Linked List: May 28, 2020

Thursday, 28 May 2020

Matt Levine, in his excellent Money Stuff column for Bloomberg:

If restaurants and drivers complained about DoorDash but DoorDash was raking in juicy profits, you could be like “what do you want, innovate or die, the market has spoken.” But in fact restaurants and drivers complain about DoorDash, and it lost $450 million in 2019 on about $1 billion of revenue. Arguably the market has spoken and said “stop it, come on, this is dumb.”

In the old economy of price signals, you tried to build a product that people would want, and the way you knew it worked is that people would pay you more than it cost. You were adding value to the world, and you could tell because you made money. In the new economy of user growth, you don’t have to worry about making a product that people want because you can just pay them to use it, so you might end up with companies losing money to give people things that they don’t want and driving out the things they do want.

That sounds like a joke but it’s not even an exaggeration.

Bonus burn on counterfeit capitalism poster child MoviePass:

Meanwhile MoviePass itself is up for auction in its Chapter 7 bankruptcy, with bids due next month. Naively I would think that a pandemic would be good for MoviePass: If your business is buying movie tickets for $14 and selling them for $10 a month, months when all the movie theaters are shut down should be relatively profitable.

DoorDash and Pizza Arbitrage ★

This piece by Ranjan Roy for his Margins newsletter is such a perfect example of counterfeit capitalism. Roy has a friend who owns a few pizzerias. They were getting complaints from customers whose deliveries were cold. What made that really odd is that his pizzerias weren’t offering delivery service. What happened is that DoorDash, with no permission, registered a phone number with Google under his restaurant’s name. The fun part of the story:

DoorDash was causing him real problems. The most common was, DoorDash delivery drivers didn’t have the proper bags for pizza so it inevitably would arrive cold. It led to his employees wasting time responding to complaints and even some bad Yelp reviews.

But he brought up another problem - the prices were off. He was frustrated that customers were seeing incorrectly low prices. A pizza that he charged $24 for was listed as $16 by DoorDash.

My first thought: I wondered if DoorDash is artificially lowering prices for customer acquisition purposes.

My second thought: I knew DoorDash scraped restaurant websites. After we discussed it more, it was clear that the way his menu was set up on his website, DoorDash had mistakenly taken the price for a plain cheese pizza and applied it to a ‘specialty’ pizza with a bunch of toppings.

My third thought: Cue the Wall Street trader in me… ARBITRAGE!

The arbitrage is good fun, but ultimately the whole thing shows how predatory these VC-backed delivery services are:

You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?

More News From Earlier This Month, Lost in the Quarantine Shuffle: ‘Uber Cuts 3,000 More Jobs, Shuts 45 Offices in Coronavirus Crunch’ ★

Preetika Rana, reporting for The Wall Street Journal back on May 19 (Apple News+):

Uber Technologies Inc. is cutting several thousand additional jobs, closing more than three dozen offices and re-evaluating big bets in areas ranging from freight to self-driving technology as Chief Executive Dara Khosrowshahi attempts to steer the ride-hailing giant through the coronavirus pandemic.

Mr. Khosrowshahi announced the plans in an email to staff Monday, less than two weeks after the company said it would eliminate about 3,700 jobs and planned to save more than $1 billion in fixed costs. Monday’s decision to close 45 offices and lay off some 3,000 more people means Uber is shedding roughly a quarter of its workforce in under a month’s time. Drivers aren’t classified as employees, so they aren’t included.

Why does Uber even have 45 offices to close, and so many employees to lay off? What exactly were the ~7,000 people they’ve laid off so far doing? Last I heard, Uber had 400 iOS engineers. Just iOS. I get it that some of that work isn’t visible just by looking at the Uber app on your iPhone, because there’s a lot of unseen work that goes into making an app like Uber work worldwide. I don’t know what the right number of iOS engineers at Uber is, but I do know that 400 is bananas. Too many cooks spoil the stew; 400 cooks don’t even fit in a kitchen.

It’s like trying to build a better engineering team by buying 1,000 copies of Fred Brooks’s The Mythical Man-Month and never once reading it.

The basic idea behind Uber is both sound and genius: smartphones made possible a revolution in ride hailing. But ride hailing is inherently a low-margin business. Companies like Uber and Lyft can make ride hailing better for everyone — drivers and passengers alike — but there’s nothing they can do to change the fact that it’s by definition a low-margin business and always will be.

The best treatise I’ve read on this whole aspect of our society is Matt Stoller’s “counterfeit capitalism”, which I linked to back in September.^* Just read that, or read it again. It succinctly captures something very important.

* Yes, the same Matt Stoller with whom I disagreed vociferously regarding his argument that Apple and Google are “exercising sovereign power” with their refusal to allow local health agencies to automatically collect privacy-invasive data from our phones. Stoller is a great writer and thinker, and it’s the sign of an adult mind that you can civilly disagree with someone whom you usually agree with. (And vice versa: a rational adult can agree with someone they usually disagree with.)

Coffee Shops in the Social Distancing Era ★

Michael Klein, writing for The Philadelphia Inquirer:

Coffee shops and cafes, largely shut down for walk-in business since mid-March, are beginning to reopen as restrictions on takeout food ease.

La Colombe, the Philadelphia-based coffee giant, is taking pages out of the airport and pharmacy handbooks in retrofitting 30 of its cafes in six cities for safety. The first location to reopen this week is at 130 S. 19th St., just north of Rittenhouse Square, where the company began 26 years ago. Others will follow in coming weeks, including the flagship store in Fishtown. The four airport locations will have to wait.

A bunch of photos and a time-lapse video showing the perspective of a customer going through the queue. La Colombe is my favorite coffee shop in Philly — great coffee and a wonderful staff — so I’m glad to see it reopen at all. But this is not normal. (La Colombe was featured quite a bit last year at WWDC in Apple Pay presentations.)

Space Invaders ★

Splendid retrospective from Game Maker’s Toolkit on Taito’s 1978 coin-op classic. What a great game.

The Pac-Man video in the same series is also excellent, and fully explains the AI behind the ghosts in a way I’ve never seen before. Four simple heuristics for the ghosts which, when combined, create the compelling illusion of intelligent coordination.

It’s also fascinating to me that, though only two years apart, Space Invaders and Pac-Man feel like they’re from two different eras of arcade games. Space Invaders is monochrome (the machines faked color with a translucent overlay at the bottom of the screen) and (generally) slow; Pac-Man is fantastically colorful and frantically fast.