We Study Billionaires - The Investor’s Podcast Network - TIP789: The Story of Uber w/ Clay Finck

Episode Date: February 6, 2026

In this episode, Clay tells the story of Uber. Uber started as a simple idea, and evolved into one of the most disruptive companies of the modern era. Drawing from Brad Stone’s The Upstarts, the episode explores Uber’s early days, its global expansion, and the never-ending battles with regulators, competitors, and the taxi industry. IN THIS EPISODE YOU’LL LEARN: 00:00:00 - Intro 00:01:42 - How Uber went from a simple idea in San Francisco to a global transportation platform in under a decade 00:03:58 - Why the taxi industry was ripe for disruption and how regulation shaped Uber’s early strategy 00:31:08 - The role venture capital, aggressive expansion, and competition played in Uber’s rise 00:39:41 - How network effects, data, and dynamic pricing powered Uber’s growth flywheel 01:00:42 - How Uber’s business model and moat evolved over time 01:15:54 - Why leadership style and company culture became both a strength and a liability as Uber scaled Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Learn how to join us in Omaha for the Berkshire meeting ⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠. Brad Stone’s book: The Upstarts. Stig Brodersen’s Uber pitch. Shawn O’Malley’s Uber pitch. Bill Ackman’s 2024 Annual Letter. Follow Clay on X and LinkedIn.  Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses in just a few minutes each week through our newsletter, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠We Study Billionaires Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X (Twitter)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Browse through all our episodes ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance Tool⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sponsors⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: ⁠HardBlock⁠ ⁠Human Rights Foundation⁠ ⁠Simple Mining⁠ ⁠Netsuite⁠ ⁠Shopify⁠ ⁠Plus500⁠ ⁠Vanta⁠ ⁠Masterworks⁠ ⁠Fundrise⁠⁠⁠⁠ References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. On today's episode, we're telling the story of Uber. I recently picked up this book titled The Upstarts by Bradstone, which tells the story of how companies like Uber and Airbnb reshaped entire industries almost overnight. Bradstone is one of the most respected technology journalists of our time, and the book gives a front seat to the chaos, ambition, and conviction required to build the world's largest ride-hailing company. Rather than focusing on polished success stories, Stone takes us inside the messy early days

when Uber had the odds stacked against them. What's remarkable about Uber's story is just how quickly it went from a Silicon Valley idea to a service that's become ubiquitous in less than a decade. It was by no means an easy ride for the company as they faced constant pressure from the taxi industry, regulators, and competitors. I thoroughly enjoyed covering this book on the show, so I hope you enjoy the story of Uber as much as I did. Since 2014 and through more than 190 million downloads, we break down the principles of value

investing and sit down with some of the world's best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness, and the art of living a good life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own. and they may have investments in the securities discussed. Now for your host, Clay Fink.

Hey, everybody, welcome back to The Investors Podcast. I'm your host, Clay Fink, and I'm really excited to bring you today's episode sharing the story of Uber. But before we get into the story, I wanted to mention that I'll be hosting a call later this month with our TIP Mastermind community discussing the investment case for Uber. I have not made an investment in the company, but I'd like to be hosting a call later this month. but I'd like to use this as an opportunity to learn more about the business and better understand

where this business is heading over the next five to 10 years. If you're interested in joining the call or tuning into the recording after the fact, you can apply to join the community at theinvestorspodcast.com slash mastermind. Or you can just click the link in the show notes below. All right, so Bradstone wrote this excellent book back in 2017 titled The Upstarts, How Uber, Airbnb, and the Killer Companies of the New Silicon Valley are changing the world. In the not too distant past, the idea of getting into a stranger's car or sleeping in a stranger's home would have seemed bizarre and dangerous. But today, it's as common as ordering a book online. Uber and Airbnb have ushered in a new era that is redefining the way we travel, move from point A to point B. So the book, of course,

dives into both the story of Airbnb and Uber, but since this was a pretty lengthy book, I cover the story of Airbnb back on episode 503, so I decided to focus this episode primarily on Uber. I'm a big believer that studying a company's beginnings can give us a deeper appreciation for the service it now provides on a global scale. When you really think about it, Uber, like many types of technologies, is a bit like magic. We can pull out her phone, click a few buttons, and a car is summoned in a matter of minutes. It's like we're already living in the future at this very moment. So let's get right into how this type of magic came about.

