How a Grocery Shopping Website Can Save America
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"This is Bill Gates. Do you know who I am?"
It was Thursday, September 23rd, 1980. I was sitting on a frayed sofa in my
Fannin Street office in Houston, meeting with Mike Griffin and Bill Radding, my
two partners in Small Business Applications, Inc. I was COO, Mike was VP of
Technology, and Bill was VP of Marketing. Mike had written a word processor that
he called the Magic Wand, largely financed by two investors who were friends of
mine. We were eight months into our first year of business, and doing pretty
well. In a fledgling microcomputer market hungry for software, word processing
was the "killer app" that sold computers, and we had, according to at least one
well-known reviewer, the best one in the world. That was what the 23-year-old
Bill Gates was calling about.
Bill Gates had left Harvard after one semester to develop (together with Paul Allen) a BASIC interpreter
for MITS, manufacturers of the Altair 8800 kit computer. Their BASIC interpreter was a rewrite of software developed by faculty and students at Dartmouth
University. Bill managed to wrest ownership of it back from MITS (Bill's father was a lawyer
for Digital Equipment) and signed a deal with Intel that paid Microsoft a royalty for every CPU that they shipped. That royalty, an estimated $5 per CPU,
was ultimately paid for some 200 million units. Microsoft made its first billion dollars from two months' work by two teenagers. So yes, I had heard of him.
"Yes," I said, "I do. To what do I owe the pleasure?"
"I'll try to say this in as few words as possible, and I need an answer as
quickly as possible," he said. "I've made a commitment to deliver a word
processor to a Japanese company that wants to compete with companies like Lanier
and Vydec. I just found out that I'm not going to make my deadline, and I
don't want to lose face. I want to buy your source code. I'll give you a
two-year non-compete agreement. What will it cost me?"
Lanier, Vydec and a few others produced dedicated word processors that were
selling at that time for around $25,000. Since a "dedicated word processor" was really just a microcomputer, a printer, a desk and a little software, the profit potential was staggering.
I remember being relieved that he didn't want to simply buy the software and compete with us. I didn't understand how Bill Gates thought. I do now. Microsoft plans for the long term. He had no intention of competing with us during the next two years; he intended to compete with us for the next twenty. I covered the receiver with my hand, turned to Mike and Bill, and repeated the
question and its generous non-competition offer. "Tell him $35,000," Mike said. I repeated Mike's number to him.
"You're not going to change your mind, are you?" the voice said. Uh-oh, I
thought; I probably should have asked for a little more. "No," I assured him.
"I'll be there tomorrow," the voice said. And after a few pleasantries, the
A few minutes later, Steve Ballmer, President of Microsoft, called and introduced himself. "I want to make sure that there are no slip-ups at the airport. Mr. Gates looks very young," he told me.
"No problem," I assured him. "I'll pick him up. What does he look like?"
"He looks very young," Ballmer reiterated. "Look for a 15-year-old in a
thousand-dollar suit reading the Wall Street Journal."
The next day I drove to Houston's Intercontinental Airport, parked my car, and
walked down to the terminal. In those days, you could wait for an arriving
flight just outside the jet way. Sure enough, there was a kid who looked about
15 in a really, really nice suit, reading the Wall Street Journal. I introduced
myself again, drove him to my house, made him a grilled cheese sandwich, and
handed him the source code to our program, printed on 14-7/8" X 11" green bar
paper and a couple of huge 8-inch floppies. He pulled out his personal checkbook
and wrote me a check for $35,000.
And that's how Microsoft got the source code for the program known today as
Microsoft Word. It was my first incursion into the world of microcomputer
I had studied to be an economics professor, my goal since an early age. I finished a
Master's degree in economics at Rice University, the "Harvard of the South." I
felt that finance offered more concrete career opportunities, because frankly,
with two degrees in economics, I didn't actually know how to do anything. So I
switched colleges and finished the coursework for an MBA and a Ph.D.,
specializing in Finance.
But the cost of caring for a child paralyzed by a spinal cord tumor forced me to look for a more lucrative profession, and when a professor that I worked with offered to teach me COBOL and help me find a contract programming job, I jumped at the chance. I soon left the academic world and focused on my new profession. I was a contract software developer at an oil company in Houston when the chance to build Small Business Applications came along. I stayed in my new profession for the next 30 years, and loved being on the cutting edge of software technology. I wrote seven books about software development, and published a monthly newsletter for ten years, writing hundreds of articles about programming. But I never forgot my roots.
When the Internet arrived, it changed everything. I learned to build websites that used databases. This was obviously something that could change the world. It inspired me to try to use the Internet to satisfy my desire for social activism. I started looking around for an idea for a website that would do something important. I didn't know if I wanted it to make me a ton of money, or to do a ton of good, or what; I just wanted an idea.
