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‘Training My Replacement’: Inside a Call Center Worker’s Battle With A.I.

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To many people, chatbots and other technology feel like a ticking time bomb, sure to explode their work. But to some, the threat is already here.“This A.I. stuff is getting really crazy.”The voices of Charlamagne tha God, host of the nationally syndicated radio show “The Breakfast Club,” and his guests Mandii B and WeezyWTF filled Ylonda Sherrod’s car as she sped down Interstate 10 in Mississippi during her daily commute. Her favorite radio show was discussing artificial intelligence, specifically an A.I.-generated sample of Biggie.“Sonically, it sounds cool,” Charlamagne tha God said. “But it lacks soul.”WeezyWTF replied: “I’ve had people ask me like, ‘Oh, would you replace people that work for you with A.I.?’ I’m like, ‘No, dude.’”Ms. Sherrod nodded along emphatically, as she drove past low-slung brick homes and strip malls dotted with Waffle Houses. She arrived at the AT&T call center where she works, feeling unsettled. She played the radio exchange about A.I. for a colleague.“Yeah, that’s crazy,” Ms. Sherrod’s friend replied. “What do you think about us?”Like so many millions of American workers, across so many thousands of workplaces, the roughly 230 customer service representatives at AT&T’s call center in Ocean Springs, Miss., watched artificial intelligence arrive over the past year both rapidly and assuredly, like a new manager settling in and kicking up its feet.Suddenly, the customer service workers weren’t taking their own notes during calls with customers. Instead, an A.I. tool generated a transcript, which their managers could later consult. A.I. technology was providing suggestions of what to tell customers. Customers were also spending time on phone lines with automated systems, which solved simple questions and passed on the complicated ones to human representatives.Ms. Sherrod, 38, who exudes quiet confidence at 5-foot-11, regarded the new technology with a combination of irritation and fear. “I always had a question in the back of my mind,” she said. “Am I training my replacement?”Ms. Sherrod, a vice president of the call center’s local union chapter, part of the Communications Workers of America, started asking AT&T managers questions. “If we don’t talk about this, it could jeopardize my family,” she said. “Will I be jobless?”In recent months, the A.I. chatbot ChatGPT has made its way into courtrooms, classrooms, hospitals and everywhere in between. With it has come speculation about A.I.’s impact on jobs. To many people, A.I. feels like a ticking time bomb, sure to explode their work. But to some, like Ms. Sherrod, the threat of A.I. isn’t abstract. They can already feel its effects.When automation swallows up jobs, it often comes for customer service roles first, which make up about three million jobs in America. Automation tends to overtake tasks that repeat themselves; customer service, already a major site for outsourcing of jobs abroad, can be a prime candidate.The AT&T call center where Ms. Sherrod works, in Ocean Springs, Miss. The company has increasingly been integrating A.I. into many parts of its customer service work.Bryan Tarnowski for The New York TimesA majority of U.S. call center workers surveyed this year reported that their employers were automating some of their work, according to a 2,000-person survey from researchers at Cornell. Nearly two-thirds of respondents said they felt it was somewhat or very likely that increased use of bots would lead to layoffs within the next two years.Technology executives point out that fears of automation are centuries old — stretching back to the Luddites, who smashed and burned textile machines — but have historically been undercut by a reality in which automation creates more jobs than it eliminates.But that job creation happens gradually. The new jobs that technology creates, like engineering roles, often demand complex skills. That can create a gap for workers like Ms. Sherrod, who found what seemed like a golden ticket at AT&T: a job that pays $21.87 an hour and up to $3,000 in commissions a month, she said, and provides health care and five weeks of vacation — all without the requirement of a college degree. (Less than 5 percent of AT&T’s roles require a college education.)Customer service, to Ms. Sherrod, meant that someone like her — a young Black woman raised by her grandmother in small-town Mississippi — could make “a really good living.”“We’re breaking generational curses,” Ms. Sherrod said. “That’s for sure.”In Ms. Sherrod’s childhood home, a one-story, brick A-frame in Pascagoula, money was tight. Her mother died when she was 5. Her grandmother, who took her in, didn’t work, but Ms. Sherrod remembers getting food stamps to take to the corner bakery whenever the family could spare them. Ms. Sherrod cries recalling how Christmas used to be. The family had a plastic tree and tried to make it festive with ornaments, but there was typically no money for presents.To students at Pascagoula High School, she recalled, job opportunities seemed limited. Many went to Ingalls Shipbuilding, a shipyard where work meant blistering days under the Mississippi sun. Others went to the local Chevron refinery.