AI Agents Are Already Changing the Price of Goods

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Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracey Allaway.

And I'm Joe Wiesenthal.

Joe, have you tried Muse yet?

Muse. Yeah. Actually, I did use it, and I found it to be very impressive on day 1, and it actually saved me several thousand dollars because it identified something in email that I had missed. But then I haven't used it since. And I've actually seen the stats of 1...

Like, bunch of people installed it and usage has tailed off, but it was like, Woah, this is very powerful.

What did it identify?

It was, I'm dealing with something with my house or something, and someone sent me a long email, and it was so long that I didn't bother to read the last paragraph. Turned out there were some important details in that paragraph.

Okay. So it it read for you.

Yeah. It read for me.

Alright. I thought you were gonna say something about the actual wallet and shopping aspect because 1 of the things that's being pitched when it comes to Muse is this idea, well, now you have a personal shopper kind of at your fingertips. And so there's a democratization of shopping where you can tell the agent to go out and find deals for you and scan thousands of prices and come up with, I guess, the best opportunity for you.

No. It's totally true. You know, obviously, look. We've had, like, price comparison engines before, whether it comes to, like, airlines, you know, booking.com, compare prices, and so forth. But, obviously, like, this idea of, like, this complete end to endness Mhmm.

It may get to the point or they hope to get it to the point where it's like it orders the trip before you knew you wanted to take a trip or whatever. That's right. Like, possibilities like that. I still think... And this...

I think this will be very temporary. Like, it doesn't quite work in the sense that for many things, if you buy them online through an AI agent, it does this weird thing where it, like, opens a browser, then the mouse moves really slowly in there. I don't think that's, like, the future of commerce as a computer using a browser that was designed for humans. Nonetheless, the broad premise clearly is gonna be a bigger and bigger deal in our life.

Now the flip side of buyers having AI powered shopping solutions is that the sellers also have them.

Yes.

Right? And this has been going on for some time. We've talked on the show before about things like algorithmic pricing Mhmm. Dynamic pricing. But now you can imagine a world where that is just supercharged.

Right?

Yeah. And so then you get this arms race phenomenon where both sides have their agents trying to battle with other agents. And, unfortunately, you know, probably the vendor has more data. Right? They're gonna have an information advantage over you.

Maybe there are gonna be companies that try to stop that. Whatever. It could just be that the only real winner are the AI companies that both sides are sending a lot of money to to win this arms race. But, yeah, like, the future of shopping, the future of pricing, very much wide open right now.

Yeah. So we do, in fact, have the perfect guest to talk about all of this. Someone who just wrote a book that does a deep dive basically into a lot of the pricing strategies that companies are pursuing nowadays and is doing some interesting research when it comes to algorithmic pricing, AI powered algorithmic pricing, I should say. So without further ado, we have Lindsay Owen. She is the author of the new book, The End of a Fair Price and What That Means for Your Wallet.

She is also, of course, president of Groundwork Collaborative. So, thank you so much for coming on the show.

Thanks so much for having me.

Why don't we start with semantics? Because we hear all these words. Right? We hear, like, algorithmic pricing, dynamic pricing. The companies themselves often have slightly different terms that they use, like profit led pricing and things like that.

What are all these terms, and how do you think about it in your head?

Yeah. The main thing to think about is that pricing has really changed as we know it. It used to be that pricing was pretty simple. Right? Companies figured out how much it cost to make an item.

They put their margin on top. They put it on a sticker. And that's really not how pricing works anymore. It's a highly engineered science, and companies hire physicists to help them do pricing. They buy AI companies to build algorithms and to run experiments on their platforms to get better and better at determining the optimal price and how much you'll pay for really everything in your grocery cart.

So pricing has really changed. The terms are, useful, I think, to explain algorithmic pricing, I think, is really just an umbrella term for pricing that involves an algorithm. There's a formula behind it. Dynamic pricing, we typically think of as pricing that varies based on market conditions, changes in supply and demand.

Is personalized pricing. I forgot that 1 too.

Personalized pricing is really the same thing as surveillance pricing, which economists would call 1st degree price discrimination. So this is a company that's setting a price just for you, ideally based on information that gives them a sense of how much they can get you to pay for it.

I might ask a bunch of devil's advocate questions during this interview. I don't like the idea of, okay, someone that's like, oh, it's Joe Wiesenthal shopping for this. He works at Bloomberg, so he probably gets paid pretty well, etcetera. So we're going to, you know, we're gonna find the optimal price point that he might be willing to say yes to. I don't love that.

On the other hand, could this be used for someone who is in a lot worse condition than me, who the algorithm determines does not have as good of a job I have, and maybe they get a really good price.

Means testing for Big Macs?

Yeah. That's right. Well, the 1st thing we should say is this is definitely gonna happen to you. Yeah. And we've got some really good examples of this.

Okay. So Expedia has been found to charge more for the exact same Manhattan hotel room if you log on from the Bay Area, where they think you are more affluent and a lot more. Right? So this is gonna happen. We have now a really interesting study of AgenTek Commerce that just came out.

They did an experiment with 325,000 agents, and they asked the agents to go find the cheapest item.

