This Week in Startups - Tech Earnings Breakdown: $UBER, $LYFT, $KIND with TechCrunch's Alex Wilhelm | E1845

Episode Date: November 11, 2023

This Week in Startups is brought to you by… NetSuite. Once your business gets to a certain size the cracks start to emerge.  Things you used to do in a day take a week. You deserve a customized solution - and that's NetSuite. Learn more when you download NetSuite’s popular KPI Checklist - absolutely free, at NetSuite.com/twist Miro. Working remotely doesn’t mean you need to feel disconnected from your team. Miro is an online whiteboard that brings teams together - anytime, anywhere. Go to https://miro.com/startups to sign up for a FREE account with unlimited team members. Arising Ventures is a holding company that acquires tech startups facing setbacks. Arising Ventures knows what founders care about because they aren’t bankers, they are tech founders themselves! Go to http://arisingventures.com/TWIST * Today’s show: TechCrunch's Alex Wilhelm joins Jason to break down the latest earnings reports from Uber (4:04), Lyft (24:28), and Nextdoor (44:15). Then, the two dive into WeWork's failed business model (1:01:44), the viability of various careers as AI advances (38:33), and much more! * Time stamps: (0:00) Tech Crunch’s Alex Wilhelm joins Jason (4:04) Uber’s earning report (7:04) Pirate cut-throat mentality analogy and the money-ball system (10:11) NetSuite - Download your free KPI Checklist at http://www.netsuite.com/twist (11:12) Did the press get Uber’s Earnings report right? (17:39) Uber and the J-Curve (20:29) Miro - Sign up for a free account at https://www.miro.com/startups (22:17) Uber, China, and DiDi (23:14) ZIRP environment playbook to own a market (24:28) Lyft gets a participation trophy (25:22) Comparing Lyft to Uber’s Revenue (Quarterly) (27:53) Labor availability (31:05) Arising Ventures - head to http://www.arisingventures.com/TWIST to learn more and connect with the team (32:15) Immigration policy and a record-low unemployment (37:37) The underground economy (38:33) AI effects on unemployment (39:12) Let’s build new cities! (44:15) NextDoor earnings (55:34) A case for hiring remotely (59:13) Combining remote work with the power of AI (1:01:44) Clip from TWiST E969 with Alex about WeWork (1:04:22) Earnings “supplements” (1:07:35) When Alex discovered business as a youth (1:14:18) A South Park clip! * Check out TWiST E969: https://www.youtube.com/watch?v=aM1DDVq3_vs Follow Alex: https://twitter.com/alex * Read LAUNCH Fund 4 Deal Memo: https://www.launch.co/four Apply for Funding: https://www.launch.co/apply Buy ANGEL: https://www.angelthebook.com 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 Jason: Twitter: https://twitter.com/jason Instagram: https://www.instagram.com/jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin

They didn't want to listen to the point that other people were being impacted by this. And so it felt like a criticism of capitalism or of the venture capital model. But I think it was more like a cry of like, oh my gosh, there were these people who were doing this thing. And now they are being whole cloth uprooted and their life savings are being torn apart. And so that's what the pirate analogy I think is actually good because pirates don't apologize. This weekend startups is brought to you by NetSuite. Once your business gets to a certain size, the cracks start to emerge. Things you used to do in a day, take a week.

You deserve a customized solution, and that's NetSuite. Learn more when you download NetSuite's popular KPI checklist, absolutely free at NetSuite.com slash twist. Miro helps take ideas from in your head to out there in the world with its ability to democratize collaboration and input. Sign up for free at Miro.com slash startups. And a rising ventures is a holding company that acquires tech startups facing setbacks. A rising ventures knows what founders care about because they aren't bankers, their tech founders themselves.

Go to arising ventures.com slash twist today to learn more and connect with the team. Welcome to this week in startups, everybody. Alexville is with us again from TechCrunch and previously that Crunch base and before that TechCrunch. Yes. Was that the boomerang essentially? Pretty much. There was one more stop in there the year I went to rehab. But yeah, that's more or less the trajectory.

So back at the mothership, and oddly enough, coming up on four years back in TechCrunch, time flies. Yeah. But I didn't even know you went to rehab, but you like me, like to partake in a beverage once at a while. Well, I like to partake in beverages all the time. And that's why they were like, you know, the old Amy Winehouse chorus there, they tried to make me go to rehab.

And I said, yeah, okay, fair enough. Good idea. Fair enough. Yeah. Good call. Listen, I'm with you. I'd like to keep it straight and narrow. No, don't drink for me.

It makes me too tired. That's too tired. That's the thing. Like, in my life right now, because, you know, our kids now 10 and a half months old and very active, like, if I was hungover, I would get, like, life would just steamroll me. Like, I have to wake up and go. Having to take care of a child, just all of a sudden, everything changes. And I can tell you, I have been hung over and had to take care of kids and not like, or like, you think you have help. And then the nanny gets sick.

And, but you were out until 3 a.m. playing poker. And then it's 6.30 a.m. and the baby's screaming, and your head is like nothing in the world. It's just literal torture. Well, this week, our beautiful daughter got her second illness. And so one night this week, we were up, like, you know, every half an hour all night long. And I went to work the next day. And I was like, oh, yeah, this is what it felt like every single day when she was two months old.

Right. Right. It gets easier. It gets easier. Yeah. It does get easier. The sick kid is something you have to get used to. It is, as a father, I found, when my daughters were sick, it was just this incredible feeling of like,

I have to do something to protect them and take care of them. And sometimes they have food poisoning and they're just going to puke every half hour. And all you can do is rub their back and sit with them with a plastic bag. I just literally had this last week. And I said, you ate something that disagree with your stomach. We're going to do this for about three hours. And then it's going to stink. But I'll get you some warm ginger ale.

And, you know, we'll make the best of it. We'll watch a movie, watch from Star Wars. So I'll welcome back to, yeah, it's good for us. But I will say new experiences, like, for example, sitting with that plastic bag, oh, God, you didn't do that 20 years ago, you know? No, no, no. You were just, you know, over the side of a fence at a random neighbor's yard on the way, oh, my God, never again.

We got a lot to get to here. Tech earnings with Alex Wilhelm. I love when Alex comes in the program because, you know, we have a very similar career path. Both of us journalists, both of us business journalists. And you're just so good at the finance side of this, Alex. So there's just nobody better to go over the earnings. Really, it's a great week for me. I have been an investor in a taxi kit company for a long time.

What? I have noticed. Yeah, it's, I was like maybe the third or fourth investor in this company and still friends with Travis. Got to spend some time with him recently. And he's doing great with the new company. But he doesn't really like to talk about it all that much. He's heads down. but his last company,

which they said would never get profitable, has now turned into a money printing machine. So, Alex, take it away. What do you take out of this Uber quarter and the last, I guess, three of the last four, I think they were profitable. And now they're set up for this S&P 500 situation. Yeah.

So it took a while to the detractors credit to get here. I think Dara's done a great job as Uber's CEO to take a company with a lot of potential and a lot of good bones and turned it into a cash flow generating machine. So to me, the question mark over Uber's viability has been answered very clearly in the last year. You can pick the starting point when you want to say it's been decided. But certainly now in Q3, we're looking at numbers.

And the funny thing about this quarter is it was good, but it was boring because it was another quarter of solid growth, good cash flow generation. You know, the net income number feels very solid for the company is. And so I almost read it and was like, nothing here is blowing my mind because the company is just healthy now. There's no longer like a, ooh, what's going to happen? It's just, there it goes. And I'm not surprised because whenever I use Uber Eats, I somehow managed to pay an extra $9 in associated fees on top of delivery and then tip. And I know that that is why Uber is making so much money.

So you are welcome, Jason, for all of my custom. Absolutely. And I'm just really happy to see the amount of implied consumer demand here. Implies a healthy American consumer. Yes. Healthy global consumer. So not a lot of negatives, frankly. Just feels pretty good.

Yeah. Gross bookings, $35 billion. They obviously get a percentage of that. That's called the take rate. Take rate's been very healthy. And that revenue, which, you know, is the percentage of the gross bookings that they actually get over $9.3. And that's broken up nicely between mobility, delivery, and freight. Although freight's having a tough time, we saw that in the market with, I guess,

convoy going out of business. That seemed to be a mismanaged nightmare. And then, obviously, Flexport. Speaking of. Original founders come back and they've also had to deal with an absolute collapse in revenue. Yeah, that's so tough. On the Uber front, though, the chart that really made me pretty happy to look at was their adjusted EBITDA over time.

And also, they're essentially adjusted EBITDA take rate. So if you look at their adjusted EBITDA margin as a fraction of gross bookings back to that point, it was just under $1.1 billion in Q3. And that was 3.1% of gross bookings. It was 2.7 in Q2. was 2.4 in Q1, et cetera, et cetera, et cetera. So not only is the number going up, the fraction is going up. So the company is just getting more and more profitable.

