Reinventing the Rip-Off with Lindsay Owens

The Weekly Show with Jon Stewart

Jon Stewart welcomes Lindsay Owens, president and CEO of the Groundwork Collaborative and author of 'Gouged: The End of a Fair Price—and What That Means for Your Wallet,' to discuss how

Key takeaways

• Corporate collusion and lack of competition allow companies to set prices far beyond production costs.
• Historical cartels like the Phoebus cartel intentionally shortened product lifespans to maintain demand—evidence of systemic price manipulation.

Main topics

• Corporate price-fixing and collusion
• Federal Reserve monetary policy and its impact on workers

Notable quotes

We've got, you know, a political price that will likely be paid to the incumbent party.

It's a rage read for sure. Although we end on a slightly happy note, but it's a rage read.

Conclusion

Lindsay Owens' insights reveal a system where fairness in pricing has been systematically

Transcript preview

Speaker 1 (0:07) Ladies and gentlemen, welcome to the Weekly Show Podcast. My name is Jon Stewart. We are coming to you Wednesday, September 16th. Normally, we tape on a Tuesday. We had to tape on a Wednesday because of the Emmys. I flew out to the Emmys. It was delightful. I got to sit at a table with my friends, Jon Oliver and Jimmy Kimmel and Stephen Colbert. And Stephen Colbert won. And God bless. I would have liked to have seen Jimmy Kimmel win as well because I know that many people could do it because I think he deserves it as well. But thank God Stephen was able to get up. and accept the award because, and the people at home didn't see this, but just minutes, minutes before the award was announced, there was a terrible accident where all four of our beards got interlocked. And thank God for a resourceful seat filler who was able to somehow unlock the Rubik's Cube that was the four nascent beards of Oliver, Colbert, Kimmel, and Stewart locked together and allow Stephen to rightfully get up and accept his well-earned Emmy for Best Variety. But that's that. I'm a little jet-lagged. It was lovely to see my friends, but it's going to be even more lovely segue to talk to today's guest who is going to save our economy from the exploitation of our overlords. She is one of my favorites. Let's just get to her. Ladies and gentlemen, Lindsay Owens, president and CEO of the Groundwork Collaborative and author of Gouged, the end of a fair price and what that means for your wallet. Speaker 1 (1:51) We are joined on this momentous day in economic history by our good friend, Lindsay Owens, president and CEO of the Groundwork Collaborative, author of Gouged, The End of a Fair Price and What That Means for Your Wallet. And Lindsay, so nice to see you. She is joining us on the day that she found out that the printer that the publisher has ran out of toner. And now she's there. They're shipping a bunch of books where maybe the words are on there. Maybe the words are not on there. Lindsay, what have you heard now? Speaker 2 (2:25) Yeah, I don't really know. I'm going to run this down after you and I log out of the podcast. But all the more reason to listen to the pod, because it might be the only way to get the material. Speaker 1 (2:38) Lindsay, thank you for thank you for saying so. And we are going to get into the book. And if for those of you who enjoy. the economic musings put into print form, it will in no way make you throw the book four or five times against the wall in utter rage, which is what I did as I was reading it. Speaker 2 (2:57) It is a rage read for sure. Although we end on a slightly happy note, but it's a rage read. Speaker 1 (3:05) That's right. What you can do about it. First we could do, it is 10 a.m. It is Wednesday. The Fed, do you know what time the Fed is meeting today by any chance? Or what time they're announcing their rate? Warsh is going to announce rate hikes. Speaker 2 (3:20) Usually two o'clock, I think. Speaker 1 (3:22) So we don't know if they're going to raise the rates or not raise the rates. Do you think they're going to raise the rates? Speaker 2 (3:26) I think they are. I think they're likely to move forward with an increase. I think that's what the markets are counting on. And I think, you know, look, inflation is still pretty hot right now. And that's what the Fed does, raise the rates. Speaker 1 (3:39) Lindsay, I do, you know, we, we've had this discussion previously that, that the Fed is a blunt, a blunt tool. And it seems like whenever the economy finds itself in a, in a difficult place, whether it be because there's a war in Iran or a war in Ukraine, or, you know, there's a pandemic. Speaker 1 (4:04) They decide to raise the rates to blunt inflation, but it doesn't necessarily deal with why inflation is higher. It just slows the economy and hurts workers' bargaining power. Would that be a fair assessment? Speaker 2 (4:20) Yeah, look, we've had a lot of policy-induced inflation. The president has started a trade war. He has imposed a huge number of tariffs on the American economy. The Supreme Court struck them down. He reimposed them. He also started a war in Iran that has had pretty significant impacts on oil and gas prices that has filtered through prices throughout the economy. And as a result, inflation is up, prices are up. And so one of the best ways to bring inflation down and start getting it cooling again would be to get out of the war in Iran and would be to recalibrate. the tariff rates, but Trump isn't