From a certain point of view, Uber is a brilliant idea to offer transportation services in a new way enabled by the proliferation of smartphone technology. In another view, Uber is more of a brilliant idea to arbitrage loopholes in existing employment law, taxi regulation, and other societal mores that had built up over decades.
Uber cofounder and former CEO Travis Kalanick’s take-no-prisoners attitude helped the company grow quickly and become the market leader. But it also led to his eventual downfall in 2017, as complaints and investigations of Uber’s conduct under his tenure mounted.
All that ancient history in startup land came rushing back to me this week as I read Emilie Friedlander’s detailed and devastating investigation for Vice of Kalanick’s new new thing, CloudKitchens, and its parent company, City Storage Systems. It’s really a masterclass in investigative journalism.
Kalanick’s new business offers take-out food in an original way, cooking everything at large, centralized facilities with delivery handled via GrubHub, Uber Eats and the like. To attract customers, these so-called ghost kitchens create virtual online restaurants listed in GrubHub and similar apps, listings that look just like real restaurants.
Friedlander first got suspicious when weirdly named restaurants like F*cking Good Pizza, Pimp My Pasta, and OMG BBQ LOL turned up in local DoorDash listings:
“Suddenly, I was seized by a need to get to the bottom of a matter that felt like a glitch in the fabric of my humdrum pandemic existence: Where did these clickbait restaurant brands come from, even if they didn’t seem to technically exist? And why did delivery marketplaces across the U.S., and countries around the world, suddenly seem to be flooded with them?”
Turned out they were all non-existent in the real world, just different faces of the same local outpost of Kalanick’s CloudKitchens. The startup has even gone a step further and helped real restaurants diversify into the ghost kitchen market by creating multiple online identities for them in the delivery service apps.
In theory, there’s nothing really wrong with a ghost kitchen or single restaurant creating several online storefronts, just like an avid video gamer might create different personas best suited for different games. If an Italian restaurant that serves pizza, pasta, and seafood can triple its delivery orders by adding specialized yet fictional online restaurants each focused on one category, it could be a win-win. The restaurant gets more business and customers get a clearer search experience.
But when Kalanick is involved, you have to be on the lookout for further “arbitrage” of rules, laws, and social mores. Already Friedlander’s detailed reporting turned up tales of unhappy customers whose food didn’t resemble the pictures or quality they saw online (I asked CloudKitchens for comment yesterday and they declined).
Those customers could leave negative reviews, but what’s to stop a ghost kitchen from opening and closing new virtual restaurants all the time to avoid bad ratings? And with the trouble we already have with fake reviews on Amazon and elsewhere, what’s to stop a ghost kitchen from enhancing its reputation with some ratings-gaming service? And the ease with which a ghost kitchen can flood the market with numerous virtual offerings in a category could overwhelm all the physical restaurants in the same category and put them out of business. How long until we see academic studies that the net economic effect of ghost kitchens is negative?
As ghost kitchens expand their haunts across the country, stay tuned for more strangeness, more controversy and, perhaps, more frights.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com
NEWSWORTHY
Your silent face. After Georgia adopted a host of new restrictions on voting, big tech companies are among those starting to object. Apple CEO Tim Cook said "it ought to be easier than ever for every eligible citizen to exercise their right to vote" and a Google lobbyist tweeted the company is "concerned about efforts to restrict voting at a local level." Salesforce, Facebook, Microsoft, Cisco, and IBM also joined the fray. Their timing seems a little off, but better late than never? Speaking of legal controversies, the Supreme Court let Facebook off the hook for unsolicited texting, interpreting 1991 anti-robocalling legislation in a way that could open the floodgates to scammers. Some lawmakers said they'd pass a fix ASAP.
Crazy Amazon is insane. While a lot of brick and mortar retail outlets are closing, Amazon is thinking of expanding. The company is considering selling home goods and electronics from warehouse overstock at steep discounts. “It’s a way to be able to clean out warehouses, and get through inventory without having to destroy it,” an anonymous source tells Bloomberg. I don't think those stores will ever be selling Casio's newly announced G-Shock smartwatch, which looks pretty sweet if you're a fan of the company's long-running line of chunky, durable digital watches. The new devices run Google's WearOS and have dual screen technology to save battery life.
