DIGETHIX: DIGITAL ETHICS TODAY — EPISODE 15

Information Asymmetry in the App Economy- The Case of the Doordash Strike

A talk with Bernd Dürrwächter

Published in

DigEthix

42 min readDec 22, 2022

“Ironically, the same people hail technology as a solution to mankind and use it against people. And that’s, it’s, that’s why it’s ethics. Digital is the means. And the ethics part is the human decision.” (25:56)
— Bernd Dürrwächter

DigEthix is a podcast that looks at issues in the ethics of technology from a philosophical perspective. This article follows a conversation with Bernd Dürrwächter about the Doordashers strike of July 2021, which consisted of decreasing wages and striking down the app Para. Ultimately, this allowed drivers to view the customer’s prior tips before accepting their riding task. This episode discusses an overview of the app and the factors that lead to this event.

This conversation explores these central questions:

What kind of information is important to disclose?
How do we evaluate if an information asymmetry puts one party and an advantage over another?
How can these relationships be negotiated in a way that will work better for both parties?

(Jump to important links here)

Click the link below to listen to the episode:

About the guest:

Back with a fellow friend, Bernd Dürrwächter, an expert and principal at AnalyticDimensions.com, a consultancy for big data analytics & data science projects. He studied computer science at the Frankfurt University of Applied Sciences from 1988–1992. Bernd is a seasoned practitioner in software engineering, IT architectures, business intelligence & data analytics solutions. In that capacity, he has done project work in education research, supply chain management, healthcare, internet services, and media.

Bernd Dürrwächter | LinkedIn

“These apps create an information asymmetry… but the reason why this is a digital ethics problem is that these large companies control the information flow.” (10:48)
— Bernd Dürrwächter

Transcript

Seth Villegas:

Welcome to the DigEthix podcast. My name is Seth Villegas. I’m a PhD candidate at Boston University working on the philosophical ethics of emerging and experimental technologies. Here on the podcast, we talk to scholars and industry experts with an eye towards the future. I’ll be having a discussion with one of my main collaborators today, Bernd Dürrwächter. Bernd is principal at AnalyticsDimension.com, a consultancy for big data analytics and data science projects. He is a seasoned practitioner in software engineering, IT architectures, business intelligence, and data analytic solutions.

This conversation was recorded over the summer in the wake of the July 31 2021 DoorDash strike. Organized initially on Reddit, DoorDash drivers took the stage to refuse to make deliveries as a result of their wages. Drivers are usually promise between $3 and $10 base pay per order, but the lower end of this range had fallen to around $2 per order. The conflict between drivers and the company occurred primarily over this issue of tips, which were part of DoorDash’s justification for lowering base pay rates. Drivers demand to know just how much they’d be tipped on a given order prior to accepting it. In fact, an app was being used so that drivers could see just how much money in tips they would be receiving. The app, Para, was banned for violating DoorDash’s terms of service since it mined information directly from the DoorDash app.

As a technology company, this conflict with drivers is fundamentally about data, and about whether knowledge of an incoming tip is useful to the driver or not. Because of the way that the Para app works, this information about tips is already available within the DoorDash system, meaning that the company chooses not to disclose it. In my opinion, the most significant problems in technology and ethics today are on the lines of information asymmetry, like the one described in this situation. These asymmetries can occur between company and employers and between company and customer.

The key questions episode are: what kind of information is important to disclose? How do we evaluate if an information asymmetry puts one party and an advantage over another? How can these relationships be negotiated in a way that will work better for both parties?

This podcast would not have been possible without the help of the DigEthix team, Nicole Smith and Louise Salinas. The intro and outro track Dreams was composed by Benjamin Tissot through bensound.com. Our website is digethix.org. You can also find us on Facebook and Twitter, @DigEthix, and on Instagram, @DigEthixFuture. You can also email us at digethix@mindandculture.org.

(2:40) Now I’m pleased to present you with my discussion with Bernd Dürrwächter.

So, it looks like the kind of instigating incident that we’re referring to this time around for people want to follow along is on July 31, there was in organized strike of DoorDash on the basis of the way that the delivery drivers have been treated through the app. So Bernd, you’re the one who kind of brought this to my attention initially, so I was wondering if you could describe it a little bit more, about what’s going on here.

Bernd Dürrwächter:

So the the strike was particularly for DoorDash, which is a food delivery company. Basically, they have this, like the app economy, similar to Uber — where a bunch of private people use their own car and then use an app to get linked up with people who have a need. You know, Uber’s case is transportation and then the DoorDash case — like you know, you’re hungry, you use this app, order something, I guess with whatever restaurant, and then this DoorDash driver will take your order, go to the restaurant, order it, pick it up, and then bring it to your house. See, there’s a lot of stickers in restaurants right, with “we support DoorDash,” not just dine-in but you know, it’s pickup on behalf of the actual customer. And those are all basically — they’re not really employees of the company, they are just private people who pick up gigs and economy. And they also call, like, DoorDash is an app because they use an application on the smartphone to create that interface for the user to order so it’s — you don’t call in, but you just use this app to order and then the driver executes on that.

And the underlying economic model is that the driver, the freelance driver, gets a fee because it depends on where it is, how far it is, how much driving they have to do. But it’s like a market, so they constantly try to “who’s the lowest bid?” right, but the customer doesn’t want to pay that much and DoorDash as a company wants to get a lot of business, and the lower the prices are, the more business they get. So usually, the driver ends up in the spot to… They have too much competition, the price goes down and in this particular case, it went all the way to $2 per trip. But it was at the point where they got paid less than it was for their gas to drive somewhere to deliver stuff. So far, so good. You know, it’s like, we can participate if the price is fine, otherwise you don’t.

