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Big Ideas: “AI-powered dynamic pricing that shifts in real-time to changes in supply and demand” with Alex Shartsis CEO of Perfect Price

The world’s most successful companies (Uber, Amazon, Airbnb, and many others) already use dynamic pricing to predict changes in supply and demand, optimizing prices in real-time to maximize revenue. Consumers are already familiar with dynamic pricing: Uber rides, flights, hotels, and even Disneyworld tickets are all examples. The benefits of AI and Dynamic pricing are […]

The world’s most successful companies (Uber, Amazon, Airbnb, and many others) already use dynamic pricing to predict changes in supply and demand, optimizing prices in real-time to maximize revenue. Consumers are already familiar with dynamic pricing: Uber rides, flights, hotels, and even Disneyworld tickets are all examples. The benefits of AI and Dynamic pricing are still far from fully realized.


As a part of my series about “Big Ideas That Might Change The World In The Next Few Years” I had the pleasure of interviewing Alex Shartsis. Alex is co-founder and CEO of Perfect Price, an AI company empowering companies to make better decisions about pricing, profitability, and utilization. Previously, he led business development as the fifth employee at Drawbridge, where in just 13 months he grew the company to a $100M valuation. Prior to Drawbridge, Shartsis led business development at TripIt, from its Series A through its $120 million acquisition by Concur (subsequently acquired by SAP). Alex holds an MBA from the UCLA Anderson School of Management, an MSc from the London School of Economics, and an AB from Dartmouth College.


Thank you so much for joining us Alex. Can you tell us a story about what brought you to this specific career path?

I have always wanted to work in technology–software specifically–as an entrepreneur. I learned to code when I was in 8th grade and wrote my first program for pay when I was 12 (I way underpriced it!). My parents quit perfectly good jobs in their late 20’s to start what is now a very successful law firm, and I saw their career path and thought that that was what I wanted to do–without the billable hour part.

Can you share the most interesting story that happened to you since you began your career?

There are many stories, and it’s hard for me to pick out the “most interesting” one. Looking back on it I’d say probably our first customer meeting at Perfect Price. We hadn’t incorporated yet, and a cold email got us a meeting with a unicorn company. Half the executive staff showed up for it, and we met in one of the strangest conference rooms ever–more like Sherlock Holmes’ salon than the SoMa office lobby we had walked through to get there. We were the experts, and we’d only been working on this for about a month. It was eye-opening.

Of course, we didn’t get the business. But we learned a ton and that meeting led directly to our first financing. It showed us there was a clear problem, and it was only another month before we found a paying customer. Persistence!

Can you tell us about your “Big Idea That Might Change The World”?

Let’s call it a “Big idea that WILL change the world.” AI-powered dynamic pricing is radically altering how we buy products and services, dramatically reducing structural inefficiencies and eliminating billions of dollars of waste.

The world’s most successful companies (Uber, Amazon, Airbnb, and many others) already use dynamic pricing to predict changes in supply and demand, optimizing prices in real-time to maximize revenue. Consumers are already familiar with dynamic pricing: Uber rides, flights, hotels, and even Disneyworld tickets are all examples. The benefits of AI and Dynamic pricing are still far from fully realized.

How do you think this will change the world?

Dynamic pricing makes markets more liquid and improves the lives of both customers and suppliers. It will be reflected in consumers getting what they want, more often, at a price, they’re willing to pay. Whether it’s cheaper baseball tickets for certain games or the new car they wanted not already being sold in a promotion, but still being available when they want it.

In the short run, suppliers’ businesses will be more efficient, and they will improve margins. From gas stations to rental car agencies or even airlines, inefficiencies cost billions per year. But the change is bigger. Setting accurate prices is the sort of rote, math-heavy process that humans are not good at and do not enjoy. As AI dynamic pricing enables more and more companies to offload this unpleasant task, while achieving better results, those people will be able to impact the business in more strategic ways.

Keeping “Black Mirror” and the “Law of Unintended Consequences” in mind, can you see any potential drawbacks about this idea that people should think more deeply about?

Any artificial intelligence learns from what the people were doing the activity before it did. Therefore it can be, especially at first, subject to human bias and unfairness. For example, we noticed that when left to its own devices, the AI we launched for one customer increased the prices for their service for an elderly community–without knowing it was an elderly community. It just discovered a higher willingness to pay. This was likely due to these people being fairly well off, and unwilling to try new things (apps, etc.) for the particular service our AI was pricing–and the AI saw that.

Detecting and controlling that sort of discriminatory pricing is, therefore, a key part of the problem and an important part of our platform.

Was there a “tipping point” that led you to this idea? Can you tell us that story?

At every company in my career, I’ve had a large hand in pricing– in fact; I usually ended up owning pricing. In one instance, in particular, I renegotiated a $20,000/year deal, and by changing pricing turned it into a $300,000/year deal. I learned on the job that price is an incredibly powerful lever.

