Speaker 1: There are no finish lines in the world of business,
Speaker 1: but this is about as close as it gets. A
Speaker 1: decade after a startup called uber Cab started out as
Speaker 1: a black car service in San Francisco, Uber Technologies, Inc.
Speaker 1: Is going public in one of the largest I p
Speaker 1: O s of all time. Perhaps more than any other company,
Speaker 1: Uber has come to embody the exuberance and the hubris
Speaker 1: of today's tech titans. Uber's this generation startup disruptor. It
Speaker 1: barreled into cities, decimated the global taxi industry, and burned
Speaker 1: through billions of dollars in investor cash. Ubers twelve billion
Speaker 1: dollar valuation is seventeen billion dollar valuation massive forty billion
Speaker 1: dollar valuation. It also was embroiled in scandal. Uber came
Speaker 1: to symbolize the worst of Silicon Valley excess, with a
Speaker 1: complete disregard for regulations and a fierce win at all
Speaker 1: costs mentality. Uber founder Travis Kalanik announced he's resigning as
Speaker 1: CEO after five major investors to man did that he go?
Speaker 1: It marks a stunning downturn for one of Silicon Valley's
Speaker 1: highest flying startup. Former Expedient chief executive Dara Kasrosha he
Speaker 1: took over this week he replaced Today. Uber says it's reformed,
Speaker 1: it's been playing nice with city officials. The company's CEO
Speaker 1: has met with prime ministers and presidents, and the company
Speaker 1: is spending millions on new businesses. Perspectives that we had
Speaker 1: so been anticipating has been disclosed. Uber a seeking evaluation
Speaker 1: of eighties six billion dollars. That's about twenty eight percent
Speaker 1: lower than the tw billion dollar targeting. This week, Uber
Speaker 1: shares finally hit the public market. It's a moment that employees, investors, regulators,
Speaker 1: and many journalists, including my friend Eric here, have been
Speaker 1: waiting for. And it might also be the ultimate test
Speaker 1: of whether the new world of the so called gig
Speaker 1: economy can grow up and turn into a normal and
Speaker 1: dare we say, even profitable business. I'm brad Stone and
Speaker 1: I'm Eric newcomer, you're listening to decrypt it. So, Eric,
Speaker 1: you have been covering Uber for Bloomberg Technology now for
Speaker 1: almost four years. So personally, what does the I p
Speaker 1: O mean for you? It sort of feels like Uber
Speaker 1: is growing up and going away to college. So it's
Speaker 1: this fascinating moment where it's going from this private, sort
Speaker 1: of secretive company to this, you know, globally sort of
Speaker 1: much more open and transparent machine. Brad, I mean you've
Speaker 1: covered it, sort of, no less closely, wrote a book
Speaker 1: on the topic. How how are you feeling right now?
Speaker 1: You know? To me, I mean, the story of Uber
Speaker 1: is like in part of the story of San Francisco
Speaker 1: over the last decade, the story of getting around in cities.
Speaker 1: I just spent a couple of days in l A.
Speaker 1: You know, I don't rent a car when I go
Speaker 1: to cities like l A anymore. It's such a remarkable
Speaker 1: story of changes in urban transportation, changes in the global economy,
Speaker 1: and then changes in the way people are working. Right now,
Speaker 1: I think we need to to layout the two characters here.
Speaker 1: We've got Travis Kalenik, you know, the co founder of Uber,
Speaker 1: who defined sort of the image. He's the brash CEO
Speaker 1: who is willing to ignore regulators, operating gray spaces, destroy competitors.
Speaker 1: Travis still owns a good percentage of the company, right,
Speaker 1: how wealthy will he get in the next week, Well,
Speaker 1: it depends how much it's worth. But he owns nine
Speaker 1: percent of the company, so that's pretty easy math. If
Speaker 1: it's worth a hundred billion, dollars. That's about nine billion dollars.
