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The real effect of surge pricing

January 14, 2014 /

While Uber is coming under a lot of fire (including from me) on its surge pricing, Wired’s latest piece on Uber’s situation clarified a point that is worth highlighting.

Surge pricing, according to Uber, is intended to stimulate supply and curb demand to ensure the two match. Otherwise, the logic goes, would-be riders are left stranded without a car. Last month, during the height of the backlash against Uber over fares reported at seven times the usual during a New York snowstorm, Kalanick told WIRED that the bad publicity his company faced over surge pricing would pale compared to the impact of Uber not being able to offer a ride at all.

(Emphasis mine.)

This is what Uber and CEO Travis Kalanick are doing with surge pricing: they’re getting the masses to back off. Anyone who’s encountered a surge pricing screen on Uber in the past few months has done so while trying to reserve a car that’s only a few minutes away, as usual. That car is available because of surge pricing—specifically, because higher prices get fewer people to grab at finite inventory, maintaining a decent supply.

Of course, Kalanick can’t say that out loud, so he talks at length about bringing more cars on the road. Yet that’s only part of the story, and he’s been challenged on whether surge pricing really aids supply. In truth, what surge pricing really accomplishes is throttling demand.

And this makes sense: if an Uber user tried to call for a car in bad weather, and the nearest vehicle was 27 minutes away rather than 6, or not available at all, what would the response be? Customers would give up on the service for lack of reliability, and return to hailing cabs and calling car services, which are equally imperfect but entrenched in society. Uber is not, at least not yet. To the company, “Uber doesn’t work” is a worse fate than “Uber is sometimes too expensive.” So premium fares continue.

Uber has decided that supply is the most important link in its chain, and is using surge pricing to maintain it. Which, while not the most satisfying thing to Uber users, is a rather logical approach.

Update: this wonderfully in-depth look at Uber’s economic and business decisions sheds additional light on the subject.

The bottom line is that the only real alternative to dynamic pricing is a ton of customers staring at screens that read “No Cars Available.” This is the fact that is least appreciated by Uber’s critics.

Obsolete vs. useless

January 8, 2014 /

Quartz and Wired is making a big deal today out of a new survey that shows 58% of American households still have a VCR.

“It shows,” writes Christopher Mims*, “that a majority of Americans are holding onto a device designed to play a media format that isn’t even available anymore.”

But there’s a reason for this “lingering on past their expiration date,” as Mims nicely puts it: old VHS tapes.

While millions of Americans have moved on from tape formats, decades of media were created and stored on them before discs, drives and cloud storage appeared. And while it’s easy to replace that videotape of “Dirty Dancing” with Blu-Ray or a stream, doing so with home movies and one-offs taped from live TV is much harder. Many families have paid for a service to migrate their essentials; mine has dubbed its childhood videos from Super-8 to VHS to DVD over the past 15 years. But many others have not. And until they do, they’re not ditching their VCRs.

I still have roughly 800 cassettes in my possession (well, technically, they’re in my parents’ basement, to my mother’s ongoing chagrin, but still), including a number of bootlegs, one-offs, hard-to-find albums, and irreplaceable moments, from a Taj Mahal concert at summer camp in 1989 to my college radio shows. It’d be great to digitize them for posterity. But seeing how hard it is even to move all my CDs to MP3, the digitizing of my tapes won’t come for awhile. And while I wait for myself, I’m glad to have a working cassette deck, still gorgeous in its anachronistic 1988 glory.

So color me unsurprised at the persistence of the VCR. It remains peripherally useful for many, even in the rarest of moments. And so it remains, unbothered in many homes’ wall units, biding its time, and probably blinking ––:–– as usual.

* Of course, Mims is the author behind the recently infamous “2013 was a lost year for tech,” which suggests he’s in the dot-com-needling-provocateur game right now, much like Farhad Manjoo a couple of a years ago.

Creating vs. creating

January 6, 2014 /

Sploid, on Thomas Julien’s Instagram short film: “Seeing all these pictures in a pseudo stop animation you realize how similar all of our photos end up being. Nothing is original. We’re all just frames in someone’s next movie.”

I’ve been thinking a lot about our collective propensity to take photos, and wondering: why? Why do we need to chronicle a moment that is being captured by another? What is the intrinsic value of a photo that someone else can (probably more capably) take on one’s own behalf? It’s one thing to grab a picture of a loved one, or a sunset on an unpopulated beach, when you’re the only person that can take that picture. But when hundreds of fellow onlookers are snapping the same photograph, unless your DSLR skills trump the crowd, is there value to your taking a shot, too?

Jillian Edelstein, on the remoteness of photography: “It’s image taking rather than image making.”