“It felt like I was going to always have to do hard labor in order to make a living,” Ms. Sherrod said. “It seemed like my lifestyle would never be something with ease, something I enjoyed.”When Ms. Sherrod was 16, she worked at KFC, making $6.50 an hour. After graduating from high school, and dropping out of community college, she moved to Biloxi, Miss., to work as a maid at IP Casino, a 32-story hotel, where her sister still works. Within months of working at the casino, Ms. Sherrod felt the toll of the job on her body. Her knees ached, and her back thrummed with pain. She had to clean at least 16 rooms a day, fishing hair out of bathroom drains and rolling up dirty sheets.When a friend told her about the jobs at AT&T, the opportunity seemed, to Ms. Sherrod, impossibly good. The call center was air-conditioned. She could sit all day and rest her knees. She took the call center’s application test twice, and on her second time she got an offer, in 2006, starting out making $9.41 an hour, up from around $7.75 at the casino.“That $9 meant so much to me,” she recalled.So did AT&T, a place where she kept growing more comfortable: “Out of 17 years, my check hasn’t ever been wrong,” she said. “AT&T, by far, is the best job in the area.”‘Your Biggest Nightmare’Sam Altman, the chief executive of OpenAI, testified before a Senate subcommittee in May. In recent months, OpenAI’s ChatGPT chatbot has made its way into courtrooms.Win McNamee/Getty ImagesThis spring, lawmakers in Washington hauled forward the makers of A.I. tools to begin discussing the risks posed by the products they’ve unleashed.“Let me ask you what your biggest nightmare is,” Senator Richard Blumenthal, Democrat of Connecticut, asked OpenAI’s chief executive, Sam Altman, after sharing that his own greatest fear was job loss.“There will be an impact on jobs,” said Mr. Altman, whose company developed ChatGPT.That reality has already become clear. The British telecommunications company BT Group announced in May that it would cut up to 55,000 jobs by 2030 as it increasingly relied on A.I. The chief executive of IBM said A.I. would affect certain clerical jobs in the company, eliminating the need for up to 30 percent of some roles, while creating new ones.AT&T has begun integrating A.I. into many parts of its customer service work, including routing customers to agents, offering suggestions for technical solutions during customer calls and producing transcripts. The company said all of these uses were intended to create a better experience for customers and workers. “We’re really trying to focus on using A.I. to augment and assist our employees,” said Nicole Rafferty, who leads AT&T’s customer care operation and works with staff members nationwide.“We’re always going to need in-person engagement to solve those complex customer situations,” Ms. Rafferty added. “That’s why we’re so focused on building A.I. that supports our employees.”Economists studying A.I. have argued that it most likely won’t prompt sudden widespread layoffs. Instead, it could gradually eliminate the need for humans to do certain tasks — and make the remaining work more challenging.“The tasks left to call center workers are the most complex ones, and customers are frustrated,” said Virginia Doellgast, a professor at the New York State School of Industrial and Labor Relations at Cornell.Ms. Sherrod has always enjoyed getting to know her customers. She said she took about 20 calls a day, from 9:30 to 6:30. While she’s resolving technical issues, she listens to why people are calling in, and she hears from customers who just bought new homes, were married or lost family members.“It’s sort of like you’re a therapist,” she said. “They tell you their life stories.”She is already finding her job growing more challenging with A.I. The automated technology has a hard time understanding Ms. Sherrod’s drawl, she said, so the transcripts from her calls are full of mistakes. Once the technology is no longer in a pilot phase, she won’t be able to make corrections. (AT&T said it was refining the A.I. products it used to prevent these kinds of errors.)It seems likely, to Ms. Sherrod, that at some point as the work gets more efficient, the company won’t need quite as many humans answering calls in its centers. Ms. Sherrod wonders, too: Doesn’t the company trust her? For two consecutive years, she won AT&T’s Summit Award, placing her in the top 3 percent of the company’s customer service representatives nationally. Her name was projected on the call center’s wall.“They gave everyone a little gift bag with a trophy,” Ms. Sherrod recalled. “That meant a lot to me.”