We are lucky to be around in 2020, especially for those from my generation because we have used bullock carts, radios and we have used computers, cell phones, apps changing the world. I am comfortable using all the new technology, and I am not overwhelmed by various apps. The gadgets and apps galore are changing the way live. Sometimes I wonder how we survived during my childhood. But everything always has two sides. There is proverbial another side the society finds at some stage, once the euphoria dies down for anything new.
I am talking of Cell Phones, FB, WA and Instagrams and many such 21st century things; along with this, there are game-changing apps, too, like Air Bnb and Uber/Lyft/Ola. These were designed to create a lifestyle previously unknown to us. But you will be surprised how the apps get used for the purpose not thought of by the creators. Those who create such apps also make errors of judgement in the software will work, or users could use it. I know a bit about software as I ran a software product company for almost twenty years.
We had a product called DMS, dealership management system. The product did everything for authorised dealers who sold and serviced vehicles. The product created for such companies followed all statutory rules, but for private dealers, we modified it to suit their requirement in the initial launch phase. One problem these dealers faced was that some vehicles were brought for repairs by the drivers hired by owners. They would demand some easy money from dealership owners. We tweaked the system to include some spare parts in the bill but did not reflect on the inventory. The extra money was paid to the driver from the vehicle owner’s pocket. An enterprising dealer used this system for engine overhauling work. The user would replace 50 spare parts but display 70 spare parts in the bill and skim the money! Software users are smarter!
Let us consider Airbnb. It stands for Air-bed and breakfast, or Airbnb (“Air-b-n-b”) for short. Airbnb is an online community marketplace that connects people looking to rent their homes with people who are looking for accommodations while travelling. How does Airbnb work? Airbnb lets people rent out their properties or spare rooms to guests. Airbnb takes 3% commission of every booking from hosts, and between 6% and 12% from guests.
Okay, this is the business part. But what it means that I have a home where I have a room available for temporary renting. I make it available on the site. Travellers who are going to be in your city, look for accommodation. They see various options with the help of photos and writeups; the home may be an average home to fancy home. You advertise the rate for the stay. If people find it suitable, they will book and stay. When you leave, you bring it back to the condition you received it in and go. It is more like a homestay.
But in London, they found a big fraud had taken place in the system. A group of people came together and created a system whereby various “homes” were under the umbrella of an organisation. They got these properties on Airbnb and fictitious owner names of Jack, Daniel, and so on. They would rotate the same properties in the name of these people. Furniture, arrangements inside were similar, but they would publish photos taken from different angles so that homes looked different. Airbnb has a separate business company where they list hotels too! But Airbnb is only for individual households. The group in London was running a big fraud probably because Airbnb charges a small commission for such homes. People tried to take advantage of some loophole in the system to cheat the company. When people offer their homes, they generally provide with great care. But this group had poor cleanliness standards and in general, had the mentality of fly by night operators. Why people go to any extent to cheat for a few extra bucks? Such episodes bring different thoughts in mind. Should I save some dollars or book formal hotels? In these hotels, at least I know what I would get.
Let us now think about Ride-Hail apps. When talk of these apps, Lyft, Uber and Ola (in India) names come to mind. The apps were supposedly THE solution to pollution problems. What was expected from the apps? People would stop using personal vehicles; they would stop buying private cars in large numbers. Lower emission and lower pollution will make a happy world! But has it happened the way it was supposed to happen? Yes and mostly no.
Why is it so? It is because there was one assumption made in the model. These ride companies expected that a lot of their business would be given by sharing of the rides, because of cost-effectiveness. But in reality, it does not happen that way. To begin with, a person like me who is used to travelling in my own vehicle, I don’t even consider sharing a ride.
How does share work? Assume that you are going to the airport. The software maps your path; you then select a share option. The software would track a customer going in a similar direction with share option. Cab will pick up the customer or customers! They all could be going to the airport or in that direction. You are already late to catch the flight, and you might just make it. On the way, the Cab takes a five-minute detour to drop or pick up a customer. You become jittery. I hope that I have created an extreme situation. The situation may not be critical every time, but would you give an additional 15 minutes buffer to handle such eventualities? It is an individual choice. But data indicates that ride-sharing is very low though sharing ride could be cheaper for customers.
Another thing that the app designers did not consider was, would ladies share rides with unknown males? If you regularly share with your colleagues, it is another issue, but otherwise, this possibility is remote.
What is the result? There are not many shared rides, but there are more and more cars on the roads. More importantly, the data says that cab drivers drive for 40% of the time on the streets, empty. Pollution is not reduced, and drivers are not happy. What has the app done for society? For people like me, when I feel that there could be a parking issue, I hail a Cab. Some of the younger folks don’t buy cars these days. They use these Cabs extensively. If the benefit expected was ten, then I think we have achieved between three and four!
Why such errors take place? Do people not think through correctly while designing the business model? These companies do not own cars, but their product is the software which runs their business. Sometime back Uber CEO had mentioned in an interview that he does not think Uber will ever make a profit! Currently, it is losing money heavily.
What other effects does it have? As the number of cars has gone up, the peak time traffic speed has considerably reduced in all Metropolis areas. As these vehicles are available anywhere, they have sucked people away from buses and trains. People used to walk short distances, but now they hail a Cab. All these consequences were unintended, but the fact remains that it has happened!
What is the lesson for the future? Wait for any new system to show its results; immediate results are meaningless. Many VC’s have invested tons of money in these companies. Is it really worth it? Does it mean that product designers made mistakes and the VC’s also misjudged? How does the entire ecosystem make errors of judgment? Mind you, these are not small systems. We have also seen the intended and actual use of social media apps. A classic example in India is the way people use “Missed Call” to send predefined messages.
In future, it is going to be tough for the human race to decide which new processes, products to use!