Welcome to Compound Interest from 74 Business. I'm Liz Hoffman, 74's business and finance editor and with me is Rohan Kwami. Hey Rohan.
I'm great. You know this is our first podcast. We've been covering the forces behind business in our twice a week newsletter on the web. We call people and talk to them all the time.
Yeah. Harass. You know it's the goo. We're excited to get this podcast going because there's just certain conversations that like you want to spend a little more time with or tilt the lens on a little bit. And so this podcast is going to be a great place to have these important conversations about the ways that business is changing and these sort of really radical but often kind of unseen ways being pushed by forces on Wall Street, being pushed of course by tech, of course by Washington. But to try to take a look at those businesses through the people running them. And so I'm really excited to get going. Who do we have this week?
We're talking to Dara Khosrowshahi who's the CEO of Uber. And for most of its existence, Uber was the way you called a cab. And now it is like maybe more than any company that kind of hit it big out of Silicon Valley's app era trying to figure out what it is in Silicon Valley's AI era, right? Is it like the way that I summon my Waymo? Is it the way that I will kind of rent out my own car? Liz, do you have a car?
I am a car owner, not in New York, but I am a car owner.
Okay. Well, I finally bit the bullet a year ago and I have a car which spends most of the time on the street. You know, is it the way that I rent that out when I sleep if it turns into an autonomous vehicle? Or is it like the operating system, the kind of mission control of, you know, what if you believe the big ideas people out there, it's just going to be everyone is going to have an autonomous car. And the sort of human element of driving gets replaced by all the software and services and insurance. And really what Uber is is sort of a demand aggregator. So kind of like what does that look like here?
And it's funny this comes as there's a real fight among all these operators to be the app that you open for a ride, order food or whatever at the same time that AI agents might come along and just abstract this whole thing into some bot boiler room.
Yeah. And there's a question of like what happens if human drivers are no longer needed and certainly Uber has had a fraught relationship with its drivers. Most of that was before Dara got there. Travis Kalanick was not known as a people person I don't think and was all a little bit dilutive to the brand and that was some cleanup work that Dara did on the way. But if it does happen, remember Uber is a marketplace that connects people with cars and people who want rides. And so if half of that sort of supply goes away or changes and it's already changing, you know, theoretically every car, mine and yours, whatever is in the city can be summoned any time and is like making deliveries at 3:00 a.m. to bodegas.
Yeah. I don't know that anyone wants to drive around my 2006 Volvo station wagon, but I will say this is a vision and give Elon credit for this that Elon laid out even if he hasn't really yet executed on it. What 15 years ago?
He has been on a rolling two-year clock of everything being autonomous and has not delivered. But like no, I think Uber is right in the middle of that. And this is a business that was itself incredibly disruptive to the taxi industry. Sure. And is now kind of having to remake itself. And I'm excited to talk to him about all that with Dara who spent his career at Barry Diller's Media Empire, then at Expedia.
Dara is probably at his heart just a media guy like all of us.
That's why he was such a great guest for the pod.
Precisely. Our inaugural guest. Let's take a short break and when we come back, we're going to pick it up with Dara.
Thanks for coming. Just to start, you know, Uber for most of its life was a way you called a cab basically and it became a way to get food delivered. What is it now and where is it headed?
Well, to some extent for the consumer, what we want to be is just your operating system for daily life in a city or the suburbs etc. We want to give you your time back. And part of the reason where people earn their time back on Uber is, you know, you don't have to do the driving. You could do some work while you're being driven from point A to B. You can get great food, groceries, makeup at Sephora, same day delivered. So we are about kind of increasing the convenience of your life and bringing your time back to the consumer. We do it by building this essentially next generation on-demand logistics system. There's never been a logistics system in the world, the size and the scale and the ubiquity of Uber. But the goal of that system for consumers is to help you kind of live your day more conveniently and more easily and give you your time back. And then of course we've got nine and a half million drivers and couriers for whom Uber is a platform for flexible work where they can work when they want, where they want on their own terms, so to speak.
And how long does that last? Like what's it like to run a company where you know that eventually most of those humans are going to go away?