‘Look at My Life’Ms. Sherrod at the Communications Workers of America’s regional labor union office where she is a vice president.Bryan Tarnowski for The New York TimesAs companies like AT&T embrace A.I., experts are floating proposals meant to protect workers. There’s the possibility of training programs helping people make the transition to new jobs, or a displacement tax levied on employers when a worker’s job is automated but the person is not retrained.Labor unions are wading into these battles. In Hollywood, the unions representing actors and television writers have fought to limit the use of A.I. in script writing and production.Just 6 percent of the country’s private-sector workers are represented by unions. Ms. Sherrod is one, and she has begun fighting her company for more information about its A.I. plans, sitting in her union hall nine miles from the call center, where she works under a Norman Rockwell painting of a wireline technician.For years, Ms. Sherrod’s demands on behalf of the union have been rote. As a steward, she typically asked the company to reduce penalties for colleagues who got in trouble.But for the first time, this summer, she feels that she is taking up an issue that will affect workers beyond AT&T. She recently asked her union to establish a task force focused on A.I.In late May, Ms. Sherrod was invited by the Communications Workers of America to travel to Washington, where she and dozens of other workers met with the White House’s Office of Public Engagement to share their experience with A.I.A warehouse worker described being monitored with A.I. that tracked how speedily he moved packages, creating pressure for him to skip breaks. A delivery driver said automated surveillance technologies were being used to monitor workers and look for potential disciplinary actions, even though their records weren’t reliable. Ms. Sherrod described how the A.I. in her call center created inaccurate summaries of her work.Her son, Malik, was astonished to hear that his mother was headed to the White House. “When my dad told me about it, at first I said, ‘You’re lying,’” he said with a laugh. With her pay and commissions, Ms. Sherrod has been able to buy a home and give her son, Malik, the childhood she never had.Bryan Tarnowski for The New York TimesMs. Sherrod sometimes feels that her life presents an argument for a type of job that one day might no longer exist.With her pay and commissions, she has been able to buy a home. She lives on a sunny street full of families, some of whom work in fields like nursing and accounting. She is down the road from a softball field and playground. On the weekends, her neighbors gather for cookouts. The adults eat snowballs, while the children play basketball and set up splash pads.Ms. Sherrod takes pride in buying Malik anything he asks for. She wants to give him the childhood she never had.“Call center work — it’s life-changing,” she said. “Look at my life. Will all that be taken away from me?” More

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    There Is Shadow Inflation Taking Place All Around Us

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    Some companies haven’t been raising prices. Instead, they’ve been cutting back customer services and conveniences, but how should that be measured?Inflation has surged in 2021, with various official measurements of consumer prices rising faster than they have in years. But in a crucial respect, the data may be understating things.Many types of businesses facing supply disruptions and labor shortages have dealt with those problems not by raising prices (or not by only raising prices), but by taking steps that could give their customers a lesser experience.A hotel room might cost the same as a year ago — but no longer include daily cleaning services because of a shortage of housekeepers. Some restaurants are offering limited service, with waiters stretched thin. Would-be car buyers are being advised to be flexible on the color and even make and model, lest they face a long wait to get their new wheels.Customer sentiment on restaurant cleanliness fell 4.2 percent this year, according to Black Box Intelligence, which tracks online reviews of 60,000 restaurants. Complaints have been frequent about the cleanliness of tables, floors and bathrooms. Satisfaction with customer service was also down, especially regarding beverages, with guests complaining more about receiving the wrong order or no drink at all.People trying to buy appliances and other retail goods are waiting longer. According to J.D. Power, even at the highest-rated retailers, only 57 percent of customers were able to get customer service within five minutes this year, down from 68 percent in 2018.Government statistics agencies try to take changes in product quality into account when calculating inflation. But that process, known as hedonic adjustment, most commonly applies to physical objects. It is relatively straightforward to estimate the value of, say, the quality of stitching on a shirt or the value of a