The rise of surge pricing: ‘It will eventually be everywhere’

Oliver Barnes, Philip Georgiadis and Laura Onita in The FT

For drinkers at the Coach House in central London on a busy work night this week, there was an uncomfortable piece of news to digest: the price of Britain’s favourite alcoholic beverage had just gone up — again.

Stonegate, Britain’s biggest pub company which runs the Coach House, has announced it will charge pubgoers 20p extra for a pint of beer on busy evenings and weekends. It is part of what it called a new “dynamic pricing” policy in some of its venues.

This has come much to the annoyance of some of its regulars. “It’s not right; we’re being done over enough on beer as it is,” says Adrian, a 37-year-old brand marketing manager, who has nipped into the pub near Piccadilly Circus after work. Sipping a £6.25 pint of Heineken, he admits that after the fuzziness of a few more drinks he might not even notice the price increase as the pub fills up.

“It just fleeces people trying to enjoy themselves,” he adds.

"Dynamic” pricing, as many in industry call it, or “surge” pricing as is more widely known by consumers, whereby businesses flex prices at particular times in response to shifts in supply and demand, is not a new phenomenon. It has been used by airlines in the US, for instance, since 1983 when the US government relinquished the power to set domestic airfares.

When booking flights and hotel rooms, consumers have become accustomed to the rhythms of the dynamic pricing model: book early or during the shoulder season and get a good deal; book last-minute or during the busy holiday periods and get penalised.

However, powered by algorithms and artificial intelligence, it is being introduced at a rapid pace by a growing number of consumer industries. Amazon changes the price of its products on average every 10 minutes, using millions of real-time data points to benchmark against competitors and track demand surges.

“It will eventually be everywhere,” says Robert Cross, who created a computerised dynamic pricing model for Delta Air Lines in the early 1980s before doing the same for hotel giants Marriott, Hyatt and InterContinental Hotels Group.

As high inflation erodes margins and improvements in technology make dynamic pricing cheaper and more practical for businesses to implement, the temptation to deploy the pricing strategy is growing in industries that have so far remained largely untouched by the method. Bars, restaurants and bricks-and-mortar retailers have historically only adopted dynamic pricing for basic discount offers, but that could change.

“If you’re a business, it’s irresistible because it will improve your margins and it’s in the consumer’s best interests too,” argues Cross, who chairs a revenue management company. “Anywhere there is a mismatch between what a customer is willing to pay and the actual price is ripe for dynamic pricing.” A 2018 study by researchers at Massachusetts Institute of Technology found that dynamic pricing boosted airline revenues by between 1 and 4 per cent, compared with traditional pricing.

However, the furore this week about the rollout of surge pricing in a beloved British boozer has reignited debates around the ethics of the pricing strategy and whether it is rigged against the consumer.

In some industries, dynamic pricing has proved less palatable. Ride-sharing app Uber refunded users in central London after its pricing engine briefly surged fares in the aftermath of the London Bridge terror attack in June 2017.

Fans trying to bag tickets for arena tours by Beyoncé, Coldplay and Harry Styles in the past year have expressed frustration over the wild fluctuations in Ticketmaster’s dynamic pricing model, which resulted in some paying more than double the face value. Ticketmaster’s parent company Live Nation Entertainment is being investigated by the US justice department as part of an antitrust probe.

Marco Bertini, a professor of marketing at Esade business school in Barcelona who advises Boston Consulting Group on pricing practices, agrees that dynamic pricing will only become more common. But he warns companies to be aware of the pitfalls, including the way that such pricing is explained to customers.

“The question is making sure there’s no secondary effect, like people getting pissed off and not understanding [the pricing method],” he says. “The devil is in how it’s communicated because you’re trying to get this customer to come back tomorrow.”

A question of fairness

For most of the history of human commerce, dynamic pricing was the norm, with customers haggling and bartering with vendors over the price of every item. But in 1876, inspired by notions of equality, Quaker merchant John Wanamaker introduced price tags at the launch of his eponymous department store in Philadelphia. Macy’s, the iconic New York-based department store, also under Quaker ownership at the time, did the same.

Beyond high-minded ideas of fairness, fixed prices allowed the stores to save on years of training for shop clerks in price negotiation, which in turn enabled faster expansion. The price tag quickly caught on.

Now, however, with advancements in data collection and the transition of commerce online, businesses are reverting to the historical norm and pivoting away from the fixed price.

There is also still room for growth: while retailers in the US have embedded dynamic pricing into their operations more widely, Europe still lags behind, according to Pini Mandel, chief executive of Israel-based Quicklizard, whose dynamic pricing tools are used by the likes of Ikea and Sephora.

More than half of retailers use it in the Nordic countries, about 40 per cent in Germany, Austria and Switzerland, but only 15 to 20 per cent in the UK, according to Mandel. “Inflation is the reason why the UK, which is the most conservative market when it comes to dynamic pricing, is also joining the revolution,” he adds.

One UK hotel group chief executive says complaints about dynamic pricing for room bookings are rare as consumer awareness has grown. “Now, I think customers generally get it in a way that they didn’t before,” he says. “Customers . . . understand that the earlier you book, the better the deal is.”

Dermot Crowley, chief executive of Dalata hotel group, which manages 52 hotels across the UK, Ireland and Germany, says despite the widescale uptake of dynamic pricing among hotel groups, even they have erred away from introducing surge pricing on food and beverage.

“When you’re deciding to stay in a hotel, it’s a big part of your weekend away, that’s the price and you can budget accordingly,” says Crawley. “If you buy a drink and then it gets more expensive, that leaves a different impression.”

Some 52 per cent of 901 US consumers surveyed by software company Capterra this year said they regarded dynamic pricing in restaurants as equivalent to price gouging. Despite the negative reaction to Stonegate’s new pricing policy, Alex Reilley, chief executive of casual dining group Loungers, says price discrimination is more common in the hospitality industry than most operators let on. Stonegate, which owns the Slug and Lettuce and Craft Union chains, had previously rolled out the same pricing strategy on a temporary basis during the 2022 football world cup, upping the price of a pint by up to £1.

A spokesperson for Stonegate said that using dynamic pricing also meant it could offer promotions on food and drink throughout the week and helped offset higher running costs when it was busy.

“I think Stonegate have almost fallen foul a little bit because of their honesty because there are lots of operators, particularly in city centre locations that do exactly the same and it’s not exactly a new phenomenon,” says Reilley. “I wouldn’t necessarily see this as Stonegate taking the piss. It’s them thinking about ways they can generate extra revenues . . . given the pressure they are under.”

Seth Moore, former chief strategy and analytics officer at online retailer Overstock.com, says the backlash that Stonegate has faced is more a result of the way it communicated the price change.