Speaker 1: But he's going to be a multi multibillionaire because of
Speaker 1: his role in creating uber okay. And now his successor,
Speaker 1: Dara Kazra Shahi. How much does he own? And and
Speaker 1: describe him and how is he different from Travis? Dara
Speaker 1: is the professional CEO. He was hired after all of
Speaker 1: Travis's shenanigans. Travis gets ousted in and then Dara is
Speaker 1: the dark horse candidate who the board picks from Expedia
Speaker 1: to sort of stabilize the company. Dar is going to
Speaker 1: be far less wealthy. His compensation is largely tied to
Speaker 1: getting the Uber worth billion, So how much he actually
Speaker 1: makes off this whole thing will depend on his success
Speaker 1: at getting the company to sustain a really atmospheric valuation
Speaker 1: for a significant amount of time. How do you think
Speaker 1: Dara has done? Oh? I mean from a from a
Speaker 1: public image perspective, it's been remarkable, right, not not only
Speaker 1: the press attention that Uber gets, but the way in
Speaker 1: which regulators and cities like London and New York City
Speaker 1: you are, I think are more willing to come to
Speaker 1: the table uh and talk to Uber and create some
Speaker 1: kind of sensible rules. I mean, the bottom line is
Speaker 1: that for me at least, and tell me if you disagree,
Speaker 1: and some certainly do, that Uber has been good for
Speaker 1: cities there there have been negative impacts, like you know,
Speaker 1: increase congestion. But but but by and large, they've increased
Speaker 1: an opportunity for drivers, and they have solved a massive
Speaker 1: taxi shortage and a lot of cities. And yet, you know,
Speaker 1: because of Travis's reputation, because of the companies early orientation
Speaker 1: towards breaking rules or not negotiating and launching without permission,
Speaker 1: Uber just got this bad reputation. I think Dara has
Speaker 1: helped that quite a bit. I think on the optics front,
Speaker 1: there's no question he's turned things around. The only caveat
Speaker 1: I think I'd give it is just, you know, the
Speaker 1: status of drivers, that they're independent contractors and not workers,
Speaker 1: that they don't have a lot of visibility into how
Speaker 1: much money they make. I think if you had to
Speaker 1: think of the sins of Uber's business model sort of
Speaker 1: establishing the gig economy, that ethical question is alive today
Speaker 1: just as much as it ever was. You know, Eric,
Speaker 1: when I told you I was ubering around l A
Speaker 1: yesterday and I talked in preparation for this, I talked
Speaker 1: to every driver. There was one guy who was a
Speaker 1: nursing student and he was driving in the margins of
Speaker 1: his time in between classes. There was another guy who
Speaker 1: was a parking attendant who was doing this some days
Speaker 1: after work to earn some extra money. So to me,
Speaker 1: you know, it's created a new kind of opportunity. It's
Speaker 1: probably been a poor full time job, but um, you know,
Speaker 1: but without some of the protections that kind of normal
Speaker 1: full time labor has so eric Before we go any further, explain,
Speaker 1: explain to me the significance of this I P O moment. Right.
Speaker 1: Uber has never had any problems raising capital, So why
Speaker 1: do this at all? Right, for most companies, you go
Speaker 1: public because you need a massive amount of money to
Speaker 1: make the next leap, to really say, okay, we're going
Speaker 1: to deliver what we've been doing on a much larger scale.
Speaker 1: They've raised like twenty billion dollars on the private markets,
Speaker 1: which is an obscene amount of money. It's more about
Speaker 1: letting those existing shareholders that they've sold to be able
Speaker 1: to trade shares in a public market. So letting some
Speaker 1: people sell their stakes, it's allowing different people to come
Speaker 1: in and invest in Uber. And I think it just
Speaker 1: also is going to force them to operate with a
Speaker 1: little more quarterly rigor, right and and and they have
Speaker 1: been operating in a quasi public manner. I mean, you've
Speaker 1: been getting a lot of those quarterly financial statements. But certainly, uh,
Speaker 1: the wider world, as you say, retail investors will now
Speaker 1: be watching closely. And the one thing that they will
Speaker 1: be looking for is whether this company can ever make
Speaker 1: any money? Right, So, how how's that looking? So if
Speaker 1: you let's think about Uber his losses for a second,
Speaker 1: if you're talking about money out the door, they're losing
Speaker 1: ten billion dollars over the last three years. So it's
Speaker 1: a huge amount of money just to set the stage.