App happy. The average Apple iPhone owner spent $138 on apps last year, a 38% increase from 2019, research firm Sensor Tower reports. Gaming attracted the most spending and the biggest increase from last year as COVID-trapped consumers sought virtual diversions. Meanwhile, you'll hear notifications from those apps in a slightly new way. Apple is diversifying the slate of voices for Siri (Apple tracker John Gruber taped the new and old options) and new iPhones will no longer automatically default to a female voice for Siri–you'll have to pick one during set up.
Advancing in another direction. On Wall Street, real estate tech company Compass went public but sold about half as many shares as it planned a week earlier. The new deal prices shares at $18 but raised only $480 million. The shares, trading with the ticker COMP, closed Thursday at $20.15, up 12%. Coursera's IPO went well and the stock, which debuted on Wednesday with the symbol COUR, was up 39% after two days. Crypto startup Coinbase scheduled its debut via a direct listing for April 14. It's grabbing the jazzy symbol COIN.
FOOD FOR THOUGHT
We often refer to computer programs trained with real data, or machine-learning systems, as artificial intelligence. But A.I. expert Michael I. Jordan thinks we're getting confused, as he explained to IEEE Spectrum writer Kathy Pretz.
In recent years, he has been on a mission to help scientists, engineers, and others understand the full scope of machine learning. He says he believes that developments in machine learning reflect the emergence of a new field of engineering. He draws parallels to the emergence of chemical engineering in the early 1900s from foundations in chemistry and fluid mechanics, noting that machine learning builds on decades of progress in computer science, statistics, and control theory. Moreover, he says, it is the first engineering field that is humancentric, focused on the interface between people and technology.
“While the science-fiction discussions about AI and super intelligence are fun, they are a distraction,” he says. “There’s not been enough focus on the real problem, which is building planetary-scale machine learning–based systems that actually work, deliver value to humans, and do not amplify inequities.”
FOR YOUR WEEKEND READING PLEASURE
A few great long reads I came across this week:
5 Years After the Oculus Rift, Where Do VR and AR Go Next? (Wired)
A lot’s happened since Facebook’s first headset brought virtual reality to the masses. Facebook might have been a first mover, but it also wants to be the last one.
Big Lies vs. Big Lawsuits: Why Dominion Voting is suing Fox News and a host of Trump allies (Fortune)
Now it wants to go to court to prove they lied—and make them pay a price for spreading misinformation.
The wannabe food influencer who's wanted by the FBI (The Guardian)
When a man calling himself Gavin Ambani tried to make his mark on the London food scene, the story of a fraud hunt stretching from Hollywood to Indonesia followed in his wake.
He was Nigeria’s biggest Scrabble star. The pandemic spelled identity crisis. (Washington Post)
On the 300th morning of waking up in a friend’s spare bedroom, the Scrabble champion pondered his next move and fixated on one word. Nine letters, 68 points: Defective.
IN CASE YOU MISSED IT
Microsoft’s Army deal shows how augmented reality has gone from hot, to not, to hot again By Jonathan Vanian
Here’s what it’s like when Meghan, the Duchess of Sussex invests in your startup By Emma Hinchliffe
How will chipmaker TSMC spend $100 billion in 3 years? Easy By Eamon Barrett
From Bitcoin to Tesla—Here are the big winners and losers for Q1 By Bernhard Warner
How A.I.-powered companies dodged the worst damage from COVID By François Candelon
4 investments that will improve the digital classroom next school year By Taher Behbehani
10 new books to read in April By Rachel King
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
That new G-Shock smartwatch I do not need (I do NOT need) has me in a gadget-y mood at week's end. So why not finish up with the latest mini-documentary in tech: YouTuber Michael Fisher aka Mister Mobile's "When phone's were fun" series. This week, he's traveling back to the mid-1990s and dug up a flip phone we all flipped for. Enjoy and have a revived weekend.
