Big Technology Podcast - Was The Sharing Economy Way Overblown? — With Emil Michael

Episode Date: April 12, 2023

Emil Michael is the former chief business officer of Uber and the current chairman and CEO of DPCM Capital. Michael joins Big Technology Podcast to discuss what's happened to 'sharing economy' darlings Uber, Lyft, AirBNB, and more. With deep insight into these companies' business models, Michael breaks down how they've reacted to our shift away from a zero-interest rate environment, examining who might win — if anyone. Stay tuned for the second half where we discuss Michael's thoughts on the latest AI wave, and whether his hometown of Miami is really a budding tech hub.

LinkedIn Presents Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Emil Michael is our guest today. He's the former chief business officer at Uber, and he's the chairman and CEO of DPCM Capital. And Michael joins us at a fascinating moment for the ride-sharing business and the sharing economy overall. Let's start with the fact that Uber is sitting at a market cap of $63 billion, which is less than this last private market valuation, and its share price is trading below its IPO price, and its CEO is giving rides himself to figure out why his company can't recruit drivers. Lyft, meanwhile, is down 87% since its IPO, and its founders just resigned for quote-unquote

personal reasons. I mean, come on. Then you look at Airbnb, which has effectively been flat on the stock market since its IPO years ago. And you begin to wonder whether there was a sharing economy at all, or whether zero interest rate environment investments from VCs and public market investors have propped up non-businesses this entire time. Well, the answer is not a clear yes, but it's also not a clear no, at least for some companies. I discussed this all with Emil Michael, who's had a front row seat to this at Uber and has followed it closely afterwards, and I think has some very valuable analysis that you're going to enjoy a lot. My conversation with Emil, coming up right after this. Emil, welcome to the show.

It's good to see you again. It's been a couple of years. Yeah, you were one of the first, we were just talking, you were one of the first guests we've ever had on the show. And it was in the thick of COVID, and we were talking about whether people were going to continue. to do ride sharing after COVID ended and whether people had, you know, we're going to just travel with their own cars. I bought my own car. All right. So I'm doing a lot less. And the businesses have struggles. So actually, it's maybe a pretty good place for us to start. What do you think the rebound from COVID has been like for ride sharing companies in

particular? Well, if you look at the data, the revenue part of ride sharing is all the way back and more. However, I think what's buried in there is the price increases have been dramatic since pre-COVID times. If you look at sort of what the same ride cost. So the number of rides probably has slowed. It's still probably growing a bit, but because the price increases have been material, the total revenue is grown, contrast that with food delivery, which is sort of shot out of nowhere and was bigger during the pandemic for Uber for a bit than rides. And now that slowed a little bit and rides is taken back over. Yeah, I mean, I got to tell you.

So I was in San Francisco, came out of the airport, and, you know, I had been away for a little bit. I'd moved back to New York. And I was so used to just getting out of the airport, calling an Uber or a lift, going to my house, into the mission, and, you know, it being a very easy process. The Uber, maybe it was surging or something. It was over $100. I had never done this before. Walked down, went to the black car drivers and said, hey, can you take me home?

and we negotiated a price, which was still double what I used to spend, you know, with Uber, but it was also much, much cheaper than the Uber prices. Is that, was that a unique experience? Do you think I know you're not there day to day anymore, but was that unique experience? Or is this sort of the, you know, par for the course right now? And if so, what does it say about the long-term trajectory of these businesses? Yeah, so two things are happening. I don't think your experience is unique.

prices are going up for two reasons. Both companies, Uber Lyft, have said, we got to get profitable. And Wall Street has said, well, you know, you guys have to get profitable or your stock's not going to move. So them, amongst other tech businesses, have sort of made that move to profitability, which meant raising prices. That's the easiest way to get closer profitability, right? The second thing that's happened is there been a ton of taxes, surcharges, fees that cities, states, and localities have added to rides in California, Prop 22 added some costs.

So there's two buckets of cost, the profitability cost and the regulatory cost has added to this. And I think that's what you're seeing, kind of across the board, across the country, across the world. And what is going to happen is on the margin, it's going to make people take Uber's or ride shares less, right? It's like we learned this very early in our time at Uber. Price elasticity for transportation is super important.

