Surveillance pricing lets corporations decide what your dollar is worth
I'm in the home stretch of my 24-city book tour for my new novel PICKS AND SHOVELS. Catch me in LONDON (July 1) with TRASHFUTURE'S RILEY QUINN and then a big finish in MANCHESTER on July 2.
Economists praise "price discrimination" as "efficient." That's when a company charges different customers different amounts based on inferences about their willingness to pay. But when a company sells you something for $2 that someone else can buy for $1, they're revaluing the dollars in your pocket at half the rate of the other guy's.
That's not how economists see it, of course. When a hotel sells you a room for $50 that someone else might get charged $500 for, that's efficient, provided that the hotelier is sure no $500 customers are likely to show up after you check in. The empty room makes them nothing, and $50 is more than nothing. There's a kind of metaphysics at work here, in which the room that is for sale at $500 is "a hotel room you book two weeks in advance and are sure will be waiting for you when you check in" while the $50 room is "a hotel room you can only get at the last minute, and if it's not available, you're sleeping in a chair at the Greyhound station."
But what if you show up at the hotel at 9pm and the hotelier can ask a credit bureau how much you can afford to pay for the room? What if they can find out that you're in chemotherapy, so you don't have the stamina to shop around for a cheaper room? What if they can tell that you have a 5AM flight and need to get to bed right now? What if they charge you more because they can see that your kids are exhausted and cranky and the hotel infers that you'll pay more to get the kids tucked into bed? What if they charge you more because there's a wildfire and there are plenty of other people who want the room?
The metaphysics of "room you booked two weeks ago" as a different product from "room you're trying to book right now" break down pretty quickly once you factor in the ability of sellers to figure out how desperate you are – or merely how distracted you are – and charge accordingly. "Surveillance pricing" is the practice of spying on you to figure out how much you're willing to spend – because you're wealthy, because you're desperate, because you're distracted, because it's payday – and charging you more:
For example, a McDonald's ventures portfolio company called Plexure offers drive-through restaurants the ability to raise the price of your regular order based on whether you've recently received your paycheck. They're just one of many "personalized pricing" companies that have attracted investor capital to figure out how to charge you more for the things you need, or merely for the small pleasures of life.
Personalized pricing (that is, "surveillance pricing") is part of the "pricing revolution" that is underway in the US and the world today. Another major element of this revolution are the "price clearinghouses" that charge firms within a sector to submit their prices to them, then "offer advice" on the optimum pricing. This advice – given to all the suppliers of a good or service – inevitably boils down to "everyone should raise their prices in unison." So long as everyone follows that advice, we poor suckers have nowhere else to go to get a better deal.
This is a pretty thin pretext. Price-fixing is illegal, after all. These companies pretend that when all the meat-packers in America send their pricing data to a "neutral" body like Agri-Stats, which then tells them all to jack up the price of meat, that this isn't a price-fixing conspiracy, since the actual conspiracy takes the form of strongly worded suggestions from an entity that isn't formally part of the industry:
Same goes for when all the landlords in town send their rental data to a company like Realpage, which then offers "advice" about the optimum price, along with stern warnings not to rent below that price: apparently that's not price-fixing either:
It's not just sellers who engage in this kind of price-fixing – it's also buyers. Specifically buyers of labor, AKA "bosses." Take contract nursing, where a cartel of three staffing apps have displaced the many small regional staffing agencies that historically served the sector. These companies buy nurses' credit history from the unregulated, Wild West data-brokerage sector. They're checking to see whether a nurse who's looking for a shift has a lot of credit-card debt, especially delinquent debt, because these nurses are facing economic hardship and will accept a lower wage than their better-off compatriots:
This is surveillance pricing for buyers, and as with the sell-side pricing revolution, buyers also make use of a third party as an accountability sink (a term coined by Dan Davies): the apps that they use to buy nursing labor are a convenient way for hospitals to pretend that they're not engaged in price-fixing for labor.
Veena Dubal calls this "algorithmic wage discrimination." Algorithmic wage discrimination doesn't need to use third-party surveillance data: Uber, who invented the tactic, use their own in-house data as a way to make inferences about drivers' desperation and thus their willingness to accept a lower wage. Drivers who are less picky about which rides they accept are treated as more desperate, and offered lower wages than their pickier colleagues:
But this gets much creepier and more powerful when combined with aggregated surveillance data. This is one of the real labor consequences of AI: not the hypothetical millions of people who will become technologically unemployed, numbers that AI bosses pull out of their asses and hand to dutiful stenographers in the tech press who help them extol the power of their products; but rather the millions of people whose wages are suppressed by algorithms that continuously recalculate how desperate a worker is apt to be and lower their wages accordingly.