And I don't think that everyone thought it was going to work out this way. Now, the true believers, that's yourself, were right all along. But it did it. Congrats. Well done. Well, I mean, this is an important lesson, I think, for journalists. You and I coming at it from the business angle, there are journalists who come at stories from a culture angle as well.

From a culture angle, you would think a cut-throw company, that was dealing with regulations and maybe had a bit of a pirate mentality which some people consider a feature other people consider a bug here in Silicon Valley when we have a group of pirates and they want to go

you know win and we're like let's go here's a couple of boats here's some provisions here's ammunition that's what we bet on pirates and so if you were Is that true?

I think people don't want to say it in today's politically correct era but I would say No, Jason, I don't actually agree with you. And I love the pirate analogy because actually, if you go back to the history of tech run, Michael Arrington, you know, about how, you know, they were the kind of the pirates that people wanted to track. But now, when I look at venture capitalists talking about metrics they look for, startups are looking for, it seems that like the early stage startup game has become so metricized that there's actually not that much room left for pirates.

It seems to be like venture has gotten risk averse because SaaS is so predictable. And so now no one wants to take a flyer on something ridiculous. I think it's a very good point you're making. People always try to take venture capital and early stage investing and they try to moneyball it. I get pitched on money ball for startups all the time. I made my own money ball system. I don't share it too much publicly, but I have a database of the 20,000 applicants that come in, and we rank them on 13 criteria of why we should invest forwards.

And then we have 25 reasons why we shouldn't invest. So I took over the last 10 years my betting strategy, and I just made some heuristics out of, look for this. and then these are either pink or red flags. And that's the totality of my money bill system. But I think in SaaS, it was very predictable. So people like David Sachs, you know, who are quants in, you know, and come out of with that, you could find in their minds, hey, how much money did you deploy?

How much money did you make? And then what's the leverage there, right? It took you $10 of invested capital to make a dollar. It took you $5 to make $2. Okay, that latter company is better. It would be the person's general thought. However, if you go to the Reed Hoffman blitzscaling, if you go to the Peter TL, you know, Monopoly or Sequoia Capital, like we're going to invest in the top top companies and it's winner take most. We are still looking for pirates.

And there was a very famous moment in the history of Sequoia where Don Valentine said to a young partner, agreeableness, like, how easy is somebody to get along with? And then how, like, exceptional are they at their job? How competent are they? And make a four quarter box. I said, where do you know, which founders do you think we make the most money from? And it was extremely competent, obviously, and then difficult to get along with. I was going to say yes. And then not agreeable, yeah. Not agreeable. And, you know, I think that's where the pirate thing comes from.

But you're right. People try to moneyball it. I don't try to moneyball it in my career. I just try to look for as many of the important variables and then place the bet. All right. Scaling a business is really hard. When you're growing, things that used to take a few hours, hey, they're going to take a week or two. And to avoid getting bogged down, you need to remain efficient. And one way to stay efficient is to understand your KPIs. That stands for key performance indicator. KPIs are critical for startups to understand. And right now, you can download NetSuite's popular KPI checklist for free at NetSuite.com slash twist. You know, if you're a SaaS company, your KPIs would be acronyms that you've heard before. Mao's MRIR, Arpoo, average revenue per user. And NetSuite's KPI checklist is going to teach you how to identify

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at NetSuite.com slash twist. That's netsuite.com slash twist and get your KPI checklist. Going back to this and looking at it, when you look at the press at that moment in time, what do you think they got right or wrong in terms of objectivity? Because obviously there was a lot of social issues

going around at that time, and Silicon Valley was getting very powerful, and then the antagonism between the tech press and the founders kind of peaked a bit during that time period. You had some bad behavior like Theranos, you had the pirate behavior like Uber and Travis, and you had everything in between

and just a lot of wealth getting created. So it got a little weird there. But what did they miss in terms of this story specifically? Well, I don't think it's going to be a single answer to that question. Okay. If you had two or three things they missed. If I had two or three things, I almost wonder if Uber was overcapitalized.

And therefore that led to it's just going to have burning through more cash than I needed to. Because if you go back to how Dara has trimmed expenses and headcounts and so forth, it seemed they could have done a bit more with a bit less. And so I think that the questions on their financials could have been answered earlier by the company itself. So while I do think that the press was in the middle era of Uber a little bit too negative, I think the company also wasn't operating at its kind of peak efficiency. So I think that that kind of falls on both sides of defense. I think that's a real, I didn't even think of that one, but you're right.

And that does trigger people because they look at it and they see people shooting money out of a money cannon. And you're losing $3 per ride or $4 per ride. And ride shouldn't be this cheap. This doesn't make logical sense. What are you doing here? And Amazon did a similar thing. Like Amazon Prime, when we first all got it, did not make logical sense. We were all like, wait a second.

It was too cheap. I give you $60 a year and you give me unlimited two-day delivery. Okay. You sure? You sure? Because I'm going to use that five times a week. We're trying to cut back on our Amazon Prime usage just for the sake of limiting the edges of our carbon footprint.

And it's so hard to get off of Amazon. That company has me by the neck, sadly. I mean, and when you have a kid, it's even, more prenicious. What I started doing was, because I too have this concern when I see all the boxes in my garage looks like a UPS, like Depot. And I have just, I can wait till Friday. Friday's my Amazon day, and I just put everything on Friday. And I've just said, you know, like on a stoic basis, I'm not like a super weirdo, like stoic, like going to make TikTok videos about it. But I'm just like, I can wait for my anchor charger station for Friday.

Yes. Yes. It doesn't have to come Tuesday at, 9 p.m. at night in like a little box, you know, with my little battery in a box with like gazillion puffed up. You know, it's just gone. And it's also the annoyance of opening six boxes versus opening one. So I think it's good for it. Okay. So I like that. That did distract people. So that's a good reason. The other thing on the Uber front is, um, pirates don't pay as much attention to collateral damage as people who are supposed to look at the broader economy. And so when we're talking about Uber going into the markets and shaking things up, you call it a taxi cab company tongue in cheek earlier, but who was its competition? At the time, it was taxis.

And just to be clear, I was living in San Francisco at the time. Taxis were terrible. I went to the Uber launch party in Chicago when I was in college. So I was around very early when it was only black cars and clearly it was a superior service. But the company was able to raise money and subsidized rides and go after a business that was often run and managed and held onto by small business owners. And so I think a lot of the complaints about people who are annoyed at the coverage of Uber was that they didn't want to listen to the point that other people were being impacted by this. And so it felt like a criticism of, of capitalism or of the venture capital model. But I think it was more like a cry of like, oh my gosh, there were these people who were doing this

thing. And now they are being whole cloth uprooted and their life savings are being torn apart. And so that's what the pirate analogy I think is actually good, because pirates don't apologize. And maybe in an economy, in a country with hundreds of millions of people and a very complex economic fabric and social fabric, maybe if you rip it, you're going to get some blowback. Now, Uber is great. You know, when my parents visit, I send them an Uber from the airport to bring them to the house, et cetera. So I'm not a hater by any means.

But I think that some people think that any criticism is somehow an attempt to say, you can't do this versus someone saying, hey, maybe we should have thought this through a little bit differently. Sure. But at this point, though, you know, we're looking at the rear of your mirror. Uber's revenue of $9.3 billion last quarter, I think shows where the world went. Yeah. The other observation I'll have there is every time Uber had any kind of a crisis, there was like an internal, I don't know, kind of wink and a nod. Anytime there was a bit of a controversy and the press kind of fell for it and there were 100 news stories. Do you know what happened?

Inside the company? Just to Uber itself. Oh, I mean, probably with things went up, right? Downloads spike. Yep. Yep. as we've seen with let's say Twitter and X, something happens with Elon, X traffic goes up, more people go check out X. And so that was another new kind of wrinkle in the fabric of PR, which is, if there's a controversy, as long as it's not so horrible that it turns into a boycott, which it did for a moment in time. And that was NG, not good.

When there was a moment in time where it was like, screw these guys, I'm deleting Uber. delete Uber movement happen and lift, that actually did have an impact, especially in places like San Francisco, like maybe 10 or 20% of people switch. That was a not good moment. And that was like the backstop against this press strategy. If it was a strategy, it really wasn't like an explicit strategy, but it was something that was notable. The thing I always looked at and I always try to think from first principles is, you know, especially as an investor, you have to be dispassioned about these things. I just looked at the total. of rides and the total number of losses. And I watched like, okay, we did 100 million rides.