Like you raise the price of dollar, fewer people use it, just period. So I think you're going to end up having slowing growth in the number of riders because of this. Yeah, and there's also one thing you didn't mention is the fact that there's much less drivers of having trouble getting drivers on these platforms. So there's this recent Wall Street Journal article with, And we got to talk about it because it has, um, it's basically, uh, documenting Uber's, uh, CEO, Dara Kosra Shah. He's, um, moonlighting as a driver with, with Uber. And I'm just going to read you a little bit of it. So, um, this was the first time he's been CEO for a while. This is

the first time he's tried to drive Uber. And he's found all these different issues. So he's, this, this is from the journal, uh, story. He struggled to sign up as a driver. He saw firsthand something called tip baiting and was, punished by the app for rejecting trips. Surprisingly hard to take was the rudeness of some riders. And they say that it's part of a campaign by him and his lieutenants to better understand and improve Uber's experience for drivers whose scarcity has become a critical challenge for the company in the U.S., which I think about supply and demand.

I think that's probably one of the issues. And here's one of the amazing lines from the story. He hadn't driven on Uber before because it wasn't his biggest priority. drivers had always been in abundance supply. And it's one of those interesting profiles where it's like you have access, so you're trying to be nice to the guy. But like as it continues to reveal details through the story, you're like, is this person really an effective leader?

So, you know, I'm curious hearing about this. Was this a practice that you guys did when you were at Uber during the Travis era and had you'd been driving Uber's, had Travis been driving Uber's, not to get too deep into that? I feel like that's been talked about to death. But I'm curious when you see a CEO driving for the first time this many years in and finding all these issues, what does that mean? I'd be surprised if that's the first time he's driven.

But yeah, we used to drive all the time. We used to, I think Travis used to do Halloween. I would do a weekday night and the product managers would do it all the time. We had a program that asked all employees. to try to do it once a year, all of them, not just product managers, including engineers, so that they could feel the experience. So that would sound surprising that your biggest product would be something that you didn't experience and shows a little bit of distance between the product you're building for millions

of people around the world and your ability to effectively lead a company that's supposed to do that. That being said, they did make a lot of product decisions in the last couple of years, which I think have been a big mistake to both the driver experience and the user experience. And maybe they're figuring those out now. I don't know. But we have never had plentiful drivers. That's not true.

There was always been a supply constraint on average at Uber all the time. It's because demand was always rising faster than supply. So again, that's an interesting quote that I wouldn't have predicted. Yeah. And, you know, I guess I kind of give him credit for, for, I mean, the knock on him is fair that it took this long for him to get into the product and start doing this. I give him credit for starting to implement some fixes. The article really gets very interesting when he starts doing delivery.

So he finds all these problems in the app that they, I guess, confess to the journal. And, you know, I guess it's good and transparent. but it was just astonishing to me how many glaring problems that they found. Let me read a little bit more. So this is, again, Dara going through the delivery experience. I guess I shouldn't laugh. It's good that he's trying it out. But there's something comical about the whole situation.

So here it is. So one time he clicked on the notification and the app started navigating him to a new address, hiding directions for the current order. New orders are now queued after existing orders, even if drivers click on them. Okay, so that's a change that he made. so information about the current one isn't lost. On another occasion, Mr. Kostrasari, showed up to a restaurant to pick up what he thought was one order, only to learn that it involved two separate deliveries.

Uber was combining orders along the same route, but the app didn't make that clear. So now the company is introducing better labeling for trips that involve one more than one delivery. He also ran into a problem. This is an interesting one. He also ran into a problem delivery drivers had been complaining about tip baiting. Customers would entice. workers to pick up their food quickly by entering big tips on the app, but then reducing them after the food was delivered and they're trying to work on fixes for that as well. I mean,

that's really disgusting for people to do that, to deliver drivers. But so what do you think about all these problems that he's finding in this service? And also, what do you think about the fact that it's kind of taking the CEO to actually do this and sort of, you know, force down changes, you know, down the org. It doesn't really speak to the strength of his lieutenants i guess what's baffling to me is that's all it's been almost six years right so this is not one year into one's tenure and it just baffles me as to you know this is the core of a product manager's job what is going on in the product management part of this company um like you there's those tv shows the undercover boss things which are kind of you know a boss goes under

cover in his own companies like holy crap what's going on here and he comes back up um this is sort of so surprising and that that it's hard to put into words but but if you look at what expedia was when he ran expedia um and you try to translate that into the mobile world where it was just sort of a lot of pop-ups and and things that weren't designed for a consumer um to sort of easily understand what's happening on and in this case drivers and delivery people are consumers of the platform too. Their users are platform as well, so you have to make them happy. It's sort of a jumbled kind of mess.