Okay.

Even when directed explicitly to go get the cheapest item, the agents rooted around in your email inbox identified that you could indeed afford more than the cheapest option and brought back a more expensive option.

Wait. So an agent that's working on my behalf Yes. Are you saying would not actually be working on my behalf?

That's exactly right. That's what the experiment discovered. They asked the agents to buy flights. These were pretty big ticket items, health insurance plans, and to select a graduate program. And even if you said bring me the cheapest health insurance plan, once the agent figured out a little bit about your financial profile Yeah.

Basically, they said, hey, I think this guy can afford the gold plan.

What's your thesis for what's going on there? Because I can imagine maybe something like Muse. I mean, Meta is also an advertising platform. Right? So maybe it wants to route some business to particular companies that advertise a lot on its platform, but maybe there's something else going on too.

Yeah. So we have 1 other study that gives us a little bit of a hint here. This 1 is not looking at agents, but it looked at 13 different LLMs. And what they found is, again, even when directed to bring back the cheapest product, they brought back the sponsored product. And often the sponsored product was more expensive.

Can you tell us just by way of another example? You did this really big Instacart study, and it was kinda interesting to read that you used to work in retail.

Yeah.

And that your nightmare was like the... What do they call them?

The Secret shoppers.

Secret shoppers. And now you get to hire a bunch of secret shoppers basically and turn the tables. What did you find?

Yeah. The secret shopper was always interesting because it was unclear whether you were ever actually secret shopped, but it was a sort of management tool of surveillance. Like, better behave because at any point, somebody could come in and secret shop. Like, every customer could be actually working for HQ. Right?

So you gotta make sure you fold everything well and you put the clothes on the rack and size order, things like that. So we recruited 400 secondret shoppers. We worked with Consumer Reports and More Perfect Union. And then we had them fire up the Instacart app, shop in 4 different locations across the country at the exact same time, buy the exact same groceries for pickup, so not delivery, from the same grocery store, 23 items. What we found, 75% of the items were differently priced for different shoppers.

Same time, same place. The differences were as big as 23%. So you could be charged 23% more for a dozen Lucerne eggs than I was charged from the same Safeway in Washington, DC at the exact same time. We estimated that because of these differences, some families could end up paying as much as $1,200 more in a given year. This was based on Instacart's own estimate of how much a household of 4 spent shopping.

And I think it really was, you know, was a blockbuster report. Right? It was the cover of the New York Post. You don't usually see a think tank paper on the cover of the New York Post. Because I think what it illuminated is that something that we all took for granted, fairness in pricing, has eroded.

This idea that you and I went to the grocery store, we stood in line next to each other with the same item, we expect to pay the same amount. And that's no longer the case.

So you talk about this in the book, but the idea of 1 price that everyone can see is also, I guess, kind of new in American history. And I didn't realize, apparently, there are Quaker roots to public price labels.

Yeah. For thousands of years, we haggled Yeah. Across the globe. Yeah. And there was haggling in The US context as well.

The Puritans were hagglers, and the Quakers didn't like it. They felt like there were moral problems with haggling. All men are created equal under God, they thought, and we should pay the same amount for a bushel of apples at the Quaker marketplace. So they skewed haggling and moved to fixed prices. And then John Wanamaker, the local Philadelphia retailer and his iconic American Wanamaker's department store, He was said to be a religious man himself, a Presbyterian, but inspired by the local Quakers nearby, and instituted the 1st fixed price, the price tag in Wannamaker's department store in the late 1870s.

So we've had a price tag for about 150 years in this country, and I think it's given us a lot. It gives you predictability. Yeah. So you can shop on a budget. You know how much something is gonna cost in the grocery store.

You know, you used to be able to get a Sunday circular where you knew what the prices of grocery would be for the entire week. Right? Pound of meat, a pound of apples. It also offered transparency, which is pretty important for comparison shopping. And comparison shopping is, of course, important if you're on a budget, but it's also the way in which prices are kept competitive in the entire economy.

Right?

That's interesting to think about fixed prices as a public good in a sense. Right? That like, okay, If there is just a price that everybody knows, and it seems like that's what you're getting at. Yep. That there is a positive externality from this is the price, and everyone knows it, and everyone can plan around it.

Absolutely. I think the predictability is core. I do, by the way, think comparison shopping is being eroded by all of the volatility in pricing right now. And I think budget shoppers who are really essential for keeping our economy healthy. Right?

When people have to price to include budget shoppers, that's good because that keeps prices low for all of us. When they are able to be picked off, you know, if a store can identify who they are and quietly push them a discount, prices will go up for the rest of us.

Now when you put research like that on the cover of the New York Post, obviously, they're gonna go with the headline. It's like, you may be paying 1,200 more for groceries than someone else, but you may be paying 1,200 less for for groceries than someone else. That's pretty good. Right?

Yeah. Look. Definitely, it was the case that different people in the Instacart study made out a lot better than others, and there were there were sort of 5 distinct price groups. Okay. You know, we do think the prices were randomly assigned.