What’s more, with the interconnectedness of social media, not only are those many other photos being taken, but in a matter of moments you and I can download and share them as well, rendering the multiplicity moot. Sometimes these efforts have value; last month, when a large fire raged up the block from me, I posted photos from my vantage point, then shared others’ images from different (and largely better) angles. But certainly my experience of the moment was interrupted by my fiddling with my iPhone, which, it should be noted, occurred while I helped my two young children stand on my next door neighbor’s radiator cover for a better view.

This can’t be where our future lands. Whether ubiquitous, wearable computing simplifies the media taking-and-sharing process, or whether we slowly learn to find the right moments to engage and disengage with our devices, or whether some other paradigms arise, I strongly hope that we evolve past the current heads-down phones-up phase. Because, if not, sooner or later we’re all going to miss something.

The year in cities, 2013

January 2, 2014 /

Ninth edition: listed here are the places I visited over the past 12 months. Per the annual rules, only overnights are listed; repeat visits (from anytime in the past) are denoted with an asterisk.

New York
Akron, OH
Atlanta, GA *
Livingston, NJ *
New City, NY *
London, England *
Avignon, France
Paris, France *
Cleveland, OH *
Groton, CT
Edgartown, MA *
North Creek, NY *
Jacksonville, FL
Portland, OR
Paradise Island, the Bahamas

How industry consolidation affects you: meat

December 19, 2013 /

Buying some steaks or pork chops for dinner tonight? If you’re buying a name brand at a supermarket, chances are it’s coming from one of the four major players in each market segment.

As of 2007, the four biggest beef packers in the U.S. supply more than 83% of our total supply, with Tyson and Cargill owning the majority. That’s right: more than half of America’s beef comes from one of two meat suppliers. Swift & Co. and National Beef Packing Co are three-four but their combined total is barely more than Cargill’s alone.

The same consolidation exists in the pork packing industry, although Smithfield Foods is the leader, with 26% of the market. The top four players control two-thirds of the market and include—surprise!—Tyson, Swift and Cargill.

These five companies are providing most of our protein nowadays, which makes the locavore movement just a bit more interesting. (Source)

This is the latest in a series of summaries of industries whose corporate consolidation has led to a small number of players controlling the majority of the market, creating oligopolies in the mass market. Previously

On quality

November 25, 2013 /

I discovered Energy Kitchen in 2004 or 2005, when it had but one lonely outpost, randomly, on Second Avenue near 59th Street in Manhattan. I wandered in looking for a fast meal and emerged with freshly grilled chicken and brown rice in a healthy wrap. Low calorie, fresh and delicious—oh, and by the way, low-calorie and low-fat, too. Genius!

A few years later, Energy Kitchen went into expansion mode, and in short order had what felt like a dozen or more outlets around the city. One opened on West 23rd Street by my then-office. I excitedly stopped in shortly after opening, and found an updated menu—now with more nouveau options, like bison—as well as modern decor and a ticketing system for the lunch rush. Oh, and by the way, every entree was under 500 calories. Still genius.

Only now, Energy Kitchen wasn’t a friendly novelty restaurant. It was one of a growing chain, and it showed. The lunch rush at the store on 23rd was poorly managed; staff actually set up a holding pen for people to wait for their food, forcing us to loiter uncomfortably next to the trash cans. The wait times were often rather long. And despite the new fast-food underpinnings, the prices stayed high; if memory serves, that bison burger was a $12 item. (I never got around to trying it.)

And, most importantly, the food went downhill. As a burgeoning quick service chain with a fair number of stores, Energy Kitchen had to harness economies of scale. That meant pre-packaging some food items rather than cooking them fresh, which degraded both the quality and the flavor of a meal. I once watched in disappointment as the cooks carried a tray of chicken up from the basement: many small plastic bags of parboiled chicken, already cut, ready for a quick spin in a microwave and an unceremonious dump into a wrap. So much for fresh and grilled.

So today’s news of Energy Kitchen’s demise, while unexpected, is not that surprising. The chain positioned itself as having a smart product: healthy, flavorful and satisfying. But Energy Kitchen charged upscale prices for a product that ceased to be upscale, despite the claims on the front window. I imagine many health-conscious customers went looking for organic and locavore cuisine rather than save a few calories on pre-bagged poultry. It’s a classic case of failing to deliver on the brand’s promise.

Which is a shame, because at the outset, Energy Kitchen had a great idea and great execution. Above all else, the quality of the product will ultimately define the success or failure of an organization.

Fifteen

November 1, 2013 /

When I launched the Ideapad, on November 1, 1998, it was rather ugly, it cribbed off others, and it didn’t even have its own directory.* But what it was, it miraculously still is: a home online for me to publish independently, everything from mundane thoughts on shopping and puppies to important perspectives on usability, digital life, the Internet business and my own evolution.