We lost 300 million. Okay. It's $3 per ride. Okay. And then it was like, oh, we did a billion rides. We lost $2 billion. It's $2 per ride. And then it was like, okay, all of a sudden, it was like, we're losing 50 cents a ride, 25 cents ride. I was like, well, why don't we just flip that by 50 cents and be profitable? And it was like, yeah, we're doing that, but we don't want to impact that top line growth. And I was like, does that really impact the top line growth? 50 cents? Like, oh, yeah. It could like change it 2%. And I was like, Why don't we just flip that dial? And it was like, well, Uber was able to raise, I think, over $20 billion as a private company.

And so the question now is, as they make this money, when does that paid in return capital go back to shareholders? And then it's all profit from there, which is called the J-curve, as you know, where you have all the money that's been paid into the company. And then slowly you pay it back. And then it's free cash-hold and all that money is just going to shareholders. That happened with Tesla recently. and it happened with Amazon in the second decade. And here we are, it will happen with Uber as well. So on that point, though, just to pull the numbers up, if you look at Uber's positive

operating cash flow quarters one through three of last year, 886 million. Uber's Q3 operating cash flow in Q3 of this year alone was 966 million. So the pace of cash generation by Uber has accelerated it dramatically. And to the point now, when I'm kind of sitting around going like, okay, So are they going to start announcing buybacks? Like how is this going to be returned to investors? Because clearly the company has an excess cash compared to its investing needs. And I think that that's kind of a, that's when I really feels like a company has hit its maturity point when it just is so cash generative that it's kind of like, oh, crap, what are we going to do with this?

But I will say today, cash has a 5% yield and makes you look brilliant. So holding onto that cash, it doesn't hurt at all. It's super efficient. You're right. I want to go back, though, to the Uber's trajectory. press media and who got it right and wrong. Here's a question I have. If Dara had taken over three or four years earlier

and the company could have avoided some of the Travis-related headlines, let's just say that. Do you think the company would be healthier or less healthy today? It's a great question. I think if you didn't have the pirate there, when there were battles to be fought,

like are we going to be allowed to exist in London? Are we going to be a standalone company for the first time in China that doesn't have a local partner. And are we going to try to compete for China? Like those kind of decisions would just never have happened under, let's just say, quote unquote, professional management. It would have been like, that makes no logical sense. There's no way we can compete in China.

Now, Travis went into China and was like, we're going to win. We're here to win. And the Chinese government and the, you know, people were like, okay. And of course, when I talked to him, I was like, are we going to actually win? He's like, we're going for the gold. but the silver we get when we own 25% of DD, that's a pretty good silver medal. So we're going for gold,

we'll accept silver. We're not taking bronze. We're out of here if we have to get bronze. And that's the kind of thing that, you know, I think a professional CEO, a Tim Cook, Sundar, whoever, Satya,

like they're just not going to think in that pirate mentality. They're going to think, is the juice worth the squeeze? Do I want to get fired? Because I went with such an audacious strategy. Only founder authority can do audacious strategy.

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Like, I don't know. That was a rare moment of big founder energy. I agree. That's BFE. Yeah. Well, you know, if you don't get that joke, you're not online enough. But I think it's possible. I just think it takes a leader that has so much built in trust inside the organization

that people will trust them to lead them close to the edge. And Satya, I think, just given his cloud background, could pull it off. Most people couldn't. But I will say, they went into China, Uber did. They spent a lot of money. They ended up. with a stake in D-D that then later got whacked by its own government. And so I wonder if that was actually a net positive.

It did wind up being positive. Yeah. At the end of the day, I think they made a couple billion. And so I think of the 20 billion that was poured into the company, something close to 10 billion came back in their ownership and other entities. Yes. Yeah.

So it was, it was super creative. But if you're right, though, that Dara couldn't have joined the company a couple years earlier as CEO because it was still. fighting the pirate battles, then I think that the media coverage at the time that was skeptical was actually relatively reasonable because the company was still a question. Yeah, I would say it was reasonable. Yeah, I think they went a little bit too far. Not always.

Yes. Yeah, it got personal, which, you know, it can get personal. It was a, it's a certain climate. But, you know, our job as I think financial journalists is to kind of get to the truth of the matter. And understanding that there is a playbook that in a ZERP environment, you will be allowed to leverage. Oh, yeah.

Whether it's Amazon, Tesla, or. or Uber where you're going to be allowed to do a decade of losses in order to own a very important market is it's allowed sometimes. And I think just getting good at identifying who gets permission to do that. Like, maybe Open AI has permission to do that right now, right? They've been just given ungodly resources, a $90 billion valuation with a billion dollars in revenue. I don't, you know, it's 90 times top line revenue. It's a little bit rich, right? And they've been given 10, 20 billion dollars in cash. I don't know what the number is now,

what they're up to in terms of investment. But yeah, I mean, feels like if you were going to give somebody a lot of rope, it would be Sam. Oh, yeah, for sure.

I mean, I've only met him once or twice. It seems like a perfectly lovely guy. But what I think he is, is a big old nerd. And you know what Satya is? A big old nerd. And nerds love to nerd it up.

And that's why you saw Satya at their developer day. He didn't have to go there. They were fine without him. He probably wanted to be there. He probably wanted to be a social social. associated with it. Yeah. He asked,

yeah. I mean, he wants that nerd cred. You're 100% correct. Uh, just quickly looking at Lyft,

gross bookings 3.6 billion, revenue 1.2 billion. Net loss 12 million. Actor writers 22.4. They got a billion seven in cash. Uh, guess what happens here? Now,

guess what is worth right now? Guess what is worth? Six billion? 4.1, according to Google finance. Ooh. Yeah. It goes with more than a Hyundai.

And Lyft's worth four. So here's the thing about, you know, about founders and doing crazy things. Lift does one thing in one country. Uber does many things in many countries and unsurprisingly, they're doing better now because they're more

diversified on their product and geographic sense. And they got permission via ZERP and capital and so forth. But I mean, Lyft also raised a lot of money for a long time. Lyft was not a poor company and they were able to lose money for a long time too. And they've ended up silver in a market. You know?

I think they got a participation trophy, if we're being honest. They participated in this. This chart is incredibly telling. I mean, if you look at revenue chart between Uber and Lyft. And I'm guessing that this is going to be a case study at Harvard and Stanford at some point is just the divergence of the revenue. Yeah.

Pretty spectacular. Look at how, if you're looking at watching the video of this, look at how long it took Lyft to recover to its pre-COVID revenue number. And then look at the different curve you see with Uber and then the acceleration points. So Uber definitely also got dinged. I mean, we all stopped taking, I mean, I think I actually deleted the Uber rides app from my phone because I didn't need it for two. years. But then if you look at the continuing performance once people went back outside,

I mean, it's night and day does not seem like an unfair way to put this. There was a lobby of people saying, don't do eats. It's a low margin business. Only do ride haling. Just be good at one thing, right? Have excellence in one vertical is a lot of times the typical advice. But then it turned out, you know, if you have the resources, you know, sometimes having a counterbalance where if Monday, Tuesday, and Wednesday, I'm staying home. And, okay, I'm going to cook Monday, Tuesday, Wednesday, Thursday, but I'm going out the other three nights of the week. Well, Uber has something for you each night.

You could order Uber Eats or you could order groceries now. And if you forgot your lemons or whatever, because you're making, you know, soul or something, you need some capers and lemons, you can get that too. So you could literally use it seven days a week. You're going to run out of money real quick. It's a pretty expensive habit. But that was, I think, a masterstroke of genius.

and I got a, I think there's another third. I don't think, by the way, the, I mean, all due respect to Leorre and shipping, I think shipping, I think shipping's great. I think that's going to be a third leg to this stool or it could be a four-legged stool, but they are experimenting with like a task rabbit like service. There was a new story about it. And I think that this could be the ultimate Uber one, which is you open your app up and you say, I need an assistant.

I need a $35. an hour or a $50 an hour person to help me with stuff. Domestic office, whatever it is. And maybe there could be two or three categories. I need hourly help for four hours. And it says, what do you need it for? And it's like, I need somebody who can work the register. I need somebody who can come to my business and be a receptionist or do some research or I need somebody to help domestically. So maybe it's like executive domestic retail. Sure. And you pick one of those three. And it just gives you an hourly rate. And an Uber person comes for 50 bucks an hour and saves your ass, you know, in a city because somebody

miss their shift. I think that's going to come. And I think that could be the third layer of the stool. I'm excited about that. But I think we don't talk about any more is labor availability. And there's an interesting tension between a tight labor market and consumers having enough cash to spend on Uber Eats and the markups and stuff that it comes with and the economy being relatively weak and having lots of possibility on the supply side for labor. So right now, I can afford to use Uber Eats every day if I would like, but it's fine. But I'm cheap. And sometimes they get peevish. I stopped my orgs. I'm like, I'm not paying $37 to have someone bring me a breedle right now. I will get off my butt and walk.