That's what Instacart said. They were just running pretty sophisticated AB tests. And Instacart in 2022 bought a company called Eversight. And this is sort of how we knew to run this experiment because Eversight was an AI company that built a platform to allow retailers to run pricing experiments on their own platforms. It was sort of turnkey pricing experiments.

And importantly, without the consumer's knowledge. Right? Because this isn't something that people like when they find out they're paying more than their friend for the same item at the same time. And so Instacart purchased them in 2022, obviously started using the product. And I think what we ultimately exposed with our experiment was their experiment on shoppers.

There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what matters and what to watch next, About the time it takes to grab a coffee, so search Barclays brief wherever you get your podcasts.

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So setting aside personalized pricing for a while, I... There is a general phenomenon in The US economy of prices seem to be going up. Right?

Yes.

I went I went to a Broadway show yesterday.

Is very expensive these days.

I bought 1 cocktail. It was a double.

$25.

Way off. What? $48. Oh, it's crazy. $48 for a double smokes.

I probably shouldn't have. I know. I was surprised.

This is the David Brooks,

like But my point is, like, I probably would have ordered more than 1 cocktail if it was less than $48, substantially less than $48. But I don't think that matters that much to the bar at the theater because if they're making $48 from a single cocktail, then they save on labor costs and everything else. Is this a dynamic that you see throughout The US economy, the idea of, like, companies pursuing profit over, I guess, costs? Price over volume? Yeah.

Yeah, absolutely. I mean, I think we're in an inflationary period. This is not a period in which you can run an aggressive cost cutting play. Your costs are going up as a business. And I think pricing is where companies have headed and they're really pushing the envelope there.

You know, the K shaped economy is real. Like we see CEOs talking a lot about it in earnings They are really testing the outer bounds of what they can get folks with disposable income to fork over. We did an experiment a couple of weeks ago for the Today show. We helped them design it. They ran it on their production assistants.

They brought them into the conference room, and everybody fired up StubHub and purchased or planned to purchase a Harry Styles concert ticket for Madison Square Garden. Same night, same row, same seat. What we found, ticket prices were constant across all of the production assistants. Fees were varying by as much as $60. Really?

Yes. StubHub charging $60 more in fees

for processing fee, Yeah. I don't understand why it exists anyway. Yeah.

The fee for emailing you a QR code. Yeah.

Wait. Did they find that... Okay. Among the 12 production assistants, they're like, yeah. I'm the rich 1.

Like, yeah. I I know why. Like, were they able to intuit what it was about themselves that the algorithm knew that they could get away with charging them more?

Yeah. Mean, it's hard to pinpoint personalized pricing on a sample of, like, 12 production assistants, but there were a couple of interesting clues. So the 1st thing I'll say is when they shopped in incognito mode, feed dispersion dramatically dropped.

Oh, interesting.

So it went from $60 to $4. By the way, StubHub responded to the Today show and said, this isn't personalized pricing. It's AB testing. It's pricing experiments. And that the incognito mode issue was sort of moot.

The other thing they found is the Android phone user was paying more. But, you know, it's impossible to isolate whether or not there were other aspects of her profile that could have been driving her price point.

We had you on the podcast before David Dione. Yeah. Now in that conversation, I remember 1 of the things and this question of Uber pricing and at least the technology existed such that if it identified that your phone was running low on batteries, that it would charge you more. But if I'm out at 1AM and my phone is at 5%, I happily pay more. In fact, if...

Let's put it this way. If I'm out at 1AM and my friend is out at 1AM and his phone is at 50 percent and I'm at 5%, I want my app to be outbidding for that random driver who's in the neighborhood. That seems great.

Because you want the ride. I want the ride. Absolutely.

And so it's like, I think most people, if their phone is at 5%, they're like, yeah, let me win this little auction that's gonna occur between this driver because I really... If I don't win it, then my battery... I might not have a phone.

This is a true economist mindset. The idea that, like, auctions are the best way of coming up with a price.

Economists love auctions. Americans like lines. Americans hate auctions.

Yeah. I know. I know. But, like, if I'm, like, out at 1AM and my phone's about to die and a bunch of people want the car, I would be happy that the app is offering to pay that driver more if he picks me up because my phone's about to die.

Yeah. We actually found a battery example with DoorDash as well.

Okay.

So we reviewed some DoorDash patents. And I should say that DoorDash, after we exposed this patent, did withdraw the patent. So that's an important thing to add to this story. But the patent was for a 16 factor agitation index that DoorDash was building Wow. To determine

So battery life would just be like 1

16 factors. Another 1 was how quickly you scroll. I mean, was basically a hangry index. Right? Mhmm.

How quickly you scroll. Another was how jerkily you scroll. And all of this was going into an index to be matched to things like whether or not you were gonna get a promotion, what types of offerings you would see 1st in the menu, sort of the ordering of the menu. All of this was connected. So so battery life is definitely something that the companies see as an opportunity.

You're over a barrel when your battery life is down. It's a little bit like, you know, there are 5 bottles of water left in a hurricane. You're willing to pay a lot for

them.

Right? So people think about price gouging as this loaded term. Yeah. And again, you know, per Joe's 0.1 man's price gouging is another man's, I guess, legitimate profit.