This is as good a candidate for AI regulation as any, but it's also a very good reason to regulate data brokers, who operate with total impunity. Thankfully, Biden's Consumer Finance Protection Bureau passed a rule that made data brokers effectively illegal:
But then Trump got elected and his despicable minions killed that rule, giving data brokers carte blanche to spy on you and sell your data, effectively without restriction:
Also, Biden's FTC was in the middle of an antitrust investigation into surveillance pricing on the eve of the election, a prelude to banning the practice in America:
But then Trump got elected and his despicable minions killed that investigation and instead created a snitch line where FTC employees could complain about colleagues who were "woke":
Naomi Klein's Doppelganger proposes a "mirror world" that the fever-swamp right lives in – a world where concern for children takes the form of Pizzagate conspiracies, while ignoring the starving babies in Gaza and the kids whose parents are being kidnapped by ICE:
The pricing revolution is a kind of mirror-world Marxism, grounded in "From each according to their ability to pay; to each according to their economic desperation":
A recent episode of the excellent Organized Money podcast featured an interview with Lee Hepner, an antitrust lawyer who is on the front lines of the pricing revolution (on the side of workers and buyers) (not bosses):
Hepner is the one who proposed the formulation that personalized pricing is a way for corporations to decide that your dollars are worth less than your neighbors' dollars – a form of economic discrimination that treats the poorest, most desperate, and most precarious among us as the people who should pay the most, because we are the people whose dollars are worth the least.
Now, this isn't always true. Earlier this month, Delta, United and American were caught charging more for single travelers than they charged pairs of groups:
That's a way to charge business travelers extra – for valuing their dollars less than the dollars of families, not because business travelers are desperate, but because they are, on average, richer than holidaymakers (because their bosses are presumed to be buying their tickets). Sometimes, price discrimination really does charge richer people more to subsidize everyone else.
But here's the difference: when the news about the business-traveler's premium broke, its victims – powerful people with social capital and also regular capital – rose up in outrage, and the airlines reversed the policy:
If the airlines are still pursuing this kind of price discrimination, they'll do something sneakier, like buying our credit histories before showing us a price. This is something British Airways is already teeing up, by offering essentially zero reward miles to frequent travelers for partner airline tickets unless they're purchased from BA's own website:
But BA operates in the UK, where most of the pre-Brexit, EU-based privacy regime is still intact, despite the best efforts of Keir Starmer to destroy it, something that neither Boris Johnson, nor Theresa May,nor Rishi Sunak, nor Liz Truss could manage:
So for now, BA travelers might be safe from surveillance pricing, at least in the UK and EU. And that's the thing, America is pretty much cooked. It might be generations – centuries – before the USA emerges from its Trumpian decline and becomes a civilized democracy again. Americans have little hope of a future in which their government protects them from corporate predators, rather than serving them up on a toothpick, along with a little cocktail napkin.
The future of the fight against corporate power and oligarchy is something for the rest of the world to carry on, as the American hermit kingdom sinks into ever-deeper collapse:
And as it happens, Canada's Competition Bureau, newly equipped with muscular enforcement powers thanks to a 2024 law, is seeking public comment on surveillance pricing and whether Canada should do something about it:
I'm writing comments for this one. If you're in Canada, or a Canadian abroad (like me), perhaps you could, too. If you're looking for an excellent Canadian perspective to crib from, check out this episode of The Globe and Mail's Lately podcast on the subject:
Just because America jumped off the Empire State Building, that's no reason for Canada to jump off the CN Tower, after all.
(Eh?)
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
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I’d like everyone to take a step back and think of everything that happened THIS year. Not this presidency, not the past few years, this year. As in these 3 months.
So far we’ve had Ramadan, Chinese new year, Epstein files, a Markiplier movie, some weird disease spreading, 2 wars breaking out, covid anniversary, the cartel wars in Mexico, Super Bowl, alternative half time show, Friday the 13th, Venezuela colonization(?), like 3 celebrities/well-known people died, I think we had a full moon of some sort, like at least 1 civil war somewhere in the world, therians being beaten up for their identity, trans people being beaten for their identity, queer people being beaten for their identity, people of color being killed left and right, queer people being killed left and right, our president posting an ai racist video of the former president and his wife, literally anything with Trump and ICE, we are literally living through like a billion historical events on the DAILY
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