Acquired - Episode 31: The Uber - Didi Chuxing Merger with Brad Stone, author of The Upstarts & The Everything Store

Episode Date: March 1, 2017

Topics covered include:The global surge in 2012 of entrepreneurs starting ridesharing companies, nowhere moreso than China Didi CEO Cheng Wei and investor Wang Gang’s backgrounds at Alibaba, first entrepreneurial effort in Momo, and Momo’s pivot to Didi DacheThe culling of the ridesharing herd in China down to Didi Dache and Kuaidi Dache through brutal competition and involvement of the “big three” Chinese internet companies Rise of the Chinese messaging apps and associated mobile payments, and their impact on ridesharingThe 2015 merger between Didi and Kuaidi, brokered in part by Russian VC Yuri MilnerUber’s decision to enter the Chinese market, and early success with investment and support from BaiduThe first meeting between Uber CEO Travis Kalanick and Cheng Wei in 2015—which does not go wellSubsequent “scorched earth” competition between Didi and Uber throughout 2015-16Negotiating an armistice: Uber’s agreement to sell its Chinese operations to Didi in late 2016End of the war, or just the beginning? January 2017: Didi invests $100M in Brazilian Uber competitor 99Sustainable growth, and building moats versus scorching earthSponsors:ServiceNow: https://bit.ly/acqsnaiagentsHuntress: https://bit.ly/acqhuntressVanta: https://bit.ly/acquiredvanta  Followups: Stay tuned for real-time coverage of the Snap IPO coming here on Acquired!   The Carve Out: Ben:  Taming the Mammoth on Wait But WhyDavid: Conversations with Tyler Podcast by Tyler Cowen, co-author of the Marginal Revolution blogBrad: Yuval Noah Harari (author of  Sapiens)’s new book, Homo Deus: A Brief History of TomorrowMore Acquired!:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Merch Store!

Any other way that we could phrase that would be great. You guys want attention for this podcast or not? Welcome to episode 31 of Acquired, the podcast where we talk about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. We have another guest episode today, and we are very, very, very excited to welcome Brad Stone. David, we'll tell you about Brad before we dive in, but I wanted to do a little bit of administrative stuff before.

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Yep. So learn how you can put AI agents to work for your people by clicking the link in the show notes or going to servicenow.com slash AI dash agents. For those of you who are longtime listeners of Acquired, you know about the Slack. But if you're new to the show, join over 400 other listeners of Acquired for real-time discussion, analysis, and news as it's happening, whether it's the Snap IPO, Trello a few weeks ago, AppDynamics, a lot of interesting conversation going on there about the M&A world. And lastly, before we dive in, a big thank you to KUOW, a radio station here in Seattle, who has generously let us record in their studio this morning. Now, David, over to you to

introduce Brad. Yeah, we are super honored and excited to have Brad on the show today. He is actually our second guest from Bloomberg after our great show with Alex Sherman a couple months back. But Brad is the Senior Executive editor of global technology at Bloomberg. And before that, he covered tech in Silicon Valley for nearly 20 years as a reporter at Bloomberg, Newsweek and The New York Times. Most relevantly and fun for us, Brad is the author a few years back of the canonical history of Amazon, the everything store, which which as listeners know, we have discussed a lot on this show. And it's had a big impact on Ben and my thinking. It's just a great book that we can't recommend enough. And Brad actually has now a new book out called The Upstarts, which covers the histories thus far of the kind of new generation of defining internet companies, Airbnb and Uber. I've heard of those.

Ben and I both read it. It's great. We highly recommend it. We're going to be talking about a lot of the content within it on this show, but definitely go out and pick up a copy. If you like this show and history and analysis of waves of technology companies, you're going to love this book. So thank you, Brad. We're super excited to have you here. Thanks, guys. Yeah. And for listeners, in my kind of typical style, knowing we were interviewing Brad this morning, just finished the Upstarts last night, and I loved it. I mean, it's truly, I talked a lot about the Everything Store on the episode with Tom

Albert, but really the spiritual successor to that Amazon book. And it's interesting how it really is the next generation of a lot of the sort of same mentality and tactics in Uber that, and to a lesser extent Airbnb, but in Uber that we saw on Amazon. Thank you. Yeah, it's hard to follow up the story of Amazon because there's really nothing like it. And, you know, somewhere along the journey of trying to find what was next, they decided, OK, maybe there maybe there isn't a follow up. Maybe you can look at the kind of wave of companies and a defining moment in Silicon Valley. And that's

kind of how I stumbled on this sort of dual profile. Very cool. Yeah, it's great. So today we're going to talk about something that a story, a merger that probably a lot of our readers know happened recently, but hasn't gotten nearly, I think, enough press in the Western world, at least. And what press there has been has really been thanks to Brad. He's been the foremost reporter on this. And that's the merger that happened last fall between Uber and Didi Shuxing in, I hope I'm pronouncing that right. I may be butchering it, in China. This is a wild story. And there are so many lessons here that I think all of our listeners can take away. And we're really, really glad to have Brad here to tell it with us. So I'm going to tell the story along the way, but definitely want to credit Brad. You know, it's his story that he did the reporting on. So with that, I'm going to dive in. So we pick

up the story in 2012. Uber's kind of already become a pretty meaningful household word, at least in the U.S., and is starting to expand internationally. They've gotten word that there's this company in London called Halo, which started with the black cabs in London, has had a lot of success there, and is planning, plotting to come into the U.S. and threaten Uber here. So in response, and Brad talks a lot about this in the book, Uber mounts a really aggressive international expansion campaign. And at the same time, Lyft and Sidecar have really pioneered true ride sharing in the U.S., not just the black car, limo and livery drivers that Uber started with, but true ride sharing where anyone can drive.

Uber's responded with UberX and kind of the world is now realizing that the market for ride sharing is orders of magnitude bigger than anyone thought. Yeah. And David, it's worth kind of noting there that in today's world where we all take UberXs everywhere, that's the most common say when I'm going to take an Uber, it's an Uber X. Uber did not pioneer ride sharing. In fact, they were reluctant to embrace it. Travis spent a lot of early 2013 trying to get Lyft and another company's sidecar shut down in California

because he saw it was a disruption and he thought it was illegal. And when the California PUC didn't do anything, that's when he embraced UberX wholeheartedly. If you can't beat them, join them. I think that's kind of Uber's motto, right? I want to say one more thing about Halo, though, because there's an interesting lesson in tactics. Halo, in 2012, promoted the hack out of its international expansion. And that was a huge mistake because they not only mobilized Uber to grow more quickly in the U.S. and then Uber got to markets like Chicago and other cities before Halo ever really moved on its promise to expand. But Halo also stirred all this entrepreneurship in China.