But basically, one of the patterns that happens with the gig economy — all these companies do similar services, you know, where a freelance agent brings you stuff or does something for you — is there’s a basic, like in a restaurant you have a basic hourly wage and then on top of that, you get the tip from the customer. And I think Amazon a while back did this, where, let’s say you get $10 an hour, and then the customer gives you $5. And then the company would subtract the tip on your actual hourly wage, which wasn’t really the intent of the tip since it was supposed to go above and beyond. In this case, the customer would tip when they put the order in for the food and the driver would have to accept without knowing what the tip is. So there was this information asymmetry where they completely put it upside down with a tip — that the tip is the driver gets it after the fact directly from the customer — and the company’s injected themselves into the tipping process and therefore control how much the driver gets off the tip. And that’s a very concerning development and enough people got upset, the drivers. So the that’s why the DoorDash drivers went on strike. But I’ll leave it at that just for a quick introduction.

Seth Villegas:

Yeah. And one of the other things I’ll say about the way in which the tipping happens, right, is the tipping is kind of the last thing that happens in the DoorDash/Uber Eats process, right? So it’s after the drivers have already delivered it?

Bernd Dürrwächter:

Normally, yes.

Seth Villegas:

Yeah. So I just want to bring that up as another thing that, well, they could definitely implement that differently, right? And also, it would be a way to incentivize people to take your orders, for instance, right, if they can see the tips. But there are big asymmetries in how people tip, right, where some people, you know, just have different ideas about it depending on the way that they’re related to service. But because of that, and the lowering of base pay — so it was at $3 and they lowered the lower of the rate to $2 — and basically, a lot of drivers were just like, “hey, this really isn’t worth it,” right? You kind of feel like you’re gambling in a sense, where you might make your money back. But as you’re saying, the driver’s paying for their own gas, the driver is using their own car, right? They have all these other things.

Bernd Dürrwächter:

No benefits either, right? They’re free agents, like an independent contractor.

Seth Villegas:

Yeah, exactly. You know, they’re just a freelance person, they can, you know, supposedly work as much or as little as they want. If you’re not being paid a lot, it turns out that you’re probably working a lot. And especially with things like gas prices going up, I think it makes sense why people would be a little frustrated with the way things are going.

Bernd Dürrwächter:

And this is all the start. You could still argue this is all free market economy, right — that you don’t have to take those gigs, even though a lot of people don’t have a choice these days with economic circumstances. But what really stood out on ethical grounds was this injecting — a company misappropriating the tip, that used to be a thing between the service provider. It’s kind of like, traditionally, in American restaurants, right, a lot of servers don’t really make a good base salary either. But when it comes to the tip, that traditionally was a cash transaction — like, they just leave money on the table, and then just, the server got it. As soon as it went on credit, uh, you know, when people paid with cards, then it became complicated. And then the IRS said, “oh, you know, this is money we don’t see, we just assume you get 15%.” Then they would tax people. So if you’re a traditional restaurant server, and you’re not friendly enough to get a tip, or the customer is in a bad mood, you end up paying taxes on money you never received. So there’s history, you know, tipping hasn’t always been as easy.

You know, with the economic pressures always, is that everybody wants to make the largest amount of money without paying, with paying the least amount of money to somebody else. And these companies, basically, “we’re not going to pay your wage, we’re going to pay you way below minimum wage.” And we bypass that with, like in Washington state and Seattle, they have minimum wage labor laws. So these like — well, that together with the tip, they make their whatever to $7, $8 an hour, and then they steal the tip. That’s really the — you’re tricking other people into thinking you pay them a decent living, and then you inject yourself in the tip process, which is one way to take it away from the driver. And that’s the lack of transparency, there’s economic inequality, there’s a couple of issues that are coming into play here.

Seth Villegas:

(8:58) Yeah, and one of the other things I kind of wanted to bring up is, there’s this kind of extractive feature to a lot of the way these apps work. If we just think about what the value is in that transaction, right — we’re talking about the food and we’re talking about the delivery. DoorDash is an app that coordinates deliveries with the restaurant. They’re, they’re kind of like, like a middleman, so to speak, right? Like they’re standing in the middle of this and kind of facilitating it. But they’re not providing the product, really. And I know that during COVID as well — especially when people were mainly getting drivers, right, and those drivers were also taking risks at that point — it’s just kind of interesting, right? Because there’s been a takeover of that kind of delivery space. Like, restaurants don’t have their own delivery person, maybe they would have in decades prior. Because of that, the Uber Eats/DoorDash, they’re kind of cleaning up on a lot of these purchases, but like I’m saying, it’s not like they’re providing the food, right? They’re more like, this is kind of like rent-seeking behavior, in my mind, right. They’re just sort of, they’re using a service that is obviously useful, but they’re not providing a lot of that value directly. Do you kind of agree with that characterization of what I just put out there?

Bernd Dürrwächter:

Yeah, I think it’s fair. And I do think there’s nothing wrong with illustrating the, the economic inequity. I don’t think it’s a political argument. It means in the nature of free market economy — and I deliberately don’t use the word “capitalism” — but like, it’s competitive, and whoever is most clever, you try to minimize cost and maximize profit. But the problem here is, it’s not equal opportunity for everybody, right? These apps create an information asymmetry, which then basically, the drivers don’t compete on the same level, like a company. You used to be able to see, you know, somebody else’s shop in your town, and you can see what their prices are and then you can lure customers by lowering your prices. But the reason why this is a digital ethics problem is that these large companies control the information flow. And at that point is not an equal footing anymore. Actually, it’s not a free market economy anymore. Now you’re more, “I have power that you don’t have and I’m going to exploit it.” It almost goes more towards oligopoly or monopolistic power. And that’s not fair. And that’s why it’s an ethics issue.