Speaker 1: And so then the question is can they outgrow it?
Speaker 1: Can they keep finding new ways to drive the revenue
Speaker 1: up so that somehow this could sort of be a
Speaker 1: profitable business. But Eric that the court transaction that underlies
Speaker 1: Uber the ride, I mean, there's so there's no reason
Speaker 1: that that should be unprofitable, right, right. I was rereading
Speaker 1: Garrett Camp, the other co founder of Uber's original slide deck,
Speaker 1: when he was planning Uber out, and he was said
Speaker 1: it was designed to be profitable, you know, and it
Speaker 1: seems so intuitive. Ubers take in the percentage of the
Speaker 1: fair that should be pure profit. That's a great business.
Speaker 1: That's why everybody loved Uber. The problem has been one competition.
Speaker 1: People are happy to switch between Lift and Uber, so
Speaker 1: when they're discounting, those discounts can be very expensive between
Speaker 1: the two companies. So that's been a major source of costs.
Speaker 1: But then there are other things. You know, Uber is
Speaker 1: now a company allowing people to move around the world.
Speaker 1: The risk that somebody dies or other forms of injury
Speaker 1: makes their insurance costs super high. So turns out there
Speaker 1: actually all these sort of embedded costs to how you
Speaker 1: run that business. And I would imagine that the hope
Speaker 1: is that this business will get more profitable over time
Speaker 1: because either you know, some rivals will will go out
Speaker 1: of business or leave the market so they'll be able
Speaker 1: to raise fares, or that they'll kind of grow into
Speaker 1: into greater scale. And so I guess that raises the
Speaker 1: question like how much growth is left. I mean, you
Speaker 1: look at a city like San Francisco or l A
Speaker 1: or a lot of cities around the world, and you think,
Speaker 1: you know, you can't really put too many more cards
Speaker 1: on the road of traffic is already pretty bad. So
Speaker 1: how how much runway is there left for Uber? Uber?
Speaker 1: You know, and it's s one plays a sort of
Speaker 1: funny word game, right. They talk about the serviceable addressable
Speaker 1: market and the total addressable market. In the serviceable addressable market,
Speaker 1: that's like competition with lift there dominate everywhere all over
Speaker 1: the world. They say, Okay, we have more than six
Speaker 1: of the market share, but then when it comes to
Speaker 1: total addressable market, they talk about it, you know, having
Speaker 1: less than one percent, because their point is transportation itself
Speaker 1: is huge and ride sharing is just at the beginning
Speaker 1: of that disruption. So what you're saying is the company
Speaker 1: is selling investors on a story that's much bigger than
Speaker 1: ride hailing. Let's talk about that next. Okay, Erica, So
Speaker 1: let's talk about Uber's future. You know, Uber is pitching
Speaker 1: this business as being much greater than ride hailing. So
Speaker 1: what what does the Uber of tomorrow look like? Well,
Speaker 1: we know it has food delivery, and that's an area
Speaker 1: where Uber has been super successful. I mean, the growth
Speaker 1: is more than year over a year, and that's what
Speaker 1: excites investors. It's long had an autonomous car research project.
Speaker 1: That's a bucket. There are scooters and electric bikes, and
Speaker 1: then there's this logistics business which is basically helping trucking
Speaker 1: companies and getting freight delivered all over the United States.
Speaker 1: So those are sort of the categories we know today.
Speaker 1: You didn't mention the flying cars. Oh yeah, the flying cars.
Speaker 1: It sounds like a joke, but of course they do
Speaker 1: have a research effort in flying cars, but it's more
Speaker 1: partnering with outside helicopter sort of companies, so they're trying
Speaker 1: to spend less money there. But you know, the future
Speaker 1: is everywhere to Uber and even flying cars. And do
Speaker 1: we what do we know about these new businesses, like
Speaker 1: how promising do they look? You know, we can see
Speaker 1: growth on uber eats. I I do think, you know,
Speaker 1: it's again an area where Uber is able to show, okay,
Speaker 1: we can tack on new things. But it's hard to
Speaker 1: understand how uber eats sort of operates profitably in the future, right.