And there was a lot of tweets the other day about some of the messiness in the Uber apps as well. And I just think there's no fundamental design point or principle in the apps themselves that are organizing how new features are pushed out. It's just feature on top of feature and top of feature. And then they start conflicting with each other so it's to make the thing unusable. So again, if I were him, I'd go right to the product management team and some heads would probably roll. Yeah. So Dara is widely viewed positively, I think, by the public.

Do you think he's getting a pass? I'm kind of curious like what you think about the public perception of him now that. But let me even read. All right, I'm going to go read the stats because I have it here on what the situation is with Uber. So the market cap is $62 billion. Last private valuation was $76 billion. It's trading at $31 a share that was priced at $45 at the IPO. With that in mind, rate the leadership.

Look, it's the tail of the tape, right? Warren Buffett, the stock price is a voting machine. And over the long term, it's a weighing machine. It's been six and a half years. Stock prices below the IPO. The stock price today at $31 is where it was in 2014. So you're almost a decade of a flat stock price, right? And you could argue sort of whatever Travis and I had left him,

had some challenges that he did work out. And he was a better diplomat and sort of was someone who the press liked a lot more. But I'd say that likeability and effectiveness are separate things. ideally want to be both. He clearly ranks high in the likeability a score. But from an effectiveness standpoint, if you're measuring by stock price, that's been, you know, a D. Right. You know, a D minus, even when you compare it to the NASDAQ or other tech stocks.

Now, the one other thing I'll mention is, behalf, just to be, you know, to be fair, he's done better, Uber's done better than Lyft. Oh, yeah. Getting right into my next questions. Yeah, who's done better than Dedi. Uber has not done better than DoorDash. DoorDash has whooped Uber on food delivery in the U.S. So that's the mixed bag on that, but stock price is really the summation of all of it.

And I think he says he's disappointed in it. I'm not sure why Wall Street isn't, you know, asking for more radical change there. Interesting. What do you mean by more radical change? Well, usually, you know, when you have a stock price that's, languishing as this has, and you promise, well, here's what we're going to do. And it's not achieved. What happens is, you know, you have some change in incentive structures, right? I was looking at the 10-K just came out. The annual report for 2022. Stock price was down in 2022 by 20%. All the

executives, all of them, made 200% of their target bonus. That doesn't seem right. Doesn't seem Right. Well, incentives are obviously not working. So the public shareholders suffer. The management team wins. That misalignment is something that, yes, should the board be fixing that and should investors be pressuring alignment there? Yeah, I think that's one easy fix, right? Who's head rolled when they lost the food delivery war to DoorDash? What's going to happen with all these product issues that were found? Who's going to be responsible for those things? things. So accountability, I guess, is what I think the key thing that's missing, not just an Uber, but in a lot of public companies when management gets entrenched. Okay. So speaking of accountability and speaking of Uber's ability to, or the fact that it has crushed lift, there has been some accountability there. Now, the reports are that these founders are, they left to go spend time with their families or do personal reason stuff. It's amazing to me that people today are even venturing those type of, excuses when you know that the business has performed miserably and this is almost certainly a business-related change. I mean, the numbers for Uber are not great. The numbers for Lyft are down right embarrassing. Lift is down 87.96% since it's open. They definitely had the likability thing going. I spent time with John Zimmer, who's one of the founders and one of his

a couple times actually I went with him when he was driving himself on New Year's and sort of getting firsthand experience with the product. I thought he was a good guy. I mean, I do think he's a good guy. But obviously, the management has not been there for Lyft. I think you had a tweet saying that you're expecting the price to go effectively to zero or something like that. So talk a little bit about the Lyft, the challenges that Lyft has had, why you think those founders are out and where you think that company is going. Yeah.

So let us be very clear. So here's another stat that's really important here. Lyft in its lifetime, including its IPO, raised $8 billion. And they're worth today three and a half billion. So they're worth a fraction of the amount of money they raised. So it's been like we work, raised all this money and it's worth less than that. That's not the case of Uber, but that is the case of Lyft. And that's a big thing to consider.