Ride savior.

Ride savior. Yeah. But there are actually regulations around price gouging in The US. Can you explain what they are and what the definition actually is?

Yeah. The legal definition of price gouging is pretty straightforward. It's charging unconscionably excessive. You know, how you define that varies a

little bit of moral relativism there. But... Yeah.

Yeah. But it's charging unconscionably excessive prices during an emergency, basically. It typically is limited to necessities. So if you're charging a bunch for a Birkin bag, like, you're not gonna run afoul of price gouging laws. But if you're charging a lot for food after a hurricane A

Birkin emergency. A luxury handbag emergency.

Right. If you're charging a lot for food after a hurricane or water, if you're charging a bunch for PPE during a pandemic, many states actually updated or brought new price gouging laws online during the pandemic. But more than 40 states have price gouging laws in the country. The title of my book is certainly referring to the legal definition of price gouging, but it's also referring to the colloquial feeling of being ripped off or squeezed or gouged, which I think is a word a lot of Americans are using right now when they see their grocery bill.

Who were the pioneers of scientific pricing? Who were the 1st to recognize that with technology, with the abundance of data, that we're all the exhaust of data that we all admit just by using devices and so forth. Who are the pioneers that recognize that this could be used for pricing?

Yeah, I really think the OG here is the airline industry. And there are some interesting reasons for that. 1 is obviously they have a scarce resource, right? You only have so many seats on the plane. So dynamic pricing can be an efficient way to allocate a scarce resource.

But it's also why when you log on and there are 5 seats left, the prices are high. When there is 1 seat left, the price is quite high. But the airlines get deregulated. They have price controls. And all of a sudden, the airline executives are like, wait, how do we set prices?

And they hire a bunch of consultants, advisors to build what becomes the 1st revenue management and yield management systems really in the country. And they really pioneered the dynamic pricing model. And it was actually pretty rare to see dynamic pricing outside of the airlines for decades. It was 2011 when Uber rolled out surge pricing for the 1st time, Halloween actually, 2011. They said, hey, gonna be a busy night tonight.

We expect a lot of people out on the streets. We're gonna try this new model that's gonna make sure you can get home. Same year, Ticketmaster 2011 as well moved to dynamic pricing. So we really got, more widespread usage of these practices around 2011.

Uber would say that on big nights like Halloween or New Year's Eve, or I guess New Year's morning more typically, that yes, prices go up, but you also need to incentivize drivers to come out at 1 in the morning Absolutely. On New Year's Eve. And that part of the purpose that surge pricing does, 1 of the things that it accomplishes is it sends a signal to drivers, get out on the road. There's a bunch of business for

it. Absolutely. It brings drivers off the sidelines. Yeah. Like like, you're sitting on your couch deciding whether or not you're gonna call it a night Yeah.

Or pick up another ride. Suddenly, the price point gets interesting. You jump in your car. Right? You put your sweatpants on.

You jump in the car. You go drive someone home. Absolutely. Here's the thing, though. Uber's model has shifted dramatically.

Okay.

And how do we know? We have run experiments on Uber, Uber Eats, and we've done it on the driver's side, and we've done it on the rider's side. And here's what we find. You put a bunch of people outside a concert, everyone's leaving at the same time. You have them set the exact same destination.

Pickup time is the same. Destination is the same. Uber prices vary substantially. Same is true for drivers. More Perfect Union did an experiment where they put a bunch of drivers in LA in a room.

They had them stick their phones on a conference table and all fire up their app and say, I'm ready to start driving. The rides came online. They all picked the same ride. They were given different price points. And I think what is going on here quite clearly is that Uber is getting very good at figuring out the maximum amount each rider will pay for a ride, and they're getting really good at figuring out the minimum amount each driver will accept for a ride.

How much of this is also a story of companies just getting bigger? Because 1 of the reasons that this would be annoying to me and maybe not to Joe, but, you know, there are limited alternatives for transportation. I know there's Lyft and there's taxis and things like that. So you have some options. But if everyone is doing the same thing at the same time, I.

E. Raising their prices or giving you a price that's higher than everyone else is seeing, then your options are limited. And certainly with something like food, where it feels like every supermarket in the world has been raising prices, and maybe you're in a city where there's only 1 big supermarket that you can legitimately shop from, you have limited choices. Right? How much of this is about scale?

I think this is about companies moving into different profit models. So I'll give you 2 examples. Kroger now doesn't just sell groceries, they sell your data. 30% of Kroger's net operating income comes from what they call their alternative profits book of business. Part of what is included in the alternative profits is the sale of your data.

95% of Kroger transactions happen attached to loyalty cards. So they've built really sophisticated dossiers on all of us that are pretty valuable, to external stakeholders.

Yeah. That makes sense. By the way, you know, another thing... And I was just thinking about the $48 cocktail. I think this is very sort of important...

Like, you bought the cocktail.

I did. Yeah. Like, this is an interesting thing. By the way, it was my birthday. So let's just be clear.

Treating myself here. I just want information.

Happy birthday.

Thank you, Joe.