And so what you have to understand these days is there are entrepreneurs all over the world that are watching sites like TechCrunch religiously. And it was Halo and not really Uber or any of the other ride sharing companies that started stirring these companies in China to start competing. Yeah. And that's exactly, thanks for teaming me up there, Brad. It's like you wrote this story or something. That's exactly what I was going to say that you know all around the world people are starting to wake up to the potential of this market and and nowhere more than china uh are entrepreneurs sort of attuned to the size of this opportunity and and ready to go after it with just kind of aggression that makes you know even a even a company like Uber look tame here in America. So there, as Brad writes about, there are about 30 companies between 2012 and 2013 that get

started in China, all going after this ride sharing Uber opportunity. And one of those companies gets started by a young entrepreneur named Cheng Wei, who at the time was a 29 year old salesman at Alibaba in Huangsao. And he had been kicking around some entrepreneurial ideas with his boss at Alibaba, a guy named Wang Gang. And actually earlier that year, they'd kind of started this side project, an app that they called Momo. And Momo was essentially, you know, on iOS, the sort of find friends feature. It was essentially that. And so they're working on this app on the side of Alibaba.

See the market opportunity in ride sharing and immediately pivot and rename the company DD Dash, which translated into English means Hong Kong, call a taxi. And so when they pivot, they decide to leave alibaba go full-time um cheng is the ceo and wang invests the initial seed capital into the company and and they're kind of off to the races along with everyone else so wanted to ask brad here i mean you spend a lot of time you're probably more than anybody interviewing these folks what are they like you know kind of what drove them to to start this company? Well, I mean, I just love Cheng Wei. He, you know, he was great. I should say, you know, his English isn't so good and my Chinese is non-existent. So my partner in crime on this

story was Lulu Chen, one of my Bloomberg colleagues in Beijing. And we went to visit Cheng Wei at Didi's headquarters. And I loved him because he presents his story as a series of small personal humiliations. So he like, for example, in his very important college entrance exams in high school, he leaves one page blank by accident and gets into a lesser school. And in college, he gets a job selling life insurance, and he doesn't sell a single policy. And then he signs up to work at a healthcare company, only to find out that it's a chain of foot massage parlors. And he sort of finds himself, he walks into an Alibaba office in Shanghai, gets a job, meets Wang Gang, his mentor. And really, they start on their entrepreneurship path because Wang Gang doesn't get a promotion. And they start kind

of brainstorming ideas. You know, Momo actually, you know, it wasn't their idea. It was something that sort of a kind of hack that existed on the App Store in China. And they sort of realized the power of GPS and the potential to do things like a halo in China, taxi hailing app. And yeah, and then they launched this company called Didi, only to find out that dozens upon dozens of other companies have had the exact same idea. So here you've got this young kind of whippersnapper

in Cheng Wei, Wang Gong, we spoke to on the phone. He very rarely does interviews, but sort of flamboyant investor who has just by virtue of his small angel investment in Didi has minted at least a billion dollars. And these guys were – they had nothing. And it was – 30 is the number of companies that launched. You know, there may have been hundreds that spun up to address this opportunity in Beijing at the beginning of 2012. So, you know, the odds were against them. But I think, you know, as we'll talk about, there was, you know, they had some experience in the industry and knew what it took to succeed in China. And Brad, I think you pointed out in your book that it was roughly the American equivalent of 100K that he put into Didi as his little angel.

A pretty good investment. Kind of on par with Sequoia's 600K into Airbnb a few years earlier that you also cover in the book. I'm also struck by both the similarities between Travis Kalanick and, uh, and Shang Wei, you know, in terms of their histories and their failures in the past. Um, I mean, these were neither of them when they started, these companies were household names, far from it, but also like the complete opposite in terms of their outward personalities. Like it must've been, you know, did that come through? And as you were talking to both of them, like, you know, this sort of underlying sort of drive that they have,

that I suspect has in many ways been motivated by their past failures, but just contrasted with these wildly different surfaces. I mean, I think that this is a cultural thing. It's funny because I was recently telling some of my colleagues in Asia that we need to stop describing internet CEOs and founders as humble. But I think they're all trying to present a humble veneer, that there's just kind of cultural value in doing that. Whereas in the US, somebody like Travis doesn't hesitate to be presented or to present himself as extremely aggressive. Right. Of course, Travis did that over the first few years. But behind the behind the facade, they are very much alike. and beat all these companies is that, you know, Cheng Wei had a vision, which is that smartphones and technology could make the, you know, could make transportation more efficient than China.

But along with that idealism, there was a ruthlessness to go and pursue that goal, to kind of, you know, like everywhere else in the world, ride hailing, you know, was quasi-legal in China, you know, and yet nevertheless, he sent those early employees, you know, was quasi-legal in China, you know, and yet nevertheless, he sent those early employees, you know, to cities to go and launch without permission. And in some places, they were shut down. And then, you know, he nevertheless kind of persevered. And that's kind of what it took in this industry, a relentlessness in the approach. In thinking about that perseverance and that relentlessness, you know, as you meet with the founders of Didi, the founders of Uber, founders of Amazon, do you get the sense that when you talk to

these people in person, there's something about them that's just different than other people, that this relentlessness and this kind of ruthlessness, that that sort of thing could be predicted? Like, are they the inherent forces of nature that set them apart from other people? Or, you know, what is it about them? That's the big question. I mean, first of all, I wouldn't put anyone else in the category of Jeff Bezos, right? Because he stands alone and had the vision before anyone that the internet was going to change the world and bet so heavily on it and then had years of people thinking that

Amazon was really just a boring retailer. I don't know that the Ubers and the Didis of the world have suffered the way that Amazon and its employees suffered for many years. I think in terms of Cheng Wei, probably what marked him and his story is that he, and I'm sure we'll get to this, had great people around him and then was able, I mean, the dynamics of the Chinese market are so unique that Didi's smartest move very early on was to hook into Tencent. And when they did that, you know, everything became possible. To pick up the story there, you know, I think what's striking reading the book and hearing about the early days of the ride sharing competition in China is it makes

the, you know, the Uber Lyft fight that, you know, we think is, is so ugly and distasteful, you know, here in, here in the States, you know, it makes it look like kids in a sandbox, right? Like these 30 companies were just brutal to each other. Um, and, and in particular, you know, they all started raising large amounts of money, um, and then going, you know, they all started raising large amounts of money, um, and then going, being willing to go deeply, deeply gross margin negative by paying drivers a lot more for each ride than, um, than the riders were paying the companies. So it kind of like, it kind of becomes that they're laying siege to each other's businesses in a way, you know, um, this is war.

And one of the tools, one of the ways that they start raising money is from the large, um, the large, the big three internet companies in China and, and, and DD dash is actually the second one. They raise money from Tencent. Um, but before that their competitor, Kwade, uh, raises money from Alibaba, which of course is Chang Wei and, and, and Wang Gang's former employer. So, you know, Brad, you talk to all these guys like what was going on? Right. Well, I think when Kuai Di went and raised money from Alibaba, it was it was definitely a blow to the Didi guys because, you know, that's their, you know, that's their alma mater. And

that's, you know, Alibaba, obviously the e-commerce giant in China. So I think that there was a moment of almost panic, that Alibaba had placed its bet. It was on Kuwaiti. And as a result, Wang Gang, the investor and Cheng Wei's mentor, his next call was to Tencent. Now, as it happened, and it was probably difficult to see in 2012, but Tencent has this social network slash messaging platform called WeChat that is- And which was, of course, QQ before that on the desktop. And this was like, sometimes it's better to be lucky than good, right? I think that's right. And I think the big moment for this industry, so Kuaidi and Dei start to emerge by virtue of the investments of Tencent and Alibaba.