Speaker 1: I don't know if there's enough information to really model
Speaker 1: out their business model. You just sort of have to
Speaker 1: trust that sort of people's way of eating is changing
Speaker 1: and that there's a reason that all these food delivery
Speaker 1: companies are growing at once. Looking at food delivery, I
Speaker 1: mean there's so many companies. There's door Dash, which has
Speaker 1: grown out of nowhere, there's still Postmates and caviare, and
Speaker 1: then there's already public crubhub. Do you think you know,
Speaker 1: in startups, usually it's the focus competitor that's seen as
Speaker 1: having the advantage. Do you think Uber's sort of platform
Speaker 1: approach will actually help it in food delivery? You know,
Speaker 1: another way to ask that is like, how are they
Speaker 1: leveraging their their current strength to get into the new market. Well,
Speaker 1: you know, on the consumer side, it's a different app, right,
Speaker 1: So it's not like there's a convenience that you're an
Speaker 1: Uber user. You're gonna be an Uber Eats customer also,
Speaker 1: And on the driver's side, I feel like the advantage
Speaker 1: is more illusory. I think the drivers that are are
Speaker 1: delivering for uber it's are different than most of the time,
Speaker 1: it seems to me, than the drivers that are taking passengers,
Speaker 1: you know, to and from the airport. So I don't
Speaker 1: know what advantage that they have. I think at one
Speaker 1: point they had this sensibility that you know, they were
Speaker 1: going to like have more prepared meals or a smaller
Speaker 1: selection and to deliver faster. That's kind of gone away,
Speaker 1: So I think they're kind of now just trying to
Speaker 1: compete with more focused competitors in the market that those
Speaker 1: rivals know a little bit better now. Uber also brings
Speaker 1: up the Amazon comparison, as everyone does these days, and says,
Speaker 1: you know, cars are to us what books are to Amazon.
Speaker 1: And I don't know, I find that to be problematic
Speaker 1: as well. I mean, Amazon had, you know, one customer
Speaker 1: that was buying things from it, and on the back
Speaker 1: end of distribution system, these the warehouses where they could
Speaker 1: apply technology to deliver more efficiently. And and yes, the
Speaker 1: warehouses were stocked with books, but it wasn't a huge
Speaker 1: leap to put toys and CD ROMs and and uh
Speaker 1: and then ultimately clothes and jewelry and those same facilities.
Speaker 1: But you know, as I say, Uber, it's a it's
Speaker 1: a different customer, it's a different app, you know. And
Speaker 1: then and then on the on the back end, the
Speaker 1: kind of different driver with different important things about you know,
Speaker 1: speed and keeping food warm and getting it to the
Speaker 1: customer quickly. So I don't know, does the Amazon comparison
Speaker 1: hold water to you? Right? I think you draw a
Speaker 1: smart comparison. I mean, Amazon lost so much money because
Speaker 1: it's building up all this infrastructure, it has these warehouses,
Speaker 1: but then when it's done with them, it has this
Speaker 1: great advantage over competitors and it can use them to
Speaker 1: beat them and other products. So the question for Uber
Speaker 1: is just does it have that same sort of situation
Speaker 1: you talked about drivers. How much is a driver base
Speaker 1: for one product useful for another. I'd say somewhat, and
Speaker 1: I think honestly Uber would agree that to some degree
Speaker 1: they're different drivers. What Uber would really argue is it's
Speaker 1: a technological advantage that they're a logistics expert, and I
Speaker 1: that's not the best mode in the world, just sort
Speaker 1: of an s furtise versus an actual network effect. Okay, well,
Speaker 1: so let's talk about the big day Thursday, trading begins
Speaker 1: actually on Friday. What do we know about how excited
Speaker 1: the market is for this listing, Well, they're excited at
Speaker 1: a price. Uber set a conservative sort of range that
Speaker 1: would value the company at eight to ninety billion, and
Speaker 1: we've reported that certainly within that range at the low end,
Speaker 1: there's plenty of appetite to buy the eight to ten
Speaker 1: billion dollars worth of shares that would get Uber public.
