WEBVTT - Fake It Til You Make It 0:00:04.240 --> 0:00:07.240 Welcome to Tech Stuff, a production of I Heart Radios 0:00:07.320 --> 0:00:14.080 How Stuff Works. Hey there, and welcome to tech Stuff. 0:00:14.120 --> 0:00:17.400 I'm your host, Jonathan Strickland. I'm an executive producer with 0:00:17.520 --> 0:00:20.919 I Heart Radio and I love all things tech, and 0:00:21.000 --> 0:00:23.480 today I thought I would explore something that's kind of 0:00:23.520 --> 0:00:26.759 related to technology and that you see it in tons 0:00:26.840 --> 0:00:29.920 of like tech startups and Silicon Valley. But if we're 0:00:29.920 --> 0:00:34.080 being honest, this topic actually goes well beyond tech. It's 0:00:34.120 --> 0:00:36.720 just that tech is one of those more visible places 0:00:36.720 --> 0:00:40.479 where it shows up. And it's the concept of fake 0:00:40.520 --> 0:00:43.680 it until you make it, which is a philosophy I 0:00:43.840 --> 0:00:48.560 personally find particularly distressing because it frequently does not turn 0:00:48.600 --> 0:00:53.519 out well for everybody involved. And I realized that this 0:00:53.560 --> 0:00:56.720 episode poses a very real danger of diving into grouchy 0:00:56.880 --> 0:01:00.480 old man complains about those young people terror worry. But 0:01:01.120 --> 0:01:03.760 believe me, that's not what I intend. And I don't 0:01:03.800 --> 0:01:07.080 even necessarily think it's the fault of young people, because, 0:01:07.120 --> 0:01:09.800 for one thing, folks like me and older we can 0:01:09.840 --> 0:01:12.119 fall prey to this type of thinking, and we do 0:01:12.280 --> 0:01:16.679 all the time. And for another, the very concept has 0:01:16.720 --> 0:01:19.800 been taking root for decades, so back when I was 0:01:19.920 --> 0:01:23.000 a young person. We were really starting to see this 0:01:23.120 --> 0:01:25.960 come to fruition already, So you can't blame it on 0:01:26.000 --> 0:01:29.039 the millennials, is what I'm really getting at. So what 0:01:29.080 --> 0:01:33.480 the heck am I talking about? Well, basically, you probably 0:01:33.520 --> 0:01:36.280 are familiar with the concept. The fake it until you 0:01:36.319 --> 0:01:39.800 make it strategy goes something like this. You come up 0:01:39.920 --> 0:01:43.039 with an idea and it's a really compelling idea. Maybe 0:01:43.120 --> 0:01:45.759 it's for a product or a service, maybe it's for 0:01:45.800 --> 0:01:48.000 an event you want to throw, but whatever it is, 0:01:48.480 --> 0:01:51.320 you think of it as really awesome idea and an 0:01:51.360 --> 0:01:54.400 idea for him, it is pretty darn cool. People agree 0:01:54.440 --> 0:01:57.080 with you, that's a great idea. But then to go 0:01:57.200 --> 0:02:00.480 beyond an idea, you're gonna need to take some big 0:02:00.520 --> 0:02:04.800 steps to actually create the product or the service or 0:02:04.840 --> 0:02:07.360 to throw the event or whatever it is. It's going 0:02:07.400 --> 0:02:09.639 to take a lot of effort, and it might require 0:02:09.720 --> 0:02:13.679 innovation and development in the tech sector, So if you're 0:02:13.840 --> 0:02:17.040 developing a product, a brand new product, or an underlying 0:02:17.160 --> 0:02:21.160 infrastructure to support a service or event, you're gonna have 0:02:21.200 --> 0:02:24.000 to innovate in that space, and it's going to take time, 0:02:24.120 --> 0:02:26.200 and it's going to take resources, and it might end 0:02:26.280 --> 0:02:29.440 up being really expensive, and of course we all know 0:02:29.600 --> 0:02:33.240 there's never a guarantee that an idea will actually work 0:02:33.360 --> 0:02:35.760 as you transition from the world of ideas to the 0:02:35.760 --> 0:02:41.440 world of reality, so that means that ideas also represent risk. 0:02:42.240 --> 0:02:45.360 There's a real risk that things are not going to 0:02:45.400 --> 0:02:49.160 work out. So maybe your idea is great on paper, 0:02:49.440 --> 0:02:53.079 but it turns out it's not practical in reality. Or 0:02:53.120 --> 0:02:55.720 maybe it turns out it's just a bit too fanciful 0:02:55.919 --> 0:02:57.840 and there's no real way to pull it off in 