The other thing to note, though, that's, I think, not intuitive, Alex, is the founders before they went public got voting control of the company. So they didn't have to go if they didn't want to. Maybe they were pressured, but ultimately was their choice to go because they could have voted to keep themselves in. I think, you know, what happened there is, this is my guess, right? Earnings are about to come out in early May for Q1. My guess is those are going to be a disaster for Lyft. They're going to show real problems.

And they didn't want to be responsible to that. So they put someone new in, he'll take the heat and say, well, you know, I'm new here, give me another quarter or two. And then also when they're on the board and not management team, they have better ability to sell their shares. So I think this is a bad sign for the whole company. And I said $5 a share plus or minus. And today it's about $9 a share.

So we'll see what happens in a month. I said May. You can hold me accountable for that. But we always knew this was going to happen in Lyft, and I'll tell you why. And it's not because they were bad leaders or whatever. it's just the nature of ride sharing is that it has a local network effect. The more riders you have on your platform, the more drivers want to be on that platform because they get rides quicker,

shorter distance between rides. The shorter distance between rides, the lower price you can charge consumers per ride and the more drivers make because they're taking more rides. That was always going to work in a zero interest rate environment. until zero interest rate environment was over when there was no more cash and you start to have to make money, then you can't subsidize the riders and drivers anymore and market share was going to start to go to 90-10. And that's where it's headed and might do.

Yeah. He always talked to me that he envisioned that ride-sharing networks would be like mobile networks, where you have a sprint and a Verizon, for instance, and you decide which one you want to use. You're shaking your head. Yeah. I mean, it's sort of a nonsense analogy in that you're like, you know, they're totally separate networks. One's not dependent on the other. Whereas the more people and ride drivers on a ride shirt network, the more valuable it is. It's more like a telephone network being more valuable, the more people that are on it. That's not the case with mobile because a Verizon customer can call a T-Mobile customer. That doesn't change sort of the value of either's network. Maybe that's why they didn't succeed is because they don't really understand that the basic thoughts of network effects and business. I don't know. That seems like one candidate. Yeah. There's also been this, there's been this talk, and we talked about it last time you were on, but it's worth updating now that that self-driving would come in and kind of save the business.

I mean, that's basically all John was talking about was how close we were to self-driving. This was 2015, 2016, I think. We're in 2023, and we're not there yet. So how bad has the fact that self-driving is not available yet been for these companies' business and their ability to prosper. You know, and I still think we're seven to ten years away from material percentages of cars being self-driving on the road, right? Travis and I always disagreed on the timeline on this. Both companies... I feel like it's always seven to ten years. It's always seven to ten years away, right? Both companies spent a lot of money on this, but it was never going to be the savior. I think for for both Uber and Lyft, it was a defense against Waymo and Google. The fear was that if we didn't

do self-driving and Google did and deployed it fast, well, that would eat rideshare. So we had to be in both camps so we weren't disrupted. It was more defense than offense. The thing I found really strange about Lyft strategy here is that they did this ballot initiative in 22 to raise taxes for electric cars, which that was going to save them somehow, too. So sort of these weird hellmeries that they were doing instead of expanding into food delivery or to Europe for rides, they're focused on autonomous and on electric vehicles, which I just think were bad, bad business choices. Yeah. I want to say for the record, before we move on, John Zimmer, I've been trying to get you on the show a couple times, sent you an email. You have an open

invite and even though i'm not at buzzfeed anymore i hope we can still talk so just making it known yeah well like he's a he's a everyone says he's a nice guy dara's a nice guy you know behind the scenes john i've tangled with him a few times he's he's pretty you know he's his moments as well yeah well okay hopefully john you come and we can talk about it so let's talk a little bit you brought up zero interest rate policy which is something that i wanted to talk about so i mean how does because these companies have been subsidizing, like you mentioned, drivers and riders for so long. And, of course, when interest rates were zero, you could lose money or be break-even and the market still loved you when they looked at growth.