Baidu is still sitting on the sidelines. And what happens at the end of 2013, beginning of 2014, and again, almost sort of lucky, is that over the Chinese New Year, WeChat integrates Didi as a way – and there's a product called Red Envelope or Red Package. And it's basically a way for Chinese WeChat users to give each other small gifts. And the idea of giving somebody a gift on Didi, the gift of these ride-sharing companies, realize that the next battlefield in this long-standing war between the internet giants and China is going to be mobile payments and that the taxi companies, the ride-hailing companies, are ways to spur payment volume with mobile payments. And so they start to kind of use these two ride-sharing companies as proxies and funnel money right off their balance sheet into these companies as proxies and funnel money, you know, right off

their balance sheet into these companies as a way to drive payment volume. And that is when Didi and Kuai Di start to just take off on steroids, not only growing very rapidly, but burning tremendous amounts of money. Yeah, because this siege is continuing. And both the, you know, Alibaba and Tencent are pouring tons of money in. But other investors are also venture firms and private equity firms also pouring in lots of money. I mean, it gets to be billions of dollars that these companies are burning just trying to subsidize rides to kind of get big fast and beat the other one, right? That's right. And then you've got people like Yuri Milner at DST, you know, who all the big investors had missed on Uber.

And believe me, they berate themselves nonstop. And that's an interesting aspect of the story, you know, that these companies very early on did not look like the prototypical internet companies. And so, you know, a Yuri Milner who prides himself on hitting all the big ones passed on Uber. And so bets big on ride-sh big on ride-hailing in China. And so makes an investment in Didi and then kind of sees this destructive war playing out between these two indigenous Chinese ride-hailing companies. And gradually, throughout 2014, starts to broker a piece.

Not only because both companies are losing a lot of money and just, you know, and siphoning cash off Alibaba and Tencent's balance sheet. Because, you know, I think that they also had the sort of foresight to know that Uber was coming and that the Chinese companies were probably better off together than they were apart. Yeah. It's interesting thinking about the big three in China. They're investment firms. They're their own business. And in America, like, or the U.S., we tend to have, I mean, there's corporate venture, but you don't have, like, oh, Facebook invested in them. So, you know, Google needs to go invest in someone else.

Those corporations just buy companies, right? And then they subsume them into their offering. But we don't really have this first tier of funding is kind of corporate venture like there is going to China. Well, the funny thing, we can make an interesting juxtaposition with Google and Uber because Google Ventures invests in Uber. It's their biggest investment ever. And then they start competing with Uber, right? They roll out a ride-sharing, well, they start talking about the ride-sharing service, but they scare Uber into thinking that maybe Uber will be a competitor.

And relations between the two companies are strained. Whereas Tencent invests in Didi and doesn't ever compete with it. And as a result, so it's interesting. It's a different model. I mean, I think maybe sort of smart, you know, that kind of Tencent knows that that is not in its core competency. Yeah. Well, it also feels like to an outsider perspective, it feels like these these big three Chinese Internet companies are willing to sort of more directly exercise their influence in the market there.

You know, if if that's the right way to put it, then then the Internet their influence in the market there, you know, if that's the right way to put it, then the internet companies are in the US. I mean, it's really hard to imagine Google or Facebook sort of giving preferential treatment to, you know, like if Facebook started giving preferential app installs to, you know, one ride sharing app over another or one, you know, other form of company over another. You know, I can't imagine that going well. You're right. That's a great point.

That's a great point. And, you know, not only, and we'll get to this, but not only was Tencent prioritizing Didi on WeChat, but when Uber comes into China, it starts blocking Uber from WeChat. So I think that's a good point. I think that there would be some regulatory or antitrust scrutiny if Google was to play favorites in the way that Tencent and Alipaba did in China. Yeah. So Yuri Milner kind of comes in, brokers this piece between Didi and Kuwaiti, and they know Uber's coming. Didi ends up, quote unquote, winning the battle. They get 60% of the combined company. Chang Wei stays on as CEO of the company. And I just want to sort of step back for a minute here

and talk about this is like two years after these companies were founded. So they go from getting started, inspired by Halo, not Uber, you know, having this sort of wide playing field. And then a bloodbath emerges, the big internet companies get involved. They raise and burn billions of dollars and like 700 days go by, you know what I mean? The pace is just like blistering. Well,

and one funny, one funny thing from, from the book, you know, there were moments of like just technical meltdown for these companies and they, you know, they mythologize these periods within the company. I think they call one seven days, seven nights,

where they worked so hard to prop up the infrastructure that one of the engineers had to go to the hospital because his contact lenses had become sealed to his eyeballs. So that kind of tells you how hard and how fast they were moving at the time. Yeah. I mean, it's like, you know, when Mark Zuckerberg talks about Facebook going on, quote unquote, lockdown, like I'm pretty sure the employees still go home at night. But in China, they don't. Well, and in crunching the numbers, it looks like it literally was about twice as fast.

We don't know exactly when Uber hit a $1 billion valuation, but they did their Series B on $300 million in December 2011 and their Series C in August of 2013 on $3.5 billion. So if you look back at their seed in August of 2009, they probably hit a billion dollars about four years after founding, approximately twice as long as their Chinese counterparts. So it really is an insane pace. And you just think about the size of the Chinese market and how car ownership is so much less developed in China. And so there was, you know, just more of a hunger for this kind of service. Yeah. So Uber, you know, as we've been mentioning, you know, they're not blind to this too. And actually it turns out that Uber had had this kind of like small sort of clandestine presence in China since 2013. There's this

story that Travis and a few other Uber executives go over to China and Travis sort of famously, you know, calls back to headquarters in San Francisco and says like, Hey, like I need you to, I need you guys to, to tweak the tech so that like, we can like, we're going to go out here, our executives sign up a few drivers and just like run some tests here in China. And, uh, so they started doing that in 2013, but they're just sort of testing. And then when, when DD and Quad A start are in the midst of their merger, that's when Travis decides, okay, he's going to put his foot on the gas and launch for real in China. And Uber does. And pretty quickly, while Didi and