0:02:57.840 --> 0:03:00.880 the real world. Maybe your idea, you know, it sounds 0:03:00.960 --> 0:03:06.040 more like wishful thinking than a realistic idea, a realistic concept, 0:03:06.440 --> 0:03:09.280 or maybe it's possible, but it turns out it's going 0:03:09.320 --> 0:03:12.079 to take way longer to get to a point where 0:03:12.080 --> 0:03:15.799 you can actually make it happen, and it takes way 0:03:15.840 --> 0:03:19.239 longer than you had initially anticipated or projected. Now you 0:03:19.280 --> 0:03:22.000 won't know any of this for sure until you take 0:03:22.000 --> 0:03:25.840 on the challenge of making your idea a reality. But 0:03:26.280 --> 0:03:29.880 it's really impossible to estimate how big of an investment 0:03:29.919 --> 0:03:33.079 of your time, talent, and money it's going to require, 0:03:33.480 --> 0:03:35.520 or how much you might waste if it all goes 0:03:35.560 --> 0:03:38.960 belly up. It might be that you finally achieve your idea, 0:03:39.280 --> 0:03:42.480 but by the time you get there, the results you 0:03:42.520 --> 0:03:45.360 have don't justify the amount of effort it took to 0:03:45.440 --> 0:03:47.920 get to that point. We've seen tons of this sort 0:03:47.960 --> 0:03:53.560 of thing on crowdfunding campaigns where the concept was something 0:03:53.600 --> 0:03:57.440 that people really identified with, It resonated with the audience, 0:03:57.800 --> 0:04:01.680 and there was a huge support system thrown in, lots 0:04:01.680 --> 0:04:04.520 of money pouring in to make this idea reality. And 0:04:04.560 --> 0:04:08.640 then in the cases where something actually was made, sometimes 0:04:08.680 --> 0:04:12.800 it falls far short of where people expected, and in 0:04:12.840 --> 0:04:15.640 that case you could say, like, well, technically the idea 0:04:15.640 --> 0:04:19.240 became a reality, but it wasn't worth all the effort 0:04:19.240 --> 0:04:21.200 and money that went into making it happen in the 0:04:21.279 --> 0:04:24.960 first place. In worst case scenarios, you don't get anything 0:04:25.000 --> 0:04:27.680 at all. It all fails before you ever get anything. 0:04:28.520 --> 0:04:34.039 So chances are, unless you have direct access to considerable 0:04:34.080 --> 0:04:36.760 wealth and you don't mind the possibility of losing a 0:04:36.800 --> 0:04:39.800 good deal of it, you'll want to find other people 0:04:40.040 --> 0:04:42.920 to help make your idea become a reality. You're gonna 0:04:42.960 --> 0:04:46.400 need investors, and investors can be great. They can pour 0:04:46.480 --> 0:04:49.159 money into your project and fund your work to bring 0:04:49.279 --> 0:04:51.840 your idea to life. And when your idea is a 0:04:51.880 --> 0:04:55.080 smashing success, you can pay back your investors, which is 0:04:55.120 --> 0:04:58.000 totally cool because you'll continue to make money as your 0:04:58.040 --> 0:05:01.960 idea continues to kick but or maybe the idea doesn't 0:05:02.000 --> 0:05:06.159 pan out, and that's a bummer. But with investment comes risk. 0:05:06.320 --> 0:05:09.680 People understand that generally speaking, and so you've kind of 0:05:09.760 --> 0:05:13.400 mitigated the risk to yourself by spreading it among all 0:05:13.400 --> 0:05:17.560 your investors. And maybe you'll have to liquidate everything related 0:05:17.600 --> 0:05:20.400 to your idea in the worst case scenario, right, maybe 0:05:20.400 --> 0:05:24.040 you've created a little company to bring your idea to 0:05:24.279 --> 0:05:26.480 reality and it doesn't work out and you have to 0:05:26.520 --> 0:05:29.680 liquidate all your assets and give all that to your investors. 