This Week in Startups - Dara Khosrowshahi, Bill Gurley, Brad Gerstner, & Jason Calacanis on Uber's growth and future | E1878

Episode Date: January 12, 2024

This Week in Startups is brought to you by…Gusto is easy online payroll, benefits, and HR built for modern small businesses. Get three months free when you run your first payroll at http://www.Gusto.com/twist*Gusto pricing shown in ad is based on pricing prior to March 2025The Paintbrush Loan is the earliest startup financing on the internet. No pitch deck, no business plan, no minimum time in business, and no warm intros. Plus, you get to keep your equity. Visit http://www.getpaintbrush.com to see if you qualify for a $50K startup loan in less than 2 minutes.Squarespace. Turn your idea into a new website! Go to https://www.Squarespace.com/twist for a free trial. When you’re ready to launch, use offer code TWIST to save 10% off your first purchase of a website or domain.*Today’s show:Dara Khosrowshahi joins Bill Gurley, Brad Gerstner, and Jason Calacanis to discuss his initial reservations about joining Uber and how he overcame them (14:57), the early magic of Uber that captivated investors (22:36), a deep dive into Uber's future plans (45:50), and much more!*Timestamps:(0:00) Dara Khosrowshahi joins Bill Gurley, Brad Gerstner, & Jason Calacanis to discuss all things Uber(2:41) Setting the stage for Uber entering 2024(4:52) Untold parts of Uber's story(09:38) Gusto - Get three months free when you run your first payroll at http://www.Gusto.com/twist(11:38) Bill Gurley discusses Dara's selection as CEO(14:57) Dara's initial reservations about joining Uber and how he overcame them(20:57) Dara’s discomfort in the free-money environment of ZIRP(21:43) Paintbrush - Visit http://www.getpaintbrush.com to see if you qualify for a $50K startup loan in less than 2 minutes(22:36) Exploring the early magic of Uber that captivated investors(26:27) How valuations impact founder mindset(30:49) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://www.Squarespace.com/twist(32:17) Discussing the relevance of secondaries in the near future(35:02) Breaking down some Uber myths and Dara’s focus on drivers(45:50) A deep dive into Uber's future plans(51:31) Uber’s strategy with upselling as AI enters the conversation(58:04) Bill Gurley on joining Zillow’s board and how innovation is needed in the real estate industry(1:05:27) Brad Gerstner on markets*Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp*Check out Uber: https://www.uber.com*LINKS:Silicon Valley clip referenced:https://twitter.com/StephNass/status/1745132141652877788*Thanks to our partners:(09:38) Gusto - Get three months free when you run your first payroll at http://www.Gusto.com/twist*Gusto pricing shown in ad is based on pricing prior to March 2025(21:43) Paintbrush - Visit http://www.getpaintbrush.com to see if you qualify for a $50K startup loan in less than 2 minutes(30:49) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://www.Squarespace.com/twist*X:https://twitter.com/Jasonhttps://twitter.com/dkhoshttps://twitter.com/altcaphttps://twitter.com/bgurleyLinkedIn:https://www.linkedin.com/in/jasoncalacanis*Great 2023 interviews: Steve Huffman, Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland*Check out Jason’s suite of newsletters: https://substack.com/@calacanis*Follow TWiST:Substack: https://twistartups.substack.comTwitter: https://twitter.com/TWiStartupsYouTube: https://www.youtube.com/thisweekin*Subscribe to the Founder University Podcast: https://www.founder.university/podcast

Hey, Dara, how are you? I'm doing great. How about you? Pretty great. Pretty great. Looks like I'm stuck on another pod with two lunatics. I was asking you about this. This is a real thing now.

It's amazing. It's an experiment. It's an experiment. It's just a couple of guys. It's like it's a thing. The girl in the era is an experiment. I love it. This week in startups is brought to you by

Gusto is easy online payroll, benefits, and HR built for modern small businesses. Get three months free when you run your first payroll at gusto.com slash twist. The Paintbrush loan is the earliest startup financing on the internet. No pitch deck, no business plan, and no warm intros. Plus, you get to keep your equity. Visit getpaintbrush.com to see if you qualify for a $50,000 startup loan in less than two minutes. and Squarespace. Turn your idea into a new website.

Go to Squarespace.com slash Twist for a free trial. When you're ready to launch, use offer code Twist to save 10% off your first purchase of a website or domain. All right, everybody, welcome back to this week and startup slash BG squared. It's a little bit of an experiment we're doing here. Last week, we got such a tremendous response to having two of my besties on the program and two legends here in Silicon Valley, of the greatest investors in the history of Silicon Valley. Of course, Brad Gersoner from Altimiter,

and of course, legendary venture capitalist, Bill Gurley and friend of mine. Welcome back to the program. Thank you. We decided this week, we would try something new. We decided we'd look for, you know, some operators, people operating businesses, maybe businesses at scale and see if there's anything we can learn from them. And we thought, you know, interesting business that all three of us were involved in as investors is a taxi company called Uber. And their CEO, Dara Kasar Shahi, is here with us. How are you doing, Dara? I am doing very well, although I am quite nervous.

This is a very dangerous group to be talking with. Knowledge is not my friend right now, but we'll see how it goes. Well, easy to go up against a journalist, right? They have partial information. You can use your charm. But here you actually have quite paradoxically in some ways. I was the third or fourth investor in Uber, Bill and the seed round. Bill Gurley, of course, did the Series A. And Brad, I'm not sure when you came in, but I think it was when it was a private, yeah? Yes. We came in a couple rounds before they went public and then also were involved in the IPO and then have been very involved in the company ever since.

This has been quite a journey for this company. We all backed it knowing that there was something special here. All of us had a, you know, a different thesis about it. But let's set the stage right now for Uber going into 2024. The company had been pitched, I think, as it will never make money. It's impossible to make money on this. And great job, I think, Dara, in shepherding the company to profitability. So maybe Brad, it would be good for you to maybe just talk a little bit about the Uber free cash flow story and pull up the slides while we set the stage here. You know, the interesting thing about Uber is they were forced to get fit before everybody else because it's a travel company and COVID hit in March of 2020, and Dara, I'm sure can tell the story, but gross bookings turned upside down. We still had excess capital and competition in the world. And so if you look at this slide one,

Uber free cash flow generation, I think it really tells the story. The company went from losing over $2.5 billion or around $2.5 billion when Dara took over to profiting over $3.5 billion, and we're talking free cash flow. This is not a bunch of manipulated, you know, kind of numbers, you know, last year. And if you look at the consensus forecast for the business, which is pretty mind-boggling, it's estimated by the consensus that will reach almost 10 billion in free cash flow just a few years from now. And then if you look at the second chart just on stock price and then, you know, kick it back over to decay. But, you know, the stock price has reflected that there was a lot of questions, Jason, as you talked. I mean, listen, how many times did you and I and Bill and Dara

talk about the fact that these headlines were that this was an impossible category who'd never be profitable. But what really happened was this capital being used as a weapon of economic destruction, destroying profits. And so the second chart shows when that stopped happening, when interest rates got real and Dara's changes that he put in place kicked in, you saw massive separation in terms of performance between Uber and Lyft. And so maybe just Dara, take a us through one or two of the key levers. And what part of the story maybe hasn't been told? Yeah, absolutely. So I do think that the, listen to early years with Uber, we were engaging like everyone else, especially private companies and private companies at scale and growth

at all costs because you had this free money regime. Everybody was doing it. And all valuations were based on growth rate and no one cared about profitability as long as you had some theoretical business model that you could show to investors and who knew when that would happen. It kind of reminded me of, I think it was Chuck Prince. He was CEO of Citibank. He's like, when the music starts, everyone has to get up and dance. I think it was free the real estate crash, et cetera. So I think the music was like really loud in the free money era and everybody was dancing.