Yesterday, but

Thank you.

Everyone... It was Tracy's birthday. So everyone was Tracy

Happy birthday. Thank you

so much. We have a lot of inflation in this country.

Yeah.

At least the people on the top side of the k, like, they're not slowing down. Like, that's the thing that's kinda weird and kind of interesting to me, which is like, I go out to eat, and I complain. I was like, oh, bacon and eggs cost this much. It didn't stop me from going the next day or the next day the next day. Maybe it's because of, you know, the stock market's going up, so everyone feels good about, like, their investment accounts, etcetera.

Like, people complain, and then they just keep doing it.

Yeah. I mean, you mentioned this idea of surveillance pricing being used as a sort of Robin Hood in corporate America, right? Like you can really soak the rich once you've had a peek into their wallets. And I absolutely think that is possible. And I think companies will do that 100%.

I think where I am not so convinced is that that will be used as a cross subsidy for everyone else. And there are a couple of reasons why. The 1st is willingness to pay is not always the same thing as ability to pay. So sometimes you don't have a lot of money, but you're willing to pay a lot because you're over a barrel. You're a mom who told her chatbot that her kid is sick, and now the personal assistant goes out to get the Tylenol.

I'll probably pay $15 for the children's Tylenol. Right? I wanna break the fever. Sometimes you need something urgently. You've got to get home to a funeral.

Right? So I think what is most likely is companies will use these technologies to take a lot from the rich. They'll use it to take as much as they can from everyone else. But they'll also be spotting opportunities where our willingness to pay is high, even if our ability to pay is not.

I'm assuming that protected characteristics apply to shopping as well as things like employment and lending. The idea that you can't discriminate based on race or age, gender, that sort of thing. However, 1 thing we've learned from algorithmic pricing is you can you can develop a pretty good proxy for someone's age and gender and race, the zip code of the area that they live in, so you can tell if it's a wealthy neighborhood or a poor neighborhood. Is anyone looking at this on, like, a federal level, whether people are sort of, I guess, getting close to discriminating based on protected characteristics without explicitly saying that that's what they're doing?

Yeah. I don't know of anyone who's looking into it closely right now. But, yes, absolutely. What we think of as statistical discrimination. You may be discriminating based on something like zip code.

But actually, the end result is you're discriminating based on race. And the best example of this in the book is there was a big ProPublica expose of Princeton Review. And what they found is that Princeton Review was charging individuals more for a test prep package, so many hours of tutoring, a couple of handbooks or whatever those things are, exercise books. If they logged on from an IP address from a high Asian American neighborhood where there were a lot of Asians in the region. And the basic idea here was that the concern was that Princeton Review had identified that there were immigrant moms who wanted their kids to go to college and as a result would pay another grand for the test prep package.

Right? So absolutely, I think, particularly given that The United States is carved up geographically by race, when companies are using geolocation. And that is a classic profiling tool that is in all of these models, right? Your IP address, where you come in from, tracking you on your phone to know where you are. That's going to be a real concern.

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Let's talk a little bit more about, you know, your work in the context of agentic pricing and AI services, AI bots, going out shopping on our behalf. 1st of all, if 1 were to find an example of an AI bot not actually pursuing the best price because it turned out it was either it was not working for me or the company that put it out, since I don't know the name, was actually gearing towards sponsored. Should be a huge scandal if that is empirically demonstrable, etcetera. But at least in theory, a company could build a model that actually works on behalf of the customer. And also at least in theory, a model could not only work on behalf of the customer, but that at the point that the model makes the transaction, that the end company does not know who's buying it.

The way these things work typically in terms of the transaction is that let's say I load my credit card info into Muse or something like that. But then when Muse makes the purchase, I believe if I have this correct, Muse is not using my credit card. Muse is generating an instant 1 time credit card, maybe from a company like Stripe. They make the transaction, and then Muse buys it, and then I'm buying from Muse. So at least it seems theoretically, more than theoretically possible, that agentic commerce could allow people to buy something without that end seller having any idea of who the actual buyer is?

Yeah. A 100%. I mean, I think there are a huge number of use cases for personal assistance in agentic commerce that could really benefit consumers and frankly could get around a lot of the stuff in my book. Right? So we've written a piece at Groundwork on the annoyance economy, the $165,000,000,000 a year that Americans spend in lost time and money and things like subscription traps.

1 of the big Oh,

yeah. Yeah.

Advertising campaigns of Muse is I'm gonna crack my knuckles and go get to work canceling your subscriptions. And it wasn't surprising to us to see the inertia stocks plummet when the Muse numbers started ticking up. Right? Because there's a lot of stuff that people leave because they forget about it that Muse can go find and handle for you. So I love the idea of folks having help getting out of subscriptions.

I love the idea that folks would have help with comparison shopping. Comparison shopping is a total bear in this digital and ecommerce age precisely because of the pricing technologies that I talked about.

The problem in my mind is the due diligence. Right? Like, you're using an agent presumably because you're already time strapped and don't have time to go look at all of this yourself. And then you're gonna review the output of the agent and be like, well, was this really the cheapest price? How do I know that the agent is actually finding me the best bargain?

