TRANSCRIPT 🔗
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Speaker 1: Bloomberg Audio Studios.
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Speaker 2: Podcasts.
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Speaker 3: Radio.
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Speaker 2: News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, the U.S.
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Speaker 4: Economy picked up steam ahead of next week's, this week's, tomorrow's, today's midterm elections. Third quarter gross domestic product rising at the fastest pace in a year. And a measure of inflation rose in September by the most in six months. So really highlighting the persistent disconnect between the strength of the economy and how Americans feel about it. Voters are no doubt about it concerned about affordability. And it's something that many of our guests on Bloomberg have highlighted. PIMCO's Rich Clarida, Neela Richardson from ADP among them. We can't list all the voices in some audio video that we want to play to you, but we still wanted to feel and share with you kind of what feels like has been a nonstop drumbeat from our guests on affordability. The first voice that you will hear is Schwab's Kevin Gordon.
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Speaker 3: You see it survey after survey, anecdote after anecdote, but younger people today, especially in Gen Z, they just don't really believe in that classic American dream.
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Speaker 2: And the American dream is being, you know, running past us.
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Speaker 3: We do and have had a K-shaped economy for some time, but the K, the branches of the K have been diverging more widely in the last six or seven years.
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Speaker 5: Forty-seven percent of Americans, according to our research, saw real wage declines over the last four years because of inflation. So this is why consumer sentiment is dismal.
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Speaker 3: Trump's tariffs, the war in Iran, both of which have jacked prices up for consumers. Cities like New York in states like California, where housing's become, you know, impossibly unaffordable. And we have the midterms coming up, and people are thinking about the economy. But every politician should be talking about housing affordability.
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Speaker 5: These health care is climbing, and whether you shift it to the worker or you assume it as a small business, they still have to be dealt with. And a lot of people work just for benefits. It's not just about the paycheck.
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Speaker 2: It may not be true in the world that we live in, but for the majority of people retiring, they cannot afford to give up 10 or 20 percent.
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Speaker 6: Of their Social Security.
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Speaker 4: All right, that was various voices recently on Bloomberg television and radio. That last voice, former U.S. Treasury Secretary under President Obama, Jack Lew. And on this election day, this is what people are talking about, affordability.
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Speaker 2: Yeah, giving President Trump poor marks for his handling of the cost of living, inflation still being high. That's the number one and ultimately most important issue to them. On affordability and the pricing behaviors of some businesses, we've got Bloomberg's Max Chafkin, who recently reported on the left-leaning nonprofit Groundwork Collaborative's It's focused on what it calls, quote, surveillance pricing. It's the idea that retailers such as Walmart might charge customers different prices for items in stores and online based on all the data that companies have collected.
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Speaker 4: Max joins us right here in studio. Joining us also remotely from Washington, D.C., is Lindsay Owens, the subject of his podcast. reporting president and CEO of Groundwork Collaborative and Groundwork Action. She is the author of Gouge, the end of a fair price and what that means for your wallet. Lindsay, good to have you here. Max is back with us. We've talked with Max about your work. Just briefly, for those who may have missed it, just remind us about your work on pricing and what you found out.
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Speaker 1: Yeah, so I just wrote a book called Gouge that really explores what I think of as the reinvention of the ripoff. Pricing used to be simple. Companies figured out how much it cost to make an item. They put their margin on top and they stuck it on a sticker. And that's not how pricing works today. It's a highly engineered science. Companies hire physicists. They acquire AI companies to help them get better and better at figuring out exactly how much they can get us to fork over for every item in our grocery cart, for every item in our online shopping cart. And so that's the shift that my book really identifies. And I also think it really resonates with Americans right now who are headed to the ballot boxes, who are quite worried about the role of corporate price gouging and corporate power in their lives and, frankly, in Washington.
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Speaker 6: Yeah, that's what was so interesting to me about this work, just the fact that you often hear people talk about affordability as if it's only inflation and tariffs. It was just about rising prices. But of course, it's also, as Lindsay's saying, this sense that many, many people feel that big companies are not pricing fairly, or that technology in some sort of form, whether it's explicitly AI or kind of AI behind some kind of pricing algorithm, is making the economy feel less fair. And I think that's, you know, it not only explains what we've seen in Trump's approval numbers and in sort of some of the polling that we've seen heading into election day. But it also explains this general sense in this country where people are mad about data centers. They're mad about AI. They're mad about executives. There's a lot here.
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Speaker 2: Lindsey, we're going to get to what could happen if Democrats do get control of the House and potentially even the Senate come January. But I'm wondering what companies are allowed to do right now when it comes to pricing? What are they prohibited from doing? What are they allowed to do?