“If my pub goes out and says, ‘Before 7pm, we’re serving drinks 25 per cent off’, nobody objects to that,” says Moore. “In general, it’s better to market it as a discount off prime rather than an increase on prime.”

Threat of manipulation

In the period that surge pricing has been in operation in the airline and hotel industry since the 1980s, prices have largely declined with the rise of low-cost airlines and budget hotels and consumers have grown accustomed to the pricing model.

“Back in the day, only the wealthy people travelled,” says Cross, formerly of Delta. “Now, everybody travels and that’s thanks to dynamic pricing.”

But there are signs that consumer and regulatory tolerance could be waning because of the sharp rise in prices over the past year.

Italy’s rightwing government sparked a furious row with Europe’s airlines last month after outlining plans to cap fares on flights between mainland Italy and the islands of Sicily and Sardinia at 200 per cent of average prices. The government said that ticket prices had risen 70 per cent on those routes.

The plans to intervene in the market were unusual, but followed a drumbeat of questions over airlines’ pricing models this year. The Spanish government has also laid out plans to limit fare rises on some domestic routes, while the European airport trade association has called on the European Commission to “monitor” the level of air fares.

“As a consumer, I understand why people don’t like paying more for things . . . but it is important to understand that it often allows the same business to charge less during another time and create more access to whatever it is,” says Jonathan Ayache, chief executive of South African airline Lift and a former senior executive at Uber.

For many retailers with a large bricks-and-mortar estate, dynamic pricing is still in its infancy, as it involves having to physically change labels, a costly endeavour. But the uptake of so-called electronic shelf labels, offering the ability to rapidly update prices, is spreading. Walmart is installing digital labels in 500 of its stores and France’s Carrefour has been using them for years.

But greater reliance on algorithms to price products could have downsides. A 2021 research paper published by the Competition and Markets Authority, the UK watchdog, concluded that while pricing algorithms have “enhanced efficiency”, companies “may also misuse them, whether intentionally or unintentionally, and can cause harms to consumers and competition, often by exacerbating or taking greater advantage of existing problems and weaknesses in markets and consumers”.

A push towards more dynamic pricing has proved unpopular for ticketing platforms. In the UK, 71 per cent of 1,523 music fans surveyed by polling company YouGov late last year said they were either strongly opposed or tended to oppose surge pricing for concerts. Rock star Bruce Springsteen angered fans in the US last year when he adopted dynamic pricing for a tour for the first time, leading ticket prices to surge as high as $5,000.

Robert Smith, lead singer of the Cure, who this year convinced Ticketmaster through a social media campaign to refund service charges to his fans, stressed that he had avoided dynamic pricing, calling it “a bit of a greedy scam”. Taylor Swift, the second most streamed musician globally, opted not to use dynamic pricing model for this year’s Eras tour after it dragged on sales and angered concertgoers during her 2018 tour.

Some ticketing industry figures are unrepentant. “It’s called the ticket business, it’s not called the ticket fan club. Nobody pays more for a ticket than they want,” says Fred Rosen, who built Ticketmaster into a behemoth in the industry before leaving as chief executive after 16 years in 1997. “It’s not the ticket companies that set the prices, it’s a simple supply and demand curve.” Rosen predicts that despite some pubgoers “moaning” about dynamic pricing, the pubs “will still be full”.

But others question whether the intrusion of dynamic pricing into all aspects of commerce and culture represents a step too far, fearing that it could be rolled out to ever more essential goods.

“The world is full of micro moments but they all add up,” says Phil Hutcheon, the founder of ticketing platform Dice, which shuns dynamic pricing. “People will ask, ‘Why are these tickets $1,000? Are they only available to the ultra-wealthy?’ If a beer at 6.30pm is a certain price, then an hour later it is a totally different price . . . you just start losing trust in the system.”

A Level Economics 62: Road Pricing Policies

Rationale for Road Pricing Policies

Road pricing policies, also known as congestion pricing or tolls, involve charging fees for the use of roads to manage traffic congestion and improve transportation efficiency. The rationale behind road pricing policies stems from several key reasons:

1. Managing Congestion: Traffic congestion is a significant problem in many urban areas, leading to wasted time, increased fuel consumption, and higher emissions. By charging a fee for using congested roads during peak hours, road pricing aims to reduce traffic volume and alleviate congestion.

2. Efficient Resource Allocation: Road pricing helps allocate road space more efficiently. During peak hours, the demand for road usage exceeds the available capacity, resulting in delays and inefficiencies. By varying toll rates based on demand, road pricing encourages drivers to consider alternative routes, travel during off-peak hours, or use public transportation, leading to a more efficient use of road infrastructure.

3. Revenue Generation: Road pricing can generate revenue that can be reinvested in transportation infrastructure, maintenance, and improvements. The funds collected from tolls can be used to enhance public transportation, expand road capacity, or support sustainable transportation initiatives.

4. Environmental Benefits: By reducing traffic congestion and encouraging the use of alternative transportation modes, road pricing can lead to lower greenhouse gas emissions and improved air quality, contributing to environmental sustainability.

Examples of Road Pricing Policies:

1. Congestion Charging Zone (CCZ) - London, UK: London's Congestion Charging Zone is a well-known example of road pricing. In this scheme, drivers are charged a fee for entering the designated zone during peak hours. The goal is to reduce traffic congestion in central London and promote alternative transportation modes like public transit and cycling.

2. High-Occupancy Toll (HOT) Lanes - United States: High-Occupancy Toll lanes, also known as Express Lanes, are implemented in several U.S. cities. These lanes allow vehicles with multiple occupants to use them for free while charging a toll to single-occupant vehicles. The toll rates vary based on traffic conditions, encouraging solo drivers to choose the toll lane and maintain faster traffic flow.

3. Electronic Road Pricing (ERP) - Singapore: Singapore's Electronic Road Pricing system is one of the pioneering examples of using advanced technology to implement road pricing. ERP uses an electronic system to charge vehicles based on the distance traveled and time of day. The pricing is higher during peak hours to reduce congestion and more affordable during off-peak periods.

4. Stockholm Congestion Tax - Sweden: Stockholm introduced a congestion tax in 2006, charging drivers for entering the city center during peak hours. The tax was part of a trial to manage traffic congestion and improve air quality. After evaluating the success of the policy, it was later made permanent and has continued to be an essential part of Stockholm's transportation strategy.

In summary, road pricing policies are implemented to address traffic congestion, promote efficient resource allocation, generate revenue for transportation improvements, and achieve environmental benefits. By charging drivers for road usage during peak periods, road pricing policies encourage behavioral changes, reduce congestion, and support sustainable transportation options, leading to a more effective and environmentally friendly transportation system.

Uber and Surge Pricing

 

Silicon Valley siphons our data like oil. But the deepest drilling has just begun

Ben Tarnoff in The Guardian


What if a cold drink cost more on a hot day?