Seth Villegas:

So let’s talk a little bit more about that information asymmetry, because I think that’s the newest feature of this. So for instance, if we kind of go for, with the example that you had, right, of two different stores that have similar products, they can do things to differentiate themselves, right — you might have one that actually offers something like premium versions of the same products — like, there’s all these different kinds of strategies that you can use to build a reputation, and all that sort of stuff. And so, the customer also knows that. But one of the things that I think the companies are using — and this is where it’s really important, where the tips being deducted from somebody’s base pay is really kind of insidious — is because the customer assumes — and this is something new, I always assumed that that money is going towards the driver, I wouldn’t be tipping otherwise — but because of this new digital infrastructure, and because of, you know, the way that cards work — and I’m glad you brought up this story with the IRS, where there used to be this kind of, I wouldn’t say it’s like under the table, right? But it’s just, you know, it’s just, it was just kind of the way that things worked. It’s just like kind of a cultural thing. And when you try to translate that, those tips are like official pay, in some sense. And so, because DoorDash/Uber Eats kind of controls that, they’re just like, “okay, well, we’ll just deduct this.” And you know, it’s funny, because the company is just like, “oh, well, I’m glad people are tipping. This saves us money on salary, right? Like this saves us money on paying people.”

Bernd Dürrwächter:

(12:55) It’s interesting, something you just brought up I hadn’t even mentioned, but the information asymmetry — there’s basically three parties here, right: the DoorDash the company; the customer, like the person who orders food; and then the delivery driver — so you have three parties. And by not telling the customer that the tip — you know, because it’s customary in US culture that the tip goes from the customer to the person who they interact with like the server, the driver — so they don’t only trick the drivers, but they also trick the customers. It’s almost, you lie to your customer or violate social conventions by withholding information or letting them be on their assumptions.

There’s a little bit of an exploitation of the commons, like that these modern companies only function because they violate social conventions, they exploit people’s trust in a way. That’s a systemic — are you familiar with the tragedy of the commons? That goes way back, right? The town had like a pasture where everybody put the cows, and everybody had one cow. And that was that. Then somebody got the idea like “cool, I got 100 cows and use the whole pasture for myself,” and broke that social contract — didn’t violate any laws, per se — but before we became these huge civilizations, we didn’t need laws, everybody knew each other and just came to a negotiated understanding. Like, everybody had common interests at heart and as civilizations became bigger and more abstract, you had to formulate laws to communicate, but the rules are enforced. And then there’s a whole new generation of companies who — in the spirit of being rebellious, creating a new order, this is a new economy — very knowingly break this whole social contract. And in a way, it’s weird, because if everybody would do that, they would have no advantage. It only works for them because there’s only a few who exploit that. If everybody would live by those standards, they wouldn’t have an advantage and we would be back to our case societies.

There’s a whole new generation of companies who — in the spirit of being rebellious, creating a new order, this is a new economy — very knowingly break this whole social contract. And in a way, it’s weird, because if everybody would do that, they would have no advantage. (14:07)

Seth Villegas:

You know Bernd, one of the things that’s kind of central to this story is the fact that there’s this third-party app called, uh, Para. And basically, what it would do is — you could kind of — it would let the the drivers see basically what the tip was going to be before they took the order, right, it kind of erased an asymmetry. And because of that the drivers got really mad. They’re like, “oh, wow, like, what, like what’s happening here? Why am I not getting my tip?” Especially if it’s something that you can see very obviously. And that’s the other thing too, right? Like we haven’t even talked about more deliberately manipulative behavior, say within the app.

Bernd Dürrwächter:

That’s what makes this all really hard to recognize for the average person who doesn’t have the time to deep dive — these patterns all exist. I was just thinking this morning, actually, how people back in the 1980s — there was this iconic movie called “Wall Street” with Michael Douglas and one of the quotes — Michael Douglas was this investment banker, and he was like ruthless, making money — and, and there was a sentence “greed is good.” And people worship that movie, right? There was, you know, Ronald Reagan, you know, capitalism versus communism, it was like a time when the, you know, the western model of economy, free market economy, capitalism is so superior over communism. And ironically, they made a new version of it — early 2000s, I think where, you know, same Michael Douglas, 20 years older repents, since like, it wasn’t such a good idea.

You talk about the other app that basically created transparency, because — so one of the ethical pillars is respecting someone’s agency to make an informed decision. Otherwise, you tricked them, and then it gets into lying territory, but you mislead them, you manipulate them. And sounds like this other app, by creating transparency of how much — whatever decision they made about the partition of the tip — but at least they let customer, they gave them enough information to decide.

Long before the app economy — so I was working a lot as a consultant. You worked for a consulting company. They’re kind of comparable, they don’t really add any value. They hook you up, say as the information technology expert, to the company actually needing you. Let’s say they pay me $50 an hour, but they charge their customer $100 an hour, right? And the argument is the consulting company has to pay me benefits, they provide me with computers and an office and all that. So it was always kind of justified. $50 for me is good enough, like the work at 2000 hours, $100,000 salary was fair enough. And then even big companies like Microsoft, when they pay somebody’s salary, they’re actual cost is double that just because of the infrastructure and this and that. But then you get companies who charge like $200 an hour and still only paid, you know, us, the workers $50 an hour. So you have the same pattern, that they’ve been exploiting that. And we had to sign contracts to not ever talk about our salary — or if we were involved in a sales process and we knew what the customer was charged, because we saw the quotes — that we don’t ever talk with anybody else about this. We saw a lot of gig contracts in the, in the market and employment market long before the app economy. So this information asymmetry is kind of nothing new. And then you have the consulting companies who distinguish themselves by saying “we’re transparent, we pay you $50, we charge $100. That’s the way it is, if you don’t like it, don’t work here, but we give you the information, you can choose.” And then it started becoming competitive and they said, “hey, we only charge $80, you get the bigger share of what we charge,” and then you could work for whatever company. So that was free market economy but you’re free to choose because we have the relevant information. And so in a way, it’s not new, but the apps kind of accelerate that, they amplify that power.

Seth Villegas:

And one of the things we talk about a lot here is about this issue of informed consent. And something that you specifically bring up a lot is, you know, what are you hiding, right? Like why can’t you be transparent about this? And one of the things that’s interesting about Para is basically — I can imagine the development of the app, you know, someone’s curious, has the skills, they create something that allows them to see the tip amount. Basically DoorDash catches wind of this and they kind of patch it out, right, they make sure that the app doesn’t work anymore.