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Speaker 1: Yeah, it's interesting. I mean, we haven't had
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price controls in this country for decades. So, you know, broadly speaking, you know, companies set their own prices and they have a lot of leeway in how they set those prices. Companies are allowed to run A-B tests, as my organization has has spent a lot of time exposing. Late last year, we helped the American public understand that Instacart was running pretty sophisticated A-B tests on millions of Americans while they shopped for groceries, but they were pretty consequential. Some Americans were paying 23% more for a dozen eggs from the exact same grocery store at the exact same time. And over the course of a year, those differences could really add up. We thought, let's take a look at what Instacart says a household of four spends on groceries in a year. And we estimated that their A-B testing, if you were on the losing end of the A-B test, it could be $ 1, 200 for your family in a given year. So there's a lot that we allow corporations to do with pricing. You know, we allow corporations to use algorithms to recommend prices. But in my book, I detail how some of those algorithms and those recommendations can result in price fixing. So I think there's a lot that's legal. There are a lot there's a lot that's in the gray area. And frankly, from my perspective, there's a lot that we need to take a look at because it really shouldn't be legal anymore.
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Speaker 2: Yeah.
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Speaker 6: Lindsay, a lot of the retailers who you have criticized or who you've done research on have responded to this essentially by saying that it's all bogus in one way or another. Instacart initially said that it essentially wasn't doing anything, and then it ended some of these experiments. But they have broadly criticized this stuff as somewhere between misinformation and and conspiracy theory. And I'm kind of curious what you make of that response.
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Speaker 1: Yeah, look, I mean, I think the fact that Instacart decided to stop running these experiments two weeks after we released the study is probably the best data point for answering this question. The American public spoke up and Instacart said, you know what, we got this one wrong. We shouldn't have been running these experiments. They said, look, when you come to Instacart from now on, The same person should get the same price for the same item at the same store. So in my estimation, I think we had a smoking gun and hardly a conspiracy theory. I mean, we really caught them red-handed. And they ultimately folded and cried uncle and abandoned the practices, which is great. I mean, it's great when companies are disciplined by consumers in the marketplace who say, no thanks. You know, this is too much for me. This isn't fair. We think you've touched the stove.
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Speaker 6: So do you think that that era is over? I mean, that companies are just giving up on this stuff?
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Speaker 1: Not entirely, no. I mean, we saw, you know, Starbucks just this week in an earnings call talking about a new era of personalization at Starbucks from when you walk into the store. How could that.
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Speaker 4: Be wrong, Lindsay? Personalization sale, I'm going to get exactly what I want.
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Speaker 3: I mean.
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Speaker 2: And you're going to pay what they want.
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Speaker 4: I don't know. What's crazy is I increasingly feel like there's so much data about all of us, right? And we just don't know. It's out there. And companies do. And I also just think about the conversation we had with Joe Matthew, who's leading our election coverage. And Max, I want to bring you into this, too. You cover Elon Musk. So much money.
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Speaker 1: In politics.
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Speaker 4: And I think about who is the Ralph Nader era of really someone speaking out for people. And obviously Lindsay and her team are doing this, but it's just who's out there really getting the attention of politicians.
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Speaker 6: I mean, you're seeing a lot of money in politics, but you're also seeing that a backlash to that. And so simultaneously, so for instance, like one of the races tonight that I'm paying a lot of attention to is a Texas Senate race, because Elon Musk has put, you know, between various PACs and so on, more than $ 200 million into Bill Paxton, backing Bill Paxton's election as a senator in Texas. And at the same time, James Tallarico, who in polling is running ahead of Paxton, is running ads essentially saying, Elon Musk is trying to buy a Senate seat. He wants your land. He wants your power. Very, you know, this really strong populist language that's placing Paxton's alliance with Musk as a liability. So I think that the thing we don't yet know is whether this money is working, whether it's helping, and maybe it's going to help Republicans hold a Senate seat in Texas, or if it's going to backfire. And it just turns into yet another data point in a story that you're seeing increasingly from progressives, which is that the Republican Party under Donald Trump has gotten too close to big companies.
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Speaker 4: So, Lindsay, come on back. You formerly were a staffer for Elizabeth Warren. So I'm just curious, you know, your role in what politics, politicians can really do for people. The average citizen.
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Speaker 1: Yeah, I'd like to see.
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Speaker 2: Yeah.
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Speaker 1: I mean, I'd like to see a lot of changes in the next Congress, of course, depending a little bit on how the election results shake out tonight. But the first thing I'd like to see is a different approach to oversight and accountability from Congress. I staffed the Judiciary Committee for a member in 2019, the last time that Trump was in office and the Democrats took the gavels in the House. And one of the things that I noticed is they were really laser focused on the Trump administration and sort of what looked to many Americans like a partisan gambit and not as focused on what Americans were feeling in their pocketbooks and what Americans really cared about from their elected officials. So in January, I would like to see if Democrats take the gavels instead of investigating what I call the HGTV hearings, going after the renovations of the reflecting pool, the renovations of the Kennedy Center, the renovations of the ballroom. I'd like them to bring in the CEOs who are deploying these pricing techniques and that are emptying our wallets and ask them the hard questions, issue the subpoenas to them to try to get a better sense of exactly what's driving this affordability crisis and start to use those conversations to remedy them.
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Speaker 5: We shall see.
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Speaker 4: Lindsay Owens, thank you so much. President and CEO of Groundwork Collaborative and Groundwork Action. Her book is Gouge. And of course, our Max Chafkin, Bloomberg Businessweek senior reporter. Check out his reporting on Lindsay and Groundwork. It is on the Bloomberg. We're back in a moment.