Customers in the UK will soon find out. Recent reports suggest that three of the country’s largest supermarket chains are rolling out surge pricing in select stores. This means that prices will rise and fall over the course of the day in response to demand. Buying lunch at lunchtime will be like ordering an Uber at rush hour.

This may sound pretty drastic, but far more radical changes are on the horizon. About a week before that report, Amazon announced its $13.7bn purchase of Whole Foods. A company that has spent its whole life killing physical retailers now owns more than 460 stores in three countries.

Amazon isn’t abandoning online retail for brick-and-mortar. Rather, it’s planning to fuse the two. It’s going to digitize our daily lives in ways that make surge-pricing your groceries look primitive by comparison. It’s going to expand Silicon Valley’s surveillance-based business model into physical space, and make money from monitoring everything we do.

Silicon Valley is an extractive industry. Its resource isn’t oil or copper, but data. Companies harvest this data by observing as much of our online activity as they can. This activity might take the form of a Facebook like, a Google search, or even how long your mouse hovers in a particular part of your screen. Alone, these traces may not be particularly meaningful. By pairing them with those of millions of others, however, companies can discover patterns that help determine what kind of person you are – and what kind of things you might buy.

These patterns are highly profitable. Silicon Valley uses them to sell you products or to sell you to advertisers. But feeding the algorithms that produce these patterns requires a steady stream of data. And while that data is certainly abundant, it’s not infinite.

A hundred years ago, you could dig a hole in Texas and strike oil. Today, fossil fuel companies have to build drilling platforms many miles offshore. The tech industry faces a similar fate. Its wildcat days are over: most of the data that lies closest to the surface is already claimed. Together, Facebook and Google receive a staggering 76% of online advertising revenue in the United States.

An Amazon Go ‘smart’ store in Seattle. The company’s acquisition of Whole Foods signals a desire to fuse online surveillance with brick-and-mortar business. Photograph: Paul Gordon/Zuma Press / eyevine

To increase profits, Silicon Valley must extract more data. One method is to get people to spend more time online: build new apps, and make them as addictive as possible. Another is to get more people online. This is the motivation for Facebook’s Free Basics program, which provides a limited set of internet services for free in underdeveloped regions across the globe, in the hopes of harvesting data from the world’s poor.

But these approaches leave large reservoirs of data untapped. After all, we can only spend so much time online. Our laptops, tablets, smartphones, and wearables see a lot of our lives – but not quite everything. For Silicon Valley, however, anything less than total knowledge of its users represents lost revenue. Any unmonitored moment is a missed opportunity.

Amazon is going to show the industry how to monitor more moments: by making corporate surveillance as deeply embedded in our physical environment as it is in our virtual one. Silicon Valley already earns vast sums of money from watching what we do online. Soon it’ll earn even more money from watching what we do offline.

It’s easy to picture how this will work, because the technology already exists. Late last year, Amazon built a “smart” grocery store in Seattle. You don’t have to wait in a checkout line to buy something – you just grab it and walk out of the store. Sensors detect what items you pick up, and you’re charged when you leave.


Imagine if your supermarket watched you as closely as Facebook or Google

Amazon is keen to emphasize the customer benefits: nobody likes waiting in line to pay for groceries, or fumbling with one’s wallet at the register. But the same technology that automates away the checkout line will enable Amazon to track every move a customer makes.

Imagine if your supermarket watched you as closely as Facebook or Google does. It would know not only which items you bought, but how long you lingered in front of which products and your path through the store. This data holds valuable lessons about your personality and your preferences – lessons that Amazon will use to sell you more stuff, online and off.

Supermarkets aren’t the only places these ideas will be put into practice. Surveillance can transform any physical space into a data mine. And the most data-rich environment, the one that contains the densest concentration of insights into who you are, is your home.

That’s why Amazon has aggressively promoted the Echo, a small speaker that offers a Siri-like voice-activated assistant called Alexa. Alexa can tell you the weather, read you the news, make you a to-do list, and perform any number of other tasks. It is a very good listener. It faithfully records your interactions and transmits them back to Amazon for analysis. In fact, it may be recording not only your interactions, but absolutely everything.

Putting a listening device in your living room is an excellent way for Amazon to learn more about you. Another is conducting aerial surveillance of your house. In late July, Amazon obtained a patent for drones that spy on people’s homes as they make deliveries. An example included in Amazon’s patent filing is roof repair: the drone that drops a package on your doorstep might notice your roof is falling apart, and that observation could result in a recommendation for a repair service. Amazon is still testing its delivery drones. But if and when they start flying, it’s safe to assume they’ll be scraping data from the outside of our homes as diligently as the Echo does from the inside.

  Silicon Valley is an extractive industry. Its resource isn’t oil or copper, but data. And to increase profits, Silicon Valley must extract more. Photograph: Spencer Platt/Getty Images

Amazon is likely to face some resistance as it colonizes more of our lives. People may not love the idea of their supermarkets spying on them, or every square inch of their homes being fed to an algorithm. But one should never underestimate how rapidly norms can be readjusted when capital requires it.

A couple of decades ago, letting a company read your mail and observe your social interactions and track your location would strike many, if not most, as a breach of privacy. Today, these are standard, even banal, aspects of using the internet. It’s worth considering what further concessions will come to feel normal in the next 20 years, as Silicon Valley is forced to dig deeper into our lives for data.

Tech’s apologists will say that consumers can always opt out: if you object to a company’s practices, don’t use its services. But in our new era of monopoly capitalism, consumer choice is a meaningless concept. Companies like Google and Facebook and Amazon dominate the digital sphere – you can’t avoid them.

The only solution is political. As consumers we’re nearly powerless, but as citizens, we can demand more democratic control of our data. Data is a common good. We make it together, and we make it meaningful together, since useful patterns only emerge from collecting and analyzing large quantities of it.

No reasonable person would let the mining industry unilaterally decide how to extract and refine a resource, or where to build its mines. Yet somehow we let the tech industry make all these decisions and more, with practically no public oversight. A company that yanks copper out of an earth that belongs to everyone should be governed in everyone’s interest. So should a company that yanks data out of every crevice of our collective lives.

Surge pricing comes to the supermarket

Tim Adams in The Guardian

In 1861 a shopkeeper in Philadelphia revolutionised the retail industry. John Wanamaker, who opened his department store in a Quaker district of the city, introduced price tags for his goods, along with the high-minded slogan: “If everyone was equal before God, then everyone would be equal before price.” The practice caught on. Up until then high-street retailers had generally operated a market-stall system of haggling on most products. Their best prices might be reserved for their best customers. Or they would weigh up each shopper and make a guess at what they could afford to pay and eventually come to an agreement.