Which, Lindsay, by the way, is why you are proposing fiduciary duties for AI agents.

Right? Yeah. Mean, I don't think this problem is new. Right? We often, I think, with new technologies, think we need a whole new set of considerations or a whole new set of policies.

But this is just the classic agent question. Who does your agent work for? Yeah. If it's calling itself an agent, and particularly if it's calling itself your personal agent, it should probably work for you and not Muse or whoever is offering sponsored content and and the highest bidder. It should probably not be rooting around in your emails to work against you in a setting.

And so, you know, we have imposed a best interest standard or a fiduciary duty on agents throughout time. We tried to strengthen those rules under Obama with a stronger fiduciary duty for financial advisors and people who offer you financial products to make sure that their interests are aligned with yours. Look, I think if these agents aren't gonna work in your interest, maybe that's fine, but like, you have to know.

Don't call them agents.

Yeah. They're not your agent. They're not your personal assistant. Like, it's basically just Google if they're returning sponsored products.

Can you remind me the fiduciary fight during the Obama administration? Because I remember there was some group that claimed that they should not be categorized under fiduciaries. Can you remind me a little bit of how that fight settled out and who ended up having to have that fiduciary responsibility?

Yeah. I mean, it's been a minute. It's just like a kind of an oldie, but I actually worked for Senator Warren at the time, and she was the major senator who was helping Obama and Tom Perez, who was running the Labor Department at the time, make sure they got the fiduciary duty over the finish line.

The basic idea is, it's like, if you're coming to me and saying, Joe, here here are some options for your child's, like, 5 29 plan to save for college. I wanna have some confidence that you are not getting a kickback from those 3 funds to get me into 1 of them. And that when you present them to me, that actually it's not because you're gonna get paid an extra bonus if you sell 1 of them.

Yeah. That's exactly what the rule did. It was actually really interesting at the time, and this I think is related to our conversation today. It was actually the robo advisors and the new fintech companies who Obama, held up as the white hat companies because they came in and said, yeah, we can set up a system that complies with this law. Like, we can provide financial advice in the best interest of customers.

We can just program it to be such. It was the mom and pop financial advisors from the Charles Schwab in the strip mall who were coming in and saying, wait, like, I used to get a trip to a castle in Scotland after I sold $300,000 worth of annuities. Are you telling me that, like, I won't get my Super Bowl style ring or my my perks and freebies and junkets? Right? I mean, they were much more opposed to it.

I think the the question with agentic commerce is, could these companies even guarantee that the agents will work in your best interest if they don't actually have full control over what the agents do?

Yeah. The other thing I want to ask you on this is, I mean, let's assume the agents do get good at finding bargains to some extent. Would you expect companies like an Amazon or a Walmart to maybe start, I guess, tweaking their APIs or, like, reconstructing the walls around some of their pricing information such that they try to erode away that that information?

I mean, it's already here. The price wars are here. Right? Or the agent wars, I guess, are here. So we have Amazon announced that it's blocking Muse.

So Muse can't go into Amazon. But Alexa for shopping, by the way, helps you with Amazon, but also leaves Amazon's walls. Right? So they're not playing by the same rules that they're going to apply to Muse. We know that Walmart is building up sort of separate infrastructure so that you can register your agent, basically.

It sounds crazy. But you would log on and say, hey, I actually am going to let Muse come to Walmart. And they're going to set up a system that sort of green lights that so that they can authorize your agent so they know that this agent is shopping on your behalf. But it raises all sorts of thorny questions about who's going to be holding the bag if your agent buys something you didn't want it to buy, for example. Walmart is going to say no.

Muse is also going to say no. So a lot of customers already are experiencing situations where someone uses a colloquialism like, go find me a garden hose. And the agent goes and buys a garden hose. And you said find because you wanted to see some options.

Right? There's

Here's this heritage garden hose for $200.

It's beautiful. Issues or what happens when you tell your agent, go find me a garden hose, and it doesn't buy the garden hose. It hacks into homedepot.com, messes with their database, and then it's like, who committed the... I mean, that's crime. That's theft.

I'm certain this is going to happen, and there are gonna be some pretty interesting legal questions about, well, did you commit the crime because you told your agent to do this? Or did Meta commit the crime? Like, these are huge questions that we're all gonna be facing in the coming years.

There's a story today in Axios about the banks

Oh, yes. I that.

Who have said they have started to see highly unusual activity in bank accounts coming from agents and personal assistants. And 1 of the things that they're tracking is that they feel like a lot of the transactions they're seeing were not directed by the users. And it's a little hard to know exactly how they determine that. But already, this idea that you're gonna give the keys to your wallet to an agent is, I think, starting to look pretty suspect.

I think there's gonna be some pretty huge corporate strategy decisions that companies are gonna have to make. Because I get why in the 1st instance, Amazon is like, we don't want your muse accessing our site. But if Walmart is like, bring on your muse is here, they might not have any choice. It all is going to depend on, like, if people really want to shop through an AI agent, then, like, someone is going to really exploit this and fling the doors wide open for them. And the Amazons of the world may not have any choice.