0:05:29.880 --> 0:05:33.080 But even then, really you're probably no worse off than 0:05:33.120 --> 0:05:36.400 you were before you got started, assuming you haven't done 0:05:36.440 --> 0:05:41.680 anything criminal like defraud investors and then got caught. So 0:05:41.920 --> 0:05:44.880 assuming everything was on the up and up, you're probably 0:05:45.279 --> 0:05:47.720 you know, back to square one, but you're not set 0:05:47.760 --> 0:05:52.120 back further than that. Now. Investors do expect results, but 0:05:52.440 --> 0:05:54.800 at times they can be pretty darn patient about it, 0:05:55.120 --> 0:05:59.560 and many might essentially be speculators. Right they're looking for 0:05:59.600 --> 0:06:02.440 a big payout and that could come in the form 0:06:02.520 --> 0:06:06.720 of a smashing success an idea that is truly remarkable 0:06:06.760 --> 0:06:09.800 and innovative and compelling, or it might come to fruition 0:06:10.040 --> 0:06:13.000 if some bigger fish out there sees you and your 0:06:13.080 --> 0:06:15.960 project and then offers to buy it up from you. 0:06:16.360 --> 0:06:19.479 A lot of startups actually operate in this way. They 0:06:19.520 --> 0:06:22.640 aren't trying to make a successful business so much as 0:06:22.720 --> 0:06:26.000 generate a ton of interest. Even if they don't have 0:06:26.040 --> 0:06:29.240 a means of generating revenue, they'll still try to generate interest, 0:06:29.520 --> 0:06:32.720 and the goal is to have some bigger entity like 0:06:32.800 --> 0:06:36.040 an Apple or an Amazon, or a Google or a Facebook, 0:06:36.600 --> 0:06:39.440 to have them come around and gobble up this smaller 0:06:39.560 --> 0:06:42.600 company for a princely sum. For a lot of folks, 0:06:42.920 --> 0:06:46.119 that is the dream. It's it's not necessarily making something 0:06:46.160 --> 0:06:48.840 that works. It's making an idea that some other company 0:06:48.920 --> 0:06:52.080 finds really really interesting and they'll pay you for it. 0:06:52.720 --> 0:06:54.880 And that means that you don't even necessarily have to 0:06:54.920 --> 0:06:57.600 make a thing that works. You just have to convince 0:06:58.040 --> 0:07:01.320 people that you know it's something they want to work. 0:07:02.480 --> 0:07:04.680 It's tricky, and this gets down to what I want 0:07:04.680 --> 0:07:07.880 to talk about today. A lot of people operate in 0:07:07.920 --> 0:07:11.480 a sort of holding pattern. They have come up with 0:07:11.640 --> 0:07:15.280 their idea, and it's possible that they sincerely believe they 0:07:15.320 --> 0:07:17.960 can bring it into reality if they have the right 0:07:18.440 --> 0:07:22.880 resources at their disposal. Maybe they realize right away that 0:07:22.920 --> 0:07:25.240 their idea is untenable. That can happen to You can 0:07:25.320 --> 0:07:27.680 have people who say, you know what, I don't think 0:07:27.760 --> 0:07:29.680 I can do this, but if I can convince other 0:07:29.800 --> 0:07:33.600 people that I can do it, that's good enough. Or 0:07:33.800 --> 0:07:37.360 you sometimes get people who from the very beginning they 0:07:37.400 --> 0:07:41.520 intended to fleece investors out of money. But whether their 0:07:41.520 --> 0:07:45.560 intentions are pure or otherwise, they tend to engage in 0:07:45.600 --> 0:07:48.360 the fake it until you make it strategy. And if 0:07:48.360 --> 0:07:52.480 it sounds like you are passionate and smart, people will 0:07:52.520 --> 0:07:55.720 give you way more slack and credit, then you'll have 0:07:55.760 --> 0:07:59.040 more opportunities to keep all the plates spinning at least 0:07:59.080 --> 0:08:02.160 a little while longer. So in the best case scenario, 0:08:02.480 --> 0:08:06.000 with sincere people, they can keep this process alive long 0:08:06.080 --> 0:08:09.280 enough to actually achieve their goal of bringing whatever their 0:08:09.320 --> 0:08:12.920 idea was to life. In a worst case scenario, people 0:08:12.960 --> 0:08:16.200 get caught in a disastrous situation in which they hurriedly 0:08:16.240 --> 0:08:18.480 seek out a way to get out of one catastrophe, 0:08:18.800 --> 0:08:23.280 typically by jumping into a different catastrophe um sort of 0:08:23.280 --> 0:08:26.040 the robbing Peter to pay Paul principle, This idea of 0:08:26.360 --> 0:08:30.760 you're constantly trying to hustle to get money to cover 0:08:30.920 --> 0:08:34.120 your last round of expenses, and that's what you're doing 0:08:34.240 --> 0:08:36.720 over and over again, rinse and repeat. You're never actually 0:08:37.080 --> 0:08:42.559 establishing a reliable way to generate revenue. You're just constantly 0:08:42.559 --> 0:08:46.120 trying to stay ahead