One day I was at the grocery store with my wife. I picked up a jar of Keiller's
Dundee Orange Marmalade, which I'm particularly fond of, and started to put it
in the shopping cart. "Don't buy that here," she said; "it's a dollar cheaper at
"A dollar?" I thought. "How can a store get away with selling something that you
can get for a dollar less six blocks away?" Turns out, grocery stores have done
a lot of thinking about things like this. Turns out, charging a dollar more than
the expected price is only one of perhaps twenty strategies to separate you from
more of your money than you thought you were going to spend. The fact that there
are thirty-five-thousand prices to remember for each store is what they're
Stores have a weapon that consumers don't: information asymmetry - the ability
to remember everything instantly (not them - their computers), and knowing that
you can't. Merchants count on information asymmetry to overcharge. They know
that you can't possibly know the prices of all thirty-five thousand items that
they and the other grocery stores in town charge. They know them, of course;
they use databases to remember things. You use your brain. Databases remember
better than your brain does. You need countervailing power. You need a database.
And my years as a database developer, plus the power of the Internet, meant that
I could offer a solution.
This was an epiphany for me. Those eleven years of studying economics had
persuaded me that, based on the theory of perfect competition, prices should be
about the same everywhere. The perfectly competitive model is the basis of the
free market - its very justification. But if the consumer doesn't have a
photographic memory, the free market fails, and the consumer loses. It's the
perfect blame-the-victim scenario.
Imagine if you could go to a website and tell it what you wanted to buy, and get
a shopping list for each store with only the items that are cheaper there than
at any other store in your neighborhood. Sounds simple enough, doesn't it?
Surely there's an app for that.
Try it. Go to Google, or Yahoo, or Bing, and try to find out the lowest price in
your city for a package of 24 newborn Pampers - or anything else. You can't. The
stores own the data, and they're not about to let you have it in a way that
permits comparison. There are no store-to-store price comparison websites.
So I stole their data and built a website to let people shop for groceries. Part
of the reason I did it was simply to teach myself the technology. In the process
of learning how to do something like this, I would have to master dozens of new
tricks and techniques. Doing this website would be good for me. So I began my
journey. I never imagined where it would take me.
I named the website JustPrices.org. People assume that it means "only prices".
It doesn't. It means fair prices.
In my demonstration website, you enter your zip code (although currently, there's only data for one),
and you see the stores in your neighborhood.
You can exclude any of the stores that you just don't like. You then proceed down the virtual aisles,
picking one of this, two of that. When you click the CheckOut icon, you get one shopping list for
each store in your area, containing only the items that are
cheaper at that store than at any other in your neighborhood. Stores that
don't have the lowest price for anything on your list don't even appear. They're
invisible. Ultimately, either they lower their prices, or they die.
Loading the data was of course the hard part; I was able to screen-scrape a few
stores, and manually entered prices from another. So if there was no website to
raid, I had to walk up and down the aisles with a pre-printed list of product
names and write their prices down, then go back home and type them in - a
ridiculously labor-intensive process. (There's an alternative, but it would take
a teeny tiny change to our laws. More about that later.)
One day, when I was in a grocery store gathering prices, an employee came up and
asked me what I was doing, and I told him. A minute later, his manager came up,
called me a communist, and told me to leave.
The economic model that my website is based on is the basis of capitalism.
What could cause a merchant to accuse me of being a communist for trying to precisely
follow the capitalist economic model? I soon found out. Based on my test data, which I loaded from some stores in San
Mateo, California, I discovered that I could save a typical grocery shopper 24%
of their grocery bill - twenty-four out of every hundred dollars, two-hundred
and forty out of every thousand dollars. In the case of the average American,
it's a mortgage payment a year; in the case of a nation, it's a big step toward
surviving this economic crisis and regaining our greatness.
In the case of a grocery store, however, it means losing 24% of their gross,
and probably 90% of their profits. That's why he called me a communist: Because to
people like him, free market means the freedom to lie to us and cheat us.
This might seem radical to you, but if someone knows that they're charging more than their
competitors and they don't tell you, they're lying. My mother taught me when I was six
years old that not telling the whole truth is called lying by omission - not "just doing business",
not "protecting the bottom line"; it's called lying.
It's the first word in the phrase "lying by omission."
There's no other word for it.
Life has become extraordinarily complex, and as a Russian "businessman" (read crook) once told me, there are many ways to profit from chaos. When you sign up for a cell phone, you're told that it will probably cost about fifty dollars a month. But your first bill is two hundred. And somewhere around page seventeen of the contract you signed, it explains why, in language that your master's in English doesn't permit you to understand. Business knows that they can mask fraud with complexity, so they exploit it.
