How Companies Cheated Price Fixing Laws... With Math | How Money Works

0:00When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at Indeed.com slash podcast. That's Indeed.com slash podcast, terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Instagram teen accounts come with automatic protections that limit who can contact teens, the content they can see, and the time they spend on the app. Learn more about teen accounts and Instagram's ongoing work to protect teens online at Instagram.com slash teen accounts. For more information, visit www.vizobel.com. With unlimited 5G wireless data and hotspot designed to keep you connected, powered by Verizon's

1:025G network, and no contract holding you back, plan started $25 a month or get the premium Visible Plus Pro plan and save $10 on your first month when you use promo code HAC. Make the switch at Visible.com. And don't forget to subscribe to our channel for more information. Visit www.visible.com.com for details. Algorithms are everywhere. Every app, every website, every business you interact with has a program working away in the background to show you what you want to see, get you to make decisions you didn't have to, and make you spend as much as you're absolutely willing to on stuff you didn't know you needed. Amazon used an algorithm to test how much it could raise prices in a way that its competitors $40 more at 3am. We know you want it. The flight that was on sale for $150 yesterday is now $300. Oh, and now it's back to $150. Well, that is likely the work of a pricing algorithm, a computer program, factoring in, supply, demand, and competitors' prices to adjust that price in real time. It's in the country when he's set to test surge pricing, so the cost for your burger

2:05would change depending on the time of day. A month ago, Wendy CEO Kirk Tanner announced that the fast food franchise would be introducing dynamic pricing. A system where how much you pay for a bacon eater would depend on an algorithm that balanced customer demand with store capacity. According to the company's announcement, they were planning to invest $20 million into this technology before it was rightfully ridiculed across the internet. This was a win for the little guy that just wanted to clog their arteries at a predictable price point, but Wendy's only mistake was announcing their plan. Dynamic pricing is already here, and it's making inflation an essential feature. Algorithms aren't bad. They are just a tool that can be used for good or evil. And as someone whose job relies on appeasing one very particular algorithm, I would like to say that they can do some good. But since companies in their shareholders prioritize profits in user growth, algorithms in the hands of companies are going to be used as a tool to maximize profit in user growth. The algorithmification of everything we interact with has had some side effect to put it mildly, but one such side effect that isn't as obvious as the addiction to the endless swipe is how

3:08it has made everything so expensive all the time. The book, The Everything War, written by Wall Street Journal reporter Dana Mattioli details how Amazon uses its market power to force prices up for everything you buy, not just in their online store, but in every store across America. According to the author's research, interviewing multiple businesses selling their products through Amazon, the online retailer contractually required that sellers list their goods on Amazon at their lowest price. That doesn't sound so bad. The lowest possible prices on a wide selection of products are why people like shopping on Amazon. But from those low prices, the businesses have to pay their cut to big daddy Bezos and pay for Amazon fulfillment, which is more expensive in most locations than regular shipping because of the emphasis that Amazon puts on same day or next day fulfillment. If a business is selling a $20 product and it costs them $5 to sell and have it shipped through Amazon, then they should charge $25 to cover their costs. That would make it more expensive than their other sales options like traditional retailers breaching their agreement with Amazon.

4:09So instead of dropping their prices for Amazon, businesses just raise their prices at places like Walmart, Target, and even their own website making everything more expensive across the market. While the company was officially pressured to do away with this practice in 2019 by the Federal Trade Commission, it still happens. Only now, instead of a formal agreement between sellers in Amazon, an algorithm to text prices that are not competitive with other retailers and bares their product on the second or third page of search results killing their business. The degree of separation between the company and its algorithm lets them claim that their automated program was just acting in the best interests of their customers without formerly breaking any rules. I will leave a link to the book below. It's definitely worth a read, although unfortunately, the cheapest place you can pick it up is on Amazon. Now the bad news is that Amazon and its algorithms are probably the least damaging to your personal finances when compared to the other algorithms slowly ratcheting down on your job, your rent, your health care, your insurance, your debt, and your taxes. So it's time to learn how many works to find out how mathematical models mandated inflation.

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6:15Two months ago, the Federal Trade Commission released a statement explaining that price-fixing bi-algorithm is still price-fixing. The release was specifically targeted at a new type of software that was marketed towards landlords and real estate agents as a way for them to get the highest possible price for their rental property. The programming question, without even the slightest bit of self-awareness, was called Rent Maximizer. And according to the FEC, it, along with similar programs, were used to determine rental prices for tens of millions of families across America. The program uses market data, along with other proprietary systems, to come up with the highest possible price that a property can confidently be rented out at. It also uses data from all of the other property managers in the area to make sure that it wasn't recommending prices that would undercut other landlords. The FTC has concluded that this is just straight up illegal price-fixing. Price-fixing is an illegal act, which is when two or more businesses agree to raise their prices to maximize revenue without properly competing with one another. This is especially damaging to consumers when the product being price-fixed is an essential good like food, water, or a place to live in.