The tipping point came when I was tasked with setting prices for TripIt Pro around the world. There was only one product at the time, but hundreds of markets and currencies. It got me thinking–how do businesses with thousands of products set their prices? Do they use machine learning and artificial intelligence? When I learned they didn’t–I knew this was the problem we had to solve.

What do you need to lead this idea to widespread adoption?

Dynamic pricing is here and is rapidly adopted by leading enterprises around the globe. The best companies in their industries–leaders, if you will–are already engaging us to figure out how to deliver dynamic pricing to their customers. In the downturn–whenever it comes–these companies will emerge even further ahead of their competitors, and the competitors will start to focus on dynamic pricing too. It is not a question of “whether” but “when.”

What are your “5 Things I Wish Someone Told Me Before I Started” and why?

  1. Raise all the money on Day 1. Being under-resourced forces you to make absurd trade-offs, and sometimes learn the wrong lessons.
  2. Hire experts in every area as close to Day 1 as you can. Nobody is a master of more than two things, and even that is rare. If we had hired, for example, a product person on Day 1, I think we would have made much faster progress. Ironically someone–a prospective investor–did tell us that, but we didn’t have a lot of cash, and I thought he was a jerk. So we ignored him.
  3. You will never feel like you have enough money in the bank. Because you shouldn’t–stay hungry, and do everything you can to get “funding” from customers–by which I mean revenue for a product customers value.
  4. Focus on the positive. Something will always be going wrong, but if you focus on what is working and do more of it, you’ll succeed.
  5. Spend your days doing only the most important things to grow your business and say “no” to everything else. Especially say “no” to investor meetings unless you are actually raising money (and then say “no” to everything else).

The future of work is a common theme. What can one do to “future proof” their career?

Future proofing your career is something we come across a lot when talking about AI. The idea of Artificial Intelligence scares people, and for a good reason. However, the answer is quite simple. The job activities that AI will automate are tactical, operational activities; those mundane, repetitive tasks that can be optimized for efficiency and speed. For job security, we need to focus on the strategic aspects of our job that will always require humans qualitative knowledge and insights. For many these are already the activities we enjoy most about our jobs, so the transition is really to focus more deeply on these strategic initiatives, developing the skill set to drive AI tools to your advantage.

Based on the future trends in your industry, if you had a million dollars, what would you invest in?
The future of AI is incredibly bright, and even now, with massive advances in the space, we’ve really only scratched the surface of what’s possible. I would, and I have, put my money into the expansion of AI technology. Today, only a finite number of qualified data scientists exist in the world, but as this space grows and higher education breeds the next generation of data scientists the impact of their contributions will be enormous.

Which principles or philosophies have guided your life? Your career?

I believe in treating people as I would expect to be treated–be they customers, employees, competitors or investors. Startups are a marathon, not a sprint, and we manage our exertion accordingly. Recently, I’ve discovered the Conscious Leadership philosophy, and think these ideas reflect how I aspire to lead.

Can you share with our readers what you think are the most important “success habits” or “success mindsets”?

I wish I had a quick path to success I could share, but the reality is more complicated.

I’ve found that the most important thing is to be patient, persistent, and honest with yourself. If you believe something will work–and stick to it–then it will. But if you are not the right person to build that company, or if customers don’t want what you are selling, you have to be honest with yourself and move on.

Every one of Amazon’s major innovations–like Kindle, AWS, and more–took over seven years to achieve success. Many of them, like Fresh, or Kindle, and including the core e-commerce business, were lambasted by everyone at some point. Patience and persistence are key.

Entrepreneurs have been lionized recently, but almost everything about true entrepreneurship sucks. You get paid awfully (if at all), you’re constantly stressed out about something important, and even if you’re a public company, you’re probably never more than 24 months from not being able to pay your team (looking at you, SNAP).

Some very well known VCs read this column. If you had 60 seconds to make a pitch to a VC, what would you say?

I’ll pass on pitching a VC; I’ve done that plenty. The ones I would want to work with know me already, and we catch up regularly.

Instead, I’ll offer some advice for VCs, because they seem to always like to offer advice to entrepreneurs. VC is a tough business. Raising money is hard–perhaps harder than raising money for a company. You’ll improve your success if you distinguish yourself by showing respect for entrepreneur CEOs and their time. Every interaction you have with a founder/CEO costs that person a fortune in time and focus. So be respectful of that. If you haven’t been an entrepreneur CEO yourself, consider asking an entrepreneur who will be honest with you (i.e., not a portfolio CEO) to review your process. 
 
How can our readers follow you on social media?

You can follow me on social media via TwitterLinkedin, or Angel.co, or by subscribing to our blog at perfectprice.com/blog.

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