In mid-2008, Garrett Camp had sold his first company called StumbleUpon to eBay for $75 million. StumbleUpon was a site that allowed users to share and find interesting things on the internet without having to search for them on Google. Camp was now living large and enjoying San Francisco's food scene and nightlife. This is when he started to learn more about San Francisco's inefficient and underdeveloped taxi industry. For decades, San Francisco had deliberately kept the number of taxi medallions capped at around 1,500. So the medallions in the city were relatively inexpensive and they could not be resold so the owners could keep the permits for as long as they logged a minimum

number of hours on the road each year. So for the most part, new permits were only available when drivers passed away, and this led to a really long wait list for new drivers. There are stories of some people waiting three decades just to get access to a permit. It's just insane. The system guaranteed a shortage of drivers in long wait times for those waiting for a taxi, so the service delivered within this industry was just brutal. Attempts to change the industry were also futile, as drivers were most interested in keeping their wages high in competition limited.

Whenever the mayor or the city's board of supervisors tried to increase the number of medallions, angry drivers would fill the city council chambers or surround the city hall causing havoc. After Garrett Camp's startup exit, he splurged on a red Mercedes-Benz class C sports car, but it just mostly sat idle in his garage as he actually preferred public transportation due to how stressful driving was in the Bay Area. He also did not want to park such a nice car on the street and did not want to risk it getting broken into. Soon enough, camp would grow frustrated with the taxi industry. Sometimes he would call up a cab only to have it not show up while he was waiting on the street, and meanwhile, he'd see

two or three cabs drive right by him. He would try to get to his dinners around 20 minutes early, only to end up being 30 minutes late due to the headaches related to transportation. In fact, he was so frustrated with how inefficient the taxi cab system was that whenever he wanted a ride, he would call all the yellow taxi cab companies when he needed a cab and simply take the first one that arrived. Of course, taxis hated this tactic and Camp believed that his cell phone number was blacklisted as they quit taking his calls. Then Camp discovered the city's gypsy cab fleet of unmarked black Sudan's that would approach prospective passengers on the street, flash their headlights to try and solicit a fare. He collected the phone numbers of the best drivers in San Francisco to try and make it more convenient for him to get around

town. One night when Camp was at home, he was watching Daniel Craig's first James Bond movie. It was called Casino Royale. Camp loved the movie, and one part of the movie in particular really got him thinking. 30 minutes into the film, Bond is driving his silver Ford Mondeo in the Bahamas when he glances at his phone. James Bond's phone showed a graphical icon of his vehicle and was moving on a map toward his destination, the Ocean Club. This was a light bulb moment for Camp. So what if he were to create an on-demand car service in an app that allowed passengers to track the location of the vehicles on their phones? Throughout the year, Camp had been jotting down several business ideas, company names, and logos.

He liked the name Uber as it was only one word, and it's a word that described excellence. He couldn't stop talking about this idea with his girlfriend at the time who thought this idea was just ridiculous. Despite others not really loving the idea, Camp knew that this was a service that he himself wanted, and he also knew that Apple's newly released App Store could make this vision of reality. Given the capabilities of the iPhone, it could act as a taxi meter by setting the rates to order a ride and show the location of the taxi that's on their way to pick them up. He also talked about this idea with friends, including podcaster, investor, and author Tim Ferriss. Ferris actually loved the idea. Can't believe that an app on your phone could be a much more

efficient cab system, especially in San Francisco. He reasoned that if he could manage to get such an app running in 100 cities, it had the potential to generate $100 million per year in service fees. So in the fall of 2008, he had more time to research his new idea, and in November, he registered UberC as an LLC in California. In December, Camp got connected with the contact he had from his undergrad at the University of Calgary, Oscar Solizer, and he pitched Oscar on the idea of being the lead developer for UberCap. He explained to that in San Francisco.

It was just a huge pain to get a taxi. he wanted to buy five nice Mercedes that would cost around $100,000 each, and these cars would be used as a taxi service through the app that he wanted to build. Solazar agreed that there was an opportunity here, and he's quoted as saying, I don't know if this is a billion dollar company, but it's definitely a billion dollar idea. Since Solizer wasn't a U.S. citizen at the time, he had to accept his compensation in equity and not in cash. And as of the time of IPO in May 2019, Oscar Solzer's stake in the company was worth around $250 million. So Camp and Solzer, they set their sights on shaking things up in the entrenched taxi industry

that was really more interested in blocking competition instead of actually serving customers. Camp was also friends with Travis Kalanick, who just loved brainstorming new types of internet companies. At the time, Kalanick had recently sold his streaming video company called Red Swoosh, Ironically, while Camp was more excited about the idea of Uber, Kalinick was raving about creating a platform to book accommodations, similar to Airbnb, as they had stayed at a lavish apartment in Paris using a service called Verbo, which he claimed was an abysmal experience. Kalanick would end up being the co-founder of UberCab and serve as an advisor to Camp. Kalanick convinced Kamp that it was a bad idea to purchase the cars himself, and it would be better if the app was available to drivers to sign up and offer rides themselves.