So I'm very curious to hear from your perspective how the raising of interest rates has changed the nature of the business for these companies, because you can't take those shortcuts you're to use to anymore and get the same benefit. Yeah. I mean, it's super simple. And the way Chavez-Ni used to describe it, you're like, at some day, there's going to be a musical chair. And there's going to be one less chair. And if you've been betting on zero interest and environment, so your ability to raise money and subsidize and subsidize and subsidize and not

doing the efficiency thing, when that breaks, you're going to break. The valuation multiples were getting pumped because there was so much money in the system and you don't want to miss the next big thing. And entrepreneurs were rightly saying, okay, what am I going to do with this money? I got to spend it so I don't get smaller than the next guy or gal. So that ethic was a ethic about who could grow faster, which was, again, you have to play the game on the field. Now that that's changed and those multiples are come down and some sense of rationalities entered into picture, which is, well, I can invest in treasuries and get a 6% year-over-year

return or I can invest in Uber stock. stock, and if that does not grow 6% year every year or 10% to account for the risk, well, why am I putting my money there? And then the money flows out from an Uber stock to there. So then your ability to spend money and raise it without being diluted is changed. So it's sort of a very natural reaction, especially in tech, which was inflated on almost any other sector in the economy. So the knock against these companies has always been that they're just, you know, VC

subsidized carpool rides. and when that when the you know the band stops playing that's going to be the end of these businesses I mean we're starting to see that it's made it harder for them to operate I got I've got you shaking your head again so clearly you have a rebuttal here so what is it no no I was going to I was going to add context to what you said which is you were right that those were VC dollars subsidizing it but you had to do that because if you didn't the other company was going to do that but our theory of the case was we will subsidize as long as we have to and as long as the money is available. And then when it comes down to it, the bigger party is going to win when there's no more money

available. And that's what I'm saying is happening today. The bigger party because of the dynamics of the ride share market is going to win and it can be highly profitable. And that's what I think's going to happen. You're just out of the 10K. What's the profitability picture for Uber right now? if you're using normal accounting metrics let's try that if you start there it's losing a couple billion dollars a year still um now to be fair a lot of that is because of the stock they hold in dd and grab and some of these other ride sure companies around the world those are marked to market every year or quarter so depending on how is you know it's not really a cash cost Uber's balance rate. So if you strip that away, then, you know, they're still losing money,

especially, you know, to the tune of probably a billion dollars a year. They're paying, I think last year they paid, you know, one or two billion in stock-based comp, which is another kind of current trick that tech companies are using and taking out of EBITDA. So adjusted EBITDA doesn't include all the money you pay your employees anymore, which is something that I don't think so is, you know, it clouds the picture of it. Yeah. One more question about these companies,

and I think we're going to start to cover some other stuff. But you mentioned DoorDash has given Uber a run for its money, or I think you said that they whipped them in North America. What has been the secret to DoorDash's ability to do so well? Tony Jew is an entrepreneur, not sort of a, caretaker diplomat type CEO so he is in the product there's zero percent chance in my i don't know tony zero percent chance he hasn't made deliveries on door dash frequently to see what that experience is like so they've just innovated some of the innovative innovations they've done that are really material

dash pass a huge innovation right because people are ordering so much food during the pandemic that if you could sign up for this 999 subscription plan and have free deliveries, it was a deal all day long. And then why would you use Uber Eats? So the loyalty they got with that, they're way ahead at Uber by years on that piece. Smart. Second thing is suburbs. They went to the suburbs faster and they were the only party out there for a long time. Because remember the old Grubhub, Grubhub was like dense urban areas. They went and attacked a new market in the suburbs. Again, during the pandemic. Super smart move. And then third, they did this brilliant thing where it's called Over the Top. So it turns out that when any human opens a food delivery app,

and we learn this at Uber, they want to see as much variety as possible. Even if they know they want Chinese, they want to know there's Italian, they want to see seven Chinese restaurants. So DoorDash saw this early. So what they did is they went to every Chinese restaurant in town and they just put their menu on the app whether or not they had a deal with the restaurant. And they would pay retail for it. And so you ordered it, the customer gave it. And then at the end of the month, the sales guy would call this Chinese restaurant and say, hey, do you know, we bought you $2,000 a business this month or you want to sign up? So, you know, they sort of hacked the variety problem.

And it was an incredibly smart move. Yeah. We have, Ron John Roy comes on every, from margins comes on every Friday. And he wrote this story about his friend who owns a pizza place. I'm sure you've seen this story. And they realized that DoorDash had put their restaurant on the app, but, like, marked up the pizza. So they just kept ordering pizza on DoorDash and then pocketing the difference. Anyway, okay, one big picture question, then we'll go to a break.

Sharing economy. This was the hottest thing about 10 years ago. People could not stop talking about the sharing economy, sharing your cars, sharing your house with Airbnb. I heard people talking about sharing. lawnmowers, whatever it might be through an app. Where is that promise gone? Because we've talked about the struggles for Lyft and Uber already right now. I mean, Uber might have a path.