And for us, the music stopped earlier, which was COVID. And literally overnight, 85% of our business disappeared in terms of our ride share business. That was the profit generator at the time. And it was a complete disaster and nobody knew when it was going to come back. Now, our Uber Eats business actually grew and grew very, very quickly. but it was unprofitable business at the time. It was much less mature, et cetera. So that was a toughest time in my career.

I never thought that I would come to Uber to do a mass layoff, but we laid off over 25% of our workforce. When you lose 85% of your revenue, you can't take kind of casual actions, so to speak. And more importantly than just cutting costs, we actually completely got out of certain businesses or we decided to get out of certain businesses. You know, we were developing our autonomous technology. It was not a fan of that.

I remember, and we totally got out of that business, bikes and scooters, hardware. We really had to decide what our core skill set was. And our core skill set is to build marketplaces, matching supply and demand at great scale with the best matching and pricing technology than anyone else on Earth, because we've got the most data. And so we really had to restrict back to our core. And while it was very, very painful, and while I never want to go through that again, one of the things that I swore to myself and my team kind of, we talked about it is we never, ever want to have another layoff. So post-COVID, while a lot of companies started spending again, when things started coming back, we were actually

very, very disciplined in terms of costs. And I think since 2019, you know, our gross bookings have doubled, but we've added about only 10% in terms of headcount. And, you know, to your words, Brad, we stayed fit. And listen, it's been, it hasn't been easy because there are a lot of demands on the team to do more and to grow the business. And in the end for our business, the first thing is growth, right? So if you look at this chart, I won't comment on the, the expectations, but since 2017, we've more than doubled our audience. This is even with COVID, right? More than doubled our audience. Trips has grown about two and a half times. Gross bookings has grown, you know, basically three and a half times as well. But we have the discipline as a company

to keep heck count flat, to be very, very disciplined in the investments that we're making, to stay in the area where we have clear advantages, which is this marketplace science and a great consumer set of great consumer apps and a great set of earner apps and not getting out over our skis. And then very kind of having discipline on every single cost center, right? It's like credit card costs, customer service costs. Every single cost center for us has an owner. There's a real pride.

And I think that the heroes that the company aren't the people. who are growing from 50 headcount to 100 headcount to 150 headcount. They're the ones who keep driving and keep building and keep innovating with small teams. You know, the definition of heroes change within the company. And I think the nice thing is that with success comes kind of the positive reinforcement that people are looking for. And we definitely, you know, because we are multi-product and our rides business can help eats in terms of demand, the eats business can help a rides business in terms of supply, the platform that we have, the scale that we have, we've, you know, the stock has definitely outperformed competition and hopefully we can keep it up.

All right. Listen, I know. I'm a founder just like you. And there are things that I love doing. I love working with my team to build great products and services that delight people. You know what I hate? I hate doing my chores. What's on the top of my chore list?

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for you. All you had to do is go to gusto.com slash twist, G-U-S-T-O-com slash twist. I use them, I love them. You must go to Gusto. Again, that's gusto.com slash twist. Okay, so Bill Gurley, this is an incredible segue into when you hear Dara and this level of competency and discipline and getting the company to this point. It wasn't always that way. It was a high-growth company, as we both know, having, you know, had a seat at the table watching this, you know, in this massive ZERP environment. massive investment, global takeover. It was really inspiring, I think, what Travis did in terms of building out the company and the speed at which he did it. But you were intimately involved in DARA getting selected for the slot. Can you take us back to the competition for the CEO slot at

Uber and maybe give us some inside information and take on what it was your champion of DARA, etc. And technically I was on the outside. I wasn't great. I wasn't on the board. at the time, Matt Kohler had taken my spot. But I would tell you this, because I remember the conversations we had internally. And there were really two issues, or two characteristics that we talked about that you would want in a CEO for this business. And the first one was someone that could help put out the fire. And there were a lot, you know, it's easy to, it's easy to forget because of how far the companies come under Dar's leadership, just how many fires there were at the time, but there were many states attorney generals that were upset with the company. There were

issues in London. There was a, we were losing, you know, market share because of what was going on with the brand. And so it wasn't an easy decision, I'm sure, for Dar, just because there was so much work to do. And then the second part was, if someone could successfully put out all the fires, you know, how would you go about growing the business and would someone be great at that? And around that time, around that time, I had for some reason decided to tweet that I felt the business could be worth $100 billion one day. And I'm taking a lot of heat over the years for that assertion. But when I look at- That was your $420 tweet?

Yeah. When I look, and look, I think the pandemic, you know, made the timing. It took a little longer. But when I look at where we are today and the company is today and $130 billion market cap, you know, I have to give it. are, you know, he's right here in front us, but I had to give them a plus on both of those initiatives or characteristics that we're looking for. So clearly the company made the exact right choice. And it wasn't easy. This idea of competing when, when capital's free, we talk about the game on the field or zipper, you know, cash being everywhere, I can remember being in it

at the time and having the thought. And I even had a chance to talk to some of the best business people in the history of the world. They've never been through it. Like you could have grabbed, you know, Warren Buffett and Jeff, you'd grab all these people. They haven't seen that game where your competitor is willing to lose $2 billion. That was the first time in the history of business that people had faced something like that. And so I think the degree of difficulty was, you know, super hard. And it created enemies of the company just for the burn alone. I can remember. how painful it was the morning of the IPO. Two legendary people from Silicon Valley were on CNBC just throwing shade for like three hours while they were trying to open the stock.

And that was, you know, that was what was in bog at the time. So it's really, anyway, massive hat-tipped door. It's really incredible how far the company's come. Who is the close second, Bill? Who is the close second? If there was somebody. I think Meg and Jeff and all the names that were out there. Yeah, Darrow, when you hear Bill Gurley's sort of recap of that time period, when you had to make the decision and you're like, this is going to be hard. There's a lot of fires. And let's face it, you needed a wartime CEO to make Uber even exist. The fact is you had to take on every city. You had to take on a lot of corruption, medallions, etc. People who were incumbents didn't want to do this. Travis did an exceptional job of that. But yeah, it was pretty expansive and it was spending money. So take us through your decision. Were you ever thinking, this is not, the juice ain't worth the squeeze here, or this is just too hard.

I'm being set up to be the fall guy taking this company over. There's just the chance. And what did you think the chances were that you could get it to where it is now? I'll give you a little bit of a victory lap here. It's actually funny that, and by the way, we don't count as a victory luck. Every day can be a victory failure. But I do remember, I got a call from a headhunter at that point.