Fifteen years on, the Ideapad is one of the world’s oldest and longest-running online blogs, which I take less with surprise or pride so much as contentedness. The good ol’ ‘Pad is still here. I’ve gone through a couple of phases where I almost stopped writing—once, I even blogged about not blogging, and promptly lost half my audience–and in retrospect the best thing about this page is its consistency.

I’ve had more than my share of reminiscences in this space over the past few months, so it’s best to look forward here, to many more years of satisfying self-publishing. Thanks for reading.

-David

* My incredulous kudos go out to Net Access, my old web host, for fighting link rot and keeping my old directory live, for more than a decade of uptime since I deactivated my account. I’m not even sure they have individual user accounts anymore, but my old pages are still live. The World Wide Web purist in me is very appreciative of this.

Instead of just narrowing airline seats, charge for better ones, too

October 25, 2013 /

The Wall Street Journal’s expose on airlines narrowing coach-seat widths seems, to me, yet another market opportunity for the airlines, if only they’d position it correctly.

Now, I’m no advocate of skimpy seating. I want to travel in as much comfort as I can afford. But the key word there is afford.

Consumers have continually shown that they have strong price sensitivity when they fly. This forces the airlines to keep their base fares low, which in turn forces them to find ancillary revenue sources. Upcharges for baggage, exit rows, and priority boarding are all designed to offset the cost of keeping airfares at competitive rates and aid profitability. (It’s working, too.)

So why not use this seating to their advantage? Selling more-hiproom seats in the same manner as more-legroom rows would undoubtedly prove profitable by servicing that segment of the policy (such as this author) that is willing to pay a small premium for an upgraded experience. If that extra seat in a nine-across row generates another $300 fare, having a handful of eight-across rows generating $40 per passenger in upgrade fees would be similarly profitable.

I do not look forward to my first 17-inch-wide airline seat. Here’s to hoping the more-space movement hits the front of the coach cabins on these planes sooner than later.

On XOXO

September 23, 2013 /

Hey, I posted on Medium for the first time today, a retrospective on the XOXO Festival I attended this past weekend.

I’d like to append it here with a note of introspection. I am one of the old-school bloggers and creators that ushered in the community many years ago that, in its own winding way, led to the XOXO Festival. As I’ve noted in this space before, I’ve often been too slow to embrace my digital community in real-life settings, missing out on both the connections that I’d have made as well as the creative sparks that come from such settings.

Somehow last year I failed to learn my own lesson and missed out on the first XOXO. I was, frankly, miserable for weeks about it after the event concluded. This year I made no such mistake, and my determination rewarded me handsomely, as the event was every bit as wonderful as I’d imagined.

Six months into my 40s, six weeks into my new job, five weeks into a new apartment, and two weeks into being the father of a grade-school-age child, I have found energy and excitement in all the change. XOXO made a little bit of magic this weekend, and it couldn’t have come at a better time. I came back from Portland with dozens of new friendships and a renewed commitment to making great things. I’m excited to see where it goes.

WTC

September 11, 2013 /

In the summer of 1990 I worked at the old 4 World Trade Center on the commodities exchange, the one made famous in cinema in “Trading Places,” although somehow the gravitas of where I landed my first-ever paying job only partially sunk in at the time. As a high school student, I drove with another kid to the PATH train in Harrison and rode in every morning. Worked four days a week for $250 cash checking trades for a dollar futures trader. Nice work at 17 if you can get it.

At lunchtime I either went to the fancy Wall Street McDonald’s, the one with the piano player and doorman and carnations on the tables, or to a terrific old-world coffee shop that used to be across the street from 4 WTC, sort of a cross between a diner and Katz’s Delicatessen, where I’d get honest to goodness New York knishes, and I’d eat them with a sprinkle of salt.

I don’t think I ever went up into the towers. 4 WTC was a low-rise, maybe 8, 10 floors, high enough that the day the power went out taking the stairs was annoying. I remember thinking that the trade center was both impressive and mildly disappointing in a “gee, it’s kind of desolate at street level” kind of way. Finding that coffee shop and that McDonald’s, walking up to the music store at J&R on Park Row, meandering all the way over to the South Street Seaport, now, that was New York.

Of course, the Trade Center was New York, too, inimitably, and remains so in our hearts and our memories, 12 years on. Tomorrow morning I’ll be in the neighborhood again, commuting in the reverse of that summer, in what is now a rather different slice of the city. There’s an old-school deli on my walk between the 2/3 and the PATH that I like to stop in for breakfast on the way. I haven’t asked about their knishes. I think I may.

Correction: this post originally listed the futures exchange address as 7 World Trade Center.

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