Seems like it's in better shape than Lyft, but also still not profitable. And then Airbnb has effectively been flat on the stock market and has its own well-documented struggles. So I think you're coming at this from a perspective where, okay, you're probably going to say no, but I want to hear your thoughts anyway on this. Why isn't the sharing economy looking back something that was completely overblown and actually in reality has not measured up to the hype? I think that the sharing economy, if you kind of look back on it,

should have only applied to high-cost assets, right? So asset like a home, a car, when you start applying into lawnmowers, you know the transaction costs don't make sense right so so we were how many times do you see we're going to be the uber for massages the uber for lawn you know dry cleaners the uber for this that it went so down the line because people were like i want the convenience of uber so let's call it the uber of this and i'm not using my lawnmower all the time so why i rent it out but you're like yeah but someone has to drive 20 minutes to borrow your 150 dollar lawn mail or drive back and you know the economics just don't make sense.

So I think it was overblown because it was applied to everything as opposed to being applied to the things where it makes clear economic sense, homes, cars. There's actually a company called the equipment share that does farm equipment where the equipment is actually really expensive and they have a sharing platform and it works, right? So there are categories where it makes sense to do that. but but the world applied it to everything just like every every hype AI is now apply what shouldn't we apply AI to right now brick making you know I don't know pick your pick your thing that it's sort of the it is the natural hype cycle and then now we're in the hangover

period on it Emil Michael is here with us he's the chief former chief business officer at Uber chairman and CEO of DPCM Capital joining us here on big technology podcast talking about the sharing economy, Uber-Lift, and all that stuff. Well, he mentioned AI, so we're going to talk about AI and what it's like to invest for him when we're not in zero interest rate days anymore. More on that, when we come back right after this. Hey, everyone, let me tell you about the Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending.

More than 2 million professionals read the Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here on Big Technology Podcast with Emil Michael, the chief, the former chief,

I should have written former in the notes here, the former chief business officer at Uber and the chairman and the CEO of DPCM Capital. Amiel, great to have you with us. So, okay, so obviously we're not applying AI to brickmaking, but this technology is going to be undeniably disruptive. I think that your perspective is, you know, given the way that you talked about it before the break, that people are blowing it a bit out of proportion. So I'm curious where you see the actual action happening on this front, what makes you excited

about it and where you think people should kind of chill. out. Yeah. So I am trying to be more sober about it just because, you know, all the companies I advise and I invest in, what do I do about AI? And just like self-driving cars, like there are some things that will happen quickly with AI and there are some things that will take a long time for AI to impact or disrupt. And so let's just be thoughtful about that, right? Um, Like, you don't need to go build your own LLM as a, you know, as a someone who sells expense management software just yet. Let's just see what, let's like think about where this is going to be applied.

So I'm a believer that AI is going to change the world in lots of ways. It's going to change learning, health care, even dating. I think it's going to change because it'll be able to match people better. There's a lot of dramatic changes it's going to make. I do not have a fully formed opinion where all the rents are going to go to the big tech companies or is there going to be an ecosystem around the tech that allows other companies to thrive like the iPhone app ecosystem did? Because when you stick LLMs into Bing, into Google, into office, just like you stuck Alexa

and Siri into all these things, does it just become a component of everything that exists today and therefore the big tech companies sort of get all the value out of it or not. I don't know yet. So that's sort of, you know, something I'm concerned about. But the valuations you're seeing now are exactly what the valuations you saw for the sharing companies back then. And it still might be a smart bet net net for a VC, but that you're seeing that bubbleicious environment happening there as well, right? Right. And we've talked about this on the podcast in the past, but it is very interesting where you get into this place where with the iPhone and apps at least, okay, the iPhone was the operating system. The apps were distinct. You weren't in the same user interface when you were using the apps versus using the app using iOS. Even though you were on iOS, you were in the app. But when you're using something like a chat GPT, you're going to be in that same user interface as you would be with the apps. And if the AI gets better, then it sort of, you know, throws the whole value of building on top of it into question.