backup camera on a new car. There is a whole world of inflation alarmists who argue that this process leads to the understating of true inflation.But quality changes involving customer service can be ambiguous and hard to measure. The Bureau of Labor Statistics, which generates the Consumer Price Index, does not incorporate quality adjustment on 237 out of 273 components that go into the index, including the vast majority of services.Alan Cole, a former staffer for Congress’s Joint Economic Committee who writes the newsletter Full Stack Economics, noticed these sorts of annoyances during a long drive through the Northeast this summer — fast food that took an awfully long time to come, poorly stocked condiment stations, soda machines that were out of stock. The dynamic became even more clear to him when he stayed in a hotel that had a large area designated for offering hot breakfast to guests — it was mostly empty, with a few sad mini-boxes of cereal.For years, he had argued that official inflation measures actually overstated inflation, because there were many below-the-radar product improvements not captured by the data, like software that was becoming less buggy. Now, he concluded, the reverse seemed to be happening.When there are shortages of labor or supplies, some businesses adjust mostly or entirely by raising their prices. Others find less obvious, less easily measurable ways to adapt. Consider, for example, rental cars versus hotels. Both were dealing with shortages. But they showed up in different ways.“The car company just had to charge higher prices, while the hotel could take the hit through service quality instead,” Mr. Cole said in an email exchange. “We measure them in different ways. The car company’s problem gets measured as inflation, while the hotel’s problem is mostly relayed by anecdote.”It is not unusual for businesses to deal with supply shortages through mechanisms other than price increases. Retailers don’t want to attract accusations of price gouging when goods are in short supply, especially in times of natural disaster. So they end up with empty shelves, a back-door form of rationing. In the 1970s, gasoline prices skyrocketed — but not enough to prevent long lines and rules around which cars could fill up on which days.This particular economic crisis has had far-reaching consequences that have made economic data harder to interpret than usual. “Usually when there is a disaster, if you’re a macroeconomist it’s a blip on the radar screen,” said Carol Corrado, a distinguished principal research fellow at the Conference Board who has researched inflation measurements. “But we’re talking a different kettle of fish with the Covid shock, and the economic implications and costs have become much more challenging to measure than in the past.”It would be difficult for government statistics agencies to try to measure these hidden costs and factor them into inflation measures, say people who study the data closely.Customer service preferences — particularly how much good service is worth — varies highly among individuals and is hard to quantify. How much extra would you pay for a fast-food hamburger from a restaurant that cleans its restroom more frequently than the place across the street?“What gets up to the level of a quality adjustment does become pretty subjective,” said Alan Detmeister, a senior economist at UBS who formerly tracked inflation data for the Federal Reserve. “If the Labor Department even decided they wanted to quality-adjust some of these things, they would have an extremely hard time doing it.”In some cases, one person’s quality enhancement is another’s deterioration. Is online check-in at a hotel a desirable timesaving feature, or a loss of personal touch that has real value? Reasonable people can disagree.Moreover, while there appears to be some shadow inflation in service industries, the reverse has arguably held true for many years.Suppose you believe that restaurant food has become more varied and delicious over the last few decades, as chefs have become more skilled and creative. If so, maybe the 2.7 percent average annual inflation in full-service restaurant prices from 2000 to 2019 that the Bureau of Labor reported was too high.It’s plausible to believe that’s true, and also that the 4.9 percent rise in those prices over the 12 months ended in August was too low if the effects of labor shortages had been fully accounted for.This hints at why inflation bothers people so much — and why it’s a political minefield for the Biden administration. It’s not just the prices you see and the numbers that are fed into economic models, or the news headlines and central bank inflation targets.It’s also that a given amount of spending buys experiences that are a little less satisfying, and that this adds up to an accumulation of frustrations that don’t necessarily show in the numbers. More

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    QR Codes Are Here to Stay. So Is the Tracking They Allow.