doing that. And so the Fed is in a position where they have their one tool, which is raising rates. And so I think they are expected to raise rates this afternoon. And that's going to be a problem for a lot of folks in the country. Speaker 1 (5:18) So the idea is, if I may, and I'm just going to, you know, put this in layman term, the president of the United States gets to fuck up everything in the world. and drive prices up. And instead of the president of the United States paying a kind of political or personal price for any of that sort of thing, we're going to take it out on workers. Yeah. Well, if you put it that way, it makes total sense. Speaker 2 (5:41) Look, we've got, you Speaker 1 (5:43) know, Speaker 2 (5:43) we do have a political price that will likely be paid to the incumbent party, right? There's a Republican trifecta in Congress. That Speaker 1 (5:53) is so optimistic. From your mouth to that, that's an exciting prospect you've just laid out there. You know, your book, and we're talking about Gouged, the end of a fair price and what that means for your wallet, and it's written by Lindsay Owens. who is our favorite, if I may say. I don't want to say pure favorite. One of our top five favorite economists. Not only because I think I agree with so much of what you say, but because you never sound, you're very pleasant. Speaker 2 (6:24) It's a tough field. There's a lot of arrogance. There's a lot of ego. Speaker 1 (6:31) I love how we're dancing around all these various things. Your book, though, it goes into, we always think about supply and demand as being, there are sort of these immutable laws of economics that drive what you pay for things. And there's almost nothing you can do about it. It's just merely companies, there's a demand for their product. There's a certain cost of making that product. They then. give themselves a little bump on their product, a little bit of profit. And that's how capitalism works. Lindsay, from reading your book, it seems like that may not be exactly how things work. Speaker 2 (7:14) Yeah, there is a lot of economic theory that depends upon a whole host of factors that make a lot of sense in textbooks, but that don't actually appear in the real world. And one of those factors is competition, for example. You know, getting prices to a nice level depends on competition. And when there is not a lot of competition, we see the opportunity for companies to raise prices well beyond what would be expected in our models. We also see, frankly, companies, you know, getting together and ensuring that prices aren't competitive. In the book, I tell a number of stories about cartels and price fixing. I talk about a kind of old school cartel, the Phoebus cartel. These were the CEOs of the major electric companies across the world from Japan to Europe to the U.S. And they met in December in Geneva, Switzerland, and they said, hey, we're not selling enough light bulbs. Why weren't they selling enough light bulbs? Because it turns out the technology that keeps light bulbs burning has been really good for a really long time. There is a light bulb today in Livermore, California, that's been burning for over 100 years. What? And you can log on. Yes. Speaker 1 (8:40) Wait, log on. It has its own webcam on Speaker 2 (8:43) it? It has. It has a webcam. It is a light bulb cam. It's like a panda cam. Speaker 1 (8:48) Lindsay, where is this light bulb? It's in Livermore, California. Speaker 2 (8:52) Livermore, California. I haven't had a chance to check it out. Is Speaker 1 (8:55) it in a living room? Speaker 2 (8:55) Is it in? Speaker 1 (8:56) Is it in the foyer? What are we talking about here? Speaker 2 (9:00) It's in like a fire hall in Livermore, California. I'm going to try to make it out later this fall to take a peek at it in person. Speaker 1 (9:08) Lindsay, your life is better than that. I'm going to tell you this right now. You don't have to do that to yourself. We can all log on to it if we want to see it. I don't want you to have to do that. Now, the Phoebus story that you're telling, and by the way, Phoebus with a PH, just to let you know. how long ago this was. When was this, early 1900s? Speaker 2 (9:28) Yeah, it was 1924 when the Phoebus cartel convened in Geneva, Switzerland to short circuit the lifespan of the light bulb. They got together. They said, we're not selling enough of these light bulbs. They're lasting too long. We've got a problem. And they all agreed to cut back on the lifespan and wrote a memo, signed it. There was a memorandum and they even vetted and ensured compliance. Each of the participating companies had to send their light bulbs to a lab where the lab tech plugged them in, you know, screwed them in and kept them burning and then logged and monitored how many hours they burned to make sure there were no cheaters. Because, of course, someone who's offering a longer burning light bulb would have a competitive advantage outside of the cartel. Speaker 1 (10:16) Yes, yes, they would. And this ushered in, I don't know if officially ushered it in, but it's sort of the theory of, I guess, what they call planned obsolescence. Speaker 2 (10:24) Sure, exactly. Where Speaker 1 (10:26) you would build things that you could build better, but if you built them better, you wouldn't be able to sell as many because you'd have no return customers. Speaker 2 (10:35) Yeah, you're degrading the quality of the product purposefully to sell more of the product. It