7:18They are using an algorithm, the software company, and the landlord. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen, and helps reach people with the right skills, certifications, and more. Spend less time searching, and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. To hire a hero, this is a job for Indeed Sponsored Jobs. Instagram teen accounts come with automatic protections that limit who can contact teens, the content they can see, and the time they spend on the app. Learn more about teen accounts and Instagram's ongoing work to protect teens online at Instagram.com slash teen accounts. With Unlimited 5G wireless data and hotspot designed to keep you connected, powered by Verizon's

8:225G network, and no contract holding you back, plans started $25 a month, or get the premium visible plus pro plan, and save $10 on your first month when you use promo code hack. Make the switch at visible.com. Terms apply. See visible.com for details. Thought they had a degree of separation because they weren't colluding on price. They were just doing what the computer told them to. The FTC does not see it this way. The good news is that since the FTC made this release, lawmakers are pushing to make the practice explicitly illegal. The bad news is that none of the parties benefiting from this kind of price fixing are likely to be punished, and at the same time, average rents for Americans have already increased by over 30% since 2020. A report by the Joint Center for Housing Studies at Harvard University found that more than 12 million households in America are now spending more than half of their total income on housing alone before taxes, transport, and other luxury goods like food. Speaking of food, the Justice Department also sued a similar operation happening amongst

9:24meat processors who were using algorithms to set the price of their products on store shelves. According to the Justice Department, the companies that shared this algorithm were responsible for more than 90% of broiler chicken sales, 80% of pork sales, and 90% of turkey sales across all of America. But leveraging algorithms to increase the cost of the house you live in and the food you eat is still not the most damaging thing these programs are being used for. The world of medical pricing is too complicated for anyone to fully understand. Money flows between doctors, hospitals, insurers, and patients, and the system really just barely works. In between all of this, you guessed it, is an algorithm called Multi-Plan that has been used by several large health insurers to cut out payments to doctors and increase billing to patients. A New York Times investigation into Multi-Plan found that the program was dominant in creating a price for out-of-network care for patients across the country. Insurers would use the proprietary algorithm to determine how much they would pay the hospital and how much patients would have to cover themselves. As a shock to absolutely nobody, the algorithm decided that the insurers had minimal responsibility

10:26and that most of the calculated costs would come out of the patient's pockets. Instead of competing to offer better coverage to their clients, insurers could just use the lowest estimates on the Multi-Plan program knowing that the competitors would just do the same. Further obscuring already ridiculously opaque pricing. The insurers have claimed that this system is essential to protect them from care providers sending them outrageous bills. Large hospital chains are certainly guilty of this, but instead of combating that issue, all Multi-Plan really does is dump the excess costs onto the patient. Other healthcare providers are also being hurt by this far more than the large hospital chains which have much more negotiating power. The New York Times report interviewed a rural doctor who had to close down the practice after Multi-Plan insurers slashed their rates. Patients that used to see that doctor now have to travel two and a half hours to find another provider who is still covered under their insurance. The insurers weren't shy about doing this either. According to the New York Times report, major insurers using this program bragged about how embedded this technology was in their claims processing systems.

11:26People paying for healthcare have even less control over their spending than they do when finding a home to rent or food to eat. People also can't choose a cheaper option. People can move to a cheaper house. They can't not receive a cheaper life-saving treatment. While this looks like the same type of price-fixing via algorithm, as the other case says, the FTC for now has been very quiet about the healthcare industry. Now you might think it's harder for it to get too much worse than this, but it does. Patients have been great tools to part you with your hard-earned money, but their most sinister use is controlling how much you earn in the first place. If you apply for a job, it's almost certainly going to go through a site like Indeed, LinkedIn, or the company's own job posting. Unfortunately, handing out your resume with a firm handshake won't get you many interviews. When you submit your application online, you're much more likely to be rejected by a program than an actual human being. A survey by Jobscan found that 98% of all Fortune 500 companies used some form of application tracking software or ATS. The remaining 1.2% probably still used it, but it was just harder to detect.

12:30Sometimes this software is just a way for companies to keep their job listings organized as some roles could have thousands of applicants. But more have started using tools to automatically find what an algorithm thinks is the most promising candidate. A report by Zeddy, a recruitment technology company, found that the average corporate job openings get 250 resumes. Only 4-6 of those resumes will be interviewed and if applicants are lucky, one of them will get a job. The use and overuse of algorithmic resume screening has created services where programs write resumes that rank well with programs that check resumes. Just getting a job is annoying enough, but the same tools that are being used to screen candidates are now also being used to negotiate wages with new hires and existing staff. If someone demands a pay raise, companies can use these programs to estimate how much they would need to pay a replacement, and if there is no cost benefit to them, they won't grant the pay increase. Most career guidance professionals will encourage you to do your research on the job market before negotiating a starting salary or a pay raise. Unfortunately for you, there is no reasonable way for a regular employee to have access

13:32to as much market data as a company with thousands of applications on file in a proprietary ATS system. Now I'm going to be writing an article on similar algorithms being used to catch tax and welfare cheats. It might sound like a good use of technology, but it's been tried before with literally deadly consequences. It also never really catches the people it actually needs to. That article will be going out to my free email newsletter this week, so if you're interested, you can sign up at the link below. Now all of this is done in the name of maximizing shareholder value. If you want to know about a man who believed that the solution to office space was algorithms, check out our video on Masio Shisan to see why he was horribly wrong. As always, don't forget to like and subscribe to keep on learning how money works.

14:41Power up your movie night and watch Disney and Pixar's Toy Story 5 now streaming on Disney Plus rated PG.