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    Fueled by a desire for touchless transactions, QR codes popped up everywhere in the pandemic. Businesses don’t want to give them up.SAN FRANCISCO — When people enter Teeth, a bar in San Francisco’s Mission neighborhood, the bouncer gives them options. They can order food and drinks at the bar, he says, or they can order via a QR code.Each table at Teeth has a card emblazoned with the code, a pixelated black-and-white square. Customers simply scan it with their phone camera to open a website for the online menu. Then they can input their credit card information to pay, all without touching a paper menu or interacting with a server.A scene like this was a rarity 18 months ago, but not anymore. “In 13 years of bar ownership in San Francisco, I’ve never seen a sea change like this that brought the majority of customers into a new behavior so quickly,” said Ben Bleiman, Teeth’s owner.QR codes — essentially a kind of bar code that allows transactions to be touchless — have emerged as a permanent tech fixture from the coronavirus pandemic. Restaurants have adopted them en masse, retailers including CVS and Foot Locker have added them to checkout registers, and marketers have splashed them all over retail packaging, direct mail, billboards and TV advertisements.But the spread of the codes has also let businesses integrate more tools for tracking, targeting and analytics, raising red flags for privacy experts. That’s because QR codes can store digital information such as when, where and how often a scan occurs. They can also open an app or a website that then tracks people’s personal information or requires them to input it.As a result, QR codes have allowed some restaurants to build a database of their customers’ order histories and contact information. At retail chains, people may soon be confronted by personalized offers and incentives marketed within QR code payment systems.“People don’t understand that when you use a QR code, it inserts the entire apparatus of online tracking between you and your meal,” said Jay Stanley, a senior policy analyst at the American Civil Liberties Union. “Suddenly your offline activity of sitting down for a meal has become part of the online advertising empire.”“I’ve never seen a sea change like this that brought the majority of customers into a new behavior so quickly,” Ben Bleiman, Teeth’s owner, said of QR codes.Ulysses Ortega for The New York TimesQR codes may be new to many American shoppers, but they have been popular internationally for years. Invented in 1994 to streamline car manufacturing at a Japanese company, QR codes became widely used in China in recent years after being integrated into the AliPay and WeChat Pay digital payment apps.In the United States, the technology was hampered by clumsy marketing, a lack of consumer understanding and the hassle of needing a special app to scan the codes, said Scott Stratten, who wrote the 2013 business book “QR Codes Kill Kittens” with his wife, Alison Stratten.That has changed for two reasons, Mr. Stratten said. In 2017, he said, Apple made it possible for the cameras in iPhones to recognize QR codes, spreading the technology more widely. Then came the “pandemic, and it’s amazing what a pandemic can make us do,” he said.Half of all full-service restaurant operators in the United States have added QR code menus since the start of the pandemic, according to the National Restaurant Association. In May 2020, PayPal introduced QR code payments and has since added them at CVS, Nike, Foot Locker and around one million small businesses. Square, another digital payments firm, rolled out a QR code ordering system for restaurants and retailers in September.Businesses don’t want to give up the benefits that QR codes have brought to their bottom line, said Sharat Potharaju, the chief executive of the digital marketing company MobStac. Deals and special offers can be bundled with QR code systems and are easy to get in front of people when they look at their phones, he said. Businesses also can gather data on consumer spending patterns through QR codes..