And my first reaction was like, hell no. Like, no way. I'm CEO of Expedia. Love what I'm doing. It's a great company. I've been to the company for 12, 13 years, worked for a person who I really admire Barry Diller. So the initial answer was absolutely not. But I actually had drinks with a friend, Daniel Eck, who runs Spotify.

And he's like, darn, I recommended you for this job. I don't know where. And I recommended you to this headhunter. did you say yes? And did he call you? I'm like, yeah, but I said, heck, no. And Daniel gave me a really hard time. And I still remember, he's like, you know, I said I'm happy at XP.

He's like, since when is life about happiness? He did his like founder pitch, right? Since when is life about happiness? It's about impact. And Uber is, you know, one of the most impactful companies in the world. And I would say that this is the magic of magical product, right? if I hadn't used Uber myself, if I didn't love the product and what it did for me and how it improved my life personally and how it was an everyday part of my life, no way I would have taken

the job. But the fact is that, you know, Travis had to fight and do a lot of good and a lot of, you know, things that were actually cost his job in the end. But he built a company and he had to fight to build that company. And yes, there were messes that had to be cleaned up. But the service was a magical service. It continues to be magical service. And it was at impact in the end. And it was that product in the end that convinced me, you know what? I think I can put out these fires. I did not know everything. And that's probably one of the reasons why I joined. It's always harder on the inside. But it's been one of the greatest experiences of my professional life. and I say like of my life.

It's, it's been a great ride. It's been a hard ride. But I don't, I would never second chance that, that decision. It was a great decision. You seem like you wanted to add something there.

Oh, no, I was thinking we, we owe Daniel a hat tip too, I guess. Absolutely. I'm just upgrading to the family plan on Spotify. During the podcast live. The random walk of life,

you know. One of the lessons, I think, you know, perhaps to come out of this, I think, you know, at the time I was talking to Dara, I was talking to Bill and others. And whenever people brought up Dara, it was like, oh, he's running another globally complex travel business. He's running Expedia. So that's why he mapped to potentially a good CEO. But when you talk to Bill

Gurley at the time, Bill's like, that's not the most important thing. Right. And I had done an interview with Darah probably four or five years before that. And before we did the interview, Dar, I don't know if you remember this at Summit, I asked you to take the Enneagram. And Darra on the Eniogram is a number nine. He's a peacemaker, right? And lots of presidents and CEOs.

So CEOs tend to fall in a couple buckets, either a nine or an eight. Eight is kind of the Frank Sloopman model of CEO. Nine is kind of the peacemaker model. And at that moment in time, having a high integrity CEO with a North Star that Dara had, who had dealt with really tough customers. I mean, yes, Barry Diller is extraordinary, but everybody knows Barry is tough. And Victor Kaufman were tough when you were CFO of USA Networks.

And then you took the handoff from a very popular Rich Barton at Expedia and doing that founder to CEO. handoff, which he had done before. And we knew he was going to have to take the baton from an incredibly popular Travis at Uber and be the CEO who came in after him. So I would say that was the first thing for me that was the most important, was who he was as a person and why that fit the needs of the company so much. And the second one was, which I think was deeply underappreciated, but Bill and I talked a lot about, which was capital markets. Darra understood. Dara understands. capital markets. He understood the value of capital assets, both good and bad. He understood the need to raise money and how to raise money. He understood capital deployment. He understood

efficiency and delivering profitable growth and free cash flow because Barry was, you know, you know, so instrumental in driving that in 99, 2000, when the world melded down, it was Diller who found his way through the door and Dara was the CFO of that company. And Uber at the time was hemorrhaging cash, needed to get rid of some divisions, needed to focus on the core. And so I think there was also a lot of confidence and a great fit in terms of your capital markets background and the needs of Uber. The private kind of spending as much as you can to put off competition, like, that was not my comfort zone. You know, I was running a public company for 13 years and the public markets instill. discipline and still kind of return on invest the capital discipline that I was quite comfortable

on. So I did have to play the game. I did have to dance, you know, to the music, et cetera. But this is, this is like, this is a great environment for me personally that I'm quite comfortable with. And I'm glad that we made the transition. I'm glad that we're in this environment. But the free money environment, some people had a party, but it wasn't a party for me. I'll tell you that. Listen, not every business is venture scale. If you're not, you won't be able to raise money from VCs. We all know that.

And not everybody has a rich family member to do their friends and family round. So if you want to jumpstart your business with $50,000, let me tell you about Payne Brush loans. Payne Brush has created a new kind of loan product. They connect ID-State startups with bank capital. So you don't need to give up any equity, and there's no pitch deck or revenue required. And the Paintbrush loan is available at the idea state. In fact, you can apply the moment you incorporate your company. Monthly repayment is a flat, predictable amount, which makes cash flow planning really simple.

So here's your call to action. If you're a founder in the U.S., go to getpaintbrush.com to see if you qualify for a $50,000 startup loan in less than two minutes. That's getpaintbrush.com to see if you qualify in less than two minutes. Gurley, I think this is sort of interesting for you and I to discuss having been there since the early days. It wasn't clear to everybody until they used the product that it was magical. I remember when I helped Travis raise the first million dollars for the company, I had 21 people at an event in San Francisco. And I said, okay, Travis, he says, what do I do? I said, just demo the product and then tell them how much you're raising. So he demoed in front of 21 investors. And the demo, Dara, you don't know the story. So he took out his phone and he just said, I'm ordering a cab. And then he said, hey, everybody come to the window. And everybody went to the window and they looked out the window and the cab was there.

And then three people, I said, who wants to invest? And three of us raised her hand. First round, Sion, Bannister, myself. 19 people said no. It wasn't clear that this product was like as incredible as it was until you used it and actually started building it. I'm curious in having watched the ZERP environment bill, it seemed obvious to me. me when I watched Uber go public and they were reporting, oh, we lost a billion dollars this quarter. We did a billion rides. And I just thought to myself, well, if you raised it $2, would anybody

stop taking Uber's? The answer was obviously no. So why do you think there was such a messaging problem, Bill, in terms of could this company ever be profitable? Wasn't it obvious to you, Bill, that it would be? Well, there's a really interesting kind of mental math puzzle, which is I used to talk with Mike Mosen about, which is a game theory question. But if you had two companies who both believed in network effects and they were going to compete against each other, how much would you spend to try and win? And I think if you talk to game theorists, you know, you'd spend, you know, right up until, you know, you die. Like, like, because it's, if you think it's winner, take all, like, that's how it's going to play out. And so to a certain extent, Mike and I had had that conversation prior to this environment showing up and then, and then the real world example played out.

In the middle of it, there were all kind of rationales that I think were wrong. But like one of them was people would say, oh, this is a natural duopoly or triop, like with no, it was just like airlines. Like with no actual rationale behind it, they would just state that. And so, you know, and it was an effort, I think, but, but what finally happened, I think, Dar mentioned moving into an environment he's more comfortable with. interest rates finally came up, money quit being free. Thankfully, all the competitors went public, I think, because that helped.

And everyone decided that they wanted to see profitability. And now, you know, I think you get into a position where you can see the power of the model. You know, David, David Sachs did that great napkin drawing years ago that I put in several of my blog post on Uber of why there would naturally be network effects, because the more users, the more drivers, the more drivers, the more coverage area, faster pickup times. It was meant to do this and it was meant to be profitable. But when companies are losing shit tons of money and it was record levels of money, it's very easy for the press or whoever else to say.