Kalanick remarked, Garrett brought the classy and I brought the efficiency. We don't own the cars and we don't hire drivers. We work with companies and individuals who do that. It's very straightforward. I want to push a button and get a ride. That's what it's all about. However, throughout 2009, Uber would remain a side project as Camp got more involved at his previous startup and Kalanick was doing all of this advising work for several different companies. But Oscar Solizer, he continued to work on the project and designed the mechanics of the service. He managed to put together an algorithm that would match passengers with the closest available vehicle. Since he had a lot of work on his plate, he brought on a couple of friends who were developers in Mexico, and the three of them worked on the Uber app throughout 2009. In the first of the first of the first of the first of the first of In the fall of 2009, Camp, Kalanick, and Salazar, the lead programmer, they set foot in New York's

East Village to test out their early version of the app. They hired a few random drivers and they handed them an iPhone with the app to start testing it out around various locations throughout the city. The founders still loved the idea, but found that building the actual application was quite challenging. And by early 2010, both Camp and Kalanick agreed that they wanted to use Uber, but neither of them really wanted to run Uber. Camp was still quite busy with his previous startup stumble upon and would remain an investor. In Kalanick, he just valued his freedom at the time

and the opportunity of doing this advising work for several different companies. So Kalanick posted a tweet stating that he was looking for a product manager for a location-based service, which is how they ended up hiring Ryan Graves. Graves was a 27-year-old from Chicago who was previously working at General Electric. Graves had an endless appetite for turning himself into an expert on any topic that fascinated him. And Graves recently completed a business development internship at the location app for Square. After Graves met Kalanick at a Soho coffee shop and saw the prototype for the app, he sensed that there was a big opportunity here. So even if the Uber idea didn't work, this allowed Graves to just get his foot in the door to,

to get connected with a lot of interesting people throughout Silicon Valley. So two weeks later, Graves moved to San Francisco and initially worked out of a hotel room and coffee shops. He quickly grew frustrated with the hand he was dealt because the app just did not work well. The wireless coverage was horrible and that Uber app's use of GPS would quickly drain an iPhone's battery. In June of 2010, Uber Cab's app, it went live on the Apple iOS App Store and the server had quietly launched in the city of San Francisco. Right as the smartphone revolution began

gaining momentum. But now they would need to get external financing in order to really scale up. So most of Silicon Valley's brightest minds, they actually passed on the deal for various reasons. Some didn't believe that Graves was experienced enough or the two founders just weren't involved enough or that the concept only applied to the wealthier cohort of society who wanted to pay for a premium transportation service. Some investors were also concerned about the city and state transportation laws. Another reason that most investors said no is that Uber looked nothing like what it would later become. So this is just the cruel reality of startup investing. Financers are betting on a future they just can't see. The app had just launched. They recruited something like

10 drivers to sign up, and the whole thing just seemed like a pipe dream. And to be honest, the initial pitch probably was not that compelling. One thing that Camp and Kalinick did have on their side, though, is that they were well-connected. So they reached out to none other than Nevolve Robicon, who had created an email network of SEC accredited investors called Angel List. A message was sent out to 16th, Angel List on Angel List on June 17, 2010. The message stated, Uber cab is everyone's private driver. We're solving the taxi scarcity problem with on-demand private cars via iPhone and SMS, end quote. The email also stated that Tim Ferriss was an advisor and investor and introduced Ryan Graves as a CEO. Most investors on the list did not respond.

One investor unsubscribed from the list, and then there were those who said yes. The Philadelphia based VC firm, First Round Capital, they led the round with a $600,000 investment, and then there were a dozen other seed investors with smaller check sizes. One backer was Jason Kalakanis, who was actually featured on our show back on episode 433 and co-hosts the popular All-In podcast. Naval Robicon planned to invest $100,000 in that first round, but he waited until the end of the fundraising process when he finally made the offer. And Graves told him that they only had room for $25,000.

So that initial investment would end up being worth hundreds of millions of dollars. The initial implied valuation was just $5.3 million after raising more than a million dollars in funding. But even the earliest investors would admit just how lucky they were to have invested in Uber, as I'm sure many who did doubted that it would ever succeed. Naval of Rabakon stated, I've made peace with the fact that Silicon Valley is just so random. You have to make peace with it or otherwise you'll never get a good night's sleep in this town. So that first summer, the app was operating. The cost of an Uber was around two times as much as a cab, but you were receiving better service. You had a nicer vehicle ride, and you had an on-demand

solution. So with some capital and some employees, Uber started to feel like a real venture ready to make their mark. And by the fall of 2010, San Francisco was starting to take notice. The service started going viral. Someone might get out of an Uber, meet their friends inside the bar, and it was just all of a sudden the topic of conversation. And drivers started showing up to Uber's office wanting to learn more about what they were up to and how they could start using the app. One driver who visited got the app up and running and told one of the employees that they were about to make a lot of money.

