing. They already passed the nation's first disclosure law requiring companies to tell you if they're using, if the price that they give you was set by an algorithm using your data. Colorado is on the precipice of signing into law legislation to ban surveillance pricing. And there's some worry that the governor will veto it.

Starting point is 00:44:58 So I think if you're living in Colorado, letting the governor know that this is something who support, good idea. But yeah, there are movements afoot in Hawaii, in California, in Maryland and Tennessee, you know, really Philadelphia, Pennsylvania, really across the country. And so I think asking your electives at the local level to move on legislation like this is actually, I think, a great place for folks to say. start. Yeah. I love that. And I think that's one thing, again, we have to, we kind of have to speak up early, I think, in in terms of making some of these shifts so that we can get ahead of this before

Starting point is 00:45:35 it gets worse and worse and worse. And really, I think that's very important. Now, you've taken on some big companies. You've taken on companies like Delta and Hertz and FIFA and Google. Are there any of those that have been kind of the hardest to crack going forward, or is this one of those things where each one has their own individual, you know, difficulties that you have to kind of work through? Yeah, that's interesting. I mean, I do think consumer backlash is the tool that is most effective at bringing these companies to their heel. So when Delta got caught last summer bragging about their relationship with Fetcher, this is really artificial intelligence company that was helping them jack up Delta prices. You know, the backlash really helped, you know, Delta back off some of what they were planning with Fetcher. And look, the other thing that really helps is competition, right? That's, you know, the backlash really helped. And, you know, Delta back off some of what they were planning with Fetcher. And look, the other thing that really helps is competition, right? That's, why it's good to have competition in markets. The, you know, CEO of American Airlines and Southwest Airlines jumped into the fray and said, hey, we're not going to do what adults is doing. We think that's creepy, right? And that is a really good disciplining force in the market to

Starting point is 00:46:37 sort of root out some of the worst practices. So, you know, consumer backlash, healthy competition, those are good ones. Obviously, it helps when you have attorneys general weighing in, you know, the New York Attorney General immediately signaled that she would be taking a close look at Instacart. And I think that was obviously very helpful in getting them to back off their pricing experimentation. But I don't know. They're all kind of equally difficult in their own way. I think the hardest part is exposing it. Once you expose it and put the sunlight on it, then the sort of process of consumer backlash

Starting point is 00:47:13 and regulation and enforcement can start to take root. And you wrote this book called Gouch that you can. kind of mentioned earlier on in the interview as well. If someone goes through that book and they reads that book, what do you want them to feel when they put that book down? Yeah. Well, it'll be out on September 29th, so you can pre-order it, but you won't be able to read it for a little while. But it is written. It's finished, so I can tell you what I hope. I mean, look, I think, you know, it is a little cliche to say that Americans are worried about how high prices are right now and how things are unaffordable. But my sense. is that most of us are upset, not just about the fact that prices are high, but also about the fact that pricing just feels more deceptive, more unpredictable, less transparent. And I think if you have felt that way and kind of wondered if something had changed and wondered if something was afoot, you know, I think when you read this book, you'll feel really validated. You know, I was right. Like, they were up to something. Like, that price did change between this week and last. week. My husband did weirdly get a better deal than me. Like, that wasn't an accident. Like,

Starting point is 00:48:23 that was by design. You know, I think the other thing that I hope the book will lay out is, you know, it doesn't have to be this way. And we know because we changed it once before. After thousands of years of haggling, it was actually the Quakers in Pennsylvania in the United States who said, you know, this price discrimination thing is super unfair. If all men are created equal under God, like all men should pay the same price at the checkout line. And they move to a standardized price. And then John Wanamaker, the Philadelphia Merchant, who had a new department store, Wanamakers, said, you know, I think I agree with the Quakers on this one. And I'm going to put price tags in my store. And he brought the price tag to the U.S. retail setting. And

Starting point is 00:49:11 it wasn't just that the price tag was more fair. There was business case for. the price tag. Haggling takes a lot of time. And you know, you're in a department store. You're going to buy some pantos and some lipstick and a blazer. Like, you don't want to be haggling over each of those. You want people linger in buying things, not spending all their time at the checkout line. And so, you know, it was kind of a win-win for Wanamaker. It was something that was fair and consumer-oriented, but also good for his bottom line. And I think, you know, we've really gotten away from that kind of bedrock equal pricing standard over that that we've had with us for 150 years now, but over the last 10 or 15 years, it's slowly eroding. And so I think, you know,

Starting point is 00:49:49 giving readers a sense of that history and an understanding that, you know, it's time for a fresh look. It's time to really rewrite the bargain between shoppers and retailers for the digital era. There are some things that maybe weren't, weren't in law, but they were norms in our society, kind of normative cultural values that we all kind of all depended on. I think it's time to bring those back. And just because you're shopping online doesn't mean you can't be treated fairly. Absolutely. I totally agree. And I think that is one of those things where you think through, you know, haggling through every single purchase that you make. That sounds exhausting to me. That's one of those areas where I'm sort of exhausting enough trying to make choices.

Starting point is 00:50:29 So exactly. So it's one of those things that I think, yeah, for sure is something. I'm so glad you're spreading this message because I think it is such an important thing to talk through. Well, Lindsay, thank you so much for coming on the show today. Where do you want people to pre-order the book? where can they find out more about you, your work and everything else that you're doing? Yeah, you can buy the book. It's gouged the end of a fair price and what that means for your wallet. You can pre-order wherever you get your books, your local bookstore, you can go to Amazon. You can go to Penguin Viking, the publisher, and buy direct.

Starting point is 00:51:02 Awesome. And we will link all those down below in the show notes. Thank you again so much, Lindsay, for coming on here. Thanks for having me.

The Personal Finance Podcast - How Companies Are Quietly Robbing You! With Lindsay Owens

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