In Good Company with Nicolai Tangen - Dara Khosrowshahi CEO of Uber

Episode Date: March 29, 2023

What’s the future of transportation? How will Uber adapt to autonomous vehicles? And what is their CEO’s Uber rating? Tune in and find out! The production team on this episode were PLAN-B’s Nikolai Ovenberg and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with additional input from our portfolio manager John Santo Domingo.Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi, everyone, and welcome to our podcast, In Good Company. I'm Nikolaj Tangen, the CEO of the Norwegian Southern Wealth Fund, and your host today. In this podcast, I talk to the leaders of some of the largest companies we are invested in, so that you can learn what we own and meet these impressive leaders. Today, I'm speaking to Dara Khosrowshahi, the CEO of Uber. Uber disrupted the market and reimagined the way the world moves. Now, they are the world's largest ride-sharing company, and it's also the company that has taken me to most different places.

We own over 1% of Uber. This translates to over 5 billion kroner, or 600 million US dollars. Tara is a very impressive leader. But how will Uber adapt to autonomous vehicles? And what does she think about teleportation? Stay tuned. So Dara, very welcome to this podcast. It's an honor to have you on. You know, you are already a bit of a legend. So wonderful.

Thank you for having me. I'm glad to be here. So you have now reached roughly 10 billion trips worldwide, and you're the largest ride-sharing company in the world. And I gather that you have made some of those trips yourself as an undercover Uber driver. So how was that? It's been great. I started actually delivering for Uber Eats during the pandemic on an e-bike in San Francisco. And I recently finally bought a car for the first time. I bought a Tesla so that I could understand the driver experience. I actually drove last night for a couple of hours. It's terrific in terms of putting yourself in the shoes of the driver and the courier,

understanding what the experience is like, and understanding how our product works for the driver or the courier. Because I think most people, obviously, you've used the Uber app to go someplace. Many have used the Uber Eats app to order something. But identifying and understanding the driver and the courier experience was something that was super important to me. It's becoming much more important for us as a company, making sure that our employees also understand the merchant experience, the courier experience. And I think it's going to be a pretty important key to our growth going forward. So when you've been driving, what have you learned? Well, first is there are a lot of particulars as it relates to the product itself that I work with our engineers on. It's a pretty sophisticated product and we are the most sophisticated of its kind.

And one of the areas that we're really working on is the information overload for the driver. We're sending the driver significantly more information now than previously. For example, we just had an innovation which shows them the upfront fare and the destination of where people are going. We will sometimes forward dispatch you so before you finish a ride, we'll send you another offer for another ride that happens to be close to you, highly efficient for the network. It makes sense for the driver often as well. But there's just a lot of information overload coming to the driver. And the driver is supposed

to be safely driving on the road. That has been something that we've been working on as it relates to engineers. But it's really the nitty gritty. And then I'll tell you, it's weird being rated every time. What's your rating? Five stars, five stars so far. I haven't screwed it up yet, but I really want to hold on to that five star rating as a driver. My driver rating is better than my rider rating, go figure. And you feel like you're being graded on your work every single day, every single ride. And you and I are being graded on your work every single day, every single ride. And you and I are being graded on our work, obviously, professionally. But it's different getting graded on your work on every single ride.

Moving tack here, Dara, you have a very interesting background. Tell us about your upbringing. Well, I grew up in Iran. We had a big family in Iran, big family business. And then in 1978, the Islamic revolution happened and my family had to leave Iran. We were lucky enough to have an uncle who lived in the U.S. We all piled into his house, all the cousins living together. And since then, I've been living in the US, grew up on the East Coast, studied engineering in school, got into investment banking, and the rest is history as

far as my road to where I am now. When you joined Uber, there were some challenges there on the corporate culture side. Just tell us about it. What type of company did you inherit? Well, Uber was a radical disruptor in the transportation space. This is a company that had to fight taxi lobbies, had to really fight for its very existence, and ultimately was able to break through as a result of a very strong competitive spirit and a willingness to disrupt and a willingness to take on the establishment. And that was very much a core part of its culture. And to some extent, that's what allowed Uber to exist. Without that will to survive and to fight and to challenge and to disrupt, Uber wouldn't be around. At the same time, once the company started having success, started growing up, at some point the company transitioned from a disruptor to call an incumbent, from a company that had very little