Speaker 1: And so now we're in this sort of gamesmanship phase
Speaker 1: where Uber tries to read the markets and decide whether
Speaker 1: they should raise the price, whether they should keep it
Speaker 1: where it is, because of course I p O is,
Speaker 1: unlike any other financial event, have this very perverse goal,
Speaker 1: which is you want to go public below the price
Speaker 1: you actually think you're worth, so that all those sort
Speaker 1: of fidelities of the world euro prices get some sort
Speaker 1: of get out or so boost when it starts trading,
Speaker 1: and that gives them the return to keep them sort
Speaker 1: of convicted on your stock. And so it's this weird
Speaker 1: marketing game to show that early trading boost and and
Speaker 1: so they're sort of in the process of figuring that
Speaker 1: out right now. And it also seems like a referendum
Speaker 1: on everything that has happened in Silicon valid and the
Speaker 1: private capital markets over the last ten years. I mean,
Speaker 1: the valuation of Uber was insane. So the last private
Speaker 1: valuation was seventy six billion dollars, right, But then investors
Speaker 1: went and said, and you know, pitched this idea that
Speaker 1: Uber could be worth over a hundred billion dollars. But
Speaker 1: let's just say it ends at around you know, the
Speaker 1: day ends, and Uber is worth about ninety billion. I mean,
Speaker 1: what does does it suggest that investors are are convicted
Speaker 1: about the long term opportunity? Yes, I think we have
Speaker 1: to zoom out and say, wow, at nine billion, you know,
Speaker 1: it's worth more than General Motors. It's worth more than
Speaker 1: tons of major American come and ease. Right when you
Speaker 1: back out, it's still a remarkable business story that this
Speaker 1: was all built and basically the last decade. Okay, so
Speaker 1: we're as journalists and it's Bloomberg journalists. We do not
Speaker 1: get to invest in these companies, and we certainly don't
Speaker 1: get paid for giving investment advice. But I just have
Speaker 1: to raise the hypothetical, Eric, would you be a buyer
Speaker 1: at a valuation at ninety billion buyer of Uber stock?
Speaker 1: It's funny. I know Uber super well, But to me,
Speaker 1: an investment in Uber is an investment on the macro
Speaker 1: economic environment and tolerance for companies with tons of debt,
Speaker 1: and that is a subject which I know very little about. Uh.
Speaker 1: It feels like at some point there's going to be
Speaker 1: a reckoning over what to do about the fact that
Speaker 1: Uber loses so much money and to eventually value a company,
Speaker 1: you have to turn a profit, and so I just
Speaker 1: wouldn't want to be exposed to the uncertainty that at
Speaker 1: some point there's gonna be a market correction, and people
Speaker 1: want to be companies that can kick off cash because
Speaker 1: that's what they know is safe. I don't know, Brad,
Speaker 1: what do you think about it? You know, I, first
Speaker 1: of all, I really do think that this over the
Speaker 1: long term, that this transportation market will be one with
Speaker 1: the application of of AI, you know, not just to
Speaker 1: you know, to create autonomous cars, but more efficient you know,
Speaker 1: routes and you know better better maps. And I think,
Speaker 1: you know, I think that actually other companies are maybe
Speaker 1: a little better situated. It's no longer a founder lead company.
Speaker 1: You know, DARO is very incentivized to get the company
Speaker 1: through the I p O. Yeah, just a sees on
Speaker 1: that point. I mean, that is the funny thing. Right,
Speaker 1: So if you go public a hundred billion dollars, to
Speaker 1: be a good investment, you have to have a story
Speaker 1: to be a two in or billion dollar company, right
Speaker 1: because it's about growth. You need sort of new product
Speaker 1: ideas to keep understanding where it's going to go. And
Speaker 1: I think that the vision that Uber is the next Google, right,
Speaker 1: I mean, do you I guess that's what I was saying. Yeah, Like,
Speaker 1: I don't know, you know, will this be an inventive
Speaker 1: company over the term. I mean I think that you know,
Speaker 1: that's often fueled by like the entrepreneurship inside the company.