I don't think it's going to be down to the Amazons of the world. It's going be down to the insurers and whoever is insuring liability for the agents and the companies themselves.

It will

be down to them, but there's a lot of value for an Amazon in you going there and them knowing something about you, right? So you go to Amazon and you buy a toothbrush and maybe you click on a movie that you're interested in and blah, blah, and suddenly they have a rich pool of data about you. That is very valuable. If you're going through your muse to buy it, you're still doing the transaction, but there's a lot less that they're getting from you. And this is, like, gonna be a very difficult trade off for them.

Like, which is the better option?

It's a huge issue. I'll say a couple things. 1, you should definitely check out your Amazon About Me if you haven't already.

Oh, I never have done that.

So Amazon now lets you know the characteristics that it knows about you. There was a viral story a couple of weeks ago because Amazon identified 1 customer as having flat buttocks based on some of their, I guess, leggings purchases and jeans purchases. So it was quite detailed. It had a lot of information about my 3 year old, for example, because I had Yeah. I know.

Done some party shopping. Amazon will

think that all I'm interested in buying is squishy toys these days. So

Yeah. The 2nd thing I'll say is we are already seeing anecdotal evidence of folks who used to do quite a bit of shopping on Amazon who are now using Muse and have bought more things off Amazon than they have in years. And I think this is a real threat to Amazon. And there are some folks at Y Combinator and other places who are suggesting that agentic commerce could be the 1st opportunity to start to, like, some blood, at Amazon for the 1st time in years.

I want to end on, I guess, a happy, happy ish Can you tell us about the the hot dog guy who managed to reverse hot dog prices in the 1970s?

Yeah. So this was someone who, was a Giants fan, who felt like the San Francisco Giants were were changing hot dog prices by, I think it was only a nickel. But he felt like this was a period of high inflation. A nickel was was far too much. He sort of ran the numbers, figured out how many nickels they were gonna bring in, figured out how much their costs had gone up.

The reason was because

they were funding some sort of renovation of the stadium. Right? And they said, like, we have to have higher hot dog prices to fight.

So Ron Gordon is basically a hot dog price warrior on behalf of San Francisco Giants fans. And yes, they were renovating the stadium. They were going to start charging more for hot dogs. He felt like it was too much. He started a campaign to keep hot dog prices down and to make sure that they didn't go up a nickel.

He actually ended up getting a letter from the Council on Economic Advisors, like praising him for his efforts to beat back price hikes during a period of national inflation. This was back during the last period of inflation 50 years ago. And he was successful, in keeping prices low for the rest of us.

For a while, anyway. I'm curious what what hot dogs cost, nowadays at that stadium.

But I guess the politics of who are the inflation fighters in America

Yeah.

They they get tricky. We did an episode when we were out in Jackson Hole with the president of the Richmond Fed, and he was talking to some of the suppliers in his district. And he was like, look. I don't know, maybe make some lawn chair or something like that. And he's like, Our prices are going up, but Walmart is not letting...

They're holding the line and they're not paying more for our lawn chairs. If we want shelf space at Walmart, we have to eat the price itself. And so when I hear that story, I'm like, Walmart, salute. You are the great, you are our strongest soldiers in our fight against inflation, I also know that a lot of people are really uncomfortable with the Walmarts of the world and politically would like to see a world of more mom and pop stores, etcetera. Although in many cases they charge more.

How do you think generally speaking about what we want as a society in terms of the optimal mix of large and small companies? Because the Walmarts of the world, the Amazons of the world, they have incredible power of scale and powers of scale they can also bring prices down, etcetera. Small businesses are sort of famous in many cases for being the worst at things like wage theft and so forth. Often they actually don't have the best prices because they don't have that scale. What do we want as a society in terms of the flora and fauna, the ecology of commercial platforms?

I mean, for me, I want the mix that provides the most price competition. And I think when we don't have price competition in our economy, we're in real trouble. And what I see increasingly is companies building technologies, and I talk about a lot of them in the book, to subvert price competition. So even, you know, companies like McDonald's are building sophisticated algorithmic pricing tools to ensure that even franchisees can't compete against each other. The whole point of franchises is that they're independent and should have some level of control over pricing.

That's increasingly not the case. Now McDonald's will hem and haw and say, we're just recommending these prices. The franchisees don't have to take them. But it turns out that when McDonald's is evaluating renewal decisions, when McDonald's is evaluating whether or not you as a franchisee can pick up another property and open a 2nd location, they evaluate things like your conformity to the pricing algorithm. Right?

And so my concern here is even in markets where there actually is some competition, these tools are being used to subvert it. So we saw RealPage, another case of algorithmic price fixing where landlords in a city who would usually compete with each other were able to share competitively sensitive information and align on pricing, resulting in rent prices as much as 25% more than you would see in a competitive market through this software. Similarly, there's a gas station technology, Calibrate, a tech company that is under scrutiny right now, a class action filed in California. They were helping 1,700 gas retailers align on price.

Coordinate on price.

The allegation is that it could have been as much as 30¢ a gallon higher for drivers in California. So I'm looking for price competition. That is not always just achieved by volume, right, when these types of technologies are able to circumvent scale.