Monopoly is against the law in the United States, but virtually every business in America has found a way to get around the laws against monopoly. They do so by hiding their illegal practices behind the shield of proprietary knowledge. They don't have to tell you how they make money, because they're allowed to protect trade secrets; but the way they make money is by lying to you. That's the trade secret they're protecting. And money earned by monopolistic practices is stolen money. More on that later.
Lying, it seems, is the biggest money-maker in our economic system. And if you
don't catch the lie, it's your fault. Caveat emptor - buyer beware. Don't beware
of lying and cheating and getting caught. Beware of being the fool who was lied
to and didn't catch on. We're been taught for years that this is perfectly fine.
And if we don't agree with it, we're communists? I don't think so. We'll look
further into the basis of our economic system in chapter one, but I'm pretty
sure that the economic system that capitalism is based on doesn't demand that we
lie. We're better than that.
When I realized what my little website could do to help people who are feeling the pain
of the economic crisis, I felt like the Leon Lederman, the Nobel-prize-winning
scientist in the television ad, who found proof of the existence of bottom
quarks one day in the early hours of the morning, and then realized that for the
next few hours, he was the only person in the world who knew of their existence.
As an economist, I understood the problem. As an Internet database programmer, I
had built a solution. I was giddy with excitement. If I was looking for
something important to do, I had found it.
It turned out to be the tip of the iceberg.
The ability to deliver any amount of information to anyone anywhere in the world
in any degree of complexity at any time for free implies greater possibilities
than saving you a buck on a box of diapers. It promises ways to fix what's wrong
with our civilization, which is poised on the brink of self-destruction. And the
problems go far, far beyond the cost of food. But there are solutions, and the
Internet is the key.
What this book is about
"If you're not outraged," the bumper sticker says, "you're not paying
attention." The essence of the cover story of The Economist, a business-oriented
British magazine that many consider the best in the world, early in 2011 was
this: "The free market has failed us, and monopolists are sucking the life out
of us." It's not a secret. Television, magazines, books, the Internet itself -
every information source we have tells us so. And we're overwhelmed with other
problems that seem to admit of no solution other than violence. We know who the
bad guys are, and where they live. What do we do next? The obvious answer - the
R word - immediately comes to mind. But it would be a terrible step to take.
However, doing nothing is no longer an option.
This book is about how we can use the free market model, with the lies stripped out, to fix
what's wrong in just about every aspect of our society. Education, medical care, government
ineptitude, corporate greed, overcharging - every single one has a solution involving
the basic elements of my little web site: Using only the truth (not someone's version of it,
but the actual, verifiable truth) to make decisions, with the option to make
decisions based on anything else removed. Politics is the power to lie and to be treated as if you were
telling the truth. Politics is what needs to be fixed. But the Internet can help...
with a few teeny-tiny changes in our laws.
Our country is falling behind the rest of the world because our children are not
learning anything. The Internet offers the perfect framework for both lowering the cost of
education and improving its quality. The infinite patience of a web server to repeat and
reinforce is just what the doctor ordered,
with a few teeny-tiny changes in our laws.
No one can afford medical care any more, and the reason isn't that we don't have enough
insurance; the reason is that they charge too much. Not only can the Internet help
to solve this problem; it's about the only thing that can -
with a few teeny-tiny changes in our laws.
Dialog between Democrats and Republicans is impossible. Democrats must be lying, because their President is a Kenyan Socialist.
So Republicans lie to destroy the evil socialist President. Since each side "knows" that the other side is lying, neither side listens.
Valid political concerns, like how to rebuild our infrastructure and educate our children, are excluded from the debate.
Paying for the things our country needs will require raising taxes on the only people who can afford to pay more, and that, it turns out, is socialism.
So in an age where virtually everything needs changing, nothing will change, because 40 Senators (who theoretically could be elected by eleven percent of the population) can bring the Congress to a standstill.
Our political system is broken, and only the Internet offers a means to fix it -
with a few teeny-tiny changes in our laws.
Blueprint for a peaceful revolution
I hope that this book will contribute to a movement that can spare us the ultimate tragedy.
With Internet technology, and with renewed determination to solve our problems justly and
rationally, we can fix this broken world. The purpose of this book is to show how to use the Internet
to avoid a violent, bloody revolution.
If the amazing power of the Internet can save us from a conflagration, that will be its
In the pages that follow, I'll talk about some of the problems that our country
faces, and propose solutions that the Internet could provide, using the same
approach that I used in my website. Most of these technical solutions would
require what I like to refer to as teeny tiny changes in our legal framework. In
fact, the changes to our legal and political framework that would be needed are enormous. We
have the technology; what we lack is the political will.
Email me when the book is published