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-w739ur{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-w739ur{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-1rh1sk1{margin:0 auto;overflow:hidden;}.css-1rh1sk1 strong{font-weight:700;}.css-1rh1sk1 em{font-style:italic;}.css-1rh1sk1 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#ccd9e3;text-decoration-color:#ccd9e3;}.css-1rh1sk1 a:visited{color:#333;-webkit-text-decoration-color:#ccc;text-decoration-color:#ccc;}.css-1rh1sk1 a:hover{-webkit-text-decoration:none;text-decoration:none;}“With traditional media, like a billboard or TV, you can estimate how many people may have seen it, but you don’t know how people actually interacted with it,” said Sarah Cucchiara, a senior vice president at BrandMuscle, a marketing firm that introduced a QR code menu product last year. “With QR codes, we can get reporting on those scans.”Tom Sharon, right, and Jamie Sunderland, founders of Cheqout. Mr. Sharon said restaurants that used QR code menus could save 30 percent to 50 percent on labor costs.Ulysses Ortega for The New York TimesCheqout and Mr. Yum, two start-ups that sell technology for creating QR code menus at restaurants, also said the codes had brought advantages to businesses.Restaurants that use QR code menus can save 30 percent to 50 percent on labor costs by reducing or eliminating the need for servers to take orders and collect payments, said Tom Sharon, a co-founder of Cheqout.Digital menus also make it easier to persuade people to spend more with offers to add fries or substitute more expensive spirits in a cocktail, with photographs of menu items to make them more appealing, said Kim Teo, a Mr. Yum co-founder. Orders placed through the QR code menu also let Mr. Yum inform restaurants what items are selling, so they can add a menu section with the most popular items or highlight dishes they want to sell.These increased digital abilities are what worry privacy experts. Mr. Yum, for instance, uses cookies in the digital menu to track a customer’s purchase history and gives restaurants access to that information, tied to the customer’s phone number and credit cards. It is piloting software in Australia so restaurants can offer people a “recommended to you” section based on their previous orders, Ms. Teo said.QR codes “are an important first step toward making your experience in physical space outside of your home feel just like being tracked by Google on your screen,” said Lucy Bernholz, the director of Stanford University’s Digital Civil Society Lab.Ms. Teo said that each restaurant’s customer data was available only to that establishment and that Mr. Yum did not use the information to reach out to customers. It also does not sell the data to any third-party brokers, she said.Cheqout collects only customers’ names, phone numbers and protected payment information, which it does not sell to third parties, Mr. Sharon said.At Teeth, customers can order food and drinks at the counter or via QR code menus. Ulysses Ortega for The New York TimesOn a recent blustery evening at Teeth, customers shared mixed reviews of the QR code ordering system from Cheqout, which the bar had installed in August. Some said it was convenient, but added that they would prefer a traditional menu at a fine dining establishment.“If you’re on a date and you’re whipping your phone out, it’s a distraction,” Daniela Sernich, 29, said.Jonathan Brooner-Contreras, 26, said that QR code ordering was convenient but that he feared the technology would put him out of his job as a bartender at a different bar in the neighborhood.“It’s like if a factory replaced all of its workers with robots,” he said. “People depend on those 40 hours.”Regardless of customers’ feelings, Mr. Bleiman said Cheqout’s data showed that about half of Teeth’s orders — and as much as 65 percent during televised sports games — were coming through the QR code system.“They may not like it,” he said in a text message. “But they’re doing it!” More

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    Robinhood's C.E.O., Vlad Tenev, Is in the Hot Seat

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    #masthead-section-label, #masthead-bar-one { display: none }GameStop vs. Wall StreetCharting the Wild Stock SwingsWhat’s GameStop Really Worth?Your TaxesReader’s GuideAdvertisementContinue reading the main storySupported byContinue reading the main storyRobinhood’s C.E.O. Is in the Hot SeatVlad Tenev has incited the fury of the trading app’s fans amid a stock market frenzy. His lack of preparedness on nuts-and-bolts issues was part of a pattern, former employees and analysts said.Vlad Tenev, co-founder of Robinhood, at the company’s Silicon Valley headquarters in 2015.Credit…Winni Wintermeyer/ReduxNathaniel Popper, Kellen Browning and Feb. 2, 2021Updated 3:06 p.m. ETSAN FRANCISCO — Vlad Tenev, the chief executive of the online brokerage Robinhood, has had practice doing damage control.Last March, he told customers that “we owe it to you to do better” after Robinhood’s app suffered lengthy outages, leaving many people unable to trade.In June, he wrote in a blog post that he was “personally devastated” and wanted to improve the “customer experience” after a 20-year-old who had a negative $730,000 balance on the app killed himself.And in December, when federal regulators fined his company $65 million for misleading users about how it made money, he said the accusations “don’t reflect Robinhood today.”Mr. Tenev, 33, is now in the hot seat again after Robinhood abruptly curtailed its customers’ trading last week amid a frenzy in stocks such as GameStop, which were driven sky high by an army of online investors. The limits infuriated Robinhood’s users, who were locked out of the action, and the seven-year-old start-up was blasted by lawmakers and others, accused of acting unfairly toward ordinary investors.For days, Robinhood was slow to fully explain why it had curbed people from trading the stocks. Only later did Mr. Tenev disclose that Robinhood had put in restrictions because it did not have enough of a cash cushion to hedge against the risky trades. To increase that cushion and avoid further problems, Robinhood raised an emergency $1 billion last week, followed by an additional $2.4 billion this week.On Sunday, Mr. Tenev told Elon Musk in an impromptu interview on the online conversation app Clubhouse that he knew that Robinhood’s trading curbs were “a bad outcome for customers.” He said the entire experience had been challenging, “but we had no choice in this case.”It was no surprise that Robinhood got caught unawares over the past week, current and former Robinhood employees and analysts said. While Mr. Tenev has helped revolutionize online trading for a younger generation with an app that makes investing easy and fun, his start-up has repeatedly been ill prepared to deal with issues as commonplace as technology glitches and trading hiccups, they said.Many start-ups go through growing pains. But “there’s a consistent pattern which makes one question whether he knows what is going on inside his company,” Vijay Raghavan, an analyst at Forrester Research who covers Robinhood and other brokers, said of Mr. Tenev. Lawmakers and some of Robinhood’s users have been even harsher on the chief executive. Representative Alexandria Ocasio-Cortez, Democrat of New York, and Senator Ted Cruz, Republican of Texas, have slammed Robinhood for freezing users’ ability to buy GameStop stock. Mr. Tenev has agreed to testify about the issue in Congress on Feb. 18.Even some of Robinhood’s biggest promoters have turned against Mr. Tenev. Dave Portnoy, the founder of Barstool Sports and a high-profile Robinhood supporter, wrote over a picture of Mr. Tenev on Twitter last week: “Fraud, liar, Scumbag.”Robinhood, a privately held company in Menlo Park, Calif., declined to make Mr. Tenev available for an interview. But Jason Warnick, the chief financial officer, said Mr. Tenev had widespread support internally.“When I watched Vlad, there is absolutely no one else I would want to be with,” Mr. Warnick said about the events of the last week. “He mobilized us in an incredibly effective way.”Venture capitalists who have backed Robinhood, which is valued at nearly $12 billion and is likely to go public this year, also said they had confidence in Mr. Tenev. Rahul Mehta, a partner at the venture firm DST Global, said the speed with which Mr. Tenev had raised the emergency $3.4 billion over the past few days “shows you the support around the table and the belief people have, in particular, for Vlad.”Mr. Tenev, who moved to the United States from Bulgaria when he was 5 and grew up in the Washington, D.C., area, founded Robinhood with Baiju Bhatt in 2013. The two met while studying math at Stanford University.After graduating from Stanford in 2008, Mr. Tenev attended the University of California, Los Angeles, to pursue a Ph.D. in math but dropped out to work with Mr. Bhatt. The pair initially had two other business ventures, including a Wall Street trading firm.But those were short-lived. Instead, inspired by the Occupy Wall Street movement in 2011 — which took aim at the power of the big banks — they began talking about how to “democratize finance” for everyone by ending the fees that most brokerages charged to trade stocks. They named Robinhood