And actually, I’ll just read this statement from DoorDash: “Para collects its information by scraping content without authorization from the DoorDash platform. This is deeply concerning as we are committed to protecting the privacy and data security of every side of our marketplace and stakeholders.”

So this is basically saying that it’s a violation of the company’s Terms of Service, you’re not allowed to do this. But that doesn’t solve the problem of the drivers — you know, a bit of a code war going on there, right? And you could see this actually happening on other platforms, where curious people would be very willing to develop apps in order to figure out the kind of information that they actually want. But the fact that it gets shut down does reveal, in this case, that DoorDash doesn’t really want them to know.

Bernd Dürrwächter:

(19:21) Well, and this just speaks to my earlier point. You have a general erosion of the whole environment — in this case, the business environment — where they set the precedent. That precedent was set — you know, when did Facebook start? — by the new economy as a lot of it was a new generation of technologists. So now they set the standard, so people rip off people, trick people. Well, then they become subject to the same standards they introduced, right? And it’s just a matter of time until the consumers figure out in the low trust environment, it’ll turn into martial law eventually. It’s kind of like what, with the law in general, who’s stronger and has the better weapons and stuff right? Because consumers are so empowered these days with software and this and that. Eventually all kind of hacking, to sabotage something will become ethical because, you know — like the whole story of Robin Hood, it’s okay to steal. If your king takes away everything, you have nothing to eat, right? That’s putting society back into a lower state. Like there’s a reason why the institutions agreed rules and laws, if everybody’s out for themselves it is far less efficient — it’ll possibly turn into war, a civil war, right, where everybody suspects everybody. And that’s the tragedy of the commons: in order for few modern technology companies to benefit their shareholders, they exploit the commons, and that ruins it for the rest of them, right? And that’s one of the lessons of the Cambridge Analytica. For some people to benefit from it, they eroded society’s trust or the whole political process, people having trust in it.

Seth Villegas:

Yeah, but let’s talk a little bit more about how this happens, right? Okay, because I think, I think we do need to get more into the, the story of apps and why they’re popular. So for instance, if I want something for dinner, right, you know, I have my phone, it’s easy enough to download an app. From the consumer side, I think that’s where the real revolution of the technology is, right? You’re aggregating lots of different services, businesses, those businesses can offer you deals, you know, there’s easy way to — it kind of streamlines the payment process, the delivery process, and all of that. And so, so that’s what kind of drives people towards those kinds of services. And then it’s out of the convenience of that service that the service eventually — you know, even though it’s not offering, say any of the food or any of the deliveries directly, it’s just coordinating those things — it becomes so convenient that on the consumer side, that’s what kind of draws people in, right, of, “oh, wow, like, you know, I can order something from here or there. I, you know, at the touch of a button basically.” And because of that, you know, people who don’t get into that kind of ecosystem are probably going to be losing customers if they — because that’s the primary way in which people, especially younger people, start to connect with those sorts of businesses.

Bernd Dürrwächter:

I mean, yeah. Another angle on this — this is one of my personal works, a lot of people’s concerns, all the way from going bowling alone, and then Sherry Turkle wrote a lot about the digitalization of society as it has estranged people from each other — but you know, again, that goes all the way back to the 60s when TV become, became more prevalent. And a lot of these things didn’t exist in societies when everybody knew each other, or we have face-to-face transactions. So, there’s no more concept of negotiation. And we have this in the same context with the terms of service where — since there’s no more humans interacting, you’re interacting with an app, and the app is a certain way, take it or leave it — you can’t really appeal to reason or to emotion like you used to do in the old day of, you know, if you go to Middle Eastern and African cultures, there’s still this, you go to the market, and they say, “well, the prices is like this,” “ah, that’s too high,” you know, it’s like you can haggle with them negotiate and that itself.

What the real problem is, with all this intermediation where the app becomes too social. And literally, the apps are called social, but it’s really their tool for exploitation, because that’s the other — other than information asymmetry — is social asymmetry, where you have no way of interacting, persuading, negotiating. So it’s in a way, the way I see it, dehumanizing, right? It started with the call centers, also, with the technology where you couldn’t talk to customer support anywhere, everything was like a phone menu, and it was designed to be so obscure that you would give up, right, and they’re just now moving back to more human. But a lot of these chatbots now it’s, it’s… it a) empowers and b) is deeply dehumanizing, and probably feeds into a lot of, you know, why depression is on the rise because people don’t have these natural interfaces anymore in commercial transactions.

The apps are called social, but it’s really their tool for exploitation, because that’s the other — other than information asymmetry — is social asymmetry where you have no way of interacting, persuading, negotiating. (23:08)

Seth Villegas:

Kind of building off of that, I think one of the things you’re hitting on is, when you have things that are kind of managed by these digital systems, a lot of the inherent flexibility of that system — especially within a kind of, you know, bureaucratic nightmare, right — that we can kind of interact with at different parts of society. For instance, it can be really helpful if the person that you’re interacting with, and you’re, say, in need of some sort of a government service, maybe at the Department of Motor Vehicles, which is notoriously bad. But it can make a really big difference if someone kind of helps you, right, of like, “okay, like, you need to fill out this form in this way,” or, you know, “oh, this is going to get bounced back if you do this or that.” And someone can kind of help you navigate that process. But as you’re kind of saying, if you’re just kind of interacting with these sorts of deliberately inflexible systems — and that’s not even talking about the systems that are designed so that you don’t want to interact with them and can’t get help from them, right, which is another problem entirely — but just the fact that if you don’t do things in a way in which the machine can read, you can’t do anything with it. It’s kind of like you know how buildings for like wind and for earthquakes have to have some, like, sway to them? That, that’s kind of the metaphor I have in my mind, right, where everything here seems really rigid and because of that, it can just crack at certain points because it doesn’t mean inherent flexibility.