Quad A are consumed with the merger, Uber gets to a 30% market share kind of right off the bat. So it's now sort of, they're a real player in the market. How did that happen so quickly? Yeah. I mean, it's funny, we'll go back to like the story of technology in China is always the story of the big three. And one of the things that happened was, you know, Uber. So when they launched, you know, the integration was very poor in China, because they were using Google Maps. And you know, we all know Google is pretty much blocked in China. So the integration was poor. And also this idea of launching via the black car or limo market in China was always a limiting one because it's just not that big of

a market. So Uber kind of tootles along for a year and a half and then makes the very kind of smart observation that Baidu has sort of missed this wave of mobile payment competition and needs to catch up. So they solicit an investment in Baidu. They start using Baidu Maps, you know, which is much smarter about transportation in China than Google. And the product just gets much better. At the same time, at the beginning of 2014, Didi and Kuai-Di are merging. And, you know, as with all mergers, it's an awkward one, and they kind of slow down. So I think, you know, Uber took advantage of sort of this opening and made up some ground. But, you know, as we'll see, it was temporary. Yeah. So they come in, you know, swinging into the market with Baidu as a partner,

get 30% market share. And Travis goes over and he meets with Cheng. He meets with the newly merged Didi. And Travis, he sort of walks into the meeting. He thinks Uber's international. Didi's not at this point. Uber has, Travis is convinced the better product, the better technology, they have Baidu maps, which are the best maps in China. And he essentially offers to acquire Didi. He frames it as an investment. He wants to invest in Didi, but he wants a 40% stake. And this is really, to my mind at least, seems like he's trying to say like, hey, I'm just going to take you guys out on the cheap. And Cheng and Didi reject this offer. And Brad, you write a lot about this meeting. What happened there?

Well, I mean, I think Travis kind of met his match. One of the things that happens at this meeting is Ching Wei stands up and on a whiteboard kind of charts Uber's growth since 2010. And then with another fever line charts Didi's growth since 2012. And the lines intersect, and he projects that Didi will be larger than Uber, primarily because the market in China is so much larger. And then the other, there's all sorts of little funny little maneuverings here at this meeting. And one of the Uber executives were wondering whether the food that they had been served at the meeting was deliberately bad as a kind of strategic maneuver. But it wasn't.

I think it was actually just a bad lunch. You royal taste tester. It's like the Middle Ages here. All right. There's a lot of maneuverings here behind the scenes. But I think that to their credit, the Didi executives and at this point, Jean Liu, an executive from Goldman Sachs, she's either advising Didi at this time or has joined really as Cheng Wei's partner. And I think there's a belief that as with so many other markets in China, the local player will be able to prevail. You know, there's a lot of sort of kind of fierce pride, I think, in the Chinese internet market that, you know, that they can hold their own. And it's funny because I contrast that with the attitude in Europe where we really don't see that.

And so as a result, you know, Travis and his bid to acquire Didi very early on was rejected, and they resolved that they're going to fight it out in the marketplace. Yeah, and question on that. So, you know, Google doesn't operate in China, and many other large internet giants have been sort of kicked out of China and, you know, not allowed with the great firewall to operate on the internet there. Why was it that Uber was able to get to 30% market penetration and didn't, um, DD have on its side, the ability to just say, Hey, we're going to make a couple of calls and like,

you really need to, I mean, I think that the, the censorship, uh, challenges that companies like Facebook and Twitter and Google face are about information and sharing, uh,

you know, sharing information that the government, uh, in China just doesn't allow. And, and Uber is a transportation tool. So it was sort of kind of less clear that they were violating those rules. Now, I think there's an argument to be made.

I don't happen to believe it was significant, but there's an argument to be made that maybe ultimately the Chinese government did tilt the playing field on behalf of Didi and slow Uber down, or that maybe in the future, if Uber was going to stay in the market, they would have problems because obviously they do collect sensitive information about where people are and where they're going. But yeah, Uber was not facing those kinds of censorship challenges. And to the extent that all these companies had problems and do have problems, they're pretty universal in terms of who's allowed to drive for these services.

Cool. Cool. Yeah. And, you know, Cheng and Didi, you know, kind of essentially say to Travis, you know, after this meeting, like, you know, okay, you want to fight? Like, you know, we can do that. Welcome to China. And, you know, like we've been through this brawl with 30 other companies. We can take you on too. And this is where, you know, I know I keep saying this throughout this episode, but really just reading about this is so surprising to me because we just don't see this in tech here in America. Things go like kind of nuclear at this

point. So what happens is Didi and Uber both start raising huge amounts of money to fight each other in China. Didi first announces... And not from the usual suspects either. And not from the usual suspects, yeah. You know, they already have the investment from the internet portals, but Uber raises $3.5 billion from Saudi Arabia's public investment fund, you know, and Didi raises $7 billion of its own. So that's over $10 billion raised, you know, within a couple of months.

And they just basically start giving this money away to subsidize rides. And then Didi does something that I think, I suspect even Travis and Uber is Machiavellian as they are in the U.S., couldn't even imagine and see coming. Didi starts investing in all of Uber's rivals around the world, including Lyft in the US and Ola in India and Grab Taxi in Southeast Asia. And they announced that they're going to literally, it's like the allies fighting the Nazis here. They've formed, they have this global alliance to fight Uber that they start building. You know, what were, Brad, what were, when people, investors and executives at Uber start

seeing this happen? What was going through their heads? Well, I mean, I think they were dismissive of the global alliance because it was unclear what it really meant or whether there was much value in sort of integrating each other's apps or how smooth that would be. I think the more meaningful thing, like Uber was bringing a couple of assumptions to its battle with China that I think are interesting to examine. One, obviously, I think at the time, Travis is pursuing a global network, but this is not really a network effects business, or if it is, it's very local. So it was sort of unclear that Uber's strength in the rest of the world would even translate into China. The great contrast is with Airbnb, where I think they do have more of a global

network effect because they've got travelers going back and forth across oceans. The other advantage I think Uber thought it had was a capital advantage. And what we really started to see in 2015 and 2016 was this unique capital market where there were all sorts of unique sources of capital that were willing to shower all these companies with money. And I think it was more the fact that Didi goes in and gets money from Apple or that all of these sovereign wealth funds start to provide capital that begins to convince all these companies that they are on a sort of unsustainable path. So I don't – the investment in Lyft, the Global Alliance, I think the Uber guys as

arrogant and confident as they are sort of shrug. But it's when a company like Apple or Foxconn gets into the fray and starts putting money into Didi that I think, you know, Travis and Emile Michael, his deputy, start to wonder, can they really win this battle? Yeah. And so by the summer of 2016, Didi is starting to pull away. And whether that's because Chinese regulators subtly tilting the field towards them or because of this capital or just better execution, hard to say. But Didi claims by summer 2016 that they have 85% market share. So they've won back another 15% that Uber had taken. And they're operating in 400 cities in China versus Uber,

which is only in 100. And then apparently it's Uber's investors that start pressuring Uber to negotiate a truce. And Uber reaches out to Didi and says, you know, OK, let's begin peace negotiations. And pretty quickly from when they reach out, you know, Brad, I think you say it's two or three weeks. They come to a deal where Uber sells its China operations to Didi in return for a 17 percent equity stake. And Didi agrees to invest one billion in Uber U.S. dollars and get a board observer seat. How did that set of meetings come together and differ from that first meeting when Travis went over? Yeah, well, first of all, we should be clear that this is not a bad deal for Uber, right?