Wanamaker’s idea was not all about transparency, however. Fixed pricing changed the relationship between customer and store in fundamental ways. It created the possibilities of price wars, loss leaders, promotional prices and sales. For the first time people were invited to enter stores without the implied obligation to buy anything (until then shops had been more like restaurants; you went in on the understanding that you wouldn’t leave without making a purchase). Now customers could come in and look and wander and perhaps be seduced. Shopping had been invented.


If you have enough data you can get closer to the ideal of giving your customers what they want at the time they want it - Roy Horgan, Market Hub CEO

For the last 150 years or so, Wanamaker’s fixed-price principle has been a norm on the high street. Shoppers might expect the price of bread or fish or vegetables to go down at the end of a day, or when they neared a sell-by date, but they would not expect prices to fluctuate very often on durable goods, and they would never expect the person behind them in the queue to be offered a different price to the one they were paying. That idea is no longer secure. Technology, for better and worse, through the appliance of big data and machine intelligence, can now transport us back to the shopping days of before 1861.

The notion of “dynamic pricing” has long been familiar to anyone booking a train ticket, a hotel room or holiday (Expedia might offer thousands of price changes for an overnight stay in a particular location in a single day). We are used to prices fluctuating hour by hour, apparently according to availability. Uber, meanwhile, has introduced – and been criticised for – “surge pricing”, making rapid adjustments to the fares on its platform in response to changes in demand. During the recent tube strikes in London, prices for cab journeys ‘automatically” leapt 400%. (The company argued that by raising fares it was able to encourage more taxi drivers to take to the streets during busy times, helping the consumer.)

What we are less aware of is the way that both principles have also invaded all aspects of online retailing – and that pricing policies are not only dependent on availability or stock, but also, increasingly, on the data that has been stored and kept about your shopping history. If you are an impulse buyer, or a full-price shopper or a bargain hunter, online retailers are increasingly likely to see you coming. Not only that: there is evidence to suggest that calculations about what you will be prepared to pay for a given product are made from knowledge of your postcode, who your friends are, what your credit rating looks like and any of the thousands of other data points you have left behind as cookie crumbs in your browsing history.

Facebook has about 100 data points on each of its 2 billion users, generally including the value of your home, your regular outgoings and disposable income – the kind of information that bazaar owners the world over might have once tried to intuit. Some brokerage firms offering data to retailers can provide more than 1,500 such points on an individual. Even your technology can brand you as a soft touch. The travel site Orbitz made headlines when it was revealed to have calculated that Apple Mac users were prepared to pay 20-30% more for hotel rooms than users of other brands of computer, and to have adjusted its pricing accordingly.

The algorithms employed by Amazon, with its ever-growing user database, and second-by-second sensitivity to demand, are ever more attuned to our habits and wishes. Websites such as camelcamelcamel.com allow to you monitor the way that best-buy prices on the site fluctuate markedly hour by hour. I watched the price of a new vacuum cleaner I had my eye on – the excitement! – waver like the graph of a dodgy penny stock last week. What is so far less certain is whether those price changes are ever being made just for you. (Amazon insists its price changes are never attempts to gather data on customers’ spending habits, but rather to give shoppers the lowest price available.)

Until quite recently this facility to both monitor the market and give consumers best price offers has looked like another advantage of the digital retailer over its bricks and mortar counterpart. Recently there have been efforts to address that inequality and replicate the possibilities of dynamic pricing on the high street.

Ever since data has been collected on customer purchases it has been possible to place shoppers into what analysts call “different consumer buckets”: impulse shoppers who were likely to buy sweets at the checkout counter; Fitbit obsessives willing to pay over the odds for organic kale. In her cheerily titled book Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy Cathy O’Neil notes how by 2013, as part of a research project by the consultant Accenture using data from a major retailer, “it was possible to estimate how much it would cost to turn each shopper from one brand of ketchup or coffee to another more profitable brand. The supermarket could then pick out, say, the 15% most likely to switch and provide them with coupons. Smart targeting was essential, [as] they didn’t want to give coupons to shoppers happy to pay full price.”

Dynamic pricing is familiar to users of online travel websites such as Expedia. Photograph: Alamy

The obstacle to creating such “smart” pricing strategies in store has been the stubbornness of the paper price tag. A price change in most British retailers still involves a laconic employee manually updating them. In that, the UK currently lags quite far behind its neighbours in Europe (a fact noted last year by Nick Boles, then minister for skills, who praised French retailers for having systems that could change prices “90,000 times a day” while we still had minimum-wage employees traipsing along the aisles). Electronic price tags, which allow those 90,000 dynamic price changes, are a fact of life in most larger stores not only in France, but also in Germany and Scandinavia.

Within a couple of years it is likely they will become the norm here too – not least because cheap “price gun” labour might be harder to come by for supermarkets post-Brexit. That is certainly the view of Roy Horgan, chief executive of a company called Market Hub, which not only offers electronic shelf labels but also data analysis to keep prices competitive. Market Hub was created in 2010 by Horgan in part as a response to what he saw as a “race to the bottom” by retailers in his native Ireland in response to the financial crash. “We just thought that this can’t be the way to compete,” he says. “One of the things we are sure of is if you are copying your competitors’ strategy and you are losing, then they are losing too…” There had to be a smarter way.

Earlier this year the French market leader SES took a majority share in Horgan’s firm, giving it access to 15,000 stores. Only two or three of those at the moment are in Britain – Spar stores in Walthamstow and Hackney in London, where they are experimenting with dynamic pricing in the food hall, particularly with bread. The retailers show not only an uplift in revenue and profit (of 2.5%), but also a drop in wasted food of around 30%, according to Market Hub. They are selling their products in part as an eco-efficient system that prevents waste.

“When we set out,” Horgan says, “there were literally hundreds of startups analysing where customers were going in the store, or whatever. But there was also a ‘so what?’ about that. It didn’t make any difference without the ability to execute price [changes] and to make that change at the shelf. We developed a piece of software called Pulse, which analyses sales, weight, stock, and competitors’ prices that allows you to basically decide or not decide to take a trade. A city centre store will want to catch customers at the end of the day before they head home, so what level do you set your price at?”

Horgan suggests that British retailers are still a bit terrified that customers will be put off by changing prices – they notice one shift in price of a loaf of bread, but don’t see 50 changes of price in the vacuum cleaner they are browsing on Amazon. He believes that the system can benefit both consumer and retailer though, because it is about getting the right deal. “If you have enough data you can get closer and closer to the ideal, which is giving your customers what they want and at the time they want it, rather than overwhelming them with deals.”

It also perhaps has the potential to offer a glimmer of hope for the beleaguered high street. Shops are all too aware of the habit of “showrooming”, by which customers look at products in stores before going home and browsing the best deals for them online. Electronic price-tag systems can not only track online prices, they can – and sometimes do – also display at point of sale the hidden cost of shipping if the same product was bought online – a cost that most online customers don’t factor in. “There is a way for [high street] retailers to become profitable again,” Horgan insists.