And look, there have been plenty of businesses, especially in like e-commerce and stuff where they lose a ton of money and they are selling dollars, you know, selling dollars for 90 cents and they can't get to profitability. So I think it's natural that people would have taken that mindset. But it's been, I would tell you, just as both as a shareholder and as a kind of an intellectual business strategist, I'm thrilled to watch this day finally arrive. It is what I expected. But boy, it took a long time and it was frightening along the way. And Bill and Brad, I'm curious, just one comment. And this, Do you think that the valuations got into the mind of the finders or the founders or the

companies? Because this is something that we were guilty of dancing as well, right? And part of it came from, Bill, when you said, this company can be worth $100 billion, right? And this is pre-IPO, et cetera. A lot of people made fun to you and it's proven to be true. But like that goes into the back of my mind, right? And I'm like, how big do I have to be in order to prove bill right? And then like, you actually start to do things to fit the valuation that someone made up for you.

And can that create for behavior? You know, oh, my God, I've got to invest more in this business. Or, oh, my God, I have to be an autonomous and I can't depend on an autonomous kind of environment like the way that we are doing right now. So is there this like double loop, which is not only as money free, but then founders and or CEOs have to do stuff to justify that elevated valuation. So they actually lose discipline too. 100%. That is that is the negative reflexivity of an overpriced round.

I, you know, I just posted in our other thread, Jason, you know, this clip from Silicon Valley that's going viral. Oh, yes. sitting at the bar and they're talking about. I could have raised less money. I should have raised at a lower price. He's like, oh, if I had raised at a lower price, I'd still have my job. The company would have survived. I would have never had to lay anybody off. I wouldn't have had to spend money like a fool. They nail it yet again. The negative reflexivity that occurs when you have a headline valuation, which by the way, barely saves any dilution for most of these companies. Like if you actually do the dilution math on it, it's really driven more

by ego than it is by dilution. Because most of these companies aren't raising that much money. But what it does is it forces the business strategy to fit that outcome. And worse yet, Dara, not only do you have to get to that number, you have to double that number. So if the number's $100 billion, you have to get to $200 billion. If the number's a billion, you've got to get to $2 billion in order to raise your next round. So I think it's one of the most nefarious things that occurred in the ZERP environment. And in 20 and 21, I remember talking to founders. And I would say, you're going to snatch defeat from the jaws of victory here. You're overpricing your company. When interest rates go back up, which they will as soon as COVID's over, multiples will adjust

down. At that point in time, you're going to be forced to do a 30 to 50% down round and very few Silicon Valley companies. Even the best ones, survive the morale hit. and all of the challenges associated with the downround of that size. And we've seen it happen. And in fact, we have over a thousand unicorns that are trying to work that out right now. A lot of these really good companies, but it's very tough when an Instacart has to go from $39 billion to $6.5 billion. So another way to frame this, you know, that even before this all happened, this issue would come up is just, and people that have been in public companies know this. but stock prices represent discounted future expectations.

And so if you raise a huge round, the expectations in front of you are huge. And to your point, Brad, if you compound at a cost of capital of 15% over five years or whatever, it's a doubling. Like, that's what you've got to get to. And too many, I think founders lack of understanding. It's really partially just financial, like understanding how financial markets work, right? and understanding, you know, and if you don't have that experience, you don't have that education, there's no way to know. Another thing that really complicates that this issue is secondaries. If founders are taking money off the table, I have found them to be remarkably singularly focused,

let's say that. It can be a massive distraction. Yeah. Yeah. Well, and they just get very price sensitive. Like, it's it's all about the price, all about price maximization. And it's, harder for them to think about these other issues that might affect the company in the future. If your landing page looks terrible, customers are just going to leave. They're going to bounce. It's 2024. There are no excuses for having an ugly website. So stop settling for okay or good enough and have an excellent, a beautiful, and extraordinary website using Squarespace. It's out of the box. Beautiful website designs that will engage your audience, allow you to sell anything, whether it's content or an actual physical product. And you know all these amazing Squarespace features. You've

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where you can create an online store or start a blog or create a subscription business for members-only content and so much more. You do this all simultaneously on the same platform. It's the simplest, most effective and best-looking way to start a business online. So here's your call to action. Check out Squarespace.com slash twist for a free trial. And when you're ready to launch, go to Squarespace.com slash twist for 10% off your first purchase of a website or a domain. Do you guys think secondaries are going to be a thing in the past? Like when I grew up and I was not in the tech space but in investment banking, et cetera, like the founder didn't sell.

And then it became okay for the founder or sell. Do you think in this more expensive environment, et cetera, that's going to go the other way or now? When we went through the zipper world and there were people raising billion dollar funds left and right, and they were begging their way into rounds, they were encouraging secretaries because the current investors didn't want to part with ownership, and everyone was dilution-sensitive, so it was the only way to get in the company. And it was even more nefarious, Bill. There were people who would use the secondary, Dara,

to win the deal. So imagine you're coming into a deal. Brad's offering, you know, whatever, $100 million out of billion dollars post. And then, you know, I come in and say, I'll give you you $100 billion a billion post, but I'm also going to allow you to sell 25, the founders to sell $25 million in secondary. And then those two things being in the same term sheet was insane when you think about the conflict of interest, right, Bill? Girlie, I think. Yeah. And look, I think it's still an issue today. I think it is still very common across a broad array of companies. I think it's the number one thing that allows a company to stay private for a very long time, because the thing that eventually causes a founder to almost be forced to go public is the employees eventually

say, hey, what about me? But some of these companies are doing broad-based secondaries across the entire employee base, almost on an annual basis. Yeah, SpaceX would be the prototypical company for this or Stripe. And Dar, I think to your question, when it's fair, and it's, you know, I guess pari, Pursu and everybody gets to participate and it's modest and controlled. I think it's a benefit to the company because people will stay long term, right? You're in year six or seven and you got to buy your house or put a down payment on it. It's great. The problem was like, Brad, you saw this up close in personal with Poppin, which the founder took out $200 million and yeah, that was peak Zurp and then the founder wasn't motivated. I want to go to two issues. I've seen that a lot.