And I wonder as the consumer around the world gets stressed and we've seen the rising debt levels of the household and so forth, I wonder if there's a point in which the prices have to come back down and the margins compress a little bit for Uber across its different products. I'm not sure. It's just something that I'm thinking about as we watch the GDP numbers and overall health of us. I put this into the category of Starbucks, which is I thought for a long time, people would stop getting Starbucks because it makes no logical sense to pay $450 for a cup of coffee with milk and that they would just austerity measures would kick in. Like I make a pot of coffee every day cost me buck 52 bucks to use high quality grounds and we make it every day. And sometimes the housekeeper

says, oh, you know, it's like we're wasting half a pot. I'm like, nope. No. Four people get to have coffee and we didn't go to Starbucks. Everybody, we saved about 15 bucks a day. So don't worry about pouring out the last third of the pot. And I always thought people would, you know, get a nice contigo or something and make their coffee at home. And it's like, nope, this is a luxury I want. Like I'll call it the avocado toast theory. And I think if something like ordering your burrito brings you extra joy, you get to work a little bit longer, I think, yeah, maybe on the margins people will, you know, the people who are stretching for that will take stuff out. But I think for people who are busy executives, middle class and above, it's just a luxury they don't want to deal, but not deal with.

And I, you know, listen, I see it. Sometimes my housekeeper was showing up with a Starbucks. And I just told her, you know, don't order Starbucks for $450. Like, you can have, drink the coffee at the house. Drink the coffee. It's like, it's a higher thing. And then I showed her how to use the espresso machine. And I was like, froth the milk, pour this thing.

This is better coffee than Starbucks coffee. I'm paying for blue bottle beans or, you know, red cat. These are better beans than that. And now she drinks our coffee. And I'm like, great. I feel so much better than her spending $100 bucks a month on Starbucks. How often does your housekeeper come? It's full time.

We have a full-time housekeeper, yeah. Full-time housekeeper, Nanny. Yeah. I mean, it's like as a kid from Brooklyn who we had chores and we had to do everything, it's like the ultimate luxury to have a full-time housekeeper and nanny. But those are two different people, right? Same. She can do a little bit of nanny stuff.

We have a big house. There's no way to have the size of a house I have right now and not have a full-time housekeeper. If you're listening to the next one minute of conversation and you're like, these guys are assholes. It's true. We have a full-time nanny and we have a housekeeper comes once a week. Our nanny is amazing.

She does. She tidies. She sweeps. But like, you know, Myra comes over and really blasted the house. And I'm not going to lie, I will, on my deathbed, I will give that up. Because I also, I grew up with a family of four kids, one income. Like, it was you're scrubbing the floors, you know. All right, tech companies are some of the fastest growing,

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and connect with the team. That's A-R-I-S-I-N-G ventures.com slash twist. Risingventures.com slash twist. If you go to other countries, pretty astounding. I spent some time in the Middle East. And the immigration policies are very loose in other countries. So, you know, for example, if you're in Dubai, you know, in the UAE, there's a ton of Indians, Filipinos, et cetera. And people get paid at different salary scale. They're happy to have the work. And people have drivers, housekeepers, chefs, whatever.

There's just a lot more labor available, as opposed to the United States, because we have this housing problem and we've got this dysfunctional immigration system. The reason why Americans are doing so good and can afford Uber Eats and can afford Amazon and all this stuff and DoorDash is because we've, because we've locked down immigration so tightly, even though people would have you believe the border is like insane. And sure, I'm, I'm sure it is insane. But we have the record low unemployment right now, like 3.5% or whatever. Like this is the lowest of our lifetime. In 50 years, it has not been this low. That's why wages are going up.

And Uber is in a dog fight with nannies, housekeepers, Apple, Starbucks, pick the retail, Walmart Target. They're all in a dogfight to, for who can pay five times minimum wage, federal minimum wage, which is admittedly like $7.20 or something we take. Yeah, so admittedly it's insane. Yeah. So admittedly it's insane. But, you know, even in the city is $15 an hour. It's two or three times that, you know, is the going rate for, you know, blue collar work. And so we've really driven up, I think, salaries in this country. And so people are really upset about the Biden administration because he's old or whatever, not to make this political.

But if you just look at the state of Americans, record low unemployment, salary is going up. Yep. And people aren't able to hire in this country. So I don't understand why immigration is such an issue. We just need to maybe make it fair, you know, like, dare I say, build a wall and control it, but let people come in fairly and in an orderly fashion. But we need more people in this country. Absolutely. I mean, not to bring up Matthew Iglesias by accident,

but his book, when billion Americans actually got me thinking about this point, if you, like, okay, you fly a lot. Sure. My favorite thing to do is whenever I get stuck in a window seat, because I'm too cheap to pay more for a better seat,

because, I don't know, I grew up lower middle cloths. Um, I look out the window and there's nothing. America is empty. There's nothing. If you,

it's a tree and flat. Yeah. Yes. And so, like, let's get another 100 million Americans. Like, people who are,

like, worried about China's government. and hate immigration in the U.S. I'm like, look, you need to get your head out of your other regions. Let's let some folks in. And I think, well, I have a lot of thoughts about this. I don't want to get too far away from earnings.

But I think that, you know, Jason, if we sit down with a piece of paper in 30 minutes, we could hash out an immigration plan. That would be much better than what we have. The problem is, I think certain people in politics have painted themselves into an ideological corner about immigration. And so they can't do much.

Step back from the extremes. And it's very simple. If you look at any country that's doing really well, they have a point-based system. And now, even me saying point-based system will have some group of people say, you're a racist or you're whatever. And it's like, no, it's logic. If somebody is a PhD who speaks English perfectly and we need that PhD in whatever chemistry, they should go to the front of the list. And then if somebody has a master's and they're a nurse, and we need nurses, they should be next up. And then if somebody doesn't speak the language and, you

know, they've got a criminal record, maybe we should have them come in less or not at all, and we could have a thoughtful process. And so I've been saying on all in, and everywhere people listen to me, point-based system, then a certain amount of compassionate from people who actually come from a place where they will be murdered if they go back, like Afghanistan, like refugee status of an acute mess, not faking it, because people know how to fake it now at the border. They've been watching YouTube videos of like, just say, these things and then you qualify for this. You know, and then you have the lottery. You know, hey, I want to come. I'm not super qualified. Can I get in line? Take a number. Yeah. And that would be

just totally fair. What do you think of this so long? I think about that, I think that's very reasonable. What about temporary worker permits for people who work on farms and such? Because there's a lot of that labor. Yeah. Of course. Of course. Okay. So basically, by the way, Republicans were in favor of an open southern border during the Reagan to Bush era. And the NAFTA era, and people forget this, but David actually pulled up the story from the Wall Street Journal during that time period. People were in favor of this, Alex, because they said, hey, what's the difference if people from Mexico come work in California and then go back for Christmas? It's no big deal. We need somebody to pick the strawberries. Americans don't want to pick

strawberries. Hard labor. So, you know, migrant workers come in. They pick the strawberries. They go home. Everybody wins. So why even have a Southern border? Just let them come and go. Let them have a driver's license. Let them have a decent quality of life. Pay them minimum wage. or, you know, hey, we're Republicans. Maybe we'll pay them cash and pay them half a minimum wage. That was kind of what people were doing. And my dad had a business in the 80s and the entire economy was driven by being able to pay a Mexican dishwasher or shorter a cook, half of what an American got paid. They got paid five bucks an hour when everybody else was getting paid $750 or something like that.

And that's kind of how the economy worked in the, you know, the off the books economy. Well, it's a good thing we no longer have an off the books economy and everything's above board in this country. Yeah. Well, I mean, it's interesting you say that because now with gambling and legalizing gambling and using, you know, draft kings or whatever, that's actually happened. And so if you, and then if you have cannabis be legal, that was a big part of the underground economy. And then if you let migrant workers get driver's license and then get W-2 to whatever, 1099, then they become part of it. So there's actually something to getting things out of the gray market, which helps the economy. the bigger your unofficial economy is the less efficient your state is like in general like if you go to if you go look at um i'm going to be very gentle in how i say this countries in latin america that have less high functioning economies you tend to see greater concentrations of gray market activity things that are off the books and so forth and that is not the best way to run an economy no um last thing on this on labor and then we'll talk about clavio but i keep hearing people talk about AI is going to replace labor we're not going to work we're not going to work or there won't be any jobs or robots will rule us. I was thinking about concerns. I think people ask me like, okay, Alex, you write for a living.

Are you worried? Not really. Unemployment is currently 3.5%, 3.6, whatever it is. And we are like, what? How many technological revolutions deep since the industrial revolution? And we're still using every single person. Nothing has changed. Absolutely.