Well, the eventually is going to take a long time. And hopefully it lasts for a long time but at the same time like you said technology is going to change and has changed historically the nature of work. And I think with AI and physical AI and autonomous whether it's a desk job like ours or whether it's a job delivering or working in a warehouse the nature of work is going to change and I think that you know people talk about the drama of machines replacing humans. But more and more what you've seen historically is that machines complement humans and they take the easier jobs and the more rote part of the jobs over and then humans adjust what they do to be more value add etc. So you could imagine a world where you know if you look at a big chip manufacturing plant there are people around they're not doing the work of let's say manufacturing the chips but they're making sure that the plant is working they're overseeing the systems etc and the processes. And you could imagine a world where you've got autonomous vehicles everywhere but taking care of the vehicles recharging them making sure that the system is working as designed so to speak becomes the work of the people and the driving and the delivering more and more becomes the job of the machines.
You launched Uber Autonomous Solutions a couple days ago, I think, which I think you've described as kind of mission control for AV for autonomous vehicles. Like what does that actually mean on the road and what does Uber's business look like, you know, going forward? What's in 10 years?
Well, if you think about the Uber driver today, sure, you know, the part of their job that you see is they're driving the vehicle back and forth, etc. But there's so much more that they do, right? First, they've got to buy the vehicle, take care of the vehicle, recharge it. They are deciding where to position the vehicle, etc. Repair. They take care of insurance. We work with them on the commercial side as it relates to insurance as well. And all of the other jobs other than the driving have to be done even more so in an autonomous world. The fleet management again the repair you know these are very very sophisticated vehicles and machines that need lots of tender loving care. We are building that ecosystem at scale to eventually be able to operate in the 70 plus countries at the scale of you know the 40 million trips a day that we do today. Building that whole ecosystem a lot of which is taken care of by individual drivers that is essentially what Uber Autonomous Solutions represents. So that you know these are technologies that companies have been working on for 20 plus years. Billions of dollars of investments have gone into this industry. Uber Autonomous Solutions is about speeding time to market with the data that we have etc and then allowing these businesses to scale with fleet management software etc. so that you can come to market and you can be profitable faster than any other alternatives if you are on the Uber network.
I finally caved last year and bought my first car in like 15 years. And somewhere between the 2006 Honda Civic I owned and the new one they turned into computers and this isn't even there's no autonomous part of this. This is just a car and everything is a computer.
Well, our job is going to be to convince you to get rid of the car in 5 years.
I live in Brooklyn. I would love nothing more than to spend that 60 minutes that I spend every week moving my car for street sweeping.
Love to have that. Speaking of time saving, but is that an acknowledgement that in a truly AV and AI world Uber might not be the consumer-facing consumer brand that it is today, but that it needs to plug into partners and find more ways to make money even when it isn't the one delivering the car?
Well, listen, I think that to some extent is true of us today in that we're not the ones doing the driving, right? We depend on an ecosystem of 9 and a half million drivers and couriers to help power the ultimate service that people recognize as Uber and you know as a verb even. So I don't think that is going to change which is the umbrella brand will still be Uber. And kind of I see where the world is going more like if you think about Uber Eats, right? Which is Uber Eats. When you order from Uber Eats, you are ordering from Uber Eats, but often the brand that you're looking for is a Chipotle or maybe that local restaurant that you love and it's Uber Eats that is helping deliver that brand and deliver that service to you. And the two live in conjunction, right? They are different brands and listen Chipotle loves their direct customers as well. They want you to come to chipotle.com but Uber Eats is another way for them to capture consumers to get their brand out there and an autonomous world. Yes, of course we will be working with partners like a Waymo or a WeRide or an Aurora and they will have their own presence and they will have their own brand. But I think Uber and the AV ecosystem can really work together to create a win-win.
You guys have really managed to do to your point about turning yourself into a verb. That's kind of the holy grail for you're not a startup anymore, but for every startup only a handful have really ever done that. Google, Venmo, Photoshop arguably.
I'm old. Photoshop means something to me. Xerox did it, right?