like when founders get too much off the table. I mean, the bird example is a great example. How much did that, Travis, take off the table on bird? I think 50. I could be wrong. I got to tell you, when the number starts equaling private aviation

or second home, that's when I think it's super distracting. Whenever you start thinking about private aviation or a second house, it's very hard to focus at work. Darla, let's get two really important questions for you. Number one, I think one of the myths about and the attacks that Uber just constantly, even to this day to a certain extent, there's some people going after this. Oh, they're abusing drivers. Oh, the drivers are making $6 an hour. It's below minimum wage. All this nonsense. And it was really people, I remember during the private days, it was people of such bad faith because they would say, oh, somebody in this on-demand world who's sitting at home waiting for a ride, they waited for a ride for three hours. They did a $10 ride, therefore four hours divided. by, you know, $10 equals this, which is not how the on-demand economy works. But despite that,

the hourly rate has gone up, 15, 20, 30, etc. There are minimums in certain markets. And the number of people choosing to work for Uber on a global basis is extraordinary. And companies like Apple, Walmart, Target, Starbucks are losing their employee base to people who want to work for Uber or DoorDash or any other on demand because it gives some flexibility and the rates have kept going up. So what's the truth, the honest truth about what drivers are making and how many drivers are in the network now when compared to Starbucks, Walmart, Target, and those places? Because you've spent a lot of time with drivers now. That was a big part of your peacetime initiative was to empathize with drivers more. Yeah, and it helped us build a better product. Like the service doesn't exist without

about drivers. And actually, I say drivers are the number one growth driver for the company. As we get more drivers, the network becomes more liquid, ETAs come down, surge comes down. Just the demand almost shows up. It's not that simple, but that's the most important element of our growth formula. So it wasn't just speed time. I was like, I need to understand what it's like to drive for Uber. And by the way, it's a lot harder than it looks. Don't take. the job that your drivers are doing for you for granted. And I think for us, the truth is, drivers are making about 30% more than they were making five years ago, but so is everybody, kind of, you know, so that that is the spot cost of labor is gone up. But drivers are absolutely doing better. Our take rate, it's affected by revenue recognition and kind of merchant versus agency, etc., kind of the true take rate of the mobility business has stayed flat around 20 to 21% for the past five, six years. And we want to grow the business without taking take rate up because it forces a discipline

on the company in terms of cost structure, et cetera. You know, Bill, if he wants to talk about the, you know, rate too far, take too far, so of speak. So we've kept that take rate flat. And while I do think we've got flexibility to take it up, we don't want to. That's a last lever that we want to use. Now, what is happening in the U.S., two things are happening in the U.S. that I do think are affecting driver perception and how they feel, which is real, that we haven't done a good enough job managing through and we have to do better.

One is that on the driver side, instead of drivers getting paid a flat rate based on distance and time, in order for us to show. show drivers the upfront destination, we now essentially algorithmically price a specific ride. So we tell you exactly where you're going and we price out the ride. And for example, if you're going to the suburbs and the boondocks, we will price more than what would the normal rate be because you're going to come back. Your utilization is going to be low. You're going to have a bunch of empty miles. If you're going from the airport to the center of SF and it's going to be really busy,

we take a little bit off that rate for the driver to fund the other route. So our average revenue margin stays the exact same, but by pricing these two trips differently, we're actually bringing in more demand into the network. And one of the things that we haven't handled well is for that trip into the city, a driver may notice that that price is lower than they're used to and our take may be higher, for that price out into the Boontox, our take rate is lower. Our average take rate is the exact same. People tend to, you know, there's this, I think investors like they remember pain more than

they remember doing well. Drivers tend to remember the trips where our take is might be higher than the ones that our take is lower. So for example, we show drivers, what's been our take rate for the past week, et cetera, to remind them that our take rate has stayed the same. But we've got to do a better job. How many drivers now? and what's the longevity of drivers?

Is it a transient job or are people kind of sticking with this as a third of their income, part-time income? How would you describe? I know it's not one thing, but I know there's millions of drivers who are active. So how many drivers are active and how do they fall into buckets of sort of participation in the network, as it were? We've got six and a half million drivers globally. Active drivers. It has active drivers globally. Our driver base has grown.

over 30% on a year-on-year basis. So we have a lot of drivers coming into the system. It's a great flexible work opportunity. The majority of drivers are part-time, but that changes. That's a different geography to geography. So in a England where it's harder to become a driver, the regulatory burden is higher, a higher percentage of drivers tend to be full-time. In a Brazil, a lower percentage of drivers tend to be full-time.

So you do have a mix of full-time part-time. The majority of drivers are part-time, but there's a core of full-time drivers that are very valuable to us who really understand the system, you know, just as well as our top engineers do. Now, the other issue that I do want to make sure that I cover to is the cost of commercial insurance in the U.S. has gone up significantly. It's been a disaster. There was like a Wall Street Journal article about people not being.

able to get car insurance, you know, home insurance, etc. That, so in the U.S., our take rate, net of those insurance costs are less than 20%, they're 15, 16%. If you include that insurance costs, which is really just the pass through, they're north of 20%. And that is a pain that drivers are feeling. So in California, for example, commercial insurance costs have been increased by over 60% over the past two to three years. It's a huge increase. We've passed that on to riders, most of that cost. Why has it gone up?

Are there more accidents and there are more claims? More litigious or? It's more tort reform. People are incredibly litigious, you know, lawyers, fine, you know, people on Facebook, etc. So I think that there is work to be done in terms of, you know, these litigation costs are sky high for everybody. And we need to essentially get some control of that. And it does involve some regulations, et cetera, in Florida, for example, those costs are just

too high. And they're unfairly high. And a bunch of tort lawyers are getting that benefit. And if we can bring that cost under control, then prices for riders are going to come down. Demand is going to come into the system and drivers are going to make more. But that is absolutely one thing that's affecting perceived take rate in the U.S. And it's a bad, you know, it's a bad trend that we're doing everything that we can to

reverse. Is there a concept of self-insuring to certain extent or because Uber is such a scaled business? Could you buy an insurance business or somehow do this internally? We self-insure, we self-insure majority of the liabilities, but the liabilities are still there. Got it. Awesome.

Girlie, you had some thoughts, I think, just on Uber as a global question. Uber as a global company. As you as you scale Uber and, you know, as a truly global company, probably more global than even some of the Magnificent 7. And you're also simultaneously driving down costs. I'm curious how you think about employment and specifically employment in Silicon Valley. And I was at a conference recently and a bunch of enterprise CEOs were talking. And they said the Valley is a great place to start a business, but a horrible place to scale a business.

And they actively discussed moving headcount away from the Bay Area. And then I work with startups who have a lot. Ironically, their headcount, they're having the hardest time coming into the business, into the office are the ones in the Bay Area. And if you were going to hire a hybrid worker, the last place on earth you would hire them is in the Bay Area because it's so expensive. So I'm just curious, you know, how you think about that big picture question. Yeah. The majority of our engineering headcount or technical headcount is in the Bay Area, SF, Sunnyvale, et cetera.

And the fact is that like there is great freaking talent in the Bay Area. And despite what some people say, it's great talent who works hard. Like our engineers, like, I have to be careful. If I ask them a question on Thursday, they'll be up Saturday, 3 a.m. answering the question. And it's awesome, right? So the power and the talent that we have is great. That said, the majority of our growth in Hecktown is coming outside the Bay Area.

And there are incredible townhubs, India, for example, in Brazil, Sao Paulo for us in Amsterdam. So we are actively looking to diversify our technical talent with a core of rock star ninjas in the Bay Area. They really, it's like, it is an excellent core. But just like we've diversified our business globally, we should diversify a talent based globally. And sometimes, you know, having talent outside of the Bay Area can actually help you build better product. And for us, you know, product touches, drivers, riders, it's very, very local. It looks really different in Brazil.