That's my broad take on labor in general. I think we're going to stay low unemployment for a really long time. I'm not worried about it. I have to agree. And that would mean immigration is. a good idea. I don't know if you saw this. A bunch of tech executives in Silicon Valley have a project called California Forever. It's like a Utopia project. About 70 minutes outside of San Francisco. Solona. Solana County exists. S-O-L-A-N-O if you want to look it up on your Google

Maps. It's before you get to Sacramento, which is like the ride to Tahoe. There's just, like, you said, just huge swaths of land. They bought, you know, like hundreds of thousands of acres there and they want to build a new town there. And then east of... San Francisco and Oakland in the East Bay, you have all these planned communities that are starting to happen. So there is a distinct lack of creativity in this country for building new cities. I think the greatest pitch for a president. And I dare, I don't want to say this because I think Trump will probably pick it up because he's so savvy. If and when I run for president, I'm going to say 10 new cities. In my administration, we're building 10 new cities. And these 10 new cities are being

built from the bottom up and will be the greatest place you could ever live. And here's what they're going to be like housing is going to be amazing. Commuting is going to be amazing. Bike paths everywhere and your kids are going to be able to live near you. There'll be community pools. You'll be able to go to a pool or a rec center. Everything is going to be like cul-de-sac or any other plant community in Austin. They have the dominion, I think. Yeah, we're going to build 10 million new homes, a million in each of these 10 cities. And high density housing, I presume given that you're talking about the best The highest of density with, you know, it'll be high density in the center and then you bike out for, you know, the five miles outside of it. And it's townhomes and then it becomes homes.

So apartments, townhomes and then homes. And you can pick what you want. You want the backyard. You know, it's half hour commute to the city. You want the townhomes, 15 minute commute. And if you want to live right there, you come downstairs. It's a five second commute to be in the middle of city. We're America.

We can't build a fucking city. No, we're, no. A fucking break. Elon's landing two rockets at the same fucking time. Why the fuck can't we build a city? In the ocean. It's easier to, I'm kidding.

I know. I mean, that's literally, it's a great point, Alex. This country is so faking dysfunctional that people have to fucking think that the best way to build a city

is in the middle of the Pacific Ocean. Have you not watched any disaster fucking film? It's going to get flipped over by a large lizard thing. A lizard wave. A lizard wave. It could be any of that.

A nuclear lizard. It's going to be f***. It's going to flip over at some point. Everything's going to be hanging upside down. People are going to die. There's the middle of America. There's a fucking between California and San Francisco. The middle of California is completely empty and it's coastline.

It's a city. Or a few. A bunch of beliefs in there, please. No, you're fine. No, I mean, or not. I mean, people aren't children. But I'm a big believer in this country in the United States. For all of our warts and flaws, for all of our starts and stops,

we've been consistently making more opportunity available to more folks over time. And I love that. And I stand behind the project. The thing that actually gets me worried isn't current federal deficits or, you know, infighting them in Congress, whatever. It's whenever I see a headline that's like, New York City is going to build 1.2 miles of subway. It's going to cost $37 billion. Like, why can't we build things?

And I've seen this in microcosm in Providence where I live. And they want to build a, I think it's a five-story building. down the street from me a little bit just to keep my location slightly generic. And the neighborhoods up in arms. Like, oh, density. And I was like,

oh my God, I saw this in San Francisco. I know this story. Build it. You guys always complained that people graduated from Brown University and RISD and all these other colleges and leave. And then you won't build cheaper housing. Yeah.

It's like I'm talking. These are smart people who care. But there, there's one argument you can get them on. Hit me. This is the argument I use. All right. Do you want your children?

and your nannies or teachers and the firefighters and the ambulance drivers to live near you? Or do you want them to commute an hour and a half in and hate you? And for some rich people, they will actually, that argument will get into their brains. Now, you saw Mark Andreessen and his wife write this Nimbie letter in Atherton. I don't know if you saw that letter. Oh, I saw. Oh, my God. And they're just like, and they were building like a three-story, you know, in the place of one parking garage,

they were going to have like eight people living there. And this makes a billionaire and his wife who owned 20 homes probably have to write a letter. This is what compels them to write a letter. Here's an idea. Write a letter. Why isn't El Camino Real,

the north and south boulevard in the Bay Area, the artery before they had the highways, the 101 and the 280. Why don't we just say, on that artery, you can build six stories up and down the entire peninsula?

Six. How about 60? Let's go. I mean, I'm just, yeah, okay, sure. I'm just trying to make it so these nimbie people don't write letters. Like six stories, the whole way, the whole corridor. Yeah, yeah, yeah, yeah.

If you let people do that, then you'd have this incredible corridor where people could get on and off of it and go into their apartment complex. And then your nanny or your teacher would not hate you. Yes. Because they have to drive three hours a day and commute. And then you can't get teachers for your school or a nanny to take care of your kids. Yes, absolutely. In fact, you know what we need. We need someone with a lot of clout in the local economy.

someone with a lot of capital and someone who has a proven extra amount of time to write long manifestos in public to push this forward and there's no one better than Mark Andreessen himself. You should get a shovel

and a cement mixer and get to work. He says let's build. Yes. Well then why don't we build? Yes, this is what Mark andreson should be. If he wants to stand on the high horse and say it's time to build,

how about saying it's time to build dot dot dot on El Camino Real? Oh, no, I'm sorry. It's time to build dot dot dot dot on the blockchain. Yeah, I mean, really, seriously. All right, listen, I want to skip Clavio for a second. I love Clavio, but we have to go to Nextdoor because it's a great segue. I love this app Nextdoor.

Okay. I looked at what's going on with this stock. They got $540 million in cash. They lost $40 million or so. They're making $56 million a quarter. And the enterprise value of the company is $500 million. So if you take out the cash, this company is worth $0, I think. as best as I can tell

let me double check I'm no genius at math Mark Caps 560 and then balance sheet I had this all pulled up but now I can't find anything this is the problem with prepping for the show

yeah but I mean it if you're it's zero yeah it's worth like a dozen million dollars on an enterprise basis okay

so you and I should get some money and just go buy it no I think it's actually well okay here's the thing okay

walk me through this Love the idea of communities. Love the idea of a social app to help people connect with their neighbors. I recall the SPAC. I recall the company when it went out. And I recall the excellent best of next door Twitter account. So, you know, I'm on board with this. The problem is in Q3 of last year, it had $54 million in revenue.

This year, this year's Q3. It had 56. That's no change at all. It's usership on a weekly basis is up a little bit year over year, but not by much. 6%. And it's not making any more revenue off of people. Its net losses are sticky as hell. And even on an adjusted basis, it is making no progress. Now, the company did announce a 25% reduction in staff in this earnings report, but you cannot

cut your way to greatness. And I wonder if next door simply doesn't scale as people thought. And therefore, it is just not going to be the business that people hoped it would be, even though I love the idea, the product and the results. Okay, they have 800 employees. Now they're going to 600, 600 employees to make 200 million in revenue. stuff. Yeah. It feels like, you know, they should be able to do that. How many people work at TechCrunch?

100? No, 65, probably? 65. It probably does 30 million in revenue. If I guess with the events and everything, if I had to take a guess, having run of these businesses before. I'd say it's about 30 million.

Probably 10 million in advertising and 10, 20 million from the events business. So if you put it all together, about 30 million probably. And so I'd have some insight information on that, not recent, but historical. Yeah. So anyway. You know, you, this thing should be able to run pretty easily with 400 people. You should be able to run this with 400 people. So half the number of people.

And then there is an advertising headwin right now. And this business only has one revenue stream from what I can gather, which is advertising. So while they can't cut themselves to greatness, they could make the business run more efficiently by probably getting rid of some underperformers. Because clearly this company has, does not have a cutthroat culture in the way Facebook does, right? Like Facebook's growing. Google's growing through all this. So this is a social network. If Facebook own this, it would be a different story.

So it's not cutthroat enough. They probably need to have a change in management. Probably need to have a change in the employees there and shake the place up. If they put me in charge of this, I'd immediately go to 400 people. Yeah. And then I would build a subscription business into it of some type. And I would say, if you want to be a vendor in the system, if you live in the community, it's free. If you want to be any kind of a vendor, it's $99 a month to have an account on the system.

And then I would try to get a million vendors, nannies, whatever, to be in the system plumbers, et cetera. I'd come up with some way to charge them for being in the directory that wasn't free. And then just try to get a base of $100 million, $200 million and subscription revenue as quick as possible like the New York Times did. So that, when you have the headwinds of advertising, the business doesn't look completely effed. Your thoughts. So, well, I've been thinking a lot about ads in general because one of the most interesting

things about big tech companies in the last couple of years, putting meta to the side for this, because we all know they sell ads. But it's amazing how big of an ads business we're seeing at like Amazon and Microsoft. And so to me, there's this thing that happens with scale and essentially just consumer reach, which is suddenly you can turn on this advertising tab and make boatloads of money. And I don't think it always yields the best consumer results or in terms of consumer surplus in certain products, but it does happen. And we're seeing those companies do well.