after the English outlaw of legend who stole from the rich and gave to the poor.In particular, Mr. Tenev and Mr. Bhatt wanted an app that a younger generation could easily use. “People in my age group, the millennials, weren’t getting into the markets and were openly distrustful of the institutions that were providing financial services,” Mr. Tenev said on CNBC in 2015.Mr. Tenev with his Robinhood co-founder, Baiju Bhatt.Credit…Aaron Wojack for The New York TimesMr. Tenev and Mr. Bhatt, who were co-chief executives, made Robinhood simple. Users were able to begin trading stocks with nothing more than an iPhone app and with no fees. The app also made trading feel like a game. New customers were given a free share of stock after scratching off what looked like a digital version of a lottery ticket.The men sought out celebrity investors like the actor Jared Leto and the rapper Snoop Dogg. The co-C.E.O.s often showed up at the office with matching Tesla sport utility vehicles, one black and one white, two former employees said.Inside Robinhood, Mr. Tenev was known as the cerebral coder in charge of operations, said six current and former employees, who spoke on the condition of anonymity. He was known for sitting down at lunch with employees to talk about books or his latest theories from science fiction. Mr. Bhatt was more fun-loving and handled design, they said.Both were active on social media, with Mr. Tenev tweeting emoji-filled, jokey replies to Mr. Musk. Mr. Bhatt broadcast pictures of themselves from floor seats at Golden State Warriors basketball games.As Robinhood grew quickly, though, so did the blunders. In 2018, the company announced that it would begin offering bank accounts. But it had not secured approval from financial regulators, which is standard practice, earning the start-up a swift rebuke.That same week, Robinhood released software that erroneously reversed the direction of customer trades, which meant that a bet on a stock going up was turned into a bet that it would go down. Mr. Tenev oversaw technology.Technological issues continued piling up. In 2019, customers discovered that Robinhood’s software accidentally allowed them to borrow almost infinite amounts of money to multiply their stock bets. Last March, as the pandemic hit the United States and the stock market gyrated wildly, Robinhood’s app seized up for almost two days, leading some customers to lose more than $1 million.That was when Mr. Tenev said in a blog post that “we owe it to you to do better.” By then, Robinhood had more than 13 million customers.Mr. Warnick and other employees said Mr. Tenev had a knack for staying calm during difficult situations. “He doesn’t get emotional,” Mr. Warnick said.But five current and former Robinhood employees said Mr. Tenev moved quickly to new projects without fixing the previous problems. After the March outages, they said, Mr. Tenev told the company that it would significantly ramp up its infrastructure and customer support. Yet almost a year later, the start-up does not offer a customer service phone number, unlike its competitors.Robinhood did not respond to a request for comment on the customer service issues.Last year, Mr. Bhatt stepped down as co-chief executive after returning from paternity leave, leaving Mr. Tenev in charge. Mr. Bhatt remains an executive and is on the company’s board of directors.Robinhood’s technical outages have continued. Last month, the site went down 19 times, more than twice as often as Charles Schwab or Fidelity, according to data from the web tracking company DownDetector. Mr. Tenev has recently kept a low profile. Last year, he said in a podcast interview that he keeps his phone out of his bedroom at night to avoid being tempted to check social media.But over the last week, as the mania over GameStop stock grew and Robinhood was forced to react, Mr. Tenev had little choice but to step out more. He has appeared on television at least eight times from the sparsely decorated living room of the home where he lives with his wife and children.In most of the appearances, Mr. Tenev used technical language and shifted quickly to talk about Robinhood’s moving forward to another stage of expansion.“This is just a standard part of practices in the brokerage industry,” he told Yahoo Finance last Friday, referring to the decision to temporarily halt some purchases. “We’re very confident about our future.”Kitty Bennett contributed research.AdvertisementContinue reading the main story More