of the creditors. Now, a big 0:08:46.120 --> 0:08:50.280 problem is that we've sort of mythologized the concept of 0:08:50.320 --> 0:08:54.480 a genius entrepreneur. In fact, this is something, especially in 0:08:54.520 --> 0:08:58.640 the United States, that has become iconic. Right Like, the 0:08:58.720 --> 0:09:04.200 United States has a history full of these mythological tales 0:09:04.480 --> 0:09:08.920 of various entrepreneurs and inventors, people like Thomas Edison or 0:09:09.000 --> 0:09:15.000 Tesla or Westinghouse, you know, people who who genuinely were 0:09:15.080 --> 0:09:19.280 very intelligent and very uh innovative and in the case 0:09:19.360 --> 0:09:23.800 of Westinghouse and Edison, particularly good at business. But we 0:09:23.880 --> 0:09:28.439 have since kind of elevated them to iconic status beyond 0:09:29.240 --> 0:09:33.199 what we would typically think of for a regular human being. Right. Well, 0:09:33.240 --> 0:09:36.319 that's a problem because we have created this sort of 0:09:37.120 --> 0:09:41.760 mythological ideal to aspire to that maybe doesn't really exist. 0:09:42.760 --> 0:09:45.239 But the whole concept is that we have an innovative, 0:09:45.280 --> 0:09:49.240 disruptive mind who comes into some existing industry and shakes 0:09:49.280 --> 0:09:52.000 everything up with a great idea that is in some 0:09:52.080 --> 0:09:55.959 way superior over the existing models. A lot of these 0:09:55.960 --> 0:09:59.240 thinkers tend to target specific industries with which we have 0:09:59.440 --> 0:10:01.560 a lot of for stration. So I'm going to give 0:10:01.600 --> 0:10:04.520 you an example with Uber. All right, So let's let's 0:10:04.520 --> 0:10:07.400 flash back a couple of decades. Let's say that you're 0:10:07.520 --> 0:10:10.040 visiting a place like New York City and you need 0:10:10.080 --> 0:10:12.959 to get around, and you're not familiar with the city. 0:10:13.120 --> 0:10:15.600 You're not familiar with the subway system, and that looks 0:10:15.600 --> 0:10:18.280 pretty intimidating to you. You don't know, like going down 0:10:18.280 --> 0:10:19.920 one says stairs, if you're going to be heading in 0:10:19.960 --> 0:10:22.800 the right direction or not. You definitely don't want to 0:10:22.880 --> 0:10:25.280 drive in the city because that looks like a heart 0:10:25.280 --> 0:10:29.240 attack on four wheels. So you take taxis to get around. 0:10:29.640 --> 0:10:33.760 But that experience might be less than ideal in some situations. 0:10:34.120 --> 0:10:37.240 So maybe you're dealing with rude drivers, or maybe you're 0:10:37.320 --> 0:10:40.440 left wondering if the driver was taking a long roundabout 0:10:40.480 --> 0:10:43.120 way to your destination in an effort to drive up 0:10:43.160 --> 0:10:46.240 the fair a few bucks. Maybe the driver spends a 0:10:46.240 --> 0:10:48.400 lot of time trying to discourage you from using a 0:10:48.400 --> 0:10:51.520 credit card and instead that you should pay with cash. 0:10:51.920 --> 0:10:54.680 That has happened to me on numerous occasions in taxi 0:10:54.720 --> 0:10:57.640 cabs in New York City. Maybe you just didn't feel 0:10:57.679 --> 0:11:01.080 safe with the person for whatever reason. But on the 0:11:01.120 --> 0:11:03.440 other hand, the taxis are pretty much the only game 0:11:03.480 --> 0:11:06.240 in town at that point. You definitely wouldn't want to 0:11:06.320 --> 0:11:09.440 jump into the car of some random driver who's offering rides. 0:11:09.880 --> 0:11:11.720 A cab at least provides you with a feeling that 0:11:12.120 --> 0:11:15.160 someone out there is managing all this stuff. There's some 0:11:15.400 --> 0:11:19.800 overriding authority that has authorized this person to drive a cab, 0:11:19.840 --> 0:11:23.600 and therefore things probably won't go too wrong. You know, 0:11:23.720 --> 0:11:27.600 there's some comfort that there's a body that is regulating 0:11:27.600 --> 0:11:31.040 this kind of stuff. Right. It's not necessarily a great experience, 0:11:31.080 --> 0:11:34.560 but that's what you have to work with. But then 0:11:34.920 --> 0:11:37.280 someone comes up with the idea of using a mobile 