I would not agree with that assessment about you being old, Liz. But fine. The point being there is a not inconsiderable amount of brand equity, goodwill on your balance sheet if the future is a little more anonymous and it looks a little bit more like an operating system, right? The back end of moving people, things, food, assets around.
Well, I think we will be more the front end, right? Which is we will have just like we've got drivers today 10 years from now might be a robot driver and the access we will be a gateway to essentially mobility of all kinds. Delivery of all kinds. And we have historically been a supply-led company that you know you associate us with a consumer brand, but the consumer brand has grown because we have essentially wired up all of the mobility and now delivery supply in the world. And as we wire up that supply, the service becomes faster, it becomes cheaper, it becomes more ubiquitous, it becomes available not just in the center of New York City, but in a Brooklyn and a Westchester County, etc. And as the service becomes, you know, faster, cheaper, more reliable, more ubiquitous, our consumer brand expands as well. And I think what autonomous promises is safer streets but an enormous expansion in terms of the supply of safe mobility to everyone. It is going to bring prices down eventually early on. It's very expensive and it will make our logistics system more ubiquitous around the world which I think is only going to grow our brand. So you know anytime there's technology disruption and AI is definitely a disruptor companies have to adjust. Do we have to adjust? Absolutely. But the potential for continued expansion and growth of this business is enormous and it's our job to take that potential.
When you think about the wages right now that go to the driver, can you do you have a sense and you know pick your time frame kind of what that savings is and then how it gets split between a cheaper ride for me, a higher margin for Uber shared with obviously partners like Waymo and others like how does that break down?
Honestly, it remains to be seen. We are if you look at our services overall globally you know we do over $200 billion of bookings on a run rate basis and the platform generally keeps about 20% of that take 80% goes to the ecosystem whether that ecosystem is a driver courier restaurant etc. My view is that 80% you know if you look at the economics of AVs at maturity or drone delivery etc that 80% is where the vast majority of economics go. We think that as a platform kind of a 20% take rate compared to other platforms is a good healthy number and for us the goal of autonomous is how do we make how do we expand the market and we think you know this is another trillion dollar plus opportunity how do we make it safer how do we make it cheaper how do we make it available to more people.
I think you're talking about a multi-channel ecosystem and that Chipotle has there's probably 10 different ways I could get Chipotle some direct some through lots of partners you launched a partnership with Waymo in a couple places. Waymo has expanded into some new places without you as a partner. What's your sense of sort of the experimentation they're doing? Does that unnerve you?
The ecosystem as is building out, it's not a surprise at all to see a Waymo expand using their own channels and work with us in certain markets as well. And what we're seeing is that you know the hypothesis behind Uber's value as a platform is that you can drive much higher utilization of your fixed asset if you use our platform. And the evidence that we're seeing in terms of Austin, Atlanta, etc. is the number of trips per vehicle per day that we are able to drive through our platform is very very high and can earn that 20% take rate and more that I talked about. So, I do think that this is not going to be kind of a black or white ecosystem. Whether it's a Waymo or it's a WeRide or a Baidu or a Pony.ai or a Wave, they will have a mix of direct channels and indirect channels. But what we're seeing is that the value that Uber brings both in terms of demand and then all of kind of this ecosystem that we're building around fleet management, repair, you know, even helping partners with the in-car experience that the value there is very significant. And this is going to be an opportunity for the Waymos of the world, for the Ubers of the world, for the WeRides of the world. This is a market that's going to get much much larger.
Yeah. How long before I go into a robo taxi and it picks up the podcast that I was listening to at home?
That's going to happen much sooner. That's actually a relatively easy technical challenge compared to the technical challenge of driving safely in all environments, weather, etc. You get that. That's an easy one.
While you still have the people. Uber has launched a program last year, I think, that pays drivers to do kind of AI data tagging, sort of blocking and tackling for third-party AI companies while they're waiting to get rides. It's a little grim, but I understand kind of why it makes sense for you and perhaps for them. How big a business is that and what could it be?