Bernd Dürrwächter:

I remember I had friends who were building call center scripts, and they were literally told, “make it as obscure and hard to interact with as possible so the customer gives up and doesn’t log a complaint, or win some money back, or whatever.” In the app economy, you and I talked about this of course, it’s called dark patterns, right? Where if they don’t like certain behaviors, if they’re not good for business, kind of like opting out of a, you know, “I’m not cool enough” or make it dark gray font on light gray background so the only thing is a big fat “accept” button. You know, “oh, well, they have a chance to opt out,” except nobody can see it, right? There is certain design in the infrastructure—making technology infrastructure. Ironically, the same people hail technology as a solution to mankind and use it against people. And that’s, it’s, that’s why it’s ethics. Digital is the means. And the ethics part is the human decision, right? Whoever’s a high level up who makes that decision does not respect your customer, who do cheat your customer by you know, misleading them.

And, for example, the — what is it — you walk into a store, a Fred Meyer or Walgreens these days, and the prices on there — the big fat advertised prices, or sometimes the only prices that are on the shelf — are the ones when you have rewards card, they don’t show the price anymore. So the other day I was buying an avocado, it said 99 cents for a big avocado and then ended up costing $5 because I didn’t have a rewards card. I never saw that price of $5. Okay, it’s like, “forget this I’m just gonna dump my groceries there and walk out of the store not buying anything,” but — and then there’s stores, apparently, that now have digital prices that change depending who stands in front of them because they can track you all the way.

Seth Villegas:

Really?

Bernd Dürrwächter:

Yeah.

Seth Villegas:

Really? That’s crazy.

Bernd Dürrwächter:

Oh, yeah. This week, I got a whole bunch of evidence that — I was talking with my wife about a couple of things and then all sudden I got, my YouTube feed was very clearly reflecting what we talked about. I didn’t Google it, I didn’t use my email to talk about it, it was very obvious that it was listening to our conversations on our phones. I was like — not mine so much, but she’s glued her phone. It was so blatantly obvious that they listened into conversations, and they still do it. But you know, people found out and then nothing was done about it. Now it’s just mainstream. My wife is still using a phone because she sleeps with it, despite knowing this. So even smart, critically thinking people otherwise get, you know, eventually worn down.

Seth Villegas:

(27:23) But if we can kind of turn the conversation a little bit back to the delivery companies, I think what you’d said before that we haven’t talked enough about yet, is about the kind of incentive structures and the kind of manipulation and drivers, right? So they’re also collecting lots of data on those people. Because of that, they, you know, can just make pretty educated decisions about what they can sort of get away with, right? And they can kind of take like, “okay, well, we’ll lose, I don’t know, 10% of our drivers if we lower by this amount. But if we do it over the course of 6, 7, 8 months, maybe it won’t really affect how many people are working for us,” right, because they still need people to drive for them, they can’t lower it to the point where nobody wants to, or they’ll have to raise their rates again. I’ve had plenty of friends who’ve worked for driving companies and whatnot, people who really try to take advantage of those incentives. But it’s actually when those services succeed, and it starts to look like a pretty good, good gig for most people they want to get in, right? You know, there’s an increase in the kind of supply of labor. And then, you know, the, the price of that labor’s is going to tank — part of that’s just economics. But I do think there’s a real pushing of the envelope here, right? Where what you’re getting for this service isn’t even, like, like, you’re not even covering what you’re doing right, which nobody would work for free, right? I mean, that doesn’t even make sense.

Bernd Dürrwächter:

Their profit margins or the niche — traditionally, actually, restaurants would also there was a way, or some restaurants will do it, deliver it themselves. So in a way, there’s a value for the restaurant just outsourcing it. Because it’s family-owned Chinese restaurant, and then one of their workers there had to deliver the food, so it’s inconvenient for them. But a restaurant has to undergo certain regulations. So in a way you have somebody handling your food who’s not licensed at all right? Because I don’t think DoorDash you have to be — my son worked for a restaurant, he had to get the food handler’s license, which expires, you have to refresh it every once in a while. Not sure if the DoorDash drivers have to have a food handler’s license. And that was the same thing with Uber, a taxi driver has to have all kinds of insurance — a traditional taxi driver — and you have to have a permit and you know, plus $10,000 a year in New York or whatever. It, you know, created a market niche because nobody else got into that gray space of not following regulations. That’s again exploitation of the commons and also creating economic opportunity by undermining the system, right, and outside the fact that these drivers, you know, being uninsured creates a risk for them, or, you know, it’s almost deferring the legal risk too. Where they say, “well, but driver decided to deliver the food and when something went bad, like, we’re just a platform,” which you hear a lot like, “well, we deny any kind of stake or responsibility in the process, we’re just the information platform.”

Seth Villegas:

It’s funny too, because just kind of looking around this stuff now, it doesn’t look like you necessarily have to have a food handler’s license. It’s funny, because I think within a lot of those sorts of like, older conversations about that people are kind of like, “oh, this is like, sort of, you know, unnecessary bureaucracy.” And you know, perhaps it is. But the thing is — that I think you’re pointing out — is the fact that if a restaurant has to go through these extra steps in order to provide something that DoorDash does without those steps, it’s a clear asymmetry, right? Like, there’s no, there’s not really a level playing field. And it seems like you could either eliminate that need, or you could make sure that they both have to do it. But the fact that DoorDash is able to sort of do that without one, right — and even as you’re saying, like with the whole taxi thing, which is a really great example of this of like, “well, it’d be really expensive to give everyone these licenses, so we’re just not going to do it.” And if you can kind of create enough momentum, if there’s enough, kind of political pressure, it just sort of happens. And things just work different now. And there aren’t even real traditional taxis anymore. Like those, those services that have had, kind of had to like completely modernize because of this new pressure from a technology that technically shouldn’t have been allowed to work.