Right. So then you're like, well, can you build a data set to the side that uses both in some way? Like take medical information. Could you take the Mayo Clinic's whole database of all the outcomes they've had of all the treatments that they've had since the beginning of time? And have that be something that's proprietary to them, but use everything else that's on the Internet. to combine the two to get, you know, sort of a worldwide, you know, trial of certain drugs or procedures and get better answers faster, is there a way to do that? That would be interesting if there were, because then you could have companies innovating around it, not just getting subsumed by it. Yeah, and it goes back to, like, I think what's happened with the evolution of technology

recently, which is that you almost get all the consumer applications, you know, by the big companies. And then there's places in the enterprise field, in like places like medical, where you can build something with value. So for instance, Character AI, which is one of those companies that raised $150 million on no revenue at a billion dollar valuation, one of those bubble-licious companies that you refer to, why can't, you know, a user then go into one of these big chat bots? And instead of wanting to chat with one of the characters from Character AI, just say, okay, chat GPT, you're George Washington right now. you don't necessarily need a billion dollar app to create that functionality you can just instruct

the big bots to figure it out yeah i mean so those you know i'm not enough of an engineering uh no i don't have enough engineering know how to know um how that will work and can you do it better outside or you know but uh these are all important questions i do think there are some scary a i questions not to be the doomsday are here but i was with eric smit the other day and we were talking about it, and obviously he spends way more time thinking about this stuff. And I said, what's your greatest fear? He said, well, what if you could subsume all the physics papers that have ever been written and that teaches Iran or North Korea how to make a nuclear bomb?

Or you could do the same thing for viruses or to the Chinese or some adversary can use their own version of AI to spit answers out that are propagandizing our citizens. You know, worried about sort of the dark uses of that, that can happen today and fast. And there's no way to regulate this stuff very easily outside of our own borders, much less in our own borders. Yeah, and Schmidt right now is even working on some warfare projects or AI projects meant to counter China. So you guys speak about that at all? We do. We spoke about it a lot because the Chinese for years have been investing a lot of manpower on this problem.

and it's been state-funded, right? Where we have four companies that have been doing off their own balance sheet this stuff, more or less. And so we talk a lot about, oh, can we get the four companies to agree that you can't chat CBT how to make a bomb and it gives you a clear answer?

And so can we get our four companies to agree? And I said, Eric, well, yeah, that's great. We get our companies agree, but how do you get the Chinese to not have their capability available to some lone wolf in our country to learn how to make a bomb. And there's no answer to that just yet. Yeah.

So are you investing in any of these companies or looking into them? What's your exposure to them as an investor? I mean, as a limited partner, a bunch of ECs, I'm kind of have some exposure through those things. Directly not yet because I'm so flummoxed by the ecosystem and how it's going to work just yet. And to be honest, I'm not in San Francisco, and this is not, this is happening in San Francisco, not in Miami right now. It's the first time I was like, huh, that's like, you know, that is the density of San Francisco engineering talent is allowing that to progress in that city more than any other city in the

world right now. Yeah, it's interesting. So you're the third investor that we've had on the show in recent weeks talking, that have discussed this type of topic, Joe Marquesi and Mike Mawkesi and Mike Nano were on from Human Ventures and Lightspeed a little bit ago. And they were also like talking about just the struggle to figure out what's investable here. Yeah. So what, yeah, what are you investing in these days we're looking at? You know, I started, I, you know, slowed slash stopped investing directly, probably, you know, mid-21, just because, you know, I'd made a lot of investments.

and I just at some point got, the Web 3 stuff was so nuts in terms of my inability after being in technology for 25 years. I was like, my brain's going to break because I must not be understanding this. Maybe I'm too old now, right? And I was like, you know, Uber for blockchain. I don't think that was it. I think a lot of it was built on, you know, inflated dreams of what could be versus what was. So then I said, I must be.

I need to go re-educate myself and, you know, go hang out with a bunch of young people to just understand what I'm missing. So I stopped investing that. And it turned out to be a smart decision, at least with that wave of companies that have come out there. But now I'm kind of more excited about, I've never been excited about enterprise software, but now I'm kind of getting more excited about it these days. Not because it's steadier, but just because there's a lot of innovation happening in this stuff. And I do think AI has applied to enterprise, is going to be clear moneymakers. And so I'm looking for companies that are doing stuff in that way. And that's what I like.