It's a sort of a remarkable retreat. And, you know, nearly 20% of what will be kind of their major international rival, you know, a billion dollars investment to kind of recoup some of the massive losses. You know, I think at this point, this was a very respectful set of negotiations, primarily between Gene Liu of Didi and Emile Michael from Uber, culminating in this, as I depict in the book, this kind of famous drinking session between Cheng Wei and Travis in Beijing over the summer of 2016, where they're drinking Baiju. And Cheng Wei was sort of hilariously dismissive of Travis's drinking abilities. But of course, Baiju is not for the faint of heart. I guess I don't have much illumination on how they came to kind of 17% or 18% ownership stake.

Other than that, this is what sort of the market was suggesting at this time. And for Didi, it's a great deal, too, because they kind of win not just the Uber China brand and its customers and all those employees, but basically an open playing field to be the primary kind of transportation innovator in the world's largest transportation market. Yeah. And we usually save this more for the end when we, our evaluation criteria, I think we're going to look at Uber here and say, you know, was this, usually we look at the M&A event and say, was this a good use of funds? Was this, you know, impactful and multiplicative in the future to bring this company in? And so the lens I think we should look at this through is, was it a good move for Uber to engage in all of this activity and then leave with a 17% stake in Didi? And like, if you just look at the raw dollar leverage, I mean, it's a very short period of time of

blowing $2 billion to get almost $6 billion in value of present dollars. And the hope is you make that investment and that Didi continues to grow in value in China. And you raise a great point. One of the best markets in the world, or the best market in the world, the biggest market in the world should get remarkably bigger than Uber itself. So I think it was a good deal for Uber and I'll give two reasons, but I'm curious to hear what you guys think. One, Uber may not have known this, but the regulatory environment in China was about to change for all the ride sharing companies. And a lot of the big cities have now said it is illegal to drive for these companies if you don't live in the city.

And that has constrained the supply of Didi and slowed down its growth. So I think Uber got out at probably the right time. If you've got a constrained supply, being in a battle for the hearts and minds of drivers is not the position you want to be in if you're the foreign company. Yeah. And for listeners, Brad was telling us this earlier. I had no idea. I think this is super new, super interesting.

And I hadn't fully thought through it. Like, Brad, why do you think it's advantageous? Why would you think a city would legislate that? It seems like it's only good for business to have people outside the city. It's protectionism. I mean, I think that the yellow cab fleets are a major source of revenue for cities and the fees and taxes that they pay and perhaps the medallion fees. And so I think that's one reason. I think they've kind of tipped their fingers on the scale as the taxi companies have done all around the world. And then I think the second reason is there's a rational argument around traffic and congestion,

and obviously all the Chinese cities struggling with it mightily. That might be a little bit of a cover story for just protectionism. And, of course, the pendulum may shift. But I think for now, Didi is kind of fighting that regulatory battle, and they've reorganized, restructured their company a little bit to put more emphasis on some of their chauffeured offerings and their commuting alternatives like buses. I think the other thing that happened,

and the reason why this was a smart deal probably for both companies, is it became very clear over the last two years that this market was about to undergo a major pivot into driverless car technology. And so it really doesn't make a lot of sense to go waging a war and spending a battle for a market that's going to be changing very quickly. And now both Didi and Uber are spending a lot of that money that they might have been spending on subsidies investigating the future. And I think that's a smart approach. Do you know if Didi is also working on a self-driving car offering?

They are. Yeah, they've been trying to hire some folks and they've got a team and they've got some partners. I think Baidu is also exploring it in China and as is everyone now. And it's of course very fashionable to say you're looking into it. It's unclear to me now whether, you know, whether DD has made the progress of say Uber, which is testing cars now in Pittsburgh and a few other cities. Yeah. And one thing I learned from, from your book, Brad, is, is how fast, uh, or how recent Uber is to this, this, uh, sort of area of self-driving cars that they really weren't tipped off to it until Travis got in one of the self-driving, uh, Google cars when he went to meet with, uh, uh, meet with Larry Page or Eric Schmidt.

That's right. It was Larry Page. But even then, remember, my times are messed up, but I think that's 2013. Even then, he believes that Google will be Uber's partner in that effort. It was only at the Recode conference in late 2014 where Sergey Brin is talking about it in a little bit of a dismissive way toward Uber. And Travis had gotten wind that Sergey was going to have to talk and maybe announce its own sort of Uber competitor, that I think Travis starts to realize that Google is not a partner in self-driving

cars, but a competitor. And that is when he begins to invest very seriously in self-driving cars. Gotcha. and provides enterprise-grade security with the technology, services, and expertise needed to protect you. They offer a revolutionary approach to managed cybersecurity that isn't only about tech, it's about real people providing real defense around the clock. So, how does it work? Well, you probably already know this, but it has become pretty trivial for an entry-level hacker to buy access and data about compromised businesses. This means cybercriminal activity towards small and medium businesses is at an all-time high.

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to threats with unmatched precision, head on over to huntress.com slash acquired or click the link in the show notes. Our huge thanks to Huntress. Let's move on to acquisition category and then come back to grading. But before I do, I just want to say, you know, we're recording this episode here in the middle of February in 2017, you know, because the deal has happened, but the story is kind of far from over. You know, just last month, Didi announced that they were going to invest $100 million in a company called 99, which is the primary Uber competitor in Brazil. So they sort of, you know, all is quiet on the, you know, eastern front of the battle in China.

But I think this is, you know, the war is not yet over. An armistice may be signed, but, you know, I think I predict that we will see more Uber and Didi, you know, going head to head throughout the world, you know, in the years to come. Yeah, the interesting analogy is that the battle for China is settled. But at the end of the day, these are both global companies. And, you know, if not now, then that's the aspiration of the future. And they're global companies in a market where it's really not clear that being global gives you that much of an advantage. Yeah, to your point about network effects. Companies in a market where it's really not clear that being global gives you that much of an advantage. Yeah.

To your point about network effects, it seems like with Airbnb, it's highly advantageous to have people everywhere on a single network since they travel a lot. Or you could imagine like eBay or Amazon where it's even stronger of a network effect because it literally – it's all shipping. It doesn't matter where you are. But with Uber, shy of having to download a new app when you go to a new place, it really doesn't seem that strong. It seems like these pockets of network effects that better describe the service. Yeah, and there's a belief at Uber that kind of technology will make a lot of U.S. cities I think is indicative of like maybe as long as you pick somebody up within three minutes, maybe nothing else matters. And like Ola in India, knowing that market, knowing the cash habits of those people, knowing just how to press the buttons of city governments or what you know, what to do in streets that are just utterly congested. I mean, that's an advantage. And not to say that Uber doesn't have that because they have local offices and very smart general managers. But, you know, I think there's a reason

that Uber hasn't run the table yet. Right. And to your point, it's not that they aren't great at those things. It's that they don't have a structural advantage by gaining the position that they're in to necessarily make that N plus one market any easier than the N market. Right. And I think that they thought that capital would be the ultimate advantage, but all these other companies have been able to fund themselves just fine. Yep. Yeah. So much good stuff for tech themes. Let's do category real quick. Ben, what's your take? So for new listeners to the show, we normally assign a category of people, technology, product, business line, asset, or other.