Bernd Dürrwächter:

I love what they did in Sweden, when Uber came out. What they did, they established taxi unions, and they just designed their own app. It’s like yeah, that’s actually pretty clever. And instead of being on the phone, and the dispatching was kind of convoluted, and the drivers were kind of rude. “Let’s just mimic what Uber did.” So, then the other Swedish traditional taxi drivers adopted Uber’s business model — and at that point, that wasn’t an opportunity anymore. So, in a way, you know, the old taxis were kind of a monopoly, and they had no incentive to be nice, or you know, this and that. And that traditional taxi, a whole lot of safer. That still requires a level playing field. A lot of these opportunities go away when, when they open the fields like okay, now everybody can get these stupid scooters, right? There, Germany had traffic laws, you needed a license plate, or the Netherlands, for a bicycle or some of these stupid scooters that are way more unsafe, right? Okay, well, you need a license plate too, problem solved. But once we put this hurdle up, then you don’t have a niche anymore, then you have no incentive, and they abandon it.

It’s, it’s the — I kept thinking, one of the things I wanted to say is these modern executives or startup founders — because it’s about ethics. How can we relay it? How do you make it — it’s almost like ethics should be a competitive advantage, right? If it’s a free market, and like with the B corporations — I think we talked about it, right — it’s your free market choice, what kind of corporation you want to found as a startup. But if you choose to be a B Corporation, you’re stuck. You’re, you’re, you have to adhere to certain principles, right? So it’s free market, we’re not telling you what to do but once you commit yourself to this business model, you don’t get to cheat on it, right? Like you say, “here, we’re more ethical because we have transparent practices,” so the customer makes, ultimately makes that choice, where we made that whole regulatory — where people were more on the socialist spectrum. “Well, don’t tell us how to live, blah, blah, blah.” It’s like you get the choices but once you commit to a choice, we will hold you accountable to that as a business owner, as a founder, as a startup. The problem is sitting, pretending to be this, you lie, you cheat, and that’s unethical. Be transparent and whatever you want to do, then you get to do whatever you want to do. But people will know how you act and they can make the choice whether they want to do business with you or not. So if somebody would ask, what would you do to put it back on an ethical playing field, while being compatible with the free market society? It is doable, and people are some, from one extreme to another, and actually it gives the consumer actually the power that they were supposed to have in the supposed, you know free market requires information transparency.

Seth Villegas:

So Ruben Mancha is one of our advisors, and one of the things that he talks about is, uh, is it possible to kind of come up with not-for-profit models for some of these services. And I’m definitely not against, you know, for profit tech companies, by any means, I don’t want to make it sound like that. The, one of the things I want to bring up here is, if I have to choose between tipping a tech company and tipping my driver, I want to tip my driver, right? And if the tech company prevents me from doing that, well, then you kind of like what you’re saying with these sorts of taxi services, alternatives that can kind of fill in that space so that I can make that transaction that I want to make, actually do have a kind of competitive advantage in that. One of the things that’s actually really useful about the app — and you’ve noticed this too — is individual drivers, if they’re rude, won’t be getting a lot of work and whatnot. You know, the same thing goes with deliveries, and it’s like, for people doing a good service — and especially if I want to be served well in the future — having those kinds of apps to maintain a reputation within the app ecosystem, is not, it’s not a bad thing by any stretch of the imagination. But what is a bad thing is the fact that I can’t make the kind of economic transaction that I’m hoping to, because of the thing standing in the middle of that, that’s where I would like kind of personally object. So if you do have some sort of a different app infrastructure at that point — again, something that maybe is more driver centric — and this is actually the problem, right is, you know, those things are probably going to be a lot slower to develop, just because the, there’s not the same motive to develop those types of things.

Bernd Dürrwächter:

You know, that always got me. If you look at the actual value, there’s a service or good that serves a need or some innovative need, and the customer benefits from it. The ideal version of a free-market economy is win, win, win, right? Everybody who participates, that’s their incentive, they get met and this gives them a motivation to participate in the system. If you look at these valuations, when these companies go public — what was it, Uber $80 billion dollars for being basically a taxi service? And why is it that they used to call a dispatcher with taxis — basically a customer calls into some office with telephones, they pick up and then they radio the driver, right, before they had the internet, they had to radio on your AM radio to the driver. Why is the dispatcher harvesting 80% of the value chain here? And the driver — who does the actual service, like the driver is the actual person transporting the customer from A to B, which is the core activity — and they get 10 to, whatever, you know, 20%. It’s like, it doesn’t seem fair by any standard. Right? It’s a classical, we haggle, and we arrive, “I get 90%, you get 10%.” All you have to do is communicate, point out these cases, let people come to their own conclusion, because you can see that these companies aren’t terribly excited at having to testify in front of Congress and how much they stonewall when there’s investigations, because they know very well themselves that this is not okay, and how, what the consequences would be if the general public would be aware of their practices.

Seth Villegas:

(37:20) Exactly. And that’s how I actually would want to explain it to someone. I think that’s probably the biggest takeaway of this conversation we’re having right now is, again, as you’re saying, why is the dispatcher taking so much of the value chain? And I don’t want to say that they aren’t providing a service — it’s just the way that that value chain has been negotiated, isn’t tilted towards the thing of value. It, like, if it was going more towards the drivers themselves, I think those are the people I’m thinking about, right? And especially like, you know — I’m going to kind of bring up my own sort of demographic in society — but almost, a lot of the people that I personally get deliveries from are like, kind of usually working multiple jobs and stuff like that. Like, again, I don’t mind paying people for a service that I actually want. But it’s just, why am I, again, paying the dispatcher though? And I know, and I know that the extra costs of those services, like for the food itself, isn’t really going towards where I would personally like it to go.

Bernd Dürrwächter:

I was just thinking of, there’s actually, when your DoorDash driver — whether you’re, or your Uber driver — whether you have some kind of contract with Uber or DoorDash — that prohibits you from taking, let’s say, when a customer — I heard this, that, especially older people who are used to giving a cash tip — whether you’re allowed to accept that, or if they have a regulatory. Because I was just thinking, what could we do? What if we do a social movement, “hey, pay your DoorDash driver in cash?” But I would suspect that since that’s undermining their business model, that there’s probably some contractual clause, when they become a driver, “do not ever accept cash.”