power to a company that wielded enormous power. And with that power and with that incumbency comes responsibility. And it all happened so fast in the early years of Uber that I don't think that the company realized or made that switch in terms of disruption to call it responsibility. Now you're a truly scale player and you've got to operate in a different way. And I think that was the cultural challenge and the cultural shift that the company had to go through. Sometimes people can't make those shifts quick enough. Uber wasn't able to, so I had to come in as a new leader to retain the entrepreneurial spirit, the drive to innovate, the drive to continue to expand and build new product,

but combine that with a newfound responsibility, a responsibility not just to think about the company, but to think about all of our constituents, to think about the driver and courier experience, to make sure that we take input from regulators and the mayors of the cities in which we operate, and to understand that your responsibility expands as your scope and scale of a company expand as well.

That was a cultural reset that was required. And I think we are well along that path. But it's a big responsibility running a company like Uber and we cannot take that for granted. How do you do a cultural reset? Because it's called culture for a reason, right? Very, very difficult to change. So How do you do a cultural reset? Because it's called culture for a reason, right? Very, very difficult to change. So what did you do? Definitely. And I always say culture isn't what you do, it's how you do it. And it's pretty easy to shift what you do.

To shift how you work is very, very difficult. I think I was fortunate in that I came in during a period of enormous disruption. So I had permission to come in and reset the culture. There wasn't anyone who would say when I came in, hey, we've got no problem. Why can't you just leave things as they are? So I do think that I got lucky while it was a challenging environment. The brand had suffered and rightly so because of some of the things, some of the practices that we had in the past. I had permission to come in as a new CEO and reset the culture. And one of the interesting exercises that we went through was that I had to move fast in terms of the cultural reset, but I didn't feel like I had the ability to redefine the culture of the company because I was too new.

You know, you've got to really know and understand a company in order to change its culture or to reset its culture into something that's constructive that also represents some reality of who the company is. So we actually went out and crowdsourced amongst our employees to get feedback regarding what are the cultural norms that employees thought represented Uber, but also represented the ambition of the Uber

that they wanted to be a part of. We took all that input, and then we as a senior team took what stood out to us, took what was common, and reshaped it into a new set of cultural norms. It's still their norms that we're working on, so we're constantly shifting our cultural norms to kind of get to the right norms. One of the most important cultural values that we've got is that we do the right thing, period. And it's a very, very important statement of intent, which is anytime you take action, take it understanding your responsibility as an employee of Uber, you're representing the company, and think about doing the right thing, not just for the company, but all of our constituents.

So when you look at the success of Uber, what is the secret here? I think secret sauces for companies are complicated. So it's too easy to say it's one thing. But if I were to name top elements that come to mind is that Uber has a very strong combination of a very strong operational, local operational culture. The teams that the city teams, the ops teams that we have, they are engaged, incredibly high quality. They are the CEOs of their city and they feel that weight and responsibility and act accordingly. And we combine that with a very, very strong technical engineering group. What's unusual about our company as a technology company is that we build technology that shows up in the real world. It's not, you know, we're not building email clients.

We're not building social networking that, you know, is very much a virtual business. These are, you know, you push a button and a car shows up in five minutes. And the real world is a challenging place in which to build a digital product. So the combination of strong technical acumen by engineers and then incredibly strong operators on the ground in city by city by city who understand the pulse of the city and can really keep an eye on how the technical product translates into the real world, that think, is the uber magic. And there's constant tension between the two, but that tension ultimately creates a much, much better product

and we think by far the best ride-sharing product and delivery product on a global basis. Are there different ways you're going to use artificial intelligence in the future? Very much. So we are, I wouldn't call it artificial intelligence necessarily, but machine learning. And we are building larger and larger models now in terms of the pricing, rider side pricing, driver side pricing, the routing, where we position drivers in anticipation of demand coming in during certain times a day

in certain places. That's one large set of machine learning that we're doing. We will be using some of the newer models, chat GPT, for customer service interactions that we think can create a much richer interaction in terms of what you're looking for. You might say, well, I want to search for a new pizza place where I can get dinner for under $40. That can be now ML-powered versus you're going through a menu and or a filter, et cetera. We think that's pretty exciting.

versus you're going through a menu and or a filter, et cetera. We think that's pretty exciting. We think that description of restaurants can be personalized on a one-to-one basis. And the interactions with Uber when something goes wrong, as opposed to standard interactions, we can now essentially build the perfect interaction for you and the perfect conversational interaction for our customers as well. So we think we are at the very, very beginning of using machine learning really in every way in which we connect with the world.