Speaker 1: And you know, say what you want about Travis, you know,
Speaker 1: and some of the early co founders and engineers, but
Speaker 1: they had that and because of circumstances, because they got
Speaker 1: very wealthy very quickly, they've kind of cycled out. So
Speaker 1: I guess I'm not convinced that in five years and
Speaker 1: ten years it continues to be a company that's inventing
Speaker 1: new things. And then one other point, you know, there
Speaker 1: are things here that probably limit their growth, which is
Speaker 1: like the tolerance of cities for more traffic, you know,
Speaker 1: like to put more cars on the road in the
Speaker 1: biggest markets you know, New York and l A and
Speaker 1: Paris and London. You know, we're going to congestion pricing,
Speaker 1: you know, we're going to fewer cars on the road
Speaker 1: and not more. And so in their biggest business, ride sharing.
Speaker 1: You know, it's like you're gonna have to grow in
Speaker 1: the smaller cities and the suburbs. What do you think
Speaker 1: it means for other companies and for Silicon Valley overall?
Speaker 1: If the c I p O goes well, the music
Speaker 1: keeps playing, you know, the party keeps going. Uber worked,
Speaker 1: the doubters were raw, the way Silicon Valley does business works,
Speaker 1: and that the technology is still transforming the world. You know,
Speaker 1: right now Weber is looking like a success story for
Speaker 1: Silicon Valley. So, Eric, last question. Uber is going public
Speaker 1: on Friday, but the more important day might be in
Speaker 1: three months time when it announces their first quarterly report
Speaker 1: as a public company. So what what do you think
Speaker 1: then they will be like and and and what will
Speaker 1: investors be looking for? And is it different than the
Speaker 1: way people have been evaluating this company for the last
Speaker 1: ten years? You know, Then we get into this world
Speaker 1: where people are judging Uber relative to past performance. It's
Speaker 1: all about expectations, you know. It starts this quarterly machine
Speaker 1: of did they increase revenue, how's the ride sharing business doing,
Speaker 1: how is uber Eats doing, how are the losses? You know,
Speaker 1: then we really have a much more sort of established
Speaker 1: framework for what it's worth. And then it's how well
Speaker 1: can I execute on that so this is a long journey, um,
Speaker 1: and can you imagine, you know, if if the stock
Speaker 1: performance isn't great and then we get like active ast
Speaker 1: shareholders and the whole drama around this company starts again.
Speaker 1: That will make your life more interesting. It's funny to imagine.
Speaker 1: It's hard to guess who would be a more steady
Speaker 1: hand than our you know, I mean the dream journalist situation,
Speaker 1: of course, is Travis Kalanick saying this company is not
Speaker 1: the exciting one that I created, and you should put
Speaker 1: me back in the chair. But I think right now
Speaker 1: his reputation is too much in tatters for that to happen.
Speaker 1: And yet you have to imagine, though, that he is
Speaker 1: plotting his comeback, right, I mean, that's got to be
Speaker 1: in the cards. I would not count Travis out yet
Speaker 1: he wants that comeback story one way or another. Well.
Speaker 1: I look forward to following the Uber journey as a
Speaker 1: public company, and Eric, I look forward to reading your
Speaker 1: stories about it. Thanks, and that's it for this week's
Speaker 1: episode of decrypt It. Thanks for listening. If you have
Speaker 1: a story to share, I'd love to hear it. You
Speaker 1: can write to us at decrypted at bloomberg dot net.
Speaker 1: Or I'm on Twitter at Eric Newcomer and I'm at
Speaker 1: brad Stone And please help us spread the word about
Speaker 1: our new season by leaving us a rating or submitting
Speaker 1: a comment in your favorite podcast app. This episode was
Speaker 1: produced by Peo Gedcary and Lindsay crowd Awell. Our story
Speaker 1: editor was Anne Vandermay. Thank you also to Emily Busso
Speaker 1: and Aki Edo. Francesco Levi is head of Bloomberg Podcast.
Speaker 1: We'll see you next week.