Seth Villegas:

Yeah, and if anyone knows about that who’s listening to this, I’d love to hear, because that could definitely be another, you know, sort of thing. But I also know, part of the reason why people use these services is because they don’t have to interact with a person, right? So if you get something delivered to say, you know, your apartment complex, it’s just sitting there and delivered and the person’s gone, right? You don’t necessarily ever — there might always be a chance to hand the person cash directly. I think especially in a kind of like…

Bernd Dürrwächter:

Maybe the broader point is: transfer money outside of the company or, if you want to Venmo it, or coffee cup, or whatever all the payment systems are right now, right? There’s a lot of ways on the internet to quickly tip somebody. I see this a lot with content creators and artists and, especially amongst younger people, right? If the customer’s a digital native and the driver’s a digital native, they already know how to transfer money to each other. Basically, the point is to transfer to their money knowing that they get unfairly treated by the company. So the social movement could be well, just tip them outside of the app and then it’s kind of — as long as — I know if a company says there’s a contract, you’re violating our contract, then you could take it to court and say, “hey, you discriminate me on a basic right,” like “well, you can’t tell me that I can’t transfer money from another person,” right? And then it becomes, now you have to defend your terms of service, whether they actually standing up as, in terms of contract law.

Seth Villegas:

So, to kind of finish off then Bernd, what do you sort of think about the fact that if the, if the, again, if the dispatcher themselves is kind of handling the transactions, there’s probably just going to be too much of an incentive for that person to collect as much of that as possible.

Bernd Dürrwächter:

That’s a classical middleman problem. That’s, you know, and I mean, part of that is a little bit monopolistic. Also, that these early visual, you know, app economy pioneers. I mean, in a way the kind of smartphone apps came out — what, 2010? — it was kind of mainstream, and they were thought leaders in a way that they came up. Now that there’s more competition, maybe people do realize, “I can go somewhere else.” But in the beginning was monopolistic, like the only transport — whatever you call the Uber category — and then there was Lyft. And then all sudden, especially in Asia, you have, like, sprouting so much that now there is an ecosystem, we actually have choice. This was far more aggravated. Even with DoorDash, I think there’s a bunch of competitors who do similar stuff. It’s really classical antitrust law. Like, if you have a monopoly, that’s not okay. And if you do price fixing — if they all coordinate with each other, do the same thing so the customer doesn’t have a choice — it’s almost like, “hey, we got to up our trust department, who can investigate that.” You know, problem solved. Because again, that pattern of wanting to make the most money with spending the least and in the process, exploiting, you know, others is kind of not new. Rockefeller did that, JP Morgan, and other points. You know, you have a captive audience and information asymmetry so it’s… We solved this problem 400 years ago, right, when they did the trust busters and such.

Seth Villegas:

It seems though, that the kind of app economy itself, though — and things in the digital age — lend themselves towards much bigger winners than before, which makes the kind of monopolistic element worse than it might have been in a prior era.

Bernd Dürrwächter:

Well, it’s the network effect and then, again, the information flow. Back then, you had to control the media. And it seems to me, it’s just like the salary for CEOs being 800 times, you know, that — the CEO has always made a multiple of their workers, but I used to be 40 and now it’s 800. Rockefeller also had his way to find out more information than his actual workers. But now the average worker has more information — but a factor of how much more outsmarted they are with AI, you know, when the companies run algorithms on their drivers and the information they have — the multiple is much higher. And the other factor on that that’s somewhat of an enabler — you and I talked about this — how clueless Congress was. You have all these non-digital native congressmen who — where the average age is 60 — you know, who don’t even know what questions to ask when they have these 6-minute millennial generation digital native executives. They were just given the runaround, right? They had no way to ask an intelligent question. They’re like, “what is Facebook? What’s the business model? How do you make money, right? And hey, can you give me fiber optics in North Dakota.” So hopefully, as these older regulators or legislators age out, and you have more like a younger generation, who are also digital natives, and they can do this, because right now, the digital economy and these companies who operate in gray areas, they are completely outgunned, both intellectually, legally, the people who actually are supposed to oversee that. Like we don’t really have an agency who oversees the digital economy. And maybe that’s, as new generations of legislators and idealistic, you know, who are more focused on “I want to be a kind of policy maker versus getting rich in Silicon Valley,” — I mean, you’re a good example, you said you want to focus your career on the more doing the right thing than getting rich and famous quick.

Seth Villegas:

(43:44) The — I mean, the startup economy itself is very volatile, right. And lots of companies in the startup space end up getting devoured by the bigger companies over time — that’s just something that, you know, seems to be happening. And everyone who kind of reaches the level of power that these current tech companies have is, I mean, they usually try to stay on top for as long as they can, so I don’t think we should necessarily be surprised by that. But I think one of the reasons why we want to have these kinds of conversations, though, is because we can talk about whether, you know, regulation is the right answer in every case. And, you know, when I often talk to people about what regulations are right, unfortunately, I don’t always get a great answer on what those regulations necessarily should be. So, probably need to talk to a legal expert at some point about those sorts of things, but one of the things I do want to kind of continue to point out, though, is the value-added problem isn’t an issue just for the person who does the labor, right? I think it is also an issue for the customer ultimately, right? Because that that process of extraction is also going to happen the other way as well.

Bernd Dürrwächter:

What, I want to add a point to this. Like I said, politically and economically, I’m very centrist, probably more on the libertarian spectrum — that if everybody would self-manage, we wouldn’t need regulations, institutions, but unfortunately, it’s just like communism, that real communism never existed and I don’t think true, self-managed libertarianism can exist either, because of the nature of humans — but I just want to set the stage that I’m not trying to drive towards “the government needs to control things,” I want to make a pragmatic argument. The average person doesn’t understand what’s going on. It’s way too complicated. That’s why we have institutions. So at the Food and Drug Administration, you have biologists, chemists, you know, people who are specialists who know how to monitor a chemical company, whether they do the right thing, whether the products — or, food companies, whether they put toxins in their food. The reason the institutions, and often linked to the government, you know, watchdogs, and you have what you call NGO watchdogs right? It doesn’t matter whether it’s the formal government or separate organizations, but the thing is, they need to be representative of the people, they need to protect the average person who has no capacity to judge whether a company’s doing the right thing, right, they just don’t have actual scientific knowledge. So that’s why we have institutions that we delegate those kind of overseeing things. That’s not really with over-regulating, it’s just transparency, so the average consumer can make an informed decision. It’s all, it also goes back to the information asymmetry that companies — or you know, those who control the economy are exploiting the power asymmetry, which in modern day is that information asymmetry — so either we have a skilled institution that we can delegate that to as society, or we educate the masses, that they can make this judgment themselves — because you can’t say the consumer votes with their feet, if they don’t know what they’re voting for.