Like if you look at Amazon's business, even Instacart's ads business is crushing it right now. Then you look at like one or two tiers down in scale and they are struggling. So looking at it next door here, I'm almost thinking to myself, you know, okay, Amazon's crushing it on ads. Everyone else is doing fine at the big tech side. Why can't this little company do better? And I think there's a threshold you hit when you matter enough to get the dollars. And so maybe the question here. Scale matters is exactly correct.

In advertising scale matters. Either you have an endemic advertising base. like Crunch Base does. Sure. Or, oh, I'm sorry, TechCrunch has. Same thing. When you have,

except not. When you have an endemic advertising base, like Engadget, when we ran in gadget, like, where is Samsung going to advertise their new phone? It's going to be in gadget. Where is, like, Silicon Valley Bank or Comerica going to advertise their stuff?

This weekend startups or TechCrunch, right? It's going to be like, there's endemic advertising. And, you know, you're exactly correct. Other people have built advertising businesses, but the people who've had success are close to the transaction or have true scale. Yes. Uber Eats and DoorDash and Instacart, they're close to the checkout. Therefore, it's coveted.

Then you look at Amazon, it's close to the checkout and it has scale. So that's why it's such a juggernaut now in tens of billions, right? And so Nextdoor is going to have a hard time because are they near the checkout? No, next door is not a checkout product. But that's what I'm saying, anybody who's in there who's not living in, you know, Boise, Idaho, or Brooklyn or Bay Ridge, Brooklyn specifically, if you want access to that community, you got to have the $99 a month vendor account.

Okay. And that gives you a profile page. And if you don't, you don't get a profile page. And I would just convert everybody, neighborhood by neighborhood, to $99 a month, $1,200 a year. If you get but one customer pays for itself. And if you can't afford that,

you can't be in the community, annoying people. That is the Tim Cook approach. What's the pirate approach? The pirate approach is to say, we need to 10x our weekly active users. Sure. So that's another approach. That's what I would do.

Because if you do what you say, you can probably build a more sustainable business and a little bit easier on the revenue side, but it's going to be worth 1.2, 1.4. Fuck that. You know? I'm just trying to build a base. So I would say it's a one two strategy. I would take your strategy as the long term strategy.

And I take my strategy as the foundational strategy. So let's put one team, 100 people on just building this base of, subscription revenue that keeps the lights on. And then, hey, advertising comes ebbs and flows. Yeah, let's go 10 exit and give people money to build content, to build local news. Like, I think it could be a really good local news like patch. I feel like that's way open.

And there's so many journalists. I don't know if you saw Jezobel shut down yesterday. At the same time, Vice laid people off at the same time. Next door is laying people off. What does a local journalist get paid? I think the median is like 40, 50. 40 or $50,000 a year, less than a nanny. So literally, if you are journalist, you get paid less than the nanny.

It's literally like being a priest. It's a vocation. It's just teachers get paid 50% more. Why are we in business journalism? Exactly. The only carvap out, right? It's the last bastion of economic viability. So I love all of that.

And I want next door to succeed because what I like about it is, it is fundamentally people power. The people in the community are at the forefront. or so I would say than in other social networks that are a bit more seemingly algorithmically driven. And let's be honest, we do have an issue with loneliness in this country. Yes. And so I think things that could, in theory, bring us closer together and make us have a slightly tighter knit local area are good. I love the fact that when I walk across the street, I know the family there.

I walk around the corner of this store. I know the owner of that store. When I walk into the cafes in my neighborhood, they're like, oh, God, here he is again, two large Americanos. and, you know, that is worth gold to me. And I think we mostly don't have it due to commuting and so forth. So I wanted to succeed. My glasses are going on. You know what that means.

J-trade alert. It's time for a J-trade. I'm opening up Robin Hood now. 20,000 shares of kind is $28,000. That's too small of a bet. Let's make a bigger bet. Let's go $30,000, $43,000. I'm going to review it, swipe up, order received,

Chiching, we got a J-trade. I just bought $43,000 worth of next door. I'm going to probably regret this, but I'm doing it. I convinced myself that there's an asset here that's worth it. We laid out our plan. Now the plan's in the world. And yeah, whatever, I'm giving you, you convinced me. I'm giving you 20% carry on this.

I think that breaks ethics. I think that breaks journalistic ethics. I'm going to donate 20% of whatever I gain to your charity of your choice. So you will, yeah. What's your favorite? You could have. You could have hired the second nanny instead of making the chase rate. No, I got to make a J-trade on this. I'm sorry. I've been sitting on the sidelines. I've been wanting to buy a company that is just totally getting demolished and it makes no sense. I think this is the company. I think this is an easy purchase. If I'm, if I'm Elon, I would buy this in a heartbeat since he's got a good team like running Twitter now, X and he's got like a good product team. If I'm Elon, I'd buy this in a heartbeat. Get all that local stuff. Mush them together.

Not just you can log in with your ex account, but he wants to build a super app. So maybe like it knows your location. And then in Twitter, you could have a stream. Like the feed from next door goes into Twitter. I don't know. What's the biggest like handy person marketplace out there? Thumbtack and Angie's List. And they are struggling.

Angie's List is struggling as a public company. You know, right now the market is brutal to anybody not profitable. We know that. And then they're rewarding people who are profitable. So the question is, to our first story, Uber, how quickly can next door start to look like Uber? I think you need to have 300 employees. Sorry, I think the cuts, you got to cut 50%. From the reduced level, yeah.

Yes. So cut 25% now and then tell everybody, we get to profitability within a year. Or if we don't, we're going to cut another 200 people. And so, and the other thing is a lot of the people who were hired, I hate to say this so brutally, but this is what I hear from folks. When they hired people 2019 to 2021, those same people would cut. command, half the comp. Then, now that you know how to manage remote workers, those same remote workers in Canada, you know, south of the border, you know, Latin America, Manila, they go for much less. And I get to see this, Alex, because I work with startups and startups have limited

capital right now. Sure. Somebody was telling me they have a VP of operations in Portugal. This person, they would value at $100,000, like a VP of ops. Guess what the Portugal salary is for this person? This is a European country. But Europe's poorer than you think. Europe's poor than Americans think. I'm going to go 57. 35. What?

They replaced 100,000 person with a 35,000-all person in Portugal. Now, guess how much an SDR, sales development rep? In the United States, these get paid 75K, fully baked, maybe 40, 50K base with 25K. Think of it like the Yelp person who's calling on people, restaurants, like that in-house salesperson, or they work as an SDR at a SaaS company. They give leads. they warm up leads, they nurture them, they hand them off to the salespeople selling Salesforce. I love SDRs, yeah.

Yeah, SDRs, which are also known as research people. Guess what a researcher gets paid per month in Latin America or Manila or India, who has been doing it for three years and has an English language proficiency in IQ that's higher than the average American. Right, per month or per year? Just go per month, per month, total comp per month. So it's 75, 12, 6. Carry the one.

times two divided by seven. Making me do math on the show my day off. I'm going to go 200 hours a month of work, 50 hours a week. Okay, let's go with 2K. Just throw it in remember. 1K. 1K.

And I know where to hire them now. So, because my, I literally, this is the great thing with working with young founders and we invest in 150 companies a year. They just explain to me how they're doing it. I'm like, wait a second. You have 12 people and you're burning $30,000 a month. everybody's getting paid this amount.

And like, oh, developers in Latin America are getting 2K a month and the ops and salespeople are getting 1K a month. I'm like, how is that possible? Like, do you know the cost of living in these countries? I'm like, I don't.

It's much lower. Unbelievable. And these are great jobs and these people do not quit the jobs. And then I said, for the people you have in Manila, can I ask a question? Are they working the overnight? They're like, they prefer to work the overnight.

If you work the overnight, you get $7 an hour. If you work during the day, you get four. So everybody, the overnight shifts in Manila and Philippines and those places is like, you almost get paid double for doing that. And they just sit in your Slack room. So you know how to manage remote people, right? I do it every day. Everything went remote, right? Yeah, yeah. Is there any difference in managing a remote

person who lives in Canada, Portugal, or Hawaii? I mean, I have colleagues around the world, so I'm actually very accustomed to the time zone dance. And I, look, I'm a long-term believer in remote work and remote teams. And I know that there is many viewpoints in that conversation. But my best argument in favor of this is, I couldn't work with the great people I do if I demanded they all live next to me. And so to me, it's like if you want access to global talent, you go global, you can do it very well. At those prices, though, oh my gosh, that's maybe, maybe unemployment is going to go up here in the U.S.

That's what I'm thinking. And, you know, what I did was, just as an experiment, I'm hiring four operations, you know, admin type people. And I'm giving them to four different departments. And I said, we're going to do an experiment for the next six months. you're going to have this admin person in this Slack room. Anybody in this eight-person group can use them for anything they want. Just say what you want in the group.

