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Illustrations by Alex Eben Meyer

What Apps For The Upper Class Mean For The 99%

How services for the "Money is no object" crowd could ultimately serve the smartphone-wielding masses.

The Mission District of San Francisco, home to many of the city's hottest restaurants, is a hipster labyrinth. If you don't live nearby, don't bother going because you'll never find parking. If you do go, go early, lest you end up in line-waiting purgatory. Plan B: Hire someone to deal with the hassle. "That's our killer-use case," says Bastian Lehmann, founder and CEO of Postmates, who last spring launched Get It Now, an app that arranges to buy and deliver to your door just about anything in the city--from haute tacos to the newest MacBook--within an hour. "A lot of people in this city value their time more than $7 to $12 per hour. That's our initial market--those people who will pay a premium."

Technology is generally viewed as a democratizing force: Get a Stanford-quality education, online, for free; use Internet efficiency to beat real-world rivals on price. But some of today's hottest startups cater to the rich, or at least those with more money than time, using them as beta testers toward the ultimate goal of mass adoption. Postmates and its soul mates--town-car service Uber and rent-a-gofer outfits TaskRabbit and Exec--bring trickle-down economics to the App Store.

At first blush, it's easy (and fun!) to lampoon some of the actual and suggested uses for these apps. There's something unseemly, especially in this dreary economy, in spending up to twice the cost of a taxi to summon a black-car service--for the sheer joy of getting that town car or SUV with one push of a button in Uber's app, rather than pressing, like, 11 buttons to call a cab. Uber's experiments that have let users summon an ice-cream truck or a mariachi band feel like what your spoiled child would do with your credit card. This summer, Exec users could hire one of its assistants, at $25 an hour, to do volunteer work on their behalf. Was the gardener too busy?

What's really going on here involves more than fat cats eating ice-cream sandwiches while the hired help mentors a kid. All these firms share an ambitious plan to rewire urban living. Uber, which is now in 15 cities, takes the location of every car request, the time they're made, and each of their destinations and maps those data to create a sophisticated understanding of demand and pricing by time and geography. The result not only lets Uber put cars where they're needed to better serve existing customers but also becomes the starting point for ideas about how else to use the network. Based on what Uber is learning from running its black-car service, it is now taking aim at the mass market--a fleet of hybrid cars whose rates are just above those of taxis. Given the often sclerotic nature of municipal taxi commissions (looking at you, Washington, D.C.), Uber can create competition where there was none, and thus make life better for everyone.

These services have the potential to be early signals of pent-up demand, which could force other businesses to improve their customer experience. For example, Postmates launched Apple Store delivery this summer. Home delivery seems almost quaint in an era of souped-up logistics that has made next-day and two-day delivery the standard. But if customers demand it, companies like Apple will insist on owning that experience itself. And for smaller merchants that can't afford to make deliveries themselves, Postmates wants to be their outsourced delivery service. "You have all these places that don't offer delivery, and our customers love these places," Lehmann says. His team is building relationships with popular businesses like Little Star Pizza and Bi-Rite Grocery to include them as an offering in its app, with orders going directly to the store. If the system works, the business would get more customers, and Postmates would get more efficient because it would not have to spend time calling orders in.

Rich early adopters (and rich VCs) are bearing the brunt of these ramp-up costs, and the rest of us will get the payoff. "Over time, for most jobs," says Lehmann, "we'll be able to significantly drive down the cost of the delivery fee." Much like airlines and hotels do, Postmates dynamically prices its service based on demand: The more time-consuming a job and the closer to peak request times, the more you'll pay. At the moment, most of Postmates's orders involve food; to prevent dinners from getting cold, the company caps each courier's hourly deliveries at three. Because the going rate for couriers in San Francisco is around $12 an hour, Postmates has to charge around $5 or more per delivery if it wants to make a profit. (Its average delivery price so far is around $8.) But with each new job, Postmates amasses more data to optimize its courier network. In time, it will be able to place more couriers in areas of higher demand; some specialize in food, while others focus on nonurgent retail deliveries. Lehmann says these efficiencies will allow each courier to perform many more deliveries per hour, cutting Postmates's prices to a level that would give the service wider appeal.

The dark side to all this involves the people doing the work. These apps create jobs, but generally low-paying service ones. While Uber, Postmates, and Exec pay their couriers and assistants, services such as TaskRabbit rely on an auction in which qualified "rabbits" bid against one another for jobs. TaskRabbit, which just raised another $13 million in venture funding to fuel its expansion beyond the 10 markets in which it currently operates, has the stated aspiration to reinvent the labor market. With unemployment and underemployment a lingering problem, TaskRabbit sees itself as offering people freedom in their work. It very well may, but it's hard to shake the image of rabbits fighting each other to perform the most menial tasks of a piggish elite--George Orwell's Animal Farm for the smartphone set.

Can these apps cater to the luxury set without becoming defined by it? One tech trailblazer suggests this is doable: Apple, whose stuff was once priced just for the wealthy, has spent the last decade mining operational efficiencies to reach the masses. Even though Apple's goodies are frequently cheaper than those of its rivals, its customers think of the firm as selling something that costs a lot to make--something luxurious. Isn't that rich?

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1 Comments

  • anonymouz

    Perhaps if more Americans were in the business of creating those same apps instead of writing their whiny hipster cry baby blogs they could afford them.  The world is growing more competitive every day.  A recent study by Deloitte indicates that within 5 years, a college degree becomes obsolete if there is no additional learning.  People need to stop "occupying" and whining about the 1% and focus on their own lives because there is a kid in India or China who wants your job, is willing to work for less money, and might very well be better than you at it.  While I do believe in equal opportunity for all to succeed, I must digress when it comes to a bunch of white 20-something hipsters from middle to upper middle class backgrounds who wine about not having money on a workday when I am busy at my job.  Let em starve.  Let them die.  I'd rather feed the kid from India.