breaks early. Another form of planned obsolescence would be. if one of the parts deteriorated earlier than the full part. So the battery in a toy, you know, running out, but then you can't change the battery. So you've got to buy a new toy rather than just sticking a new battery in. Speaker 1 (10:57) Right. Yeah. And to be clear. They can make it better so that you wouldn't have to buy as many. And they have gotten together to choose not to. Speaker 2 (11:08) Yeah, that's exactly right. And I think the key here is coordination. To execute a successful cartel, a successful price fixing scheme, you need coordination. And coordination costs are significant. Everyone had to fly to Geneva and get in a room and talk it through and sign a deal. This is Speaker 1 (11:27) all pre-Zoom. This is pre-Zoom where people could have just done it from their computers. Speaker 2 (11:33) Yeah. And look, those types of cartels are still alive and well. I mean, we saw examples recently of the big tech CEOs sending each other emails and making sure they weren't hiring each other's employees and engineers because they wanted to keep wages down. We had an example in California recently where. the attorney general exposed a kind of old fashioned price fixing scheme between Amazon and Walmart and retailers like Levi's, where they were emailing each other and saying, hey, it looks like the price on the Levi's website is a little better than the price on the Amazon website. Like, let's take care of that. Right. Like, let's get the prices back up. But in the book, I'm really focused on the ways in which new technologies have allowed. tech companies to sort of supercharge these age-old impulses and reinvent the ripoff. And these days, you can get price fixing across industries and sectors where coordination would be impossible, but for the players using a common algorithm. Speaker 1 (12:36) Now, let me roll this back. So in the old days, they would fly to Geneva and they would sit in a room. And they would say, our product is lasting too long. Let's all make this product shittier so we can sell more of them. Was that at that time illegal? Is collusion amongst competitors, has it been typically illegal? Speaker 2 (13:01) Yeah, collusion and price fixing is illegal. And the case I just mentioned against Amazon is being brought by the attorney general of California. It is illegal to price fix. It is illegal to collude. Speaker 1 (13:14) OK, so and the way that they would track that down is I'm assuming it would be different government agencies would regulate this kind of collusion. And typically that would be the Federal Trade Committee. Who would who would typically be in charge of of figuring that out? Speaker 2 (13:32) Yeah, the Department of Justice has an antitrust division and they can prosecute companies at the federal level. They can prosecute companies for price fixing and collusion. Speaker 1 (13:42) And the tax on companies to comply with that, because I assume it's you kind of think of it as just another cost compliance, that there's a tax if they were to get caught, is enough of a deterrent that generally that has not that people have not colluded other than there's the famous case you use in the book. I guess it's not collusion. Well, now, you know what? We'll get into like price gouging based on surging and things like that later. uh let's keep talking about collusion so generally the price of colluding would make people think twice about it. Is that, would that be fair to say? I Speaker 2 (14:22) mean, ideally, yes. Like litigation risk would be something that would keep companies from flouting the law. But clearly, you know, many companies in the U.S. and elsewhere have made a decision that flouting the law is more profitable than complying with the law. And they don't view the compliance costs and the potential for getting caught. as as fatal. I think they probably feel like they'll get a slap on the wrist. I think they feel like they can tie up those legal proceedings for a long time. Maybe they feel they can fight them effectively. You know, in the case of the algorithmic price fixing I talk about in the book, you know, a lot of these companies argue that they're just suggesting the prices and therefore, you know, they aren't technically involved in price fixing. Right. They're just the algorithm offering prices. It's the retailers that are taking the prices and setting the prices. Speaker 1 (15:16) Well, this is where it gets really interesting. So in the old days, it was, you know, you would think of guys in a smoke-filled room talking about, let's make our light bulb shittier. We can spend more. Speaker 2 (15:25) Yeah. Speaker 1 (15:26) These algorithms are involved. Everything that makes it so that when you're talking to your wife about lamps. And then you open your phone and suddenly every other ad on Instagram is about lamps. The way that they drive those ads, the way that they target you for those things, they're also targeting price. They're targeting what you can pay. Is that correct? Speaker 2 (15:56) Yeah. So look, for a long time, prices were posted. They were on stickers. They were pretty straightforward. Speaker 1 (16:04) You worked at the Limited. I worked at Ormond's. So I worked as a stock boy there. And we did. We had a little gun. And you would go around it. Yeah. And you would just hit the prices on the thing. And that's how it was determined. Speaker 2 (16:19) Yeah. There was some