You are probably already doing business with your replacement; algorithmic salesmen are everywhere, and they are just the beginning.
If you have ever bought something from an online retailer such as Amazon or even if you purchased these same commercial goods in a store, you have already been buying things from algorithmic salesmen. These increasingly complex algorithms use a number of metrics to try to set the best price for any particular item, including what the current market demand for these goods is and what other retailers are selling this item for.
If you want to get an idea of just how advanced the algorithmic pricing model is, you can try this simple experiment yourself. Go to a website which offers flight deals, of which many can be easily found through google so I won’t need to shill any here. Next, type in a destination you might be interested in going to and check out the prices that are on offer.
Now you need to wait a few days and go back and check the prices again. Have the prices changed? Now try opening the private-mode of your browser (such as incognito for Chrome), and perform the same airline search. You may find that the prices are suddenly lower. This is algorithmic sales in action, and it is the future of business.
Not only is the pricing algorithm using data such as the number of seats available of a particular flight, the prices that competitor airlines are charging, and the amount of time left before the flight, but it is actually using information about you as a customer to determine an individualized price aimed at maximizing profits.
Visions might come to mind of a robot dressed in a cheap suit hocking used cars.
There remains little doubt that airlines are embracing this model of sales, as they make it increasingly difficult and expensive to buy an airline ticket through any means other than the internet. This model of mostly automated pricing could even be argued as the key driving factor behind the recovery of profitability in the airline industry over the last decade.
The role of these kinds of algorithmic business strategies do not stop at the sales counter either. Have you noticed that google is getting better and at delivering those targeted ads for exactly what you are looking for. In particular, I have found myself much more often clicking the ad-links for specialized scientific items I am googling for. Algorithmic marketing through google is getting better at connecting me to the product that I am looking for, or the one that I didn’t even know that I am looking for.
Algorithmization of business is a much larger threat to the economies of the western world than the kinds of robotic automation of transportation or production that is typically discussed. Algorithms will replace more modern workers than robots.
So what is all this driving towards?
Ultimately I see this kind of algorithmization of business leading to the evolution of a new kind of business, and one that involves little or no people. Over the next few years, I envisage the emergence and rise of totally autonomous businesses (or TABs).
TABs are business entities which employ few or no people at all; clever algorithms which identify demand through monitoring various data sources and act upon it. The classic example of this kind of algorithmic sales is the story of the algorithmic price-war which raised the price of a simple textbook on Amazon from somewhere around $70 to over $23 million. While this exposes the weakness of algorithmic sales, it is merely the infancy of an industry that stands to take the business world by storm.
Say for instance that there is a swell of interest in widgets in South Africa. An algorithm notices that people are paying 80% more for widgets in South Africa than someone in India. The TAB then identifies a source for widgets, gets quotes for shipping said widgets, and can even identify retailers looking for widgets in South Africa. The algorithm then executes the sale and moves on to the next business deal.
Sounds like a typical business deal of the kind that enriches middlemen the world over. I predict that competition between these kinds of TAB businesses will serve to deliver goods to market with increasing efficiency, and involving diminishing numbers of human employees. These services will do nothing but connect producers to consumers, and will profit only their owners.
Businessmen hold themselves in high esteem for their ability “to generate wealth” with increasing efficiency, and rightly so. But with the ubiquity of the internet today, the friction of that created so much wealth for the middlemen of the business world is rapidly disappearing. The emergence of the totally autonomous business will be the death knell for middle-managers everywhere, and if we are not careful it may just be the end of the middle class too.
This post was partially inspired by an interesting and insightful post by BTC Geek on Bitcoin and the Dawn of the Autonomous Corporation