You mentioned chat GPT. So we asked the chat GPT for what kind of questions we should be asking you. So we asked ChatGPT for what kind of questions we should be asking you. And so the one that came up right here is, what's Uber's vision for the future of transportation? Well, ChatGPT asked some very good questions. Hold on, let me see what ChatGPT says, the vision of the future for Dara Khasr Shahi Sibi.

Okay, so it says that the vision of transportation for Uber should be really powering movement of every kind. So if you imagine, you know, we are, there are cars that move people. There are cars and bikes that move food. There are trucks that move enormous payloads There are trucks that move enormous payloads in all over the world. There are bikes that are available to rent, taxis that want to carry people, buses, subways, etc. What we are doing now is wiring up everything that moves in a city and is available to move either people or things. in a city and is available to move either people or things. And connecting them in an intelligent way with all of the demand in the world, whether that demand is coming from a person or it's coming from a restaurant

or it's coming from an Apple store that wants to deliver a phone to you or comes from a dry cleaner who wants to get you your dry cleaning or comes from an Anheuser-Busch who wants to deliver their product to stores. We're essentially wiring up all of the movement and all of the demand in the world and then intelligently pricing, routing, matching it in a way that I think no other company can. We think it will create much more efficiency in terms of miles

traveled on the road. It will take away from empty legs, so to speak, so that to the extent that you're using energy to move things around, you're using that energy much more efficiently. And we're very much now engaged in the transformation to EV and electric, where we've committed to, by 2030, in the US, Canada, and Europe, for our fleet to be entirely electric so that we are doing our part to help with the global warming crisis that we're all seeing and feeling around us.

Do you think teleportation will ever be possible? I hope not, because I think we'd be out of business. I think so too. What's your take on autonomous vehicles? How are you preparing for this? We are, I think it's a technology that's enormously challenging. And I think it's taken longer

for anyone to develop autonomous technology that's ready for the real world. And the issue with autonomous is that the tail is incredibly difficult to build against because it's definitely the tail and there are these events that happen every once in a while that humans can adjust to quite readily that robots have a much harder time being trained on. And the second issue, and I think there's a real issue, is that people are much more forgiving of people making mistakes. The ability for society to forgive an autonomous car for making a mistake, getting into a crash, getting into an accident is much lower. So actually, the bar that we judge a human driver against is much lower than the bar that we will judge an autonomous driver against.

Why do you think that is? I think it's just societal. Why do you think that is? I think it's just societal. You know, you think about in the US, there are, I think it's about 25,000, 30,000 deaths as a result of humans making mistakes and driving. There's no way that would be permitted for robots. So if you have robot drivers and you have 10,000 deaths,

that's a disaster, right? That cannot happen. So I think have robot drivers and you have 10,000 deaths, that's a disaster. That cannot happen. So I think that's one of the challenges that not only are you solving for the tail, but the hurdle is much higher. You can be perfectly logical and say a robot that's three times better than a human should be something that we embrace as a society.

I don't think we're prepared for that. So when do you think we'll have autonomous vehicles as part of your fleet? I think that we will have, we're piloting with various players now. I think inside of three to five years, we will have some autonomous vehicles as part of the fleet and specific originations and destinations during specific times. And I think there will be a

significant period of hybrid autonomous and non autonomous that will stretch out for a good 50 to 20 years. So autonomous is coming. But I think autonomous at scale will be a 10 year fair. What's the competitive landscape now? economies at scale will be a 10-year affair. What's the competitive landscape now? Well, the competitive landscape continues to be intense in that we work in, you know, our business is a business that has a total addressable market of over a trillion dollars in mobility, well over a trillion dollars in food.

We're getting into grocery and obviously trucking as well uh a digital brokerage as well so these are large markets uh and the competition is is intense that said with the newer market environment uh with a higher cost of capital and the greater demand for cash flow and and proper profits now, we do see the competitive environment rationalizing. Competitors are spending less on average, competitors are more focused on profitability, on creating models that are no longer dependent on raising capital in the markets because the cost of that capital has gone up significantly, where in some cases there's no capital out there. So we think the competitive environment benefits

the larger players like Uber. We have the additional benefit of not only being global, not only typically being a leader in our marketplaces, but being multi-product and being a leader in mobility and delivery, where we can essentially acquire a customer and sell them into our mobility product set and delivery product set. And the same thing for drivers. Drivers in the U.S., you can deliver or you can move people around or both, or you can shop, for example. So our scale and our position puts us in a place where this is actually a competitive environment that I think is quite good for Uber.