I think it's great. A way of looking at Uber is we are a platform for flexible work opportunities and the first work opportunity that we went after was driving then it's delivering then it's shopping and this is just another work opportunity that we are finding our flexible workforce and there are some people who love doing this you know whether it's in between rides or when they go home etc. and some of the roles are becoming much more specialized finding a PhD who speaks French and understands physics as well. So it's really it represents our expanding the scope of our call it flexible labor ecosystem. And it happens to provide more people more work opportunities and that is absolutely one of the missions that we have to expand the kind of work available to the general population.
And how big a business is that for you today?
It's growing. It's one of our fastest growing businesses. It'll hit the hundreds of millions we think this year and then beyond that you know we think this can be another billion dollar business for us. The role of whether it's training the agents or we even have drivers driving around measuring cell phone signals etc. There's a lot going on going to shopping shelves and taking a real-time inventory on supermarket shelves. The kind of work is quite expansive and I don't see that ending anytime over the next 10 years after that. Who knows?
I mean, one thing that is funny to me, and Liz and I were talking about this earlier, is that it costs less on Uber to send a package across town, right, from Brooklyn to Manhattan or what have you, than it does a person.
One of the reasons is that packages are not sensitive to how quickly they get there. So, what you may not be seeing behind the scenes is the packages get to party and get to drive together. So, usually we'll take one package from you. Liz may have another package. We batch that together. That's one of the benefits of the network that we have and the enormous amounts of supply and demand that we have together so that one driver can drive four or five packages and the packages are much more patient than human beings. Go figure. And we deliver those packages at a lower cost as well. That's what's going on. It's really a bunch of AI that is driving batching technology to drive the cost of each package delivery.
It's not that the driver charges more to interact with a passenger than they like there's not some discount for human interaction baked into that. That should unnerve us all.
Listen, there are some drivers who actually like driving inanimate objects more than human beings. And that's one of the powers of Uber. I still remember after COVID there was a driver who I was talking to who had switched over from driving people to delivering food and you can make more money driving people generally there's a higher premium there and I asked her like why don't you just go back to driving people and she said well a Big Mac isn't going to give me COVID so every driver you know like they can decide what kind of work that they want to take on and that's one of the beauties of our platform in terms of the flexibility that we offer.
You know, I remember Uber came in for some criticism at some point for like, you know, you could put your driver on like quiet mode or something. And that was understandably ruffled some feathers, but I always worry about it on the other side, which is that I am a chatty passenger. I like to talk to people and I always wonder if I'm like there should be a way to match with someone who that does not annoy.
I'm glad that you're concerned like some passengers kind of don't care. I remember when I drove, I was always nervous as well. It's like, do you there's this feeling out your passenger, you know, do you want to talk? How was your day? And you see if they're talkative or not. But listen, we're all human beings and we figure it out one way or the other.
Do you still have time to fire up the driver app and do a few laps around and pick people up or no?
Not as much as I'd like to. I make time for it, but I don't have nearly as much time as I'd like to.
You got to stay close to the product. You know, if every car is autonomous in the future, and I don't know if or when we'll get there, but does that in some way unlock kind of to your point that there's this fixed appreciating asset that most of the time isn't doing anything. Is there a world in which my car is out delivering to bodegas at 3:00 in the morning and I'm making some money on that? And by the way, Uber is like the wraparound service by which that happens. And like what does that world look like?
First of all, I think it's quite likely that 10 years from now, every new car sold will have autonomous capabilities. L4 autonomous capabilities. Like I think that is very much a likely outcome. It'll be very good for Uber. I do think that the cars are going to be cheap enough where someone like you you're probably not going to want strangers in your car, right? And the amount that you can make per your vehicle driving around at night is just not going to be that much. So the ecosystem that we see is that in the big cities for example there will be very large fleets that are going to be owned by big financial institutions you know the Blackstones of the world etc. They will own and finance the fleets. We will kind of build that whole operating infrastructure, the fleet management tools, the recharging etc. And so in large markets, you will have institutional supply. And then on the outskirts of those markets, you know, in a Westchester County, you know, Tarrytown, New York or that area, you're going to have smaller entrepreneurs. There may be two people with a garage that have bought 20 cars that are running a smaller fleet management operation, and it's going to be quite entrepreneurial. Hopefully, a lot of those people will be our drivers. And then I do think there will be a minority of individuals who kind of send their cars out. It will certainly be something that you can do. But I imagine it to be a little bit like Airbnb where you've got these superhosts and then you've got you know Airbnb a lot of Airbnb's volume sure comes from individuals but there are these superhosts as well. You will have superhosts. In the big cities there'll be institutions and then in the outskirts in the suburbs you'll have kind of smaller fleet managers who are entrepreneurs who are building business for themselves.