0:11:37.320 --> 0:11:41.720 app on phones to connect riders with drivers, and the 0:11:41.720 --> 0:11:44.440 app can search for all available drivers who are registered 0:11:44.480 --> 0:11:47.559 with the service within a certain area. It can calculate 0:11:47.559 --> 0:11:49.439 which of those drivers would be most likely to get 0:11:49.480 --> 0:11:52.520 to the passenger. First, it could contact a small group 0:11:52.559 --> 0:11:55.199 of them with the prospect of a ride. The drivers 0:11:55.240 --> 0:11:59.080 could accept that job request and then header on over 0:11:59.120 --> 0:12:01.760 your way to pick you up. The premise is that 0:12:01.800 --> 0:12:04.839 this cuts down on wait times, particularly for people who 0:12:04.840 --> 0:12:07.360 otherwise would just be standing on the side of the 0:12:07.400 --> 0:12:09.679 street waiting for the next cab to pass by and 0:12:09.679 --> 0:12:12.400 try to hail that cab with no guarantee that the 0:12:12.400 --> 0:12:15.080 cab is actually gonna stop. Like you're you're limited to 0:12:15.120 --> 0:12:19.720 which cabs you can see in the traditional cab hailing situation. 0:12:20.160 --> 0:12:23.520 That has since changed, by the way, but we're comparing 0:12:23.920 --> 0:12:28.080 the app version to the traditional taxi cabs situation or experience. 0:12:28.559 --> 0:12:32.560 So this app also goes a step further. It facilitates 0:12:32.559 --> 0:12:35.800 payment from the rider to the service, and then the 0:12:35.840 --> 0:12:38.800 service pays a percentage of the fair out to the driver. 0:12:39.360 --> 0:12:43.000 The service access is sort of dispatch and a cashier 0:12:43.080 --> 0:12:46.199 all at once. Money need never needs to change hands 0:12:46.200 --> 0:12:49.520 directly between the passenger and the driver. What's more, the 0:12:49.559 --> 0:12:52.280 app can display a map for both the driver and 0:12:52.400 --> 0:12:55.120 the passenger, so the person riding in the car can 0:12:55.360 --> 0:12:58.240 be certain that the driver isn't going on some sort 0:12:58.240 --> 0:13:01.400 of wild goose chase that can actually allow along. Moreover, 0:13:01.840 --> 0:13:04.600 the service allows people to become drivers without having to 0:13:04.640 --> 0:13:08.000 overcome the hurdles that taxi cab drivers must manage in 0:13:08.080 --> 0:13:11.560 order to operate a cab legally. So in New York City, 0:13:11.600 --> 0:13:15.120 there are a limited number of taxi licenses, so there's 0:13:15.160 --> 0:13:18.240 always a cap on how many people can actually operate 0:13:18.280 --> 0:13:22.680 a taxi cab legally in the city. These licenses are 0:13:22.760 --> 0:13:26.680 called medallions, and medallions can be bought and sold, and 0:13:27.040 --> 0:13:28.839 new ones can be issued by the city and then 0:13:28.880 --> 0:13:33.680 auctioned off by regional authorities to potential taxi cab operators. 0:13:33.720 --> 0:13:36.720 But the limited number means there's a hard cap on 0:13:36.800 --> 0:13:39.160 the number of cars that are licensed to operate as 0:13:39.200 --> 0:13:41.560 taxi cabs. This is a model that a lot of 0:13:41.600 --> 0:13:45.000 other cities have followed. This makes it easier to regulate 0:13:45.040 --> 0:13:49.119 the taxi industry and to try and affect other connected 0:13:49.200 --> 0:13:53.320 issues like traffic congestion or pollution and more. Means that 0:13:53.640 --> 0:13:56.239 if you limit the number of cars that can be taxis, 0:13:56.679 --> 0:13:59.840 then you don't have to worry as much about taxis 0:14:00.000 --> 0:14:02.840 fluttering up city streets and generating a lot of pollution. 