And I think we as a company recognize the change early and we started to drive towards profitability a bit faster than many of our competitors, which I think has put us in a good place right now in terms of competition and in terms of total market size. Now, talking about your job, what do you think is key to good leadership? Well, for me, as a leader, I very much try to be a transparent leader.

One of the universal truths that I've learned as I have moved up in my career is that the higher up you are in a company, the less you really understand what's going on what's going on on the ground and in most of the circumstances where i've seen leaders fail it's not because they're incompetent or they aren't smart enough it's because they didn't assess the situation correctly because they weren't either getting signal asked what was wrong or were ignoring that signal there's a a very, very strong confirmation bias in humans to look for signals of success and ignore signals of failure. That, for me, has translated into a leadership style, which is quite transparent

with my team. When I talk about my team it's not my direct team it's it's it's the whole company because the only way that i figured out how to get the real stuff how to get real signal to be able to talk to an engineer who's three levels down for her or him to tell me actually what they really think versus what they think i want to hear is to be entirely truthful and transparent to them about what the issues are, what are challenges, what are key strengths, where can we go going forward. So what you will find with me as a leader is we have all hands of the company every two weeks. We open it up to questions from everybody and there's a dialogue that's going on with a company that's a very frank transparent truthful dialogue because then that allows me to have a real

relationship with my employees it's not you know sometimes it's polite sometimes it's impolite because they're telling me not just what i want to hear, but also what I don't want to hear as a leader. Are you a good listener? Yes. It's actually one of the skills that I learned from Barry Diller, who was my chairman when I was at Expedia and is a real business mentor, is the ability to listen. How did he teach you how to listen? He has an intensity. One is, I learned just by

watching him. I still remember we were going through a strategic planning exercise. And usually at the end of the year, we would present our plan to Barry. The whole company would come in and present. And we had the presentation afterwards, Barry and I usually sit down and we chat about what we think. And he said, you know, what do you think? And I said, you know, oh, I think we've got the right plan going forward. And he tells me, no, you don't.

I'm like, what do you mean? I just told you, I think we have the right plan going forward. He said, there's something wrong. There's something wrong. What's going on? And he nailed it. And I wasn't feeling great about our plans going forward. And I didn't want to go against my team because it was a plan that they had spent hours and hours on, but I was feeling uncomfortable

with the direction. And here's Barry Dillard telling me that I'm feeling uncomfortable with the direction. And that exchange actually led me to go back to the team and say, we got to start over again. You know, this is not where I want to be, et cetera. And we grinded our way into a much better plan going forward. So with Barry, you know, he's not a person who kind of sits down and gives you a speech on what to do. He just does it. And either you learn from that or you don't. I was lucky enough to learn from that.

And I think that listening and really hearing people out, one, I think people who are heard, who believe that they have been able to represent what they truly think, I think then you can align with them much better. You can disagree, but at least you heard them out. And also it allows you, again, to get that signal so that when it's time to make that key decision, you're working with the whole data set, not an edited part of the data set. And if you're not the editor, then someone is deciding what you're going to hear.

And that is not a position that you want to be in. I should just interject that Barry Diller is a very successful American entrepreneur. And you mentioned him as your very important mentor. Now, what makes a good mentor generally? And how should that relationship be? So I think that the most important part of learning in business is doing. And what I learned from Barry is he was very willing. He would judge you not based on your skill set, but he would judge you based on your capability.

What kind of person are you? skill set, but he would judge you based on your capability. What kind of person are you? How do you operate, not just in a good environment, but also in difficult environments? How do you react when you're challenged? Do you fight for your convictions? Are you stubborn in your convictions? Do you not listen, et cetera? So what I found with Barry in terms of mentorship was his mentorship was a pattern of challenging and then creating opportunity. And that's what I try to follow with my team as well. It's not sitting down and giving a speech. It's listening, understanding the person, and then putting them in increasingly challenging or foreign roles so that they can learn and shape themselves in the way that's right for them. Because I will tell you that one piece of advice that I give leaders is just take what feels right for you. Don't try to

be someone else. I still remember I had read, it was a, I think it was a Fortune article about a CEO that I really admired who talked about walking the halls and, you know, going out there, meeting with his employees, et cetera, really talking to them, having conversation with them. And I thought, wow, this is a great practice.