I'm a little worried about emerging markets right now because of currency devaluation, especially in Latin AM because of political instability. So, you know, I'm kind of keeping it enterprise and keeping it, keeping my eye open and AI stuff right now. Interesting. Okay, let's end with this part of the discussion, because you brought it up and we have to talk about it. Man, I think two years ago, I couldn't, you know, go five minutes without hearing about how Miami was the new capital of tech. I mean, it's died down a little bit, but, you know, living there and saying what you've just said about AI in San Francisco, what's your perspective on the state of that city? So, you know, I love this city.

I've been here five and a half years before sort of the pandemic rush. So I came to know it before it had, I started to attract a lot of the people it did. I'm excited that it has. I do think there has been an outflux from New York, L.A., Miami, from VCs, hedge funds, some founders, some people, some technology folks who want the lifestyle here, but the remote work sort of revolution allowed them to be here in a place they wanted to live. I still think there's a dearth of engineering talents here that'll be a leading indicator as to when Miami can build its own startups. There are a few great startups here that are homegrown and have engineers here, Lula, Papa, GoPuff, sort of essentially headquarters here. So you have three or four companies that make it, then could it be like New York or Austin in terms of the outcomes in a couple of years? Yeah. San Francisco still is a 5X from any other city in the country in terms of the density of talent and the speed of money, talent, and ideas.

So I love it here. I'm friends with Keith Rubea. I like him a lot. I love that he's boosting it. I agree with him that Miami's increased its relevance in the tech world by a factor of five. But there's still another factor of five to go to get to. to be on the same tier as these other places. Okay. And before I let you go, so you said you took a break, you wanted to study what the Web 3 stuff was all about. What did you conclude there? Because you seemed fairly happy that you didn't invest. I mean, I concluded that there are use cases for a blockchain.

If you think about a blockchain as a network that, you know, doesn't have human intervention. So it has an unbiased way of delivering information, data, or property from one place to another and securing it in that way, right? I was talking to a company that was doing, you know, wanted to use blockchain for home titles. How do you trade home titles? Now it's like a little piece of paper. You go to the county recorder's office.

Why should that all not be electronic or you sell a car and, you know, you just send the title over? It doesn't have to be blockchain. You know, you're going to argue with that. But the notion of a network where properties traded makes sense. The notion of the shit coins, okay, I think we all agree. Like, we were like, I don't know what was happening there. People were bored in their mom's basement, you know, trading. When you call it shit coin just to begin with, I mean, it seems like the answer is in the question right there.

Yeah, no, no. So I, but I do spend a lot of time thinking about what biology says and how he thinks about Bitcoin. and why it's different, and it has proven to be somewhat different than everything else. But so there are parts of it I get, but there's parts of it that are proven to be non-utilitarian. There's no use case for them. Right. So you're not taking that billion. What is the million dollar bet that Baljeet was making?

Oh, that bet that bet is a bet on the Fed's hyperinflation, what he believes are hyperinflationary policies, right? Yeah. Are you on board with that? I don't know, there's 60 days left in the bat. I'd take those odds. I'd think those odds. Yeah, yeah. I forget what the hyperinflation was defined by,

but my recollection is I'd probably take that bat, a friendly bat because I like biology. Okay. Emil, thanks so much for joining. Great to speak with you as always. All right, good to see you. Awesome. Take care.

And that will do it for us here on Big Technology Podcast. Thank you so much for listening. Thank you, Emil, for coming your second time here on the show, which is awesome. This was super fun. I appreciate you being candid. speaking about the issues. Thank you, Nate Gwattany for handling the audio.

Special shout out for Nate. You know, I've been working with Nate for three years, and if you're looking for a podcast editor, I highly recommend Nate. Just get in touch with me, Big Technology Podcast at gmail.com, and I'll put you in touch with Nate. Thank you, Nate, as always.

Thank you also to LinkedIn for having me as part of your podcast network. And thanks to all of you, the listeners. Special treat for you coming up this Friday, Jim McKelvey, who's the co-founder of Square, and currently the founder of Invisibly. We've had him on the show before. He's going to come on the show with Ron John and I

to discuss the current state of the economy, looking at the Fed, looking at what some people are calling a credit crunch and much more. So stay tuned for that. That'll be 11 a.m. Pacific 2 p.m. Eastern on LinkedIn, and also here on the feed, if you miss it. So stay tuned. Jim McElvey coming up Friday,

and I'll be back next Wednesday with my standard flagship interview with Congressman Rokana talking about his trip to Taiwan. excited to bring that to you excited that you're here appreciate you listening as always thanks again and that will do it for us here on this edition of big technology podcast