So having an engineering team in Sao Paulo, who sees how our product translates there makes a lot of sense. I have an important question about, you know, this cleanup work you did and divesting from a bunch of businesses. Well, that then leads to innovation and new businesses and new business lines. Right now, Uber, I believe we refer to as a three-legged stool, maybe not a four-legged one. obviously you have rides mobility you got food delivery

and then of course you have Uber freight and there's this fourth one I noticed you ran a test and you and I talked about I was super excited about it of maybe workers and having Uber you know I called it Uber exec but I think you guys are calling it something else in this test and you've been public about the test

maybe you could talk about is there going to be a fourth leg to the stool and then how do you think about innovation is now the time to think about launching new innovative products or is there just still so much growth left in terms of rides and food delivery and the competition with DoorDash and grab and other places around the world that you should just stick to the three legs of the stool? So I think that there might potentially be a fourth leg, but I don't have an agenda. Listen, I want growth.

I want innovation. I want to build cool shit, right? And so the majority of the growth that you see, for example, in our mobility space, we have a bunch of new verticals, taxi, reserve, Uber for business, low-cost, high-capacity vehicles. All of these businesses have been built in the past five years. It's about $9 billion worth of GPs that literally has been built in the past five years, buyer engineers, by our product folks, et cetera. That kind of innovation, which is kind of adjacencies that you have natural rights to win at,

we, you know, who would have thought that Uber would now be powering New York City taxis, but that's a very natural adjacency for us, right? Like we have, you've got to tune the product. Now, they're really important tuning, which is for taxis. They might be full, et cetera. So we send a blast dispatch for taxis. We don't do a one-to-one match like we do with our drivers because we know when a driver is when a car is open or not.

With taxis, we don't. So we send a blast dispatch. The taxi who's open says, yes, the taxi who's not open. Says no. And we will work to integrate, by the way, with the taxi dispatch system so we can be smarter about that. But that's, it's exciting. It scales. It's much less expensive to go into, et cetera. Same thing with eating into grocery or getting into the direct business where we deliver for an Apple or a Walmart. These are greater agencies. And the great thing about Uber's, they're big, right, groceries of five plus billion dollar business.

It could be a $50 billion business. Direct, you know, is a billion dollar business, multiple billions of dollars. So the reason why I'm a little neutral as to the fourth leg is there are very large opportunities right in my backyard. So that's the stuff that we are focusing on. But what you're talking about, which is this work platform. We do have a global work platform. It's better than any other work platform.

And what we found is the more flavors of work we can offer someone, the more engaged they get with our platform. For example, in India, it's actually pretty cool. We have some of our drivers now working on artificial intelligence labeling, right? We're from home or drive for Uber during the day. Oh, really? You have a mechanical turk type business in AI labeling? Yes. High quality mechanical Turk business that are building.

It's a nice little adjacency. I'd love for it to get to a nice business. a nice big adjacency. And so we are definitely working on different kinds of work because we do have this work platform, flexible work platform that's absolutely second to not. This is fascinating that I think, you know, in terms of a framework that I hadn't considered, there's one side, which is customers have the app and they have the super app experience. But on the other side, six and a half million people who you vetted and have done jobs and have

been raided, hey, what else could they do? And some of them might want to work from home. Hey, you know, I'm dropping my kids off. you know, and then I do a couple of Uber rides or deliver some food, but there's this other opportunity, hey, I'm home, my kids are doing homework or my kids are asleep. I can't leave the house, but I could do two hours of work. The Uber app gives me an alert, hey, do you want two hours at X dollars per hour? Wow, that's quite brilliant. Our driver app is the closest thing, I think, to a Western super app there is, but not that many people see it. Most people don't see the

driver app. Most investors don't see it. Yeah. No, let's talk about super apps for a second. I know Uber had, we have Uber one, right, a membership. I think that's like an incredible product, but I don't hear too much talk about it from the company or from individuals. So maybe you could just talk a little bit about Uber one and then how that fits into everything that we're seeing. It's not exactly rocket science, which is what we find is people who use more of our stuff tend to engage with our platform more. They tend to stay longer. They tend to spend more. And so we actually have Uber 1, which is our membership program. It's growing very, very well.

We'll have more to say about it. And Ernie's coming up. So I don't want to say too much. Have you ever released the number of subscribers, the number or no? I think the last time it's 15 million and it's grown since. And more importantly, I look at the percentage of gross bookings that come from Uber one members. And for example, with Eats is getting to that 50% mark.

And it is, it's priced the same exact as our competitors. And we have more content, which is there's, you know, not only get delivery benefits, but you get mobility benefits. So over a long period of time, we think that'll be a winning strategy. But at the same time, we're constantly upselling people from a regular Uber ride to a reserve ride, for example, or from a ride to Hates, you just got home, why don't you have dinner, et cetera, we'll give you $5 off. And what's fun about those kinds of upsells is it used to be a bunch of people kind of sitting

around table, having ideas, let's do this upsell, let's do that upsell. And then it's like, let's put this percentage of our inventory to, you know, upsell on safety, etc. All of that is now being driven by AI. All of it is being targeted. So, you know, we have algals figuring out, you know, is Bill, will he take that upsell going to work for a coffee? And will Brad take that upsell, which is, hey, if you order, because he's got a family, he's got kids, $50 order, you get 10% off, et cetera. So, So what it started with like a bunch of people with ideas, now it's all algorithmic. And again, like, I have no idea what the algorithms are going to come up with.

But we got more consumers, more services than anyone else, more upsells than any other player. That combination is a potent combination, even outside of membership. Is that happening with AI right now? Or is it, you know, the team is. And you always start with simple algorithms and the algos get. Yeah, more complex. But the idea is what's the next best thing, right? What is here's Jason?

What is the next? What's that pixel that we can optimize? Because any pixel that upsells you something takes away from your base experience. And ultimately, where we came from the realm of design and opinion, we're going to a realm of data. And it's just a much better place. Hey, Dar, with your mentioning AI, we've been through this period where I think everyone got super excited, right? And Nvidia stock went up and everyone dove in and everyone told every CEO, you got to do it in every department and all this.

And I think we're moving towards a more rational mindset of like where is this stuff really fit? Where does it really add value? Where do you really get ROI? What's happening inside of Uber and where do you think the big early wins are? So I think one no-brainer win is developer productivity. So we are in, and listen, it's, it's, it's actually, it sounds easier than it is because we have a bunch of developers and they're like, listen, I'm working hard enough. Don't tell me use this thing. Don't tell me how to do my job. Just let me do my job. Let me get my diffs and et cetera. So the, we now have a subset of our developers who are power users of GitHub copilot. And it is excellent. And so the job now is to, to, and it's, And it's truly adding productivity. But we now have to sell it from like 20% of those power users to 50% to 80%.

And you shouldn't take that for granted. Like why can you do that tomorrow because we want developers to do their day jobs while they're training on how to get more productive? That's one angle. It's absolutely going to happen. It will be a home run for everybody. And it will, it takes some of the kind of BS work. away from developers so they can truly be creative.

So I do think it's a win-win. Next for us is customer service, which is, you know, actually for Uber, right? When you call in, we have to know what kind of customer you are because there's a lot of fraud in the system. There are a lot of people taking advantage of the system. Second, we have to understand the context. What happened, you know, to Bill in terms of his food didn't, he said he didn't get his food. Is that true or not?