You're a finance guy, not an engineer by training. But what how do you imagine cars look like in that world 10 years from now where everything is autonomous? What do they actually feel like to be in them?
There's a tagline. It's the ultimate driving machine. I think you'll move from an ultimate driving machine to an ultimate passenger machine so to speak. So you won't have gas pedals, you won't have steering wheels. You'll have a lot more room in the back. You have specialized vehicles for different missions, so to speak. I think that there will be a lot of two-seater vehicles because the majority of ride share actually is either individual or two passengers. And then you'll have vehicles. I do think that the bus networks etc. of cities are going to become autonomous. And so you'll have a population of vehicles that will be tuned for the individual and then you'll have populations of vehicles that will be much much cheaper and built for mass transit. And I think it's going to make for a much much better logistics ecosystem in the cities.
It's interesting like one thing that tickles me I was talking to someone who makes these cars and I was like why does the Waymo have windshield wipers and he was like well like for right now it's because we don't want to have a different assembly line that doesn't put on windshield wipers but he said but there's actually people who get nervous if the car that they're in doesn't have windshield wipers even if it doesn't need it that there's obviously still like an emotional connection to having a steering wheel where you expect it to be and I don't know I wonder like how quickly you think that part will be to change.
Well, I do think that the one of the work areas that we're thinking about is that internal environment and whether or not people will kind of want their phones and that's the ultimate kind of personalized ecosystem that you go through or there will be pretty big AV systems, etc. So that you can move your Spotify podcast from your phone to a high-fidelity AV ecosystem as well. So, there's going to be a lot of customization going on. And I think windshield wipers probably are going to see their last days is my guess.
Your stock was among those hit this week with this kind of little known research firm put out this very cinematic dystopian view of not that far in the future where you know AI sort of first pushes everyone into the gig economy which is probably good for you in the short term and then kind of consumer demand just goes to zero and no one has the jobs to buy all the stuff that AI is producing. I with the caveat that like nobody knows anything right now. Like does anything about that scenario read true to you?
You know, I think the scenario was just a bunch of bad stuff happening without any of the positives, right? And I think it's just highly unlikely. Of course, there will be negative externalities associated with this enormous change coming up. The nature of work is going to change. You as an individual have to become very knowledgeable about using AI tools. And if you don't, the individual who is going to out-compete you. So I do think that there's this drama of kind of the black and white which is like AI replacing people. AI is going to augment people. Machines have always augmented people over a very long period of time and they make those people more capable and the question is who is going to make that transition to the AI native worker and I think it's the AI native workers who are going to win and I don't think it's the AIs themselves that are going to win I think humans and AIs together are the better solution that's certainly what we're trying to build and I think that's a future that's certainly I want to believe in.
You're making this millennial very nervous. Dara, do you walk out of your house without a phone?
No. Right. We are augmented human beings. We're augmented by this thing and whether we know it or not, it's already happening, right? There's a machine in each of our pockets. That machine is making us more productive, more communicative. There's good things about it and bad things about it. If you're having dinner with your family and picking this thing up, that's bad. But the majority of it is good, right? So this is we're just moving up on that augmentation path. This journey has been happening for a very very long time. It's usually slow and you don't notice it, but I know very very few people who walk out of their homes to work without one of these things. So it's happening to us whether you like it or not.
You know, in my youthful naive I prefer your much sunnier and optimistic forecast to Cathie's. But still, you know, ever since September, you guys hit all-time highs back then and your stock's been down a little bit. What are these investors missing?