0:14:02.920 --> 0:14:06.080 But it also means people who might be fully qualified 0:14:06.200 --> 0:14:09.320 and who might be genuinely awesome. Taxi cab drivers, if 0:14:09.320 --> 0:14:12.360 they got the chance, can't break into the system because 0:14:12.360 --> 0:14:15.439 they can't get a medallion. Now, there are other requirements 0:14:15.480 --> 0:14:17.440 that some cities have that make it even harder to 0:14:17.440 --> 0:14:20.400 become a driver. So, for instance, to drive a black 0:14:20.480 --> 0:14:23.480 cab in London, a driver must first show that they 0:14:23.560 --> 0:14:27.880 possess the knowledge. That's an actual term. The knowledge means 0:14:27.920 --> 0:14:30.200 that they know the layout of all the city streets 0:14:30.200 --> 0:14:33.760 in London and essentially that they can get anywhere from 0:14:33.800 --> 0:14:38.640 anywhere without the use of a GPS. So that's impressive 0:14:38.680 --> 0:14:40.400 and it usually takes a couple of years and it's 0:14:40.440 --> 0:14:43.760 another big barrier to entry. But see here the app 0:14:43.880 --> 0:14:47.320 version side steps all that right because you have a 0:14:47.360 --> 0:14:51.160 GPS with the app, And in addition, passengers can assign 0:14:51.200 --> 0:14:54.680 a rating to their driver, which can let future passengers 0:14:54.680 --> 0:14:57.120 know if that driver is someone they want to ride with. 0:14:57.440 --> 0:14:59.640 You can also tell the service if a driver is 0:14:59.680 --> 0:15:02.000 being a problem and that person can be removed from 0:15:02.040 --> 0:15:05.800 the loop entirely. Drivers can also rate passengers, which has 0:15:05.840 --> 0:15:09.120 a similar effect, but behind the scenes. So in other words, 0:15:09.760 --> 0:15:13.040 the promise of the service is to eliminate many of 0:15:13.080 --> 0:15:18.119 the frustrations and concerns associated with the entrenched taxi industry. 0:15:18.200 --> 0:15:22.720 It disrupts it. The company positions the app to be disruptive. 0:15:22.760 --> 0:15:26.440 It's taking aim and an antiquated system by the argument 0:15:26.440 --> 0:15:29.680 of the app that a lot of people find inconvenient 0:15:29.840 --> 0:15:34.600 or irritating or maybe even predatory. It democratizes the service 0:15:34.720 --> 0:15:39.320 across a wide range of drivers. So what's not to love. Well, 0:15:40.200 --> 0:15:43.200 the taxi drivers don't love it. They've gone through the 0:15:43.240 --> 0:15:46.840 processes and overcome the hurdles to operate a cab legally, 0:15:47.400 --> 0:15:50.880 and to get undercut by a quote unquote disruptive service 0:15:51.000 --> 0:15:54.280 is a pretty big blow. On the positive side for customers, 0:15:54.600 --> 0:15:56.360 it is meant that a lot of taxi companies have 0:15:56.400 --> 0:15:59.920 adopted many of the features found in apps like Uber, 0:16:00.360 --> 0:16:03.240 such as using an app to hail a ride and 0:16:03.480 --> 0:16:05.720 seeing where a driver is in relation to where you 0:16:05.760 --> 0:16:08.160 are on the app, and tracking your trip in real 0:16:08.240 --> 0:16:11.640 time in the vehicle, things that make people feel better 0:16:11.680 --> 0:16:14.240 about taking a taxi. You could argue a lot of 0:16:14.240 --> 0:16:17.960 those things only exist because the competition from services like 0:16:18.080 --> 0:16:22.120 Uber forced the hands of taxi companies to adopt them, 0:16:22.160 --> 0:16:24.560 and we should also remember that some of the regulations 0:16:24.560 --> 0:16:27.920 in place, they aren't just red tape. That's not just 0:16:28.000 --> 0:16:32.400 bureaucracy for bureaucracy's sake. Some are genuinely intended to ensure 0:16:32.440 --> 0:16:35.320 passenger safety and to act as a control mechanism for 0:16:35.360 --> 0:16:38.640 traffic congestion and pollution and stuff. The entry of an 0:16:38.720 --> 0:16:44.080 unregulated fleet of drivers behaving like taxi cab operators throws 0:16:44.160 --> 0:16:47.320 all of that into the garbage. But more germaine to 0:16:47.600 --> 0:16:52.120 this discussion is that the revenue model just isn't working. 0:16:52.680 --> 0:16:57.440 Uber loses money, a lot of money. In the second 0:16:57.520 --> 0:17:01.560 quarter of two thousand nineteen, Uber reported revenues of three 0:17:01.680 --> 0:17:06.760 point one seven billion dollars. That's billion with a B. Now, 0:17:06.800 --> 0:17:10.879 that's most assuredly a princely sum. Heck might bump that 0:17:11.000 --> 0:17:14.560 up to an imperial sum. However, it's not as much 0:17:14.600 --> 0:17:18.280 money as the company lost in that same quarter. So 0:17:18.400 --> 0:17:23.040 while they made three billion bucks, the company posted losses 0:17:23.080 --> 0:17:28.520 to the tune of five point two four billion dollars. Yawsa. 