So far, such systems have not entered the murkier waters of using the data to offer different customers different prices for the same product at the same moment. A couple of years ago B&Q tested electronic price tags that display an item’s price based on who was looking at it, using data gathered from the customer’s mobile phone, in the hope, the store insisted, “of rewarding regular customers with discounts and special offers” – rather than identifying who might pay top price for a product based on their purchasing history.

That trial hasn’t become a widespread practice, although with the advent of electronic systems and the greater possibilities of using your phone apps as a means of payment, it is probably only a matter of time. Should such pricing policies alarm us? The problem, as with all data-based solutions, is that we don’t know – no one knows – exactly which “consumer bucket” we have been put in and precisely why. In 2012, a Wall Street Journal investigation discovered that online companies including the office-supply store Staples and the furniture retailer Home Depot showed customers different prices based on “a range of characteristics that could be discovered about the user”. How far, for example, a customer was from a bricks-and-mortar store was factored in for weighty items; customers in locations with a higher average income – and perhaps more buying choice – were generally shown lower prices. Another study, in Spain, showed that the price of the headphones Google recommends to you in its ads correlated with how budget-conscious your web history showed you to be.

Increasingly, there is no such thing as a fixed price from which sale items deviate. Following a series of court judgments against other retailers advertising bogus sale prices, Amazon has tended to drop most mentions of “list price” or recommended retail price, and use instead the reference point of its own past prices.

This looks a lot like the beginning of the end of John Wanamaker’s mission to establish “new, fair and most agreeable relations between the buyer and the seller” and to establish something closer to a comparison site that works both ways – we will be looking for the low-selling retailer, while the retailer will equally be scanning for the high-value customer. The old criticism that consumer societies know the price of everything and the value of nothing is under threat: even the former certainty is up for debate.

Store wars: the future of shopping

Vending machines 2.0

Smart-Vend-Solutions-facial-recognition-vending-machine-in-use

The Luxe X2 Touch features facial recognition software to identify users and suggest purchases based on spending history or context, such as iced drinks on a hot day. It can also prevent children from buying cigarettes or alcohol, or keep hospital patients away from sugary or salty foods.

The Amazon Go store

The Seattle store is the first to eliminate checkout lines by using a mobile app. Customers simply scan their smartphone on entry and pick up what they want. Computer vision technology keeps track of their purchases and their Amazon account is debited when they are finished.

Automated assistants

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US home improvement store Lowe is introducing a new employee into its workforce: a robot that finds products for you. The robots, which will start roaming the aisles in San Jose, California, during the course of the year, speak several languages and can answer customers’ questions.

Beacons of hope

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Beacons are small, battery-operated, wireless devices that transmit a bluetooth signal to an appropriate smartphone app. This technology can be used to nudge customers into the store, suggest offers and purchases, and also stores information to monitor customer behaviour.

The Starship delivery bot

FacebookTwitterPinterest Photograph: Starship Technologies/PA


Conceived by the founders of Skype, this is designed to deliver anything from groceries to books. The autonomous six-wheeled robot is speedy and saves you from lugging shopping bags, although it is questionable how safe it will be roaming the streets of Britain.

Pop-up shops

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How airlines and Uber rip you off

Arwa Mahadwi in The Guardian


 

Flighty prices: many airlines employ ‘dynamic pricing’ – and the practice is growing. Photograph: Getty Images/iStockphoto


Even rocket scientists, I would wager, are befuddled by airline pricing. One minute, a flight you’re looking at costs £400; 30 seconds later it has increased by £100. Panic sets in; you buy a ticket before it ascends out of your price range.

I experienced this fluctuation frustration recently while trying to buy a ticket home to London from New York for Christmas. After about a gazillion visits to British Airways’ website, I decided finally to book something. Immediately, the price went up. That’s OK, I thought, trying to console myself. I read on Twitter that London has gone all Islamic anyway and Christmas has been banned. Probably nothing to go home to any more, just ritual stonings and sharia. Then I remembered a rumour that clearing your browser cookies could get you a cheaper flight. I gave it a go and, voila, the flight reverted to its earlier, cheaper price.

The thinking behind the cookies trick is that airlines can tell from your browser history when you’re particularly interested in a flight – and thus willing to pay a higher price – and take advantage of this. Whether this is true is known only to a few (when the Guardian asked BA about this in 2010 they said they didn’t use cookies this way). What is clear, however, is that airlines – and many other companies – are increasingly moving towards “personalised pricing”. Sometimes called “differential pricing” or “price discrimination”, this means charging customers different prices for the same product based on how much they think people are willing to pay.

Price discrimination, to be clear, is not the same as “dynamic pricing”. Airlines have practised dynamic pricing for a long time: there are a set number of prices available, and you get a different fare based on factors including when you book and the availability of seats on the flight. Prices, however, are starting to get more personal. In 2014, a US regulator approved an industry-wide system, the implementation of which started only recently, that allows airlines and travel agencies to collect personal data – information such as marital status, address and travel history – and use that data to offer you “more agile pricing and more personalised offerings”. So, if an airline can see that you live in a fancy neighbourhood and regularly fly business-class, it may offer you a higher fare than it would someone whom it believes is more price-sensitive. As technology grows more sophisticated, companies may be able to serve you higher prices based on factors such as your emotional state.

Businesses are already using customised pricing online based on information they can glean about you. It is hard to know how widespread the practice is; companies keep their pricing strategies closely guarded and are wary of the bad PR price discrimination could pose. However, it is clear that a number of large retailers are experimenting with it. Staples, for example, has offered discounted prices based on whether rival stores are within 20 miles of its customers’ location. Office Depot has admitted to using its customers’ browsing history and location to vary its range of offers and products. A 2014 study from Northeastern Universityfound evidence of “steering” or differential pricing at four out of 10 general merchandise websites and five out of five travel websites. (Steering is when a company doesn’t give you a customised price, but points you towards more expensive options if it thinks you will pay more.) The online travel company Orbitz raised headlines in 2012 when it emerged that the firm was pointing Mac users towards higher-priced hotel rooms than PC users.

Price discrimination doesn’t happen only online. Supermarkets have used personalised pricing based on information gleaned from loyalty cards and shopping habits. Broadly speaking, economists tend to think of price discrimination as a good thing for businesses and customers. Essentially, it is algorithms robbing from the rich to subsidise the poor, all while growing a company’s market.

There is the potential for this to go further still and for customised pricing to help reduce some of the inequities in society. In Finland, speeding tickets are linked to income, a system known as progressive punishment. Could we not have progressive pricing, a system where the cost of necessities such as bread and milk is linked to your ability to pay for them?