Think of it like it's like Amazon Web. It's like we have a mechanical Turk in the company. Go to the room, make a request. They do it for you. Boom. So if it was you, you could say, hey, I want some charts made or I want you to make me a table of this. And then you have to ask yourself, can chat GPT do it? Or does the person in Manila using chat GPT do it?

Oh, because you're going to give them the chat. Jimmy Deacare. Yeah. Yeah. Okay. But then apply that with GitHub co-pilot to the developer question. And then suddenly the people you're hiring around the world that are lower price point can do more. I mean, okay.

And this is where it becomes super mind-blowing. So if you think about what you just said, you're a 2K a month developer in Latin America or India. That's what they get paid. Two or three-k a month. So 25, 40K, great job. But that's for an average developer. Now imagine your average developer has co-pilot. So if we were going to rank them on a scale of 1 to 10,

they would be maybe a five or six developer. Sure. They start using copilot. They immediately become a seven or eight. Now you're the CEO of a company and you can hire three developers in Latin America or India for the price of the U.S. one. The U.S. one's at eight out of the gate. But maybe they want some quality of life.

Maybe they want, you know, more free time, work-life balance as Europeans and Americans have now become a custom. And then you've got three grinders, you know, and they're both, you're interacting. with them is on Zoom and Slack. So what I think happened was people like you as a manager or myself as a manager or CEOs, once you learn to manage a remote person, then the idea of hiring somebody overseas who speaks another language natively and is a part of a different culture and gets paid a different pay scale is not scary anymore.

I'm not scared of having remote workers anymore. That's all I have. That's all people want to do is remote work. So fine, I give up. Yeah. I give up. Also, if I give up, I should also get the benefit of being able to hire globally. Yeah. The most important thing you learn when you travel is that everywhere you go, it's folks.

They, food changes, clothing changes, religion changes, but everyone wants the same thing. Everyone's lovely. Everyone around the world's fantastic. And the thing about this is, you're right in many cases that these are very well-paying jobs. And what happens is in economies where you do see work like this, eventually the labor price goes up for the local community and makes people a lot richer. So I'm totally in favor of this. I love the democratization. of opportunity around the world thanks to the internet. It's taken longer than I would have thought. But I think we'll know things have really changed when developer salaries in the US peak. All right. On an inflation adjusted basis. Yes.

We got to do this. You were on the show when the WeWorks S1 came out. You and Molly, episode 969. Oh, God. Let's go to Alex at the top of his game with Molly at the top of her game. Three, two, one. We'll play a 40-second clip.

See you on the side. I'm glad I'm not alone in the We-Ware chaos because I was concerned that I was too stupid to figure it out. I was missing something very important, but it doesn't sound like it. So stress out. What to you is the worst part of all of this? The business model, the personal red flags he keeps throwing up, or something else? The fact that I cannot, with complete confidence, tell you their gap gross margin.

And I'm talking to that is a fundamental basic way to understand the quality of revenue in a business that helps you understand their burn rate. Are they burning money to build a recurring strong revenue base? or they burning money to build a revenue base that may have 5% gross margins. And if they are doing that, they are throwing tons of good money to get bad revenue. And then it's ridiculous. But because they set up the S-1 in such a way that they don't actually break that out, my hands are off. I'm not even going to give it a thousand miles away.

Okay, there it is. You were talking about the eventual gross margin of the business. I think you nailed it. Here we are. We were going bankrupt. And I think you get your victory lap here. You were exactly correct. The gross margin of business were flipped and broken.

Yeah. So that's what I discovered when I went back through the numbers, uh, when they did file. I went back through the SPAC deck, the original S-1s, and then the recent earnings. And the company's gross margins were always somewhere around zero, as best as I could tell, through all the, all the spoken mirrors. Um, it was just never a good business. People like to say, you know, gap is not fair because share base comm shouldn't be blah, blah, blah.

You know what the nice thing about gap is? There's no hiding. And so that's why I really do appreciate having at least some rigorous set of numbers to go against. And we work never had good revenue. They spent too much money. And then they got several successive shocks from the economy, remote work being one, COVID being another. And I think that was just, you know, a couple of extra nails right through the heart. Yeah, I think we really have to look at everybody playing community EBITA, adjusted EBITA. I think it might be time for us to stop with allowing accounting, Musugina, massaging. If you want to talk about that on your own

time, fine. But if you're talking about it in relation to S-1s, 10-Qs, earnings calls, there's an argument to maybe not let people do that. So, I'm for a free country, but I just feel like the accounting shenanigans. Why do we have gap? Why do we have principles and rules if we allow people to ignore them and then focus on a different one? It's a really good point. And here's what I'll say it. I was prepping for this show about half an hour before we got on. Just want to go back through the numbers, make sure I recall things. And I was going to to point up the slide decks from each of these companies' earnings reports. And they were not called investor presentations.

They were called earnings supplements, which I think is actually a change in how they're being described. I think the SEC is saying, you need to point out that this is not your earnings. This is something in addition to your earnings. And you need to be clearer about that. And I agree with you. And the reason why I think, especially adjusted EBITDA is something that we should not trust as much as many people want us to, is that they strip out share-based comm.

and then later on they have to buy all that stock back with cash. And so all they're doing is moving essentially a cost to the future, which they then bury in their, I think that would be an investing cash flow. And so to me, it's a little bit of a shell game to make the numbers look better in the meantime and to not show how much your employee base actually costs. Yes.

For startups, absolutely don't care. Yeah. For big companies, I care a lot. Yeah. See, I think maybe the rule here should be, kind of like when you get your credit card statements or you have a banking account, they're required to show you your interest rate.

Yes. On the top level, there's some level of regulation here to protect consumers. And the regulation, I think is, and I, you know, I'm not up on this, but this happened during Dodd-Frank or something, where they just felt like the banks were not being up front. They said, okay, you guys obviously can't police yourselves. On the top level of a bank statement above the fold in newspaper terms, you got to have your interest rate and how much interest you paid this year. Yes.

And even I, when I go into like my Morgan Stanley account, when I, I look at my margin loan account, it has how much I'm paying and my margin loan is variable. It was like 1%, and now it's 6 or 7%. But I can see it right there. And it says, how much did you pay? And so I can make the decision, do I sell shares in Uber or other things? But it's growing and is it growing faster than 7%. Okay, great.

If I need some quick cash, I can take the margin loan, spend the money and pay it back or sell shares to pay it down, right? This is how affluent people never pay taxes, as you probably are from Elizabeth. with Warren and Bernie Sanders, you just take loans out against your equity holdings. And hopefully if your equity holdings keep going up, you eventually can push the tax burden way down the road. Yes. And then put it into a trust and then give it your kids.

And then maybe, yeah, that could work too. Yeah. If you, but I don't want to leave them with too much of a burden. I want to just leave them with the investment company and having a share in that. And either you work there and you get a nice share or you don't work there and you get a smaller share. Now that I, I just want my daughters to work with me. Yeah.

Now that I have, now that I have, oh, kid one and we're thinking about kid two, I'm thinking a lot more about like how to teach them about money. And oh, God, it's going to be so hard. The best thing to do is to have put a certain amount of money into their Robin Hood account or wealth front, whatever easy to use platform you have. Yeah. And I would just give them when they're of age, the app. I'm going to do this with my 13 year old with $1,000 in it and say you have the S&P, you have $1,000 in, you know, QQQQ, the NASDAQ or some Vanguard fund. or I put 500 in each. And if you want to sell it and move it to other things,

you can go have fun with it and we'll both look at it and talk about it. If you think you can outperform the indexes, go for it. If you don't, just leave it there. Do you know when I discovered that I thought business was really interesting? Elementary School Stock Club joined on a whim. We got $1 million in fake money. We got to play with it. This was, you know, back in the 90s, I tanked it.

I was so bad. But I loved it so much. What did you buy? Who the hell knows? I was in the computer lab. that elementary school in rural Oregon. Like it was not high tech. But I remember the first day before I did any trades, my money went up because I earned some interest on it.

And I was like, this is the best thing in the world. And it had me hooked the line and sinker and therefore the rest of my life. So I agree with that. But more like my children are going to have more money than I had. And instilling work ethic is, you know, I think something you think about. And I don't know. I just might I stay up at night thinking about this now versus like sports. You know, I think the right thing to do with your kids is understand that chat GPT and AI is going to take away a lot of the jobs that we thought were the great jobs, being a writer, a developer, a designer.

And those jobs are going to have compression in how much money they make. And they will go to the median average of, they'll go to the average of an international person with chat GPT4. And so while you could thumb your nose and be on your high horse about a low. logo designed in India or Manila or Latin America 10 years ago. Now, if I were to show you a logo made in one of those countries versus an American, you would not be able to pick the difference. And using Adobe and Canva and their new AI suites, you would be like, wow, the average logo built for 50 bucks is better than the average logo built 5,000 bucks 20 years ago. And when you started a company 20 years ago, one of the things you did with your first million and a half was you gave 5 to 25K to an agency to build your logo. Wow.