0:17:28.720 --> 0:17:32.480 So they are losing money way faster than they are 0:17:32.560 --> 0:17:35.760 making money now. To be fair, according to Uber, part 0:17:35.800 --> 0:17:38.560 of what made the losses so big that quarter was 0:17:38.640 --> 0:17:41.760 that the company was buying backstocks from employees as part 0:17:41.800 --> 0:17:44.479 of a compensation plan after Uber went public with an 0:17:44.480 --> 0:17:47.760 I p O. But analysts said, even if you took 0:17:47.760 --> 0:17:50.840 that out of consideration, the company still lost one point 0:17:50.920 --> 0:17:53.800 three billion dollars that quarter, and that it was a 0:17:53.880 --> 0:17:58.080 thirty percent increase in losses from the quarter before. That's 0:17:58.119 --> 0:18:02.120 not a great story. It's a downding amount of money. Now, 0:18:03.080 --> 0:18:06.360 speaking of money, we need to earn a little ourselves. 0:18:06.600 --> 0:18:09.159 So we're going to take a quick break. When I 0:18:09.200 --> 0:18:12.119 come back, I'll talk more about uber strategy and the 0:18:12.240 --> 0:18:23.960 challenges the company faces. Right, I'm back. So, how the 0:18:24.000 --> 0:18:27.440 heck can Uber stay in business if it costs more 0:18:27.480 --> 0:18:31.080 to operate then the company can generate in revenue. Well, 0:18:31.560 --> 0:18:33.639 I'm glad you asked, because this is where we get 0:18:33.680 --> 0:18:36.240 into some really messed up stuff about fake it until 0:18:36.280 --> 0:18:39.160 you make it. So Uber has managed to keep going 0:18:39.640 --> 0:18:44.120 mainly through getting investments into the company. More money gets 0:18:44.160 --> 0:18:47.199 poured into Uber by people who are hoping to receive 0:18:47.240 --> 0:18:49.920 a big payout in the future, or there are people 0:18:49.920 --> 0:18:53.040 who hope to guide the company by essentially purchasing enough 0:18:53.119 --> 0:18:56.000 voting shares to make a big impact. A question that 0:18:56.080 --> 0:19:00.240 naturally arises with this revelation is how long can at 0:19:00.320 --> 0:19:03.640 keep going on? How long will it be before investors 0:19:03.720 --> 0:19:06.280 worry that the money they're putting into the company is 0:19:06.400 --> 0:19:08.760 never going to come back to them. Because if that 0:19:08.880 --> 0:19:12.040 day should come and Uber still can't operate as a 0:19:12.040 --> 0:19:16.000 profitable business, the company is doomed because it will eventually 0:19:16.040 --> 0:19:18.240 burn through all the money it has and it will 0:19:18.280 --> 0:19:21.000 have to fold. And by the way, while I'm talking 0:19:21.000 --> 0:19:24.800 specifically about Uber, no right hailing service out there has 0:19:24.800 --> 0:19:27.400 proven to be profitable yet it's just Uber has been 0:19:27.640 --> 0:19:32.880 spectacularly unprofitable. So one path Uber might try and take 0:19:33.040 --> 0:19:36.040 is to dominate the market right swoop into a region, 0:19:36.520 --> 0:19:42.080 undercut competitors, gain customers, build customer loyalty, and then when 0:19:42.080 --> 0:19:46.560 competition has been starved out because Uber is undercutting everybody else, 0:19:47.080 --> 0:19:50.040 then you can hike up prices so that the company 0:19:50.119 --> 0:19:52.879 is making money on a per ride basis instead of 0:19:53.000 --> 0:19:57.120 losing money. That might be what has guided some pretty 0:19:57.200 --> 0:20:00.760 darn cutthroat maneuvers on Uber's part in the past, but 0:20:01.240 --> 0:20:04.040 really it's a race against the threat of bankruptcy, whether 0:20:04.119 --> 0:20:08.120 or not you can do enough to defeat your competition 0:20:08.440 --> 0:20:10.960 and become the only game in town before you run 0:20:10.960 --> 0:20:13.600 out of money. Another path is for Uber to get 0:20:13.680 --> 0:20:16.719 involved in a lot more segments of the transportation sector, 0:20:17.000 --> 0:20:19.720 which is stuff we've been seeing recently, and stuff with 0:20:19.760 --> 0:20:22.080 like a food delivery. But there are a ton of 0:20:22.119 --> 0:20:25.240 competing companies in those spaces too, which makes it really 0:20:25.320 --> 0:20:28.040 hard for any one company to dominate the market, let 0:20:28.119 --> 0:20:32.280 alone and industry. So while we're left with is a 0:20:32.280 --> 0:20:36.440 company that's trying to stay ahead of existential threats while 0:20:36.600 --> 0:20:40.439 establishing a profitable business model. And the technology side works. 