However, it seems more likely that companies will exploit the increasing amounts of data they have about us to our detriment. Take Uber, for example. Its much-hated “surge pricing” is an example of dynamic pricing: prices change according to supply and demand. They don’t change according to how desperate you, as an individual, are to get a cab, but this may not be the case for long. Uber knows a hell of a lot about you – including, for example, how low the battery is on your phone. It also has data that shows people are more likely to pay surge pricing when their phone battery is low. “We absolutely don’t use that ... but it’s an interesting kind of psychological fact of human behaviour,” a behavioural economist at Uber said earlier this year. This may be true, but why do you think Uber employs behavioural economists? It is not simply to marvel at the psychology of human behaviour.

As airlines become more adept at gathering and exploiting data, I shudder to think what “interesting facts” of human behaviour they will start to factor into their pricing strategies. Fares will stop being linked to variables such as seats already sold and start fluctuating according to how many times your mum has texted you to ask if you’ve bought your ticket yet, and how guilty you feel that you haven’t. Good luck trying to clear your cookies to fix that.

How friendship became a tool of the powerful

William Davies in The Guardian

Imagine walking into a coffee shop, ordering a cappuccino, and then, to your surprise, being informed that it has already been paid for. Where did this unexpected gift come from? It transpires that it was left by the previous customer. The only snag, if indeed it is a snag, is that you now have to do the same for the next customer who walks in.

This is known as a “pay-it-forward” pricing scheme. It is something that has been practised by a number of small businesses in California, such as the Karma Kitchen in Berkeley and, in some cases, customers have introduced it spontaneously. On the face of it, it would seem to defy the logic of free-market economics. Markets, surely, are places where we are allowed, even expected, to behave selfishly. With its hippy idealism, pay-it-forward would appear to go against the core tenets of economic calculation.

But there is more to it than this. Researchers from the decision science research group at the University of California, Berkeley have looked closely at pay-it-forward pricing and discovered something with profound implications for how markets and businesses work. It transpires that people will generally pay more under the pay-it-forward model than under a conventional pricing system. As the study’s lead author, Minah Jung, puts it: “People don’t want to look cheap. They want to be fair, but they also want to fit in with the social norms.” Contrary to what economists have long assumed, altruism can often exert a far stronger influence over our decision-making than calculation.

Such findings are typical of the field of behavioural economics, which emerged in the late 1970s. Like regular economists, behavioural economists assume that individuals are usually motivated to maximise their own benefit – but not always. In certain circumstances, they are social and moral animals, even when this appears to undermine their economic interests. They follow the herd and act according to certain rules of thumb. They have some principles that they will not sacrifice for money at all.

It seems that this undermines the cynical, individualist theory of human psychology, which lies at the heart of orthodox economics. Could it be that we are decent, social creatures after all? A great deal of neuroscientific research into the roots of sympathy and reciprocity supports this. Optimists might view this as the basis for a new political hope, of a society in which sharing and gift-giving offer a serious challenge to the power of monetary accumulation and privatisation.

But there is also a more disturbing possibility: that the critique of individualism and monetary calculation is now being incorporated into the armoury of utilitarian policy and management. One of the key insights of behavioural economics is that, if one wants to control other human beings, it is often far more effective to appeal to their sense of morality and social identity than to their self-interest.

This is symptomatic of a more general shift in policy and business practices today. Across various fields of expertise, from healthcare to marketing, from military training to finance, there is rising hope that strategic goals can be achieved through harnessing the power of the “social”. But what exactly does this mean? As the era of social democracy recedes further into the past, the meaning of the term is undergoing a profound transformation. Where once the term implied something concerning society or the common good, increasingly it refers to a technique of psychological intervention on the individual. Informal social connections and friendships are being rendered more visible and measurable. In the process, they are being turned into possible instruments of power.

Using the social to make money

Over recent years, generosity has become big business. In 2009, Chris Anderson, former editor of Wired magazine, published Free: The Future of a Radical Price. Anderson argued that there was now a strong business case for giving products and services away for free, in order to forge better relationships with customers. Giving things away for free becomes a means of holding an audience captive or building a reputation, which can then be exploited with future sales or advertising. Michael O’Leary, boss of Ryanair, has even suggested that airline tickets might one day be priced at zero, with all costs recovered through additional charges for luggage, using the bathroom, skipping queues, and so on.

What Anderson was highlighting was the potential of non-monetary relationships to increase profits. And just as corporate giving can be used as a way of boosting revenue, so can the magic words that are used in return. Marketing specialists now analyse the optimal way of saying the words “thank you” to a customer, so as to deepen the social relationship with them.

The language of gratitude has infiltrated a number of high-profile advertising campaigns. Around Christmas 2013, Lloyds TSB, one of the British banks to bemost embarrassed by the 2008 financial crisis, launched a campaign consisting entirely of cutesy images of childhood friends enjoying happy moments together, concluding with the words “thank you”, written in party balloons. There was no mention of money. More bizarrely, Tesco, whose brand has suffered in recent years, released a series of YouTube videos in 2013 with men in Christmas jumpers singing “thank you” to everyone from the person who cooks Christmas dinner, to those driving safely, to other companies such as Instagram and so on. Tesco, it was implied, sprays gratitude in all directions, regardless of its own private interests.

There is inevitably a limit to how much of a social bond an individual can have with a multinational company. Businesses today are obsessed with being social, but what they typically mean by this is that they are able to permeate peer-to-peer social networks as effectively as possible. Brands hope to play a role in cementing friendships, as a guarantee that they will not be abandoned for more narrowly calculated reasons. So, for example, Coca-Cola has tried a number of somewhat twee marketing campaigns, such as putting individual names (“Sue”, “Tom”, etc) on their bottles as a way to encourage gift-giving. Managers hope that their employees will also act as “brand ambassadors” in their everyday social lives. Meanwhile, neuromarketers have begun studying how successfully images and advertisements trigger common neural responses in groups, rather than in isolated individuals. This, it seems, is a far better indication of how larger populations will respond to advertising.

All this – along with the rise of the “sharing economy”, exemplified by Airbnb and Uber, offers a simple lesson to big business. People will take more pleasure in buying things if the experience can be blended with something that feels like friendship and gift-exchange. The role of money must be airbrushed out of the picture wherever possible. As marketers see it, payment is one of the unfortunate “pain points” in any relationship with a customer, which requires anaesthetising with some form of more social experience. The market must be represented as something else entirely.

