This article describes the rise of the food delivery business through the use of apps and gig economy drivers from Uber and other services. The delivery services reach agreement with a wide variety of restaurants and fast-food outlets to deliver their meals. Then they create an app and distribute this to a customer base that is oriented to millennials and those in more densely populated areas. You open the app, select a restaurant, pick what you want from the menu, place your order and voilà, your food arrives quickly and still hot.
Or not. The article describes the failures of these systems and frustrations of many users. The food is overpriced (due to delivery and service charges and other markups), the waits are inordinately long (sometimes an hour or more for restaurants that are almost within walking distance) and the food is often cold by the time it arrives (thank goodness for microwaves).
More to the point, these services set out to solve a problem that didn’t exist. Customers have been able to get home food deliveries since the 1950s from local pizza parlors, Chinese restaurants and Jewish delis, among others.
What does this tale of food delivery apps have to do with investing? It shows that Silicon Valley’s best and brightest are devoting substantial time and effort to fixing things that don’t need fixing. The added productivity from each such application is low at best, and may be negative (especially if the food is cold).
Building apps just for the sake of building apps is a waste. Also, don’t underestimate the extent to which these apps have nothing to do with food delivery and everything to do with getting in your smartphone, data mining your personal preferences and selling the data to advertising giants like Google and Facebook.
Stories like this help to illuminate the mystery of declining productivity, which has stumped economists. Enjoy your next food delivery while you ponder how much value-added the service has relative to the older alternatives. The answer is not much.
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