You know, I'm going to start walking the halls as well. And I started scheduling, my assistant started scheduling wow, this is a great practice. I'm going to start walking the halls as well. And I started scheduling, my assistant started scheduling walk the halls time for me. And I would go walk around, talk to people. And it was so awkward. It completely didn't work for me. Why? And my assistant just, it was because it was, for me, felt like a fake encounter so i like you and i are sitting down we're having a real discussion and we're going to talk about the real stuff and and listen that that's what works for me um a five minute casual conversation talking about the weather and what are you up to today and then moving on is not a rich interaction for me. So the point is that I find that learning by doing, the job of the mentor

is to advise, to challenge, to push. But ultimately, I think that the best way people learn isn't because someone else is telling them something. It's because they figure it out themselves over a long period of time. Apart from walking the halls, what are the other most challenging parts of being SEO? You know, I think the most challenging part and the most important part is to put the right team together around you. Ultimately, your success is a reflection of your team around you. There's no way you can do it all yourself.

And that can be a difficult challenge if you're coming in and you don't have the right team and you've got to recruit a bunch of folks. And if you find yourself with different needs going forward and as a result, a different team. So finding that the right team, the right mix. One team at Uber, which is doing really well and which is very diverse is, of course, all your drivers. So who is a typical Uber driver?

Oh, you know, the Uber driver is, it really looks like the general population. So 90% of our drivers or couriers, first of all, work on Uber less than 40 hours a week. So these are people who come in and engage with the app when they want to. About two-thirds of them are actually even working less than 20 hours a week. So they live their other lives. They may have another job or they may be a caregiver, et cetera. giver, et cetera. About 15% of the overall population are women, about 85% are men, and we're trying to have more women come onto the platform much more. And we have a significant share of immigrants of different ethnicities as well, which makes the driver very much a part of the general population

and certainly the blue-collar population in most countries out there. And how long do they stay on the platform? Drivers, actually drivers who are driving 20 hours or more, they're quite sticky. So they will stay on the platform for years and years. And then drivers who are in that platform usually for the 20 hours or less are coming in and coming out. It really is a earnings augmentation tool for them. About 70% of drivers who are signing up for us now, actually in this environment, are saying that they've signed up because inflation is a factor in their decision

making. They're signing up so that they can make that extra money to be able to afford their groceries or their gas, etc. That type of driver is coming in and out of the marketplace quite quickly. Now, how do you approach unionized labor? Well, we don't because our drivers are not full-time employees, we don't have unions per se. But we do engage in dialogue with unions. And we do have unions now who represent, call it sectoral bargaining, for our driver pool so that our drivers do have a voice and a constructive voice, sometimes directly with us, but then with unions. So for example, in France, as a result of the sectoral bargaining, we came to a minimum fare for trips. Drivers didn't like super short trips where they

weren't getting enough, they thought, kind of a fair shake in terms of their shorter trips. enough, they thought, kind of a fair shake in terms of those shorter trips. And we raised our minimum fare for short trips as a result of that interaction. So while we're not unions, we do think the voice of the worker, often in concert with a union, is something that can be constructive going forward. We have many thousands of young listeners on these podcasts. What is your advice to them? You know, I'd say my advice is to the extent that you're making a career decision, make the decision not just based on where you're working

or how much you're making or what your title is but whom you're working for uh i have in my career i've always like i kind of didn't care what i was doing or what my title was or what i was making i always looked for someone to work for and and and you know because i could learn from that person and if i learned from that person then i would you know meet another person that I could learn from and kind of move from person to person and really shape myself as a result of those interactions. And I think the second factor, and this is entirely practical, and I'm an engineer and I think about these things, is usually if you make a bet on a smart person who's successful, that person is going to move up as well. And usually they will take their team up with them. So you're not only benefiting from the fruits of your own labor and your own understanding

and knowledge, but you're also leveraging the person that you're working for as well. And that has always served me well. I've never cared about what I'm doing. My goal has been to go work for someone smart. And that has always been a good decision in my life. Well, Dara, big thanks for being on the podcast. Also, a big thanks for all the trips because your company has taken me more places

than any other company. And we're going to price those trips perfectly from now on. Thank you very much for having me. Sounds like a plan. Thank you very much for having me. Sounds like a plan. Thank you. Take care.