And asset, we added a few episodes back when we were talking about purchasing a data asset. And in this episode, I am going to go with other and possibly create another one too. This was a takeout. I mean, Uber was not buying something here that they couldn't otherwise get by making a talent acquisition or buying an interesting new technology company. This was literally, you are a massive competitor and we is massively disadvantageous for our business for us both to be fighting here so it's like geopolitically right it was a it was a peace treaty it was it was yalta yeah we will we will cede this country to you and uh and and be putative allies uh and of course they took seats on each other's board uh and yet uh it's an uneasy peace yeah yeah the category i

was going to go with was sort of like, you know, marketplace consolidation, sort of like we talked about with Kathleen Phillips in the Zillow Trulia episode. But the twist I was going to add is, you know, it's incomplete, right? Like it's marketplace consolidation in one part of the world, but the fight continues elsewhere, as we've been talking about. Yeah. We should make bets on how long we think they'll be on each other's board. Yeah.

Who knows? For all we know, they're not even, or that was a little illusory to begin with. I mean, those were not voting seats as far as I understood it. So, and that's a heck of a long way to travel for a board meeting. So, you know, that may have been optics. Yeah. So what would have happened otherwise? I mean, Brad, I'm curious for you, like, if they kept fighting, like, how long could this have gone on? You know, I think it could have gone on for a long time, but it would have

been destructive to Uber and other parts of its business. You know, it was, you know, it was fighting a multi-front war. Instead of fighting in China, they kind of reinvested in their India operations. So that wouldn't have happened. And I think they would have moved less aggressively into driverless cars and continue to see this war in China, but less activity in other parts of Uber's business. So I don't know that they were constrained with capital. They've raised, you know, $12 billion, $13 billion plus. They could have kept fighting, but in the end for what? You know, for points of market share. Another thing to factor in here is if they hadn't gone and spent a couple billion dollars in China kind of waging that war, could they have focused on an earlier IPO? I mean, it's been eight years now that Uber has been around and they've gotten these capital. They went and aggressively raised capital from all sorts of different places to wage this war.

I don't know that they're mutually exclusive, but should they have IPO'd by now? What would have been the advantages of that? Well, I mean, they haven't been constrained in raising money, right? So if anything, that would be embracing a whole set of challenges and obligations towards transparency. That clearly, particularly with all the troubles that Uber has had recently in the press, you know, the company is sort of not ready for. So, you know, I don't know. I don't know. I think it's probably valuable that they haven't gone public so they can kind of get their house in order. Yeah. But the flip side though, is like, you know, I think at least in terms of public perception and, and honestly, as like a user of the product too, like, you know, like one story that like just sort of to me as a total outsider, but totally characterizes Uber to me is I was in San Francisco.

This was probably a year or two ago. I was going to meet a friend who's an Uber employee at dinner. And I ordered an Uber to take me there. And the driver just started driving in the other direction, like clearly didn't want to pick me up. And, um, so I waited a couple of minutes, you know, I ended up canceling the ride, then had to get another one. It was rush hour. I was like 30 minutes late to dinner. I showed up, I apologize to my friend who works at Uber and he said, oh yeah, it happens all the time. And I was like, wait, you work at Uber? Like, you know, and I just wonder if, you know, without like and some of these problems that we hear so much about there

wouldn't have popped up or would be taken care of by now. It's perhaps. I mean, it's a company that, you know, whose founder and CEO, you know, had a kind of manifest destiny to be the global transportation innovator and, you know, kind of moved in one mode, aggression.

And I think like, you know, all these guys are disciples of Bezos, right? And they're kind of following that blueprint of boldness. But I think it's true. I mean, like, you know, Uber is not infallible. To some extent, it's still very much dependent on the limits of GPS. And, you know, I was just in DC and was taking Ubers and Lyfts all around the city. And every single time there was a phone call between me and the driver, where are you? What street are you on? There's lots of aspects of the transaction that Uber just can't control because it doesn't control GPS and is operating on a smartphone platform that it doesn't own. So there's lots of room for improvement for sure. I feel like we've been touching on it as we often do throughout the show. Let's jump into tech themes. Ben, what do you have? A big one that I really want to talk

about is company culture and its impact on business trajectory. I think that Uber is one that has been a win at all costs company. And Brad, you mentioned in your book that Airbnb defined its mission and values very early and Uber didn't really. Their mission and values were just keep going and win. And I think you have a more eloquent way of phrasing it, but it's really something where they're massively leaving a scorched earth behind them. They've won so far through incredible boldness and strong headedness and they're leaving. Everybody has a different reason to be pissed off at Uber. It seems very true, particularly recently. Yeah. And I mean, drivers are feeling like they're getting the short end of the stick. Uber claims that they're their customer, but they're changing the take rate so the drivers

get less. With riders, they're feeling like they're getting the short end of the stick on surge pricing too. And this will probably be last week by the time we release this episode, and there'll be new news since then. But just the horrible news coming out of the Uber engineering organization yesterday with the misogynistic, sexist behavior that Uber has moved incredibly fast, everything in the name of winning. And there's a lot of problems there. And I think that I'm not totally sure this is a tech theme that applies to every other company, but we're certainly seeing in other companies too, where as everyone is either a disciple of Bezos or let's just call it a disciple of boldness, we're really seeing a lot of this churn in the wake. And I think as a lot of these mega unicorns get ready to start going public, that's going to be a major issue for them.

Yeah, no doubt. I did think it was interesting that Uber kind of came late to developing its values. And when it did, when Travis did present them to the company in 2015, they very much mirror Amazon's. In fact, some of them are quite similar. And I think it's a company to some extent that it's still searching for its identity. And, you know, and like, I don't, you know, first of all, I don't jump to conclusions about the, I'll say I don't jump to broad conclusions about the engineer who blogged about her time at Uber.

I think it's deplorable what she went through. But it's hard to reach broad conclusions about a company culture from an anecdote. And we will see if others kind of follow in their wake and how well Uber does in investigating and addressing her claims. But I mean, I think it's true that, you know, this is a company that as they all are in rapidly growing internet world, that was marked by a lot of chaos early on. And I talked to lots of Uber employees and Airbnb employees in my book, whose experiences kind of mirrored, you know, the folks at Amazon early on, just chaos, you know, the busiest year, two years of their life,

kind of traumatized when they get in, when they leave. But I certainly don't want to make excuses for Uber with that sexual harassment, those allegations. But I think we're going to have to watch. And I think calmer heads hopefully will prevail before we kind of reach broad conclusions. Let me put it this way. I think it's unfair to the many accomplished women who work at Uber and have leadership positions to just dismiss it as a frat boy culture. Yeah. Yeah. Yeah.