And the third is, what's the policy? And the policy is going to be different place to place. but we're trying to make that more consistent. A human being has to go through all that. Now, essentially, and we take into steps, right? First step is AI summarizes all of it. So it's in a nice little package. Now the AI not only summarizes it, but gives the recommendation to the customer

service agent. We look at those recommendations. Are they wrong? And eventually we'll be able to move much more of the customer service to AI's as well. So that's another one. We are building out customer-facing products as well for eats, some cool stuff. My instinct is the next 24 months are going to be much more focused on backend stuff. On the customer-facing side, it's still too slow. Like, you know, our responses have to be in milliseconds, and there's, you know, even very small delays can cause

drop off, et cetera, but I'm confident that the customer saw it is going to come. And this is a big wave. It just may be a little bit slower than some people expect, but the backend stuff is dynamite. And Darrow, are you building custom models to help drive these? I mean, you mentioned GitHub co-pilot, obviously a Microsoft product. But are you, I'm just curious, there's this debate in the LLM land, whether everything's going to be large frontier models. What I hear from a lot of companies is that those are very, very.

expensive and they have to figure out how to do this within the context of a, you know, expense side of their business that makes sense. So I'm just curious, are you using open source, are you customizing or are you doing a combination thereof? Right now, all of the buffs. So we have an application layer that is our own AI layer and we can plug in public models, open source models, and we work with all of the larger players. And I actually think, think the answer is going to be all the above. There are certain highly idiosyncratic use cases where a smaller custom-built model will be the right solution.

And then for, I think, a GitHub cop pilots, et cetera, it might be you want more general models on some of these larger models. So I don't think it's going to be an if-or. It's going to depend on the circumstance. I think we're going to use all that. Like they are, you know, and when you're dealing, we're a little bit of a unique piece, which is, I don't know. Our data sources are changing and are so variable so quickly that these AI models are quite powerful with data sets that generally don't change.

And for us, sometimes, like, we're going to have to layer models on top of each other in order to get that right customer interaction. Moving down the docket here as we go, Bill, I saw on the Twitter that you are taking a board. X now? Oh yeah, sorry, on X. I haven't. Even I'm going to take a little time. Yeah, exactly. Your post, your post on X. I reposted your post. But you're going to

join the board of Zillow. That's interesting, Rich Barton, obviously, a friend of everybody here on the pod. What's your thinking there? And is this going to be the trend? You're going to go back on the Uber board or you're going to just start being public boards again? As the world knows, because I've announced it, like, a couple

years ago, I stopped doing new investments. So I've taken boards historically as part of my day job and as part of investing. And as I look towards the future, you know, you say, what board would you take just because it's interesting to you as an independent, you know, human and not as a venture capitalist? And here's a board that I've had an experience on. Rich and Lloyd and the entire team are just remarkable. The level of the strategic conversations that are had in that board room are very different. you know, from other places I've been. They are both engaged, you know, as founders, you know, despite being a decade in, they're hungry.

They look at the, you know, we're talking about the magic of the Uber app. My partner, Matt Kohler, used to say that the smartphone's a remote control for your life. And the phrase one-click, like, can you one-click something? And one-clicking an Uber ride, you know, or an Uber meal to you is a magical experience. but the real estate industry is still far from a one-click. If you've been to a transaction, all the different, you know, pieces of paper you have to fill out visits, things you have to schedule. There's still quite a bit of opportunity for innovation.

And so I'm excited to be back in the room with that incredible team and board, but also because I know Rich and Lloyd are so hungry still at this point in their career. it's an exciting problem to go work on also. Work you on the board? You may not be able to talk to this, but do you think this realtor, the antitrust case, is that a good thing or a bad thing for Zilla? My gut, and I'm not a lawyer, and so, but my gut is that if anything, it's probably a positive. I think the NAR operates as a pseudo-monopoly.

They've been accused of that a lot by the. different, you know, governmental agencies and can create constraints. And if you look at countries where there's not a NAR, I think you typically see more innovation and more, more market cap per home for the leading real estate player than you do here in the U.S. Yeah. And for people who don't know, National Association of Real Estate is NAR, and they just had a giant $1.8 billion judgment against them based on... As an example, the ridiculous document that you're handed by a realtor every time you want to buy a house, that is a creation of NAR. And the primary objective function of that document is to protect your realtor from liability.

And that's why you have to sign it on all 35 pages and initial... five different times inside the 35 pages. And that's all about the realtor and it's not about the consumer. And so that's the kind of thing that I think you could see innovation that would be pro consumer and better for the industry. That was extraordinary to think. I don't know if you guys have ever done a private market transaction, but I bought a home in a private market transaction. It was $15,000, it was $12,000 initially. And then there was like a $3,000 upsell from my real estate attorney, and this was for a non-insignificant home, my primary residence. And I am now hated by real estate agents everywhere in my location because what would have been hundreds of thousands of

dollars in commission, I just bought the house from my friend. I spent $15,000 total, total on the purchase of the home. And there was no commission, zero commission. No, Corridor. Going back to even before I invested in Uber, I looked at a lot of the companies that we're starting in taxis. And because of the presence of the taxi and the taxi authority, your flexibility around price and how you get the app in the car, all that was regulated in a way that prevented flexibility of innovation. And so I just think if anything less nor means more innovation.

Yeah, the other piece of this. And, you know, I was on that board with Bill and Rich. And, you know, for probably between 2005 when we led the Series B in 2010. or shortly before they went public. As soon as ChatGPT came out, and this is, you know, Bill said that they've been at this for a decade. They've actually been out of for two decades now. You know, it's extraordinary to see founders in the case of Rich Barton and Lloyd Frank,

who care as much. And why do they care so much in this moment? Chat GPT comes out. Rich Barton texts Bill and I and said, hey, I want you guys to come to an executive offsite with me. We're going to Red Team Blue Team AI. What is the impact? that AI is going to have on 10 blue links? What is the impact that AI is going to have on vertical

search? We're a major vertical search engine that lives in this larger ecosystem, and we think that this might be changing everything. And so I tweeted about this at the time, and Rich gave me permission to do it, but the blue team was this idea, how do we make our existing team better? How do we just go through the list of all the things we do, customer service, all the things Dara talked about, code generation, and make it better? Red team was this idea is if we were starting today with the power of LLMs and we wanted to put the magic of the world's best realtor in your pocket, what would it look like? And, you know, that to me, that story just captures, right, the founder-led journey of a company like Zillow with Rich, right? He's not 20 years in resting on his laurels thinking, you know, I've done great and now it's just time to serve.