Digitising the social

Yet the greatest catalyst for the new business interest in being social is, unsurprisingly, the rise of social media. At the same time that behavioural economics has been highlighting the various ways in which we are altruistic creatures, social media offers businesses an opportunity to analyse and target that social behaviour. It allows advertising to be tailored to specific individuals, on the basis of who they know, and what those other people like and purchase. These practices, which are collectively referred to as “social analytics”, mean that tastes and behaviours can be traced in unprecedented detail. The end goal is no different from what it was at the dawn of marketing and management in the late 19th century: making money. What has changed is that each one of us is now viewed as an instrument through which to alter the attitudes and behaviours of our friends and contacts. Behaviours and ideas can be released like “contagions”, in the hope of infecting much larger networks.

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The most valuable trick, from a marketing perspective, is how to induce individuals to share positive brand messages and adverts with each other, almost as if there were no public advertising campaign at all. The business practice known as “friendvertising” involves creating images and video clips that social media users are likely to share with others, for no conscious commercial purpose of their own. The science of viral marketing, or the creation of buzz, has led marketers to seek lessons from social psychology, social anthropology and social network analysis.

Businesses have long worried about their public reputations and the commitment of their employees. It also goes without saying that informal social networks themselves are as old as humanity. Despite the countercultural rhetoric of the “sharing economy”, what has changed is not the role of the social in capitalism, but the capacity to subject it to a detailed, quantitative, economic analysis, thanks primarily to the digitisation of social relationships.

In the longer term, the most profound cultural and ethical implications of this may be how we come to view ourselves and those around us. As data about social ties becomes easier to collect and access, and as concepts of duty and altruism become increasingly understood by economists (as the pay-it-forward study exemplifies), the temptation to ask self-interested, strategic questions about one’s own social circle will arise. Applying the mentality of cost-benefit analysis beyond the realms of the market is often controversial to start with, but can quickly become normal. Government economists today have no problem calculating the price of human life or the natural environment, if it is useful for purposes of policy appraisal.

Could we come to view our own personal acts of generosity and friendship in a similarly utilitarian sense? The evidence to support such an egocentric logic is growing rapidly. The area where there could be most to gain from such calculations is in the domain of health: social contact is good for us, in both body and mind. Just be sure that it is contact with the right people.

Using the social to improve health

In February 2010, I found myself sitting in a large hall, with a huge golden throne on my left, and the future leader of the Labour party, Ed Miliband, to my right. We were watching images on a screen that reminded me of the fractal videos that used to be sold by “herbal remedy” salesmen on Camden market in London in the early 1990s. Also present were a number of government policy advisers, all straining to appear as relaxed as possible – a status game that goes on in the corridors of power, played to indicate that one is at home there. (The game was won under the coalition government by David Cameron’s former adviser, Steve Hilton, who was notorious for wandering into meetings barefoot.)

There were about 10 of us in the room, one of the more baroque offices in the Cabinet Office, and we were all staring at the screen, transfixed by the movement of individual lines and dots that were being displayed. Standing next to the screen, clearly enjoying the impact that his video was having on this influential audience, was the American medical sociologist Nicholas Christakis. Christakis was on a speaking tour, promoting his book Connected, and had been invited to present some of his findings to British policymakers during the dying days of Gordon Brown’s government. As a sociologist with an interest in policy, I had been invited along.

Christakis is an unusual sociologist. Not only is he far more mathematically adept than most, but he has also published a number of articles in respected medical journals. The images we were watching on the screen that day represented social networks in a Baltimore neighbourhood, within which particular “behaviours” and medical symptoms were moving around. Christakis’s message to the assembled policymakers was a powerful one. Problems such as obesity, poverty and depression, which so often coincide, locking people into chronic conditions of inactivity, are contagious. They move around like viruses in social networks, creating risks to individuals purely by virtue of the people they happen to hang out with.

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Christakis is part of a growing movement within the policy world. While marketers desperately seek to penetrate our social networks in order to alter our tastes and desires, policymakers have come to view social networks as means of improving our health and wellbeing. The “social neuroscience” pioneered by John Cacioppo of the University of Chicago suggests that the human brain has evolved in such a way as to depend on social relationships. Cacioppo’s research suggests that loneliness is an even greater health risk than smoking. Practices such as “social prescribing”, in which doctors recommend that individuals join a choir or voluntary organisation, are aimed at combating isolation and its tendency to lead to depression and chronic illness.

Driven particularly by neuroscience, the expert understanding of social life and morality is rapidly merging into the study of the body. One social neuroscientist, Matt Lieberman, has shown how pains that we have traditionally treated as emotional (such as separating from a lover) involve the same neurochemical processes as those we typically view as physical (such as breaking an arm). Social science and physiology are converging into a new discipline, in which human bodies are studied for the ways they respond to one another physically.

At the Cabinet Office presentation, there was something mesmeric and seductive about Christakis’s images. Could entrenched social problems really be represented by graphics of this sort? Christakis’s technical prowess was certainly alluring. In the grand tradition of American GIs bringing chewing gum and nylon stockings to the British during the second world war, his hi-tech social network analysis seemed novel and irresistible.

But what I found slightly surreal that day, aside from the gold throne, was the freakish view of this particular inner-city US community that we were privy to. Like the social analytics companies, which try to spot consumer behaviour as it emerges and spreads, there we were in London observing how the dietary habits and health problems of a few thousand relatively deprived Baltimore residents were moving around, like a disease. It felt as if we were viewing an ant colony from above. The fact that these flickering images represented human beings, with relationships, histories and agendas, was almost incidental.

It would seem a little perverse to suggest that policymakers ignore this evidence of the impact of social networks and altruism on health. If medical practitioners can change the behaviour of just a few influential people in a network for the better, they can potentially spread a more positive “contagion”. Yet there is a danger lurking in this worldview, which is the same problem that afflicts all forms of social network analysis. In reducing the social world to a set of mechanisms and resources, the question repeatedly arises as to whether social networks might be redesigned in ways to suit the already privileged. Networks have a tendency towards what are called power laws, whereby those with influence are able to harness that power to win even greater influence.

One example of this is known as “emotional contagion”. Psychologists working with social analytics can now track the spread of positive and negative emotions, as they travel through social networks. This was the topic of Facebook’s controversial experiment using newsfeed manipulation, the results of which were published last summer. Different moods, including anger and depression, are now recognised to be more socially contagious than others. But what will we do with this knowledge? The anxiety, as social life becomes swept up by quantitative analysis, is that happy, healthy individuals might tailor their social relationships in ways that protect them against the “risk” of unhappiness. Guy Winch, an American psychologist who has studied this phenomenon, advises happy people to be on their guard. “If you find yourself living with or around people with negative outlooks,” he wrote on the website Psychology Today, “consider balancing out your friend roster.” The impact of this rebalancing on those unfortunate friends with the “negative outlooks” is all too easy to imagine.

