Solutions in Search of Problems

Last week’s New York Times magazine had an odd article about eBay’s shifting fortunes in the world of e-commerce.   It seems that the days of eBay being the world’s largest, never-ending garage sale are coming to a close, as it’s trying to reinvent itself as another Amazon.

Most people think of eBay as an online auction house, the world’s biggest garage sale, which it has been for most of its life. But since [CEO John] Donahoe took over in 2008, he has slowly moved the company beyond auctions, developing technology partnerships with big retailers like Home Depot, Macy’s, Toys ‘‘R’’ Us and Target and expanding eBay’s online marketplace to include reliable, returnable goods at fixed prices.

Why Amazon?

For some time now, physical retailers have lived in fear of the various ways in which Amazon can undercut them. If you’re looking for a product that you don’t need to try on or try out, Amazon’s customer analytics and nationwide network of 40-plus enormous fulfillment centers is awfully tough to compete with.

When it comes to goods, provided you don’t need them now, you don’t need to make sure they fit or are suitable for your particular needs, then less expensive beats more expensive any day for the same item. Yet, digital natives who assume that everyone behaves as they do might be surprised to learn that Amazon CEO Jeff Bezos doesn’t yet own the world.

And yet online commerce currently accounts for only about 6 percent of all commerce in the United States. We still buy more than 90 percent of everything we purchase offline, often by handing over money or swiping a credit card in exchange for the goods we want.

Remember the very early days of Amazon, when they used commercials about warehouses full of books to convince people they could deliver inexpensively? How quaint. eBay’s fight against Amazon is based on Money 3.0.

When you shop online — when you do anything online, as we are all supposed to know by now — you’re being tracked. Sites know who you are, when you’re there, how you got there, what pages you clicked on, how long you stayed on each page and in some instances exactly where and for how long your cursor hovered as you tried to make up your mind.

You looked at blue widgets online last week?  You will be guided to the blue widget display, even though you’re there for something entirely different. But maybe you’re hungry along the way?

At the cafe, [eBay “Brand Ambassador” Josh] Beyers’s sandwich — which he ordered earlier from his phone, down to the condiments — was ready for him when he arrived. The app also saved his preferences, so he could order the same thing again later without having to repeat the process. His picture popped up on the point-of-sale system at the cafe, and the ‘‘clerk’’ verified who he was and then handed him his sandwich.

After all, if you ate a ham and cheese on rye with mustard once, isn’t that what you want to eat every single time?  The goal is more efficient selling, even if it’s not what you want to buy, even if it has nothing to do with why you’re there or what you need. Technology has the ability to seize whatever data we offer, and find new ways to use it. Whether it’s good for us or we want it is irrelevant.

Tech expects us to be sufficiently trainable to adapt to it, and if it means that we will buy blue widgets or eat ham and cheese forever, even though we don’t care to, isn’t important. What’s important is that technology has the ability to make things happen, and so they will.

Of course there’s a catch — or, really, a series of catches. The first is that there’s not much genuine demand for the digital wallet. Even Hill Ferguson, PayPal’s chief product officer, says, ‘‘The digital wallet is the linchpin for everything we do, but it’s interesting, because consumers aren’t asking for them.’’ People who don’t work at corporations that have a financial interest in digital wallets are even more direct. Sucharita Mulpuru, a vice president with Forrester Research who specializes in online commerce and consumer behavior, says: ‘‘Digital wallets, at this point in time, are solutions looking for problems. We don’t fundamentally have friction in payments in the U.S. People who want to use cash are using cash for a reason: They prefer to or they don’t want to be traced. As for credit cards, there is not something fundamentally inconvenient about them. They’re fast, they’re reliable, our networks are good.’’

In his opinion dismissing the ACLU’s suit for the NSA’s collection of telephony metadata, Judge William Pauley noted:

Every day, people voluntarily surrender personal and seemingly private information to transnational corporations, which exploit that data for profit. Few think twice about, even though it is far more intrusive than bulk telephony metadata collection.

While hardly the same as secret governmental seizure, the point that it’s hard to get too worked up about the privacy lost to the NSA when we give it up willingly to Google isn’t trivial.

I used to love eBay. It was a great way to indulge in my hobbies of collecting Georgian Sterling,  dash timers, mechanical tool watches, parts for my Healey. But that was then, before people became pigs and auctions became scams. In the early days, others tried to create online auctions as well, but they failed. And even eBay, the winner in the space, is failing and has to change.

Yet, lawyers are told that this is our future as well, giving away privacy for ourselves and our clients. Changing our methods to accommodate technological solutions to problems that don’t exist.  We have the technology to do things, but few give much thought to why we would want to, whether it works and what we lose in the process.

The Times article contains two very telling graphs. One shows that Amazon’s net revenue has far outpaced eBay’s. The other shows that eBay’s profitability dwarfs Amazon.  You see, Amazon survives on huge volume with negligible profit margins. Sure, there is money to be made that way, but then, they sell goods for less.

We’re lawyers, not eBay or Amazon. Yet, there are lessons we can learn from them, which is mostly we can’t be them and they can’t be the future of law. They may not even be the future of commerce, unless the sacrifice of privacy is worth the discount on a blue widget or the ready-made ham sandwich.  We have problems, and this is not the solution.


5 thoughts on “Solutions in Search of Problems

  1. pj_cryptostorm

    The really interesting story is the exponential rise in use of bitcoins for actual purchases of actual stuff – not as a tulip-mania speculatory vehicle but as an actual medium of exchange.

    These digital wallets are useless tech fluff beloved of corporate coding shops but not real economic ecosystems. Bitcoins, in contrast, are getting used for actual transactions more and more because they’re filling a need folks couldn’t fill efficiently otherwise.

    No, it’s not some libertarian “utopia” and it’s not a crypto-geek solution to all the world’s problems… but it’s interesting. When the original Nakamoto paper was published, more than a few folks took note of the novel technical underpinnings it proposed in order to make “digital cash” actually work (unlike myriad earlier systems, which failed to gain uptake). Turns out, we weren’t entirely wrong about that. The way bitcoin validates transactions is… again, interesting.

    Ebay? Not so interesting. Nor even Amazon, save from a purely econometric perspective. They aren’t tech companies any more – they were, each of them, a decade ago. Nowadays they’re implementation projects: well-run, profitable, etc. Good for them. But nothing interesting technology-wise.

    Bitcoin is interesting. As is bitmessage, and namecoin’s blockchain-based DNS alternative is deeply fascinating.

    There’s interesting tech out they’re, which might even provide metaphorical grist for mills of thought in other, unrelated areas of endeavour. Pace Christensen, it’s unlikely to be found in big, profitable, well-run companies subject to extensive media coverage. Usually, anyway.

    1. SHG Post author

      Bitcoins remain a question mark. I suspect they’ll have legs, even though I also suspect our government will do whatever it can to kill them as they exist outside the government’s sphere of control. But if they continue to thrive, it will be of their own virtue rather than because some corporation wants to ram them down our throats. Which is the way technological advancement is supposed to work.

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