Alright. Owens, the book is gouged. Thank you so much for coming

on HotPods. Thanks for having me. This is great.

So, Joe, I found all of that really fascinating. I know you asked a lot of devil's advocate questions there, but in

you my

said it, not me. In my mind, the issue here is an imbalance. Right? If you're a Walmart or an Amazon, you have, like, the best technology, the best AI models, the best data out there at the touch of your fingertips versus if you're someone, you know, working a 9 to 5 or whatever who's just trying to buy, I don't know, a car

Totally.

Or a computer. You don't have that much time or that much technological prowess to actually devote to it. AI could, in theory, solve some of that for sure. Yeah. Except But

No. Like, I'm hopeful that AI could solve some of these imbalances. Mhmm. But what I worry about, and not just with pricing, but with range of fields, cybersecurity, very much in the news today, we're recording this October 22. The dynamic that I'm worried about is that it's just gonna be arms races.

Yeah. Right? So you're gonna have an agent and maybe it truly does work on your behalf, etcetera. And then someone else is going to have an AI pricing model that tries to figure out more about you and overcome that. And then you have to upgrade to the next version of the model to overcome that.

And that in many respects, it's possible that AI makes markets more efficient. It makes things cheaper, etcetera. It is also possible that it just becomes deadweight loss where we arrive at the exact same price that we would have before, except the only difference is that both sides have paid more to OpenAI, Anthropic, or Meta in order to rearrive at the same equilibrium that we could have had without all this AI stuff.

This is my busy work theory of AI, where everyone's just gonna have agents that, like, file lawsuits at

each other. To the same

place in the end, but

someone makes a lot of money selling tokens to us.

Also, I thought the his... The history behind, like, the single public price tag is really interesting because if you think about it to some extent with AgenTik AI and all these new pricing strategies coming out of companies, we're kind of going back to that customized era of haggling where you have to Haggling. You have to devote a bunch of time to, like, figuring out the price. If you're buying from McDonald's and you want a good price, you have to, like, figure out which coupon you want for that day and what's available to you. It's a time suck.

Right? Where is

It is a time suck.

You know It's not efficient.

You know, here's a thought that I had. Remember in 2021, 20 22, 23, there was this very recurring thing that you'd see online. Was like someone would say, oh my god. I just paid $15 for blueberries. Okay?

Mhmm. And then someone else was like... Would say, you're an idiot. Go to walmart.com. Here's blueberries that you can buy for $2.99.

Yeah.

And if you're paying $15, it's really your fault. And it kind of is. But when I see these... You could have bought blueberries for $2.99 at Walmart. What I see is a lack of general equilibrium thinking, by which I mean, if all of those people who shopped at Whole Foods suddenly switched to the $2.99 Walmart blueberries Mhmm.

They would not be $2.99 anymore.

Right.

Right? There would be this big inrush. Maybe they would... They wouldn't jump to $15. Maybe they'd jump to $4.99, etcetera.

But, like, prices are prices. And so just because there exists a lower price does not mean that everyone can capture the lower price because then the lower price goes up. And so I don't know.

I would also argue that buying blueberries for a decent price should not consume that much mental capacity. No. It shouldn't. It shouldn't be like a 5 minute campaign even to go online and research like, oh, I'm gonna buy it from here, and I'm gonna have it... You know, if you buy it online, you're gonna have to have it delivered to your house as well versus just walking in a store.

It's a time issue, and it's efficiency... An inefficiency issue in my mind. Yeah. And I say that as someone who loves shopping and buying $48 cocktails apparently.

Yeah. This... Well, this is the last point I was gonna make. And this is a macro question, and it has nothing to do with algorithmic pricing, which is that there is a... Those of us on the top of the K complain about prices all the time.

And for whatever reason, by and large, some of us, but most of us have not meaningfully changed our consumption behavior despite all the prices that we complain

complain about. I'm really getting grilled for buying a cocktail on my birthday. No. It's all... It's easy to want and present.

This is... People complain and then they

do And the

same thing they do the next

that is why inflation continues to persist because it... Behaviorally, whatever it else, people complain, and then they buy the same thing the next day.

Yeah. It's true. But, also, it's not like if you want to drink something in a theater, you don't have a choice. Or it's not like I can go out

No.

Somewhere else. But, anyway, we leave it there?

Let's leave it there.

This has been another episode of the Odd Thoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway.

And I'm Jill Weisenthal. You can follow me at the stalwart. Follow our guest, Lindsay Owens. She's at Owens Lindsay 1. Follow our producers, Carmen Rodriguez at Carmen Arman, Dasho Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano.

And, of course, you can chat about all of these topics 24 7 in our Discord, discord.gg/oddlots. And for more Odd Lots content, you can check out our daily newsletter, which you can find at bloomberg.com/oddlots.

And if you enjoyed this conversation, if you like it when we talk about pricing, then please leave us a positive review on your favorite podcast platform. And if you're watching this on video and you enjoyed it, then please leave a comment or like the video or better yet, subscribe. And remember, if you're

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Thanks for joining.

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