stability. Like in, you know, in America, we've had price tags for 150 years. You know, we didn't always have price tags. You know, haggling was the norm for thousands of years. You know, the retailer. I Speaker 1 (16:32) was shocked to find that out from the book that haggling was the norm in America up until, you know. 1800s. Speaker 2 (16:41) Yeah, late 1800s. It was the Quakers who said, look, it's pretty unfair to charge different people different prices for the same item. All men are created equal under God. We should have a fixed price. It shouldn't depend on... Speaker 1 (16:57) I can't believe they're using the all men are created equal under God to be like, this should only be 59 cents. Everyone should pay that. I love that. Speaker 2 (17:07) Look, praise discrimination. Discrimination is inherently unequal. And I think it didn't sit right with them. You know, this idea that you might charge someone who you didn't like a little more. If I had some dirt on you, I could probably get a better deal. Right. It felt unfair. But also, eventually we got the price tag because there was a business case for it, right? So John Wanamaker is usually credited with the first price tag in the U.S. in his Wanamaker's department store in Philadelphia in the late 1800s. And he was supposedly inspired by the Quakers. He was a devout Presbyterian and religious man. But also... He wanted you to buy a lot of stuff in his department store and haggling for each item took a long time. And so posting the price got you in and out of the store more quickly. So there was, you know, there was a business reason to to use a price tag. But look, 150 years we had price tags. You got the Sunday Weekly and the newspaper and you could see the price of all the groceries that week. What is the price of? pound of meat going to be? What is the price of a gallon of milk going to be? And you could compare prices across grocery stores. And when you went to the grocery store with your weekly, you knew that the price in the grocery store would match the price in the weekly, right? And if it didn't, for some reason, an error, they would, you know, they would match it for you, right? It was pretty straightforward. And today, pricing isn't like that. It is a highly engineered science. There are teams of pricing consultants and pricing advisors. In the book, I talk about them as a sort of cross between the geek squad, sort of physics nerds and SEAL Team 6, right? They are assassins. Speaker 1 (18:51) Look, be fair, price assassins. Price Speaker 2 (18:54) assassins. Speaker 1 (18:55) They're not literal assassins. Speaker 2 (18:56) They're trained in the art of wallet emptying, right? I mean, they are really good at it. Speaker 1 (19:01) The SEAL Team 6 of bankruptcies for consumers. And also in the old days, let's be fair, to change the price was laborious, you know, and it would be not something that you could do on a whim. It would be relatively infrequent. But now it's a second to second. Speaker 1 (19:24) microsecond to microsecond affair. Speaker 2 (19:26) It's dizzying. In addition to the lack of transparency in not having clear set posted prices, it also makes pricing way more volatile and unpredictable. If you go on TikTok right now, John, there will be dozens of videos. You know I'm Speaker 1 (19:44) going to, Lindsay. I'm actually on it right now. I'm just scrolling. Speaker 2 (19:48) Just multitasking. Speaker 1 (19:50) Yep. Speaker 2 (19:50) You'll find dozens of videos of women and some men taking pictures and snapshots of prices changing right before their eyes or, you know, in Walmart being like, hey, the price, you know, was supposed to be this. And now I'm at the checkout line and the price is three times what I expected. Or look, I'm in Walmart and I'm in the clothing section and they haven't even bothered to put price tags on the clothes anymore. They're just, you know, brand labels. Right. Everything has shifted under our feet as pricing has gone high tech. Speaker 1 (20:31) hello, it's time for your favorite thing, which is advertisements. By the way, I was at the Emmys and I'll say one thing about myself at the Emmys. I think I might've been the prettiest boy at the Emmys. The whole night Colbert kept trying to get, I must've gotten schmutz on my right shoulder. And the whole night he was trying to teach me how to get it off by using the fabric of my own jacket to clean my own jacket. Apparently it works. But I'll tell you the one thing. I don't like to think about it. And quince is how I don't have to think about it. Quince, they bring you the wardrobe staples that you reach for every day. You don't have to worry about a tux or a cumbered bun. Do you want a cumbered bun? No. You want a standard bun. Quince Pry has those. Quince has cashmere sweaters, fall wardrobe, pants, tees, activewear, high-quality stuff. Find your next fall favorite to Quince. Download the Quince app for app-exclusive offers or go to quince.com slash TWS. Get free shipping on your order and 365-day returns. Now available in Canada and the UK, too. That's Q-U-I-N-C-E dot com slash T-W-S. Speaker 2 (21:55) I mean, the best example I can give you is the fact that it has become commonplace for companies to run experiments, pricing experiments on millions of Americans while they shop. There are AI companies, Eversight is a good example. This is an AI company whose sole purpose was to set up a system, a platform to run pricing experiments without people's