You know, the public markets don't like uncertainty. And the fact is that we are going through a period of uncertainty. There's a lot of risk as it relates to AI and the changes and the competitive effects that it's going to have on lots of companies, software companies, physical world companies like ours. So I do think that we have an enormous opportunity ahead of us is a trillion dollar plus market. I do think that if we get it right, transportation is going to become ubiquitous. And we have the potential of actually growing at an accelerated pace, but we have to get it right. So it is that moment of the market picking winners and losers. Risk is definitely increased, but ever since I've been at Uber, you know, we are a company that has had lots of question marks. We've executed through incredible periods of crisis and come out better for it and then some. This is one of those moments and I think if we put our heads down and execute and innovate and build as fast as we're building and build with this AV ecosystem, I think we'll be winners and whoever makes a bet on us during this period of uncertainty is going to be really really happy. It's my job to make that happen. And I definitely intend to.
There were also some rumors that you were actually interested in picking Expedia back up. How I mean if you want to bite on that, was that true at all? Was there anything? But also more broadly, it seems like you guys are covering transportation. You are in 70 plus countries. Do you think about whether travel bookings more broadly tapping into how people move around? Is that part of Uber's future 5 10 years from now?
I'm still on the Expedia board. Love the company. Love that team and they're doing great. And travel is a very big use case for us, right?
Because we are ubiquitous in so many countries, the international traveler especially uses us both for mobility and delivery as well. If you get to your hotel and room service ain't that great, Uber Eats is going to be there for you. So we are wiring up different travel opportunities. For example, in the UK, we've got cars, we got buses, but we also have trains and we even have Uber boats, you know, boats moving up and down the Thames. So you can imagine us wiring up more things that move. And with travel being such a large part of our ecosystem, it is something that we are going to build. There will be more travel options on Uber, but we're doing it through partnerships. And stay tuned as it relates to who those partners are going to be.
I mean, is there a world where I'm sitting in my apartment and I decide I want to go to London on a whim and I open the Uber app and say, "Take me to, you know, House of Parliament," and Uber will, you know, pick me up in an autonomous car, plop me on a Delta flight, and send me across the pond. Is that a world that you envision if you're talking about being an operating system for mobility?
If you get bored of your job and want to work in a strategy team, you're welcome. Absolutely.
This job is too fun. I get to talk to people like you.
Yeah, exactly. And listen, the power of AI, too. It has historically been difficult to build out here is the code that can respond to the real world because lots of things happen in the real world. There are delays in every single one of those handoffs. But with AI and these larger models, what you describe, that vision of kind of door-to-door travel through different modes of travel and having a player like ours who has access to all of the inventory and all of the prices and can stitch together that end-to-end journey for you, that is absolutely going to come true. It'll be through a combination for us of partnerships and then direct relationships with our various ecosystem. But it's definitely a vision that we think about and it's a vision we love to bring into the world.
How do you think about M&A though? You came up in Barry Diller's empire which has been kind of put together and remantled a couple of times. How do you think about it?
I think the best M&A strategy is not to have to buy anything.
Said the former CFO of IAC.
Listen, deals are hard. The majority of deals fail. So my job number one is to build out a path for organic growth and we've grown over 20% for I think four or five years now. That continues for the next 3 to 5 years. Where I can actively plan for 10 years from now is much harder to plan for. My job is to set that reality so that any M&A that we do is essentially optional. And on top of that, we tend to look at M&A in areas that are adjacent to us, or M&A doing the same thing that we do, expanding into different countries for example, buying one of the leading food delivery players in Turkey which has been an enormous success. So M&A will always be a complementary strategy, but my mainline job is to make sure I never need to buy anything and the business keeps growing at very, very healthy rates.
Tech deals also look very different today than they did 20 years ago. Now people are acqui-hiring and taking stakes. I mean, is that something, is there a world where you would consider maybe, no specific company names, taking a 10% stake at very favorable terms in a partner of yours? Is that how you think about M&A at all? We're fresh off the Meta-AMD deal yesterday. We got variance coming out of our ears, Dara. Sorry.
That seemed like a complex deal. No, but we are for example investing in our AV partners. We have investments in Pony.ai, WeRide, Waymo, many of these partners we are helping with our capital and helping with our data capabilities, data collection capabilities, etc. So there definitely is our investment that we're making in the ecosystem and that will be a significant part of our activity going forward.