The fabric of social life is now a problem that is addressed within the rubric of health policy, and there is something a little sad about that. Loneliness now appears as an objective problem, but only because it shows up in the physical brain and body, with calculable costs for governments and health insurers. Generosity and gratitude are urged upon people by positive psychologists, but mainly to alleviate their own mental health problems and private misery. And friendship ties within poor inner-city neighbourhoods have become a topic of government concern, but only to the extent that they mediate epidemics of bad nutrition and costly inactivity.

The irony is that, for all the talk of giving and sharing, this is potentially an even more egocentric worldview than that associated with the market. The cornerstone of orthodox economics, dating back to Adam Smith, is that self-interest in the marketplace is ultimately beneficial for society. The era of social optimisation looks set to stand this claim upside down: being social in your everyday life is worth it, because it will ultimately deliver benefits back to you. The trouble is that our appetites for this new commodity can spiral out of control.

Addicted to contact

Over the past decade, the ubiquity of digital media – and social media in particular – has become a lightning rod for media hysteria. The internet or Facebook can be blamed for the fact that young people are increasingly narcissistic, unable to make commitments to one another or concentrate on anything that is not interactive, and so on. There is indeed some evidence to suggest that individuals who use social media compulsively are more egocentric, prone to exhibitionism and grandiose behaviour. But rather than treat the technology as some virus that has corrupted people psychologically and neurologically, it is worth standing back and reflecting on the broader cultural logic at work here.

What makes social media so compulsive, even addictive? It is the experience of social life, stripped of all its frustrations and obligations. People who cannot put down their smartphones are not engaging with images or gadgetry for the sake of it: they are desperately seeking some form of human interaction, but of a kind that does nothing to limit their personal, private autonomy.

 FacebookTwitterPinterest Illustration by Pete Gamlen

What we witness, in the case of a social media addict, is only the more pathological element of a society that cannot conceive of relationships except in terms of the psychological pleasures that they produce. The person whose fingers twitch to check their Facebook page when they are supposed to be listening to their friend over a meal is a victim of a philosophy in which other people are only there to please, satisfy and affirm an individual ego from one moment to the next. This inevitably leads to vicious circles: once a social bond is stripped down to this impoverished psychological level, it becomes harder and harder to find the satisfaction that one wants. Viewing other people as instruments for one’s own pleasure represents a denial of the core ethical and emotional truths of friendship, love and generosity.

One grave shortcoming of this egocentric idea of the social is that none (or at least, vanishingly few) of us can ever constantly be the centre of attention, receiving praise. And so it also proves with Facebook. As an endless stream of exaggerated displays of positivity or success, Facebook often serves to make people feel worse about themselves and their own lives. The mathematics of networks means that most people will have fewer friends than average, while a small number of people will have far more than average. The tonic to this sense of inferiority is to make one’s own exaggerated displays of positivity or success, to seek the gaze of the other, thereby reinforcing a collective vicious circle. As positive psychologists are keen to stress, this inability to listen or empathise is a significant contributor to depression.

If wellbeing resides in discovering relationships that are less ego-oriented, less purely hedonistic, than those an individualistic society offers, then Facebook and similar forms of social media are rarely a recipe for happiness. It is true that there are specific uses of social media that lend themselves towards stronger, more fulfilling social relations. One group of positive psychologists has drawn on its own evidence of what types of social relations lead to greater happiness, to create a new social media platform, Happier, designed around expressions of gratitude and generosity, which are recognised to be critical ingredients of mental wellbeing.

What remains unquestioned by such efforts to redesign social networks for greater wellbeing is the underlying logic, which implies that relationships are there to be created, invested in and – potentially – abandoned, in pursuit of individual optimisation. The darker implication of strategically pursuing positive emotion via relationships is that the relationship is only as good as the psychic value that it delivers. “Friend rosters” may need to be “balanced”, if it turns out that one’s friends are not spreading enough pleasure or happiness.

Neoliberal socialism

Our society is excessively individualistic. Markets reduce everything to a question of individual calculation and selfishness. Unless we can recover the values associated with friendship and altruism, we will descend into a state of ennui.

These types of claims have animated various critiques of capitalism and markets for centuries. They have often provided the basis of arguments for reform, whether moderate attempts to restrain the reach of markets, or more wholesale demands to overhaul the capitalist system. Today, the same types of lament can be heard, but from some very different sources. Now, the gurus of marketing, behavioural economics, social media and management are first in line to attack the individualistic and materialist assumptions of the marketplace. But what they are offering instead is a marginally different theory of individual psychology and behaviour, in which the social is primarily an instrument for one’s own medical, emotional or monetary gain.

What we encounter in the current business, media and policy euphoria for being social is what might be called “neoliberal socialism”. Sharing is preferable to selling, so long as it does not interfere with the financial interests of dominant corporations. Appealing to people’s moral and altruistic sense becomes the best way of nudging them into line with agendas that they had no say over. Brands and behaviours can be unleashed as social contagions, without money ever changing hands. Empathy and relationships are celebrated, but only as particular habits that happy individuals have learned to practise. Everything that was once external to economic logic, such as friendship, is quietly brought within it.

How would one break out of this trap? The example of “social prescribing” by doctors is an enticing one. While it starts from a utilitarian premise, that individuals can improve their wellbeing through joining associations and working collaboratively, it also points towards the institutions to make this happen, and not simply more cognitive or behavioural tips. If people have become locked in themselves, gazing enviously at others, this poses questions that need institutional, political, collective answers. It cannot be alleviated simply with psychological appeals to the social, which can exacerbate the very problems they aim to alleviate, once combined with digital media and the egocentric model of connectivity those media facilitate. There is a crucial question of how businesses, markets, policies, laws and political participation might be designed differently to sustain meaningful social relationships, but it is virtually never confronted by the doyens of social capitalism.

It is not very long since the internet offered hope for different forms of organisation altogether. As the cultural and political theorist Jeremy Gilbert has argued, we should remember that it was only a few years ago that Rupert Murdoch’s media empire was completely defeated in its efforts to turn Myspace into a profitable entity. The tension between the logic of the open network and the logic of private investment could not be resolved, and Murdoch lost half a billion dollars. Facebook has had to go to great lengths to ensure that the same mistakes are not made – particularly by anchoring online identities in “real” offline identities, and tailoring its design around the interests of marketers and market researchers. Perhaps it is too early to say that it has succeeded.

The reduction of social life to psychology, or to physiology as achieved by social neuroscience, is not necessarily irreversible. Karl Marx believed that by bringing workers together in the factory and forcing them to work together, capitalism was creating the very class formation that would eventually overwhelm it. This was despite the “bourgeois ideology” that stressed the primacy of individuals transacting in a marketplace. Similarly, individuals today may be brought together for their own mental and physical health, or for their own private hedonistic kicks; but social congregations can develop their own logic, which is not reducible to that of individual wellbeing or pleasure. This is the hope that currently lies dormant in this new, neoliberal socialism.