And totally. I mean, we're at the beginning of the news cycle on this. And, you know, there's lots of, you know, that's why in tech as well as in politics, that's why the role of, you know, an independent inquisitive press is so important. And, you know, the story remains to be told. But I think there is no question that, you know, and I suspect even people who work at Uber and listeners, if you do work at Uber, you know, reach out to us and would love to hear your perspectives. But I think it's uncontroversial to say, like you said, Brad, there are a lot of challenges and chaos there that needs to be solved. That seems that at least seems clear. And I think it's a sort of a hopeful sign that Travis last year hired an executive from Target named Jeff Jones to be his

right hand. I think his title is president. And one of Jeff's goals for 2017 was to address the writer community. We all know from being in this industry that two-sided marketplaces are hard. And from the very earliest days of eBay, you had sellers complaining or buyers complaining. It's just hard to balance the two. I mean, Airbnb's approach is clear. They are kind of a host-driven community. And they started as hosts and they cater to their hosts. Uber is really a rider-driven community. The founders started out wanting classy rides around San Francisco. And so, you know, you kind of have to pick where you start. And so Uber now is sort of focusing on the driver community and has a lot of work to do, I think, to quell some of the dissatisfaction, particularly among full-time drivers. And, you know, if we all, when we get into these cars and talk to our drivers, we know that dissatisfaction is there. And partly, David, as you said, because of the sort of relentless lowering of the fares to try to position Uber as an alternative to car ownership.

And you touch on another thing that's been a tech theme for us before and couldn't ring true here is founder DNA. describe the culture and values and character of a company, not even through like the internal workings, but in the way that the product experience feels when you use it, it's almost indistinguishable from the founder's personality. And very rarely does a company, even when it goes through multiple CEOs, significantly deviate from that founder DNA. I think we talked about it in the next episode, David. We talked about it definitely in the, the Amazon episode and it, it just, companies take the shoes of their founders and stay that way kind of forever. Yeah. Go ahead, Brad. Well, I was going to say, you know,

Garrett Camp is really the inventor of Uber and he's on the board, but it's in a large presence in the company. And the idea, you know, every company, I like to say, has to sort of combine idealism and ruthlessness. And the idealism of Uber almost comes from Lyft. You know, it's funny because Logan and John from Lyft are talking about replacing car ownership and solving traffic on the highways of LA far before Travis ever was at Uber. I think that he drew a lot of their idealism and kind of borrowed it. And I think it's authentic and it's now a mission at Uber as well. But, you know, if that does make a difference and we'll see, I think the genuineness, the

idealism is more genuine at Lyft than it is at Uber. And I certainly don't mean that founder DNA is a negative side. I think for better or for worse, you're stuck with it. It's your personality. The tech theme that I wanted to talk about is, I think in many ways, just a slightly different perspective on the culture question, you know, and the founder DNA, um, from a investor view, uh, as opposed to a kind of internal company view. And that's the, what this story of both Uber and DD really highlights for me is the difference between building a moat and scorching the earth, you know, and, and these are companies, all of them in ride sharing, really, you know, I mean, I think

Lyft has, you know, gotten dragged into it too. And probably all the other companies around the world, like they've taken this scorched earth approach and they've gotten huge, you know, probably, you know, I, I don't know, but I would suspect that just in terms of net revenue to the company, Uber is probably larger than Airbnb at this point and Didi perhaps as well. They've gotten big quickly, but you have to ask how sustainable is what they're doing. And I think at points along the way, it's clear through this story that Uber and others thought perhaps capital raising was going to be a sustainable advantage in a moat that they could build, thought that driver density was going to be sustainable. Well, it turns out it's really easy for drivers to multi-home and they do all the time, you know, and I think about that versus, versus as you juxtapose in the book, Brad, you know, kind of Airbnb. And while it's, while what they're doing and what they're,

what they're, the market they're attacking looks very similar. You know, I do think they've taken a much smarter approach to building a moat and that's around, you know, focusing on the community, you know, things like a host could multi-home, but, you know, by making reviews and trust and interaction between the community, the kind of focal point of the network, you know, once you have 50 positive reviews on Airbnb, you know, you're not going to spend much time on HomeAway because you're going to get so many more bookings. And that's, I think, something that the ride sharing companies haven't. And I don't know if it's possible to create something like that or if the dynamics in the market are just such that it's not, you know, something where you can build a moat

like that. But as an investor, it makes me think about, you know, those dynamics. Yeah, David, it's really interesting to think about how could Uber, Lyft, Didi, how could ride sharing in general be better at building their flywheels for defensibility? Because I love that point that it's just not, the networks of extras are not as strong as an Airbnb or other businesses, like at least in a global sense, what could they do to bolster that? I think that there's a belief, particularly among some Uber investors, that maybe there is a moat. We just don't see it right now that when the capital environment changes and these companies have to get profitable, we're going to separate the men from the boys, so to

speak. And so we don't yet know because none of these companies have had to get real or rationalize their balance statements. Lyft clearly still loses a lot of money. And they discount. They're still in expansion mode. They don't have the scale that Uber has. So in some respects, it almost might be too early to make kind of judgment on the value of these businesses. And there's ambiguity around driverless cars.

There's still some regulatory questions. I mean, I would say that there's still a lot of regulatory ambiguity around Airbnb. It's a separate topic, but almost like cities are waking up now to the potential and the disruptive power of Airbnb and are beginning to wonder if they want residential communities to have little hotels sprinkled throughout and all the problems and economic opportunities that brings. And so that's Airbnb's challenge. I mean, Uber, I think, has to hope that we move into a different capital environment and all these companies like Lyft, but also like Juno, this New York startup that's giving its drivers equity, that all that stuff starts to look very unsustainable in an environment where companies have to go public and they have to show profits. Right now, Juno is winning this battle for hearts and minds in New York of drivers because drivers can feel a part of it. And we have no idea whether any of that is sustainable.

So we're still at 2017. We are still kind of high on the drug that is internet stock, right? And this amazing opportunity. I agree, David. It seems to me like the moat is a lot shallower in the ride-sharing market. But I think that there is a belief, and it may be a sort of errant one, that time will anoint Uber as the king. And we'll see. Brad, thank you for bringing your seasoned journalistic take to this.