Seth Villegas:

And especially if, you know, it’s not even voting with their feet, right? It’s voting with, you know, “oh, hey, like, I’m here that, you know, thumbing for some food that I’m craving while I’m watching Netflix or something,” right? Like it’s —

Bernd Dürrwächter:

(46:53) I mean, that, like my worry is — and some people wrote this about AI — the real risk with AI is — every development before in society, you know, when the Irish were oppressed by the Lords by having their land taken away, or you know the whole Robin Hood — people were always aware when they were being oppressed. Like when they were thrown into jail, like you can organize resistance, because you knew that you were exploited, and oppressed and maltreated. With the whole data asymmetry and then to some extent, a lot of the AI research goes into creating bots that mislead people or better understand people than they understand themselves. And we don’t even know anymore what happens to us, how somebody exploits us against our own interests, because normal systems designed to not make us aware of that it’s happening. So you can’t even put up a resistance. It’s it goes back to undermining our decision autonomy, but that’s why it’s so, almost so sinister compared to every other injustice throughout human history. It’s almost like a matrix — you don’t know that you live in the matrix, or there’s no way back once we get sucked into this vortex of living in this world that we believe it is, without being realized somebody else benefits from that and it’s actually harmful, because the whole thing wouldn’t matter if it weren’t harmful.

Seth Villegas:

Yeah, and I think this is a pretty good point for us to start to wrap up on. Because, you know, I think we’re going to be hitting it sort of over and over again, of, you know, one of the things you say all the time, right, is Zuckerberg is a behavior guy, he’s a psychology guy. And you know, this gets a lot back into, you know, Shoshana Zuboff’s surveillance capitalism, where the whole point of that system is that your behavior is being altered without your knowledge. And I think most people would object to that. And, again, if we’re thinking about, even just something as simple as a food delivery app that’s happening to the customer, to the driver, and to the restaurant, right, and you have somebody just kind of sitting outside of that process, just sort of extracting from it, right? And that’s where I think, again, just looking at it in terms of the actual value chain — it’s hard to say that that’s actually creating something good.

Bernd Dürrwächter:

You just introduced a fourth stakeholder that I hadn’t even thought about. The restaurant is actually one of the stakeholders and uh, you know, I said earlier, there were three parties. But you’re right, the restaurant is one of them. I mean, it’s probably the agency — the decision autonomy is probably a higher ethical concern or value than even fairness, because you can’t even figure out that you’re unfairly treated if you’re not aware, if your autonomy to make an informed decision is not there. And who gets to decide where the some fall because you hear a lot of Silicon Valley mentality, but where — maybe they really mean it — “we’re trying to improve, we’re making it more convenient.” Like let me decide what I find more convenient. And just because, maybe 60% of the customers feel that way, that doesn’t mean — let me, individually, choose what I think is okay. They intuitively know that it’s not okay, why else would they have this route their business practices?

Seth Villegas:

Exactly. And I think that’s probably well, we’ll end this here, just because I do think for kind of people listening to this, you know, this is one of the primary points that we’re going to hit on over and over again is: you know, before we can even get some more sort of complicated things, the very most basic thing that people need in order to have agency and be able to make their own decisions is just to know what’s going on, right? And kind of before that, it’s hard to talk about all these other things. But I just wanted to kind of point out that even in a, what seems like a straightforward situation like this, there’s already you know, several stakeholders who can be potentially subverted by this kind of information asymmetry that’s going on. And unless we kind of work to disrupt that sort of thing, I think we’re only going to see more of this kind of behavior over time.

Thank you for listening to this conversation with Bernd Dürrwächter. You can find more information about DigEthix on our website digethix.org and more information about our sponsoring organization, the Center for Mind and Culture at mindandculture.org. If you’d like to respond to this episode, you can email us digethix@mindandculture.org. You can also find us on Facebook and Twitter, @DigEthix, and on Instagram, @DigEthixFuture.

In this episode, Bernd and I spoke about the range of issues related to the summer DoorDash protest. At the center of this conflict is the question of information. Why is information about tips being withheld? Unlike in a restaurant environment, this number can’t be known. In fact, the third party app reveals that this data is sitting waiting to be mined. However, we have to keep in mind why DoorDash might be motivated to withhold this information. My hunch is that has to do with guaranteed service. So we have to consider that DoorDash and companies like it are simply aggregators, and that they stand to make a great deal of profit from simply being in the middle of customers and restaurants. How valuable is the service exactly? What is to be gained from maximization of profits at this level specifically?

I think that we have to keep in mind that technology is valuable so long as it can provide food and services quickly and easily. However, there have to be actual goods and services for it to work. I worry that these apps begin with a sense of empowerment, but just end up creating another treadmill. We have to keep in mind that these technologies are designed to work in a certain way. And that alternative arrangements are always possible. But unless we take the effort to imagine how they might be different, then we risk accepting less favorable working conditions for the sake of services that are only mostly convenient. Well, they’re convenient so long as people are willing to do the work to make the service possible in the first place. This is Seth signing off.

DIGETHIX: DIGITAL ETHICS TODAY — EPISODE 15

Information Asymmetry in the App Economy- The Case of the Doordash Strike

A talk with Bernd Dürrwächter

Transcript

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Written by Center for Mind and Culture