Like, we are all enthusiastic to see what AI is going to do to actually put the power of that one-click, the power of that remote control in everybody's pocket. And for those of you don't know, Red Team, Blue Team, that's like a generally a cyber, I think the origin is cybersecurity. Blue Team tries to protect. Red team tries to attack. And you get both teams making a company more secure. Brad, maybe we could wrap here since we have Dara and talk a little bit about markets.

and just where we're at in terms of, I saw the interest rate print was a little bit hotter, I think. I'm sorry, the inflation print was a little bit hotter than people thought it might be concerning, not concerning. And then maybe we'll go over to you, Dara, just in terms of how does this stuff impact you as a CEO? It's amazing as we look over the last five years. I think all of us spend our time thinking about technology, super cycles, internet, mobile, cloud, AI, how that's going to change. the world. But really since the start of COVID, we've all been overwhelmed by macro, right? Like, you know, Dara had to lay off 25% of the company, not because anything idiosyncratic about marketplaces or mobile or anything else, but we were fighting a global pandemic,

and rates went negative. And so, you know, as we come out of this, I think it's important for us to keep our eye on that prize, you know, and understand, you know, and I, you know, and I, you know, Dara and I talk about this often, is the world look normal, or not. And I think if you look at that first chart, you know, that I shared with Nick, just the CPI glide path, you know, there's really nothing to see here today. There was some noise this morning that it came in a little bit hotter. But I mean, if you just look at this longitudinally, right, where the dotted line represents the consensus forecast of where inflation's going to go. And Bill and I talk about this all the time. Of course, nobody knows with any degree of accuracy

exactly where it's going to go. But I think it's important. and understand what's baked into the cake. If you go to that second chart, Nick, we've talked about this a lot, 10-year tips. This measures the restrictiveness in the economy. So effectively think about what is the future interest rate, less the future inflation rate? And as you can see, we're as restrictive really as we've been since 2008 and 2009. This is above the Fed's neutral rate. That's why, you know, the third chart I sent you, which is what is the Fed funds projection? We expect rates to come down this year. So if you just look at the Fed's own forecast, a point and a half, the 1.5% positive growth on GDP, you know, that inflation's going to follow that consensus curve and that rates are going to come down.

That, to me, is the backdrop for a very healthy economy. Now, of course, there's a lot of stuff that can go wrong. But yesterday, I think it was Fed's Williams was out. He said, listen, I think rates are high enough, restrictive enough. Remember, every month that inflation goes down, the effective restrictiveness of the economy goes up holding all else equals. So you got to take rates down just to keep it at the same level of restrictiveness. And so I think that's where we're seeing, you know, we started the year.

Mag 7 was down 10, 15%. There's a bunch of jitters around interest rates. They popped up from 3.5% back to 4 plus percent. So we're coming out of this from my perspective from the cheap seats, cheap seats. It seems like we're on the glide path. Things are normalizing. And that for a CEO like Dara, there's a lot of predictability in the world, hell of a lot more than there's been over the last four years.

And I guess I'll kick it over to you, Dara. Is that the way that you see it relative to the challenges you've had trying to manage the business through the ZERP period of the last few years? Very much. I mean, I can't comment on rates and where they're going, but we had to fight. We felt inflation hugely post-COVID, which is the cost of bringing drivers up, the cost of labor, and we have to translate that into more expensive rides, et cetera. If you look at this year, we have actually actively been trying to keep the cost of

rides lower and essentially it's been flat. We've been working with our restaurant partners if the economy weekends, you know, building out a toolset of kind of merchants able to fund promotions to being prices down. So like the focus of our business is how do we create a win-win and try to keep prices down for riders and keep prices down for eaters and really dry volume through the system as much as we can. And I say so far so good. We haven't seen, you know, let's say inflation rearing its ugly head again. But I've seen a lot of very fast changes in the marketplace.

So I take nothing for granted. By the way, I wanted to give a little nod to Brad. I thought using the word glide path in a CPI slide is very suggestive of soft landing. It was like a really good word. Very subtle language, yes. I mean, listen, listen, let's be clear. He's hoping the Fed listens to this. Just please listen.

I know that there's some delities of coming in saw. I know there's some people who told us to go into cash at the beginning of last year. Some people in our group who said, hard landing, Mike Wilson, Q1, go into cash. And then surprisingly, even at the end of the year, they thought that that was a good decision. 5% on cash versus 30 to 40% in the market seems like a pre-1%. pretty bad decision to me. And I think it will be a bad decision again this year. That's not to say that there aren't risks in the world, but when I look at the balance of risk, I would say that these seem like pretty decent environments, whether it's soft or medium or whatever, I think it's a pretty

decent environment for Dara to build the business this year. So with that, thanks so much to Dara for coming on and being so candid with us. Gurley, Gersner, you're incredible. And none of this is investment advice. Make your own decisions. Do your own. underwriting, disclaimer, disclaimer, disclaimer. We all are absolute degenerate gamblers at the poker table and thoughtful betters on public markets. That does not mean you should do what we do. I have watched Gurley lose his entire staff with bottom set to lunatics who hit runner-runner. I've seen Gersner lay down pocket aces to people with seven high. Do not follow us in making bets. Make your own goddamn decisions.

Reminder to self, don't go to Vegas with any of this group. Thank you. And Dara, do you have an interest in learning poker? Because we know you have a little bit of money to put to work now. My daily job is a gamble, you know, kind of running this company called Uber. So after that, I like to just stay still. Oh, you know, one thing I didn't ask you. It's one more thing there.

This is my Columbo after I do the outro. Drizzly, Postmate. You did a couple of acquisitions years ago. The market's been closed for acquisitions. Do you just put that out of your mind or are bankers calling you about acquisitions? What do you think is going to happen in the next two or three years? Or do we have to wait for a regime change, Lena Khan to get out of there for maybe acquisitions to happen again?

Is it even on your radar? Do you think about it? Listen, it should always be on a radar. But one thing that I've learned with Uber is running a business and trying to integrate other businesses into a two-sided marketplace is really hard. And the organic path for the company is great unless I screw it up, but it looks great. So the cost of an acquisition in terms of just the distraction from the daily grind, which is a wonderful grind that we love, it's pretty high. So it would have to be awesome for us to look.

We should. It's part of my job to look, but it's not the baseline of what the next three years is going to look like. Do banks pitch you regularly, hey, buy this, buy this startup, buy this startup? Is it like a constant stream? And especially, listen, the public markets are closed. So the only M&A is the way forward. So I get a lot of pitches and free drinks and, you know, leave it there. Well, the public markets aren't closed.

They just think that you're dumber than the public markets. and that you'll pay a bigger price. But I think what they're finding, the reason we don't see a lot of M&A is because folks like Dara aren't willing to pay the big bucks. And the public market is sober. And the reality is if you're trying to sell a business today, you've got to get on the same page as the public market. Your multiples going to reflect your growth rate and your profitability that's demanded

by the public markets. And all those people still living and make-believe land that there's some strategic inherent value to their business that's losing money and, you know, that has a real. It's just not going to end well, right? You know, I think we've seen it this week, a bunch of layoffs again at Amazon at Google, you know, and others. And what it tells me is, you know, in 2020, if 2023 was the beginning, right, of time to get fit, I really see it kicking into high gear right now. And you heard it from Dara. They're not growing headcount a lot.

Amazon's not. Apple's not, right? They're doing more with less. AI is enabling that. And, you know, to me, M&A is only going to happen for those companies that are accretive and profitable. And, you know, they're going to have options. They could go public today or they could sell their business today. But the broken things, you know, that are still expecting high prices, I don't think are going to find a home.

I agree with that. I think you got another year of people getting in touch with the reality that exists, which is the real issue that prohibits both of those transactions. Yeah, accepting reality. That could be a theme for 2024. All right. We'll see you all next time on this. Take care, everyone. Roundtable with no names. Bye. Bye. Bye.