The tech industry used to think big. As early as 1977, when personal computers were expensive and impractical mystery boxes with no apparent utility or business prospects, the young Bill Gates and Paul Allen were already working toward a future in which we would see “a computer on every desk and in every home.” And in the late 1990s, when it was far from clear that they would ever make a penny from their unusual search engine, the audacious founders of Google were planning to organise every bit of data on the planet—and make it available to everyone, free.
These were dreams of vast breadth: The founders of Microsoft, Google, Facebook and many of the rest of today’s tech giants were not content to win over just some people to their future. They weren’t going after simply the rich, or Americans or westerners. They planned to radically alter how the world did business so the impossible became a reality for everyone.
Whatever happened to the tech industry’s grand, democratic visions of the future? We are once again living in a go-go time for tech, but there are few signs that the most consequential fruits of the boom have reached the masses. Instead, the boom is characterised by a rise in so-called on-demand services aimed at the wealthy and the young.
With a few taps on a phone, for a fee, today’s hottest startups will help people on the lowest rungs of the 1 per cent live like their betters in the 0.1 per cent. These services give the modestly wealthy a chance to enjoy the cooks, cleaners, drivers, personal assistants and all the other lavish appointments that have defined extravagant wealth. As one critic tweeted, San Francisco’s tech industry “is focused on solving one problem: What is my mother no longer doing for me?”
No, no, say the startups that, today, look as if they’re targeting the rich. The nature of the tech business is that costs come down. Through repeated innovation and delivery at scale, the supercomputers of the 1960s became the PCs of the 1980s, which in turn became the smartphones of the 2010s. The rich subsidise the rest of us—were it not for the suckers who spent more than $10,000 on early versions of the Mac, Apple might not have survived to build the iPhone, in turn begetting an era of affordable pocket supercomputers.
This is the basic defense of the new wave of on-demand startups: If their rosiest visions of growth come true, they’ll achieve a scale that will let them reduce prices, and in that way offer services that could radically alter how even ordinary people conduct their lives.
It is a plausible vision—but an unlikely one. To achieve the scale that will enable the startups to reach a wider audience, everything for these companies will have to go right, and success will have to feed on itself. That happens rarely in the tech world. Two companies that are archetypes of today’s on-demand business recently allowed me to investigate their economic models for a look at how they might achieve mass scale. One is Shuddle, a startup that is creating a ride service for children—an Uber to take your tots to school and soccer. Another is Munchery, which delivers restaurant-quality food to your door (you can think of it as an on-demand personal chef). Both firms resisted the notion that they were building services for the wealthy and explained in detail how they planned to serve the masses and lower their prices.
“The first time you roll out a service, it’s fairly expensive,” said Tri Tran, Munchery’s co-founder and chief executive. “But we have an internal mission of making real, good food accessible to everyone, everywhere, and if we only catered to the upper middle class or people who are really affluent, then we will not accomplish that goal.” He conceded that his prices weren’t low enough to make Munchery an option for everyone, but the business model, he said, would soon allow for greater access. Munchery, which began in 2010, operates in the San Francisco Bay Area, Seattle, New York and soon Los Angeles. Today, a typical adult-size Munchery entree costs around $11 or $12, and a child’s meal around $6. With a $3 delivery fee, a dinner for a family of four might cost around $37. That compares to about $25 for dinner at, say, Chipotle, not counting the time and money it takes to get there.
But like many e-commerce businesses, Munchery enjoys certain cost advantages over its physical counterparts that Tran says will lead to lower prices. It buys high-quality ingredients in bulk, uses a single kitchen in an out-of-the-way part of a city and uses advanced cooking tech to cut down on labour.
Tran promises that within a couple of months, chicken, beef and fish dishes will sell for less than $10 a portion and pasta dishes for $7. In the long run, Tran is aiming for prices that are competitive with those of fast-food chains and that will make cooking at home seem expensive.
“If you buy the same quality ingredients that we do and cook it yourself, just the ingredients alone will cost you more,” he said.
Foodies might scoff at this idea. But sociologists have found that for many low- and middle-income families, cooking every day takes too much time, planning and money. If Munchery can make a non-junk-food dinner at prices comparable to junk, without much time, wouldn’t that be a useful service to people who aren’t millionaires?
“If there are great, commercially driven companies out there that can do things like food distribution at scale, and we can piggyback on their success, that could be a huge win,” said Hannah Calhoon, the director of Blue Ridge Labs, an organisation that aims to build tech products for low-income communities.
You can make a similar case for Shuddle, which was created by Nick Allen, a founder of the ride-sharing service Sidecar, who said he was trying to solve a problem of modern parenting—the parents are working, the children need to be ferried among home and school and their activities, and all the ways to do so require lots of time and money. Though I did not use Shuddle for my own children—the service is available only to children who have grown out of car seats, so mine are too young—I spoke to several parents who described it in rhapsodic terms.
“It’s amazing to have someone else drive your kids while you’re making dinner, so everyone’s eating dinner at a logical hour,” said Rana DiOrio, a Bay Area mother of three who has been using Shuddle a few times a week for several months. DiOrio, the chief executive of a children’s book publishing company, said she found the service cheaper than alternatives like hiring a baby sitter for an hour to drive a car, but she acknowledged that she was relatively well off and that it was not at a price that could serve everyone.
Today, most parents pay $12 to $15 a ride—more than for on-demand services like Uber, and much more than public transportation, which of course isn’t available everywhere. The cost is partly a result of complexity. Shuddle puts drivers through a more extensive screening than its ride-share competitors, including requiring that they have previous child care experience. As a result, almost all of its 250 drivers are female. To allocate drivers efficiently in low-density areas like the suburbs, parents must schedule rides ahead of time, and to help coordinate the rides, children must carry basic cellphones. The company uses software to track how carefully its drivers are driving.
But Allen has a plan to sharply reduce prices: carpooling. As Shuddle grows, it will learn enough about the ride habits of local families to put multiple children in cars or vans together, which would significantly lower the price. “I’d love to be able to get your kid to school every day for $5—basically almost as low as taking the city bus,” Allen said.
After hearing the startups out, I remain unsure if they will ever get to the point where they can serve the masses. Yet even if Shuddle and Munchery do not get their prices low enough to go mainstream, they deserve credit for trying—rather than focusing only on the wealthy.