0:20:41.000 --> 0:20:44.000 The apps function as they are meant to, They match 0:20:44.080 --> 0:20:47.800 up drivers and writers, they facilitate payments, but the business 0:20:47.840 --> 0:20:51.520 model underneath it is flawed. I don't think anyone is 0:20:51.600 --> 0:20:54.320 questioning how services like Uber can be useful to the 0:20:54.400 --> 0:20:58.840 end customer, but the other issues stuff like underpaid drivers 0:20:58.880 --> 0:21:01.560 who struggled to be wreck ignized as employees at all, 0:21:02.240 --> 0:21:06.680 traffic pollution, safety concerns, or there was a recent story 0:21:06.720 --> 0:21:10.240 about Uber in London about how customers had been matched 0:21:10.320 --> 0:21:13.120 up with a driver only to have a totally different 0:21:13.200 --> 0:21:17.960 driver be the one to pick them up fourteen thousand times. 0:21:18.480 --> 0:21:20.399 That ain't great if you're hoping to be sure that 0:21:20.440 --> 0:21:23.600 the person who's picking you up has a good rating. Anyway, 0:21:23.840 --> 0:21:27.040 these things raise a lot of red flags. Meanwhile, Uber 0:21:27.080 --> 0:21:30.399 and other ride hailing companies keep making aggressive moves in 0:21:30.440 --> 0:21:33.359 an effort to build a sturdy foundation, and no one's 0:21:33.720 --> 0:21:38.200 totally sure if they can actually do it, so they're 0:21:38.200 --> 0:21:42.000 faking it until they make it or until it breaks them. 0:21:42.040 --> 0:21:44.840 So how about we transition over to a quick rundown 0:21:45.000 --> 0:21:49.760 of a different event, a true event in that it 0:21:49.880 --> 0:21:53.960 was eventful. I'm talking about the Fire Festival, which made 0:21:53.960 --> 0:21:57.639 headlines in two thousand seventeen. So again, depending upon the 0:21:57.680 --> 0:22:01.160 account you believe, the Fire Festival was they're a sincere 0:22:01.200 --> 0:22:04.919 attempt to throw a really luxurious music festival on an 0:22:05.000 --> 0:22:08.359 island in the Bahamas, or it was a total money 0:22:08.400 --> 0:22:12.000 making scam from the beginning. Now, the pitch was that 0:22:12.119 --> 0:22:16.679 attendees would get a truly first rate experience with astounding 0:22:16.720 --> 0:22:20.120 accommodations like the stuff you would see in travel magazines, 0:22:20.600 --> 0:22:23.800 and the festival would feature top notch talent and enough 0:22:24.119 --> 0:22:28.000 Instagram were the experiences to propel even the most modest 0:22:28.200 --> 0:22:34.000 social media socialite into total influencer status, or again, it 0:22:34.040 --> 0:22:36.160 was just a scam from the very beginning. Now, personally, 0:22:36.200 --> 0:22:38.240 I'm more inclined to think that it was something that 0:22:38.280 --> 0:22:40.760 a few folks were convinced they would be able to 0:22:40.800 --> 0:22:44.680 do because they had no appreciation of their own limitations 0:22:45.000 --> 0:22:47.920 nor of the magnitude of the task they had set 0:22:47.960 --> 0:22:51.960 out for themselves. So they overestimated their own abilities and 0:22:51.960 --> 0:22:55.280 they underestimated how much work it would take to pull 0:22:55.359 --> 0:22:57.679 something like this off. Now, there are a couple of 0:22:57.720 --> 0:23:01.400 documentaries about the whole fiasco, and they're well worth watching. 0:23:01.680 --> 0:23:03.720 And I'm not going to go through all of it here, 0:23:03.800 --> 0:23:06.080 because they did a great job of it. You should 0:23:06.119 --> 0:23:09.400 go see those documentaries. But basically, a guy named Billy 0:23:09.480 --> 0:23:12.040 McFarland and some of his associates came up with this 0:23:12.160 --> 0:23:16.080 concept and they identified things that young, affluent people would 0:23:16.080 --> 0:23:19.720