And you're right. My crazy metaphor is... Cool. Well, you want to run to the conclusion? Yeah. Well, I mean, I think we discussed earlier, you know, my grade on this, you know, is probably, I think I'd give it a... Well, I think I'm going to give it a B plus for both sides because it was clearly the right thing to do. And, um, uh, in

that it was just going to be unsustainable going forward. Um, but also sort of, you know, I don't get into a territory, I guess a little bit punitively, like I'm scratching my head a little bit as like, if I were a board member of one of these companies, how would I let the situation get to this point? But Brad, you make the great point that like, you know, hey, this was a good investment for Uber, you know, despite all that distraction. But I just keep coming back to thinking about what are they building here at these companies and what is going to be sustainable in 10 years from now? You know, if you're, if you really don't know, you know, 10 years into the company or close to 10 years into the company in Uber's case, if you don't know what the

mode is you're building, um, that would make me really scared. So, um, B plus for me. I, you know, it's interesting to think about, I phrased it in the raw dollar perspective earlier that they got, you know, two to three X on the dollars that they poured into China in terms of the highly illiquid stock that they have in Didi. And that's sort of the like private equity approach. It's like if Uber wanted to be a conglomerate, then like, hooray, they put in some dollars and got, you know, three times those dollars out. I don't know that it actually gives them, it doesn't, if the machine that they're building is Uber technologies proper, then what did they really get out of, you know, investing in Didi? Does it actually help the Uber business to have a large value in Didi? And so I think with Uber, you know, to me, it was like, it was their best option and it was the best record to pull at this point and a, you know,

highly profitable one. But David, I sort of agree that like, I don't know that it was that strategically interesting other than kind of competitive truce. And then from the DD side, you know, you got to wonder, is there any way they could have gotten away with this without giving up 70, 17 to 20% of their company? So that's a little rough too. So I think I'm going to go A- for Uber because there might have been a lot more interesting things they could have done with that capital over those years. And I'm going to go with B- for D. Brad, what do you think?

Well, I don't know that I want to get into the business of the grading, but the only point I would add is that both of these companies and their investors and their founding teams took enormous amounts of dilution to wage this battle. I wonder if you're, let's say, a Chang Wei right now, a Deedee, and you

had a certain percentage of your company and then you merged with Kuai Di, and then you merged with Uberai-D, and then you merged with Uber China. And, you know, and you're sitting there probably with your low single digit ownership percentage and still extraordinary, you know, stake. But, but like, what did you know, what did you gain for all that dilution? You know, was there, I guess, I guess the question is, was there a way to win in the marketplace? And what we've been saying is that perhaps not, right? Perhaps it was – I mean, Didi always had the high ground in China because it had the integration with Tencent. So the question is, was there a way to just kind of leverage that position and circumnavigate all these awkward mergers?

I don't know. Maybe there wasn't because it's just too easy for other competitors to come in with alliances with the big three. So I don't know. I think we have to give Cheng Wei in particular credit for moving very quickly from being an anonymous middle manager at Alibaba to really joining the ranks of the upstarts. And that's why I included him in the book and why I was very impressed with his journey. Yeah. Ben, do you want to really quickly mention our follow-up and hot take? Yeah. So we just have one to mention listeners. The Snapchat IPO will price on the evening of March 1st, go out on the 2nd for the first day of trading. David and I are going to

be recording an episode on the 3rd in the morning, and then hopefully producing that and getting it out over the weekend on the 4th. So we'll let you know when that's here. And stay tuned for far too early to tell speculation and lots of fun analysis on Snapchat. Because we haven't really covered the IPO yet, or I'm sorry, the S1 yet. And no matter what happens the first day of trading, there is some gold to talk about in there. Absolutely. Carve out? Yeah. I'll do mine real quick. So I, you know, I think our carve outs collectively between us, have been way but why like five times so far on this show. But I was recently on a flight back

from London and had just like way too much time and read a whole bunch of Wait, But Why. And this one from 2014 that I really love is Why You Should Stop Caring What Other People Think, Taming the Mammoth. And he brings up this really great idea that, you know, you shouldn't care what other people think, but it's deeper than just this thing that we always talk about. We frequently talk about how we're people pleasers, or we overweight our perception of what other people are talking about or thinking of us. And really, they're just

not thinking that much about us. They're consumed in their own lives. Their head's probably in their smartphone. But then links it to this evolutionary track that I never really thought about before. That was, it was evolutionarily advantageous for other people to like you, for you to be a member of the tribe and have other people like you and want to look out for you and feel sameness so that they would protect you in events. And so you can sort of trace that, that, um, you know, every, every splashy article that we read is, you know, don't care what other people think about you. And here's some new research to show that you really need to be your own person and underweight

the, the, that influence in your life. And like, as it turns out that that's really, really grained into us or, or, or, you know, it's possibly the result of natural selection of that being a highly advantageous thing in the fact that we're really fighting biology there. And so it's a really cool way to tie those two things together. Yeah. You know, who probably doesn't have that trait is Travis, but, uh, or maybe he cultivates it through Zen practice, but, um, mine real quick, uh, is a podcast, uh, conversations with Tyler by Tyler Cowen, who we've talked about on the show before. Co-author of the Marginal Revolution blog. Really good. His first one is with Peter Thiel. And while I certainly don't agree with all of Peter's statements, it's a fascinating conversation.

He has another great one with Kareem Abdul-Jabbar. Well worth listening to. Brad, do you want to close it out with your recommendation for our listeners to listen to or perhaps read in the coming weeks? Well, sure. Aside from my own, touting my own book, which naturally needs to be on everyone's. You're welcome to recommend your own book. We recommend it. Well, thank you. So I will not do that. But I will say, and this is an're welcome to recommend we recommend well thank you so i'll i will not do that but i'll i will say and this is an easy one to recommend but you know the book sapiens by you've all know harari was so many people and he's got a new book out that i'm just starting but enjoying very much uh homo homo deuce i think is how you pronounce it a brief history of tomorrow

which uh you know is him kind of looking at the future and automation and the future of humanity. And I just find his writing to be mesmerizing. I listened to the first book on Audible. I'm reading this one, but I might actually get the Audible. And he's just brilliant. And he puts everything in perspective. We can be so consumed with the daily ebb and flow of the tech industry. So to be able to step back and look at humanity in an ethical timeframe is why I just love

his work. So he's got a new one coming out that everybody should read. Love it. We want to thank our longtime friend of the show, Vanta, the leading trust management platform. Vanta, of course, automates your security reviews and compliance efforts. So frameworks like SOC 2, ISO 27001, GDPR, and HIPAA compliance and monitoring, Vanta takes care of these otherwise incredibly time and resource draining efforts for your organization and makes them fast and simple.

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And perhaps most importantly, your security reviews are now real-time instead of static, so you can monitor and share with your customers and partners to give them added confidence. So whether you're a startup or a large enterprise and your company is ready to automate compliance and streamline security reviews like Vanta's 7,000 customers around the globe, and go back to making your beer taste better, head on over to vanta.com slash acquired and just tell them that Ben and David sent you. And thanks to friend of the show, Christina, Vanta's CEO, all acquired listeners get $1,000 of free credit. Vanta's CEO, all Acquired listeners get $1,000 of

free credit. Vanta.com slash acquired. Well, that's it for us. Let's close it down. I just want to say, if you want to join the Slack, we're there. Join us, 400 strong, and would love to bring you into the conversation. Share the show if you liked it on Twitter, Facebook, rate us on iTunes, wherever you feel that would be something you want to do. Go read the Upstarts. It's fantastic. And thanks so much to Brad for

joining us. And we will see you for the next one.