Now, in the days of Engadget and TechCrunch when we were building those brands, Peter Rojas's fiance at the time and then wife today, she made the Engadget logo. I think we paid her 500 bucks, $350, and that was a lot for a logo, you know, 20 years ago. Now, founders make their logos using Dolly or some AI looks great. Yeah. And I'm like, how did you do that? How much should it cost?

and they said 17 minutes. And I say, okay, cautious, 17 minutes. Got it. That's the price. 17 minutes. Okay, well, if you're a founder and you've got unlimited time, you're working 16 hours a day, seven days a week. Okay, 17 minutes is free.

So logos, now free. Okay, question, though. I think you're slightly more pessimistic than I am about certain jobs in their viability long term, but that's nuance. What are the safe jobs do you think in a world of AI? If you're 18 right now listening to this. Clearly, anything physical in the world,

that's like a, trade skill is going to be crazy. Like, you know, try getting a plumber, electrician, any of those jobs. So if you have the propensity, it's going to be a six-figure job.

And I would say it's safer than the equivalent six-figure job you might get after 20 years of being a journalist, right? To hit six figures as a teacher or journalist is a 10 to 20-year journey, I'd say. And your job as a plumber,

electrician, carpenter, pick the trade will be higher. Yeah. But I do think the skills of leadership, building product, building a team and being able to manage teams to build products, that's always going to be there. Because you correctly pointed out at the top of the episode

that we always find work for people to do. Well, the work is, what's a problem in the world where I can save people time, save them money, or delight them and make them laugh? Those three things will always be here. Can I entertain somebody, make them laugh, cry, otherwise feel emotion, you know, inform them, whatever it is? And then save them money, save them time.

Those things are always going to be there. So go ahead and teach your kids how to build a product or service in the world and how to build a team to work together to collaborate to build products and services in the world. That's what I'm teaching my daughters. And if they can do that, they're going to have a job forever. Yeah. Or learn to weld. It's really funny because, you know, for a really long time, people looked down their nose at people who worked with their hands and those jobs reviewed as lesser. And even the whole blue color, white color divide was not just class.

in the United States, but it was also, you know, kind of like a cultural cachet that they, that were valued jobs didn't have. If we think about the power of digital technologies in a realm of generative AI, taking away the white collar premium, and oddly enough, pushing that back onto the blue collar jobs, there's a full circle element to this that I, that I, that I, that I appreciate and find ironic that the computer guys got so smart, they took away their own jobs, almost to a degree. Yes. Like, who would have thought? Unpack that. well okay so we worked really hard on on getting big data to work and then we talked a lot about how to do machine learning and then we learned about transformers then learned about LLMs and then we built generative AI applications and then they learned how to code and suddenly the snake began to eat its own tail and so now the people who made all this great stuff almost like a not sisyphus who's the dude of the sun and got burned and icarus icarus thank you kind of an ikarrian journey flying too close to building somebody that's as smart as you are and then it takes a dude of the sun and it takes the way your work. I think you're right about

anyone being able to evoke emotions, which is why I hope that my writing is sufficiently humorous, even though I'm a journalist, to keep me employed. We'll see. I had a thing with writers, you know, in our organization, when we needed to write copy, myself, Jackie, or maybe one other person where the copyrighters out of 20 people at the investment firm. And so people would come to us with their, you know, raw copy, we'd polish it.

Now they come to us and I say, highlight everything in Notion or Coda or Google Docs or Grammarly and then say make better. Or if you really want to get good at it, take it from Grammarly, then put it in Notion, then have notion improve it and do two layers of improving your writing. And literally, there is something where you can, I think it's in notion when you highlight it or it might be superhuman and you just say make better. It's not even like make it more definitive, make it more concise, make it more appealing to a business user. It's just better. Yes. And my Lord. it takes people from where you and I are at as writers,

like we're elite riders who can get paid very well for our service. I think if we were, if we're 100 out of 100 or 99, we're 98, 99 out of 100 in terms of getting paid as writers. Yeah. It brings somebody who's a 20, I think, to an 80. Oh, wow. So it's just behind us. Okay.

Yeah, I think they're like, it's good enough to hit the publish button. In other words, remember like writers? She'd be like, this person doesn't get the published button on Tech Roger and Gadget. Somebody got to read your shit and make sure it's tight. Now, that person. That person, you could actually let them publish. All right, I got to play you this. Did you see the South Park episode about...

I have not seen it yet. Okay, I'm going to play you one clip. Please. And then I want your reaction. Here we go. Hey, excuse me, you're a handyman, right? Can I get you to come look at my oven door? I can trade you services.

I have geology skills. Could you come fix my door and I'll give you some geology? Jeep. Hey, why don't you guys get out here? You're making the Home Depot look all cheating. So apparently, I was just quoting South Park and didn't even know it. The joke here is, all the intellectuals with PhDs, lawyers, accountants can't find handymen. So they say, go to Home Depot and just hire the people outside. Yes. So many of them go to Home Depot that they now become the Home Depot. Yes. And the handyman's drive by to get their, you know, sheet rock. And they look at them and say, you guys are making this place look really shitty.

Get the hell out of here. It's a bunch of attorneys and lawyers. So, I mean, I really do think, at a lot of professions, entry-level work is currently done by hand that could be done by digital services in the future. And I think we're seeing startups attack every bit of the insurance stack and so forth, just to pick a random example. And it's going to get a lot better and faster. So the cool thing for me is, given my thesis, that no matter what, we're going to have employment between three and five percent long term throughout the history of mankind is, what are, was going to do once they get their stuff taken away? And what does that unlock? And that's a question I don't know the answer to. But I'm very curious. Yeah. I think you're going to have to have a level

of resiliency that I think a generation or two didn't have to have. Gen X, there was always going to be a job for us. You know, we may or may not like it, but we could be, you know, moody when we took it. Then Gen Z, you know, millennials like, like, yeah, they were like paralyzed. Like, oh, my God, I have to go to the office. Like this, I don't know if you saw that the, the, the TikTok of the woman who was like, I leave my house at 8.30. I don't get home until 6.15. And my life is, I have,

there's no life left for me. We don't have time to have that argument. But to me, was two hours each way. That's insane. Back to your point about people commuting too far. Yes. That was insane.

Yeah, she wanted to live with her parents. And I was like, oh, here's the hack. Get a roommate who has the same problem in Manhattan. And then one of you sleeps in the living room. The other one sleeps in the bedroom and you turn a one bedroom to a two bedroom. More than just one. Fine. You have three of you. Put a bunk bed in. Like, then just live by your house and you'll be cool.

And just, you got to just get into dorm life. Anyway, there's been a great episode. It's going to be a crazy future. You need to be resilient and self-reliant. So if you have kids, build self-reliance and resiliency. It's your kids. You can do that by taking them on long hikes or camping or anything that takes grit, skiing, boating, hikes, camping in the wilderness, make them build a fire,

make them build a tent for themselves. Let them feel like they could, survive in tough conditions. And then when they face a world without jobs or jobs that are hard, they're like, oh, well, being a welder's not that difficult or a construction person. If I got to paint a house, it's not the end of the world. Well, they'll all be podcasters anyway. Let me tell you. I've done welding poorly.

And it's terrifying. So shout out to all the welders out there because that is a legit skill. And I'm always in awe when I see some really good welding out in the wild. Jason, though, I do hope that in the future there are jobs for podcasters because I find it amazing that people still, I don't know, listen to us. Thanks everybody. Yeah, thanks everybody for listening. I love doing this.

I hope I get to do it until I'm dead, you know? Absolutely. All right, listen, everybody follow at Alex. First name club, yeah? Oh, yeah. On the Twitter still. So everybody follow Alex. He's just extraordinary and a great guest to have during earning season.

You can follow me. I'm at Jason. And you can just tweet to us, hey, enjoy the pod at Alex at Jason. And we get to flex on our Gen X first name club. I'm a millennial. I'll have you know. Yeah, you're kind of more Gen X than millennial. You don't whine all that much.

Are you moody and do you want? Only to my spouse and then she tells me that I'm, I need to get it together. Exactly. You feel more Gen X to me because you're, yeah, you're more passionate about weird verticals. I forgot what I, I forgot how old I was. That's how I know that I'm getting older because I was like, am I 33 or 34? And my wife was like, you're 34.

I'm like, really? So I put into wool from Alphabet. I'm like, oh, yeah, she's right. You're a mature 34. You feel like 44 to me. You're like perfect to be a dad. You'll be walking around. You've got the dad vibes going now.

I'll text you about the stroller he bought it. It's going to blow your mind. Absolutely. I thought we should go. All right. We'll see you all next time on this week in startups. Bye bye.