Bradstone gets a bit into a couple of the other startups that had similar business models to Uber, but the biggest mistake that these other startups made was trying to work with the taxi cab industry. So one startup out of New York, they partnered directly with owners of fleets. And another startup that was actually in San Francisco, they worked with the taxi cab drivers. So Uber, they primarily differentiated themselves initially by working with drivers who weren't in the taxi cab industry. So it didn't take long for Uber to just blow all of the competition out of the water due to their superior technology that scaled well. And they didn't have to deal with all the friction and inefficiencies within that industry. Then, of course, it also did not

take long for the taxi drivers and yellow cab fleet owners to take notice of an unlicensed competitor. They poured into the offices of city and state regulators and claimed that it was illegal what Uber was doing and it should be shut down. In October of 2010, officials then showed up to Uber's office with a ceased and desist letter and a large, glossy headshot of Ryan Graves. Graves might have just been braver relative to the other startups to launch a service that would compete directly with taxi cabs. The letter threatened penalties of $5,000 per ride in 90 days in jail for each day the company remained in operation. But the question was, what law had Uber broken? A few blocks away on the seventh floor of a former bank building sat the most

powerful figure in San Francisco's highly dysfunctional cab industry, Christine Hayashi. Hayashi was the director of taxis and accessible services at the Metro Taxi Agency, and in the summer of 2010, her phone started ringing off the hook, as taxi drivers were upset about a new app called UberCab that allowed rival limo drivers to act like taxis. By law, only taxis could pick up passengers who held them on the street, and cabs were required to use the fairer calculating meter that was tested and certified by the government. Limos and town cars that act like taxis would need to be pre-arranged by passengers, typically by a phone call. So clearly it wouldn't be right that Hayashi would regulate the taxi industry and require

taxis to play by the whorls, but then do nothing about the rise of Uber. Upon receiving the cease and desist letter, Uber asked for a meeting, which would mark their first of countless meetings that executives at Uber would have with government officials in the years that followed. The meeting really didn't lead to anything. Hayashi was stressed and upset at Uber from making this industry upset at her. Bradstone then turns to discuss Travis Kalanick a bit more, Uber's co-founder. Up until this point, Uber was one of many projects he was working on, and he was just partially

burnt out from running his previous company, Red Swoosh, and Garrett Kemp. Camp, his partner, he was really on Kalanick about joining Uber full-time. So Kalanick had a long history of starting companies. He dropped out of college's senior year in 1998 to join six classmates to develop one of the web's first search engines, Scour.net, which let people search computers on university networks for multimedia files like movies and songs. The site debuted around the same time as Google, and Scour initially flourished, attracting more than a million page views a day, scaled up to 70 employees, but it quickly got shut down when major music and trade groups sued Scour for billions of dollars. Scowers' attorneys argued that internet companies cannot be

held liable for the activities of their users, and that Scour was not hosting the content, but they just did not stand a chance against the entire media industry. So this led them to file for bankruptcy in the fall of 2000, and Kalanick, who was 24 at the time, he watched everything he had worked for essentially disappear almost overnight. But this led him to launching Red Swoosh, which was another difficult experience. He had to deal with having pretty much his entire team leaving and pitching this idea hundreds of times to big corporate customers to try and get the ball rolling. Let's take a quick break and hear from today's sponsors. All right, I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight,

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so he invested a million dollars, and Kalinick eventually sold the business in 2000. 2007 for 18 million. It wasn't a huge exit by Silicon Valley standards, but it was a huge relief for Kalanick after working so hard for years on these various startups. David Hornick of August Capitol had said he could have and should have given up well before he sold it. So that just points to Kalinick's work ethic and how hard he works at getting these businesses to succeed. And Stone writes here, Kalanick had endured the most grueling experience of his life. and emerged as battle-hardened and defiant as ever. So with that as a backdrop, Garant Camp was on Kalanick for taking charge at Uber.

At this point in 2010, Uber had half a dozen employees, a few dozen limo drivers in San Francisco, and little in the way of expansion plans. Their motto was everyone's private driver, which conveyed luxury and exclusivity, so not a mass market appeal. Kalanick was very much a math and data person, and one of the biggest challenge. at the time was trying to figure out how they were going to attract drivers during peak times and route cars to high demand areas. Uber had the data to figure those questions out, and it started to dawn on the founders that Uber was going to have more data about how people

moved around cities than any other company in history. Kallnick had later reflected, My Happy Place is right in the midst of all that complexity. The other thing that was remarkable about the data that Uber was seeing in their early days was a phenomenon called negative churn. So negative churn is when users who join a service are more likely to stay with it and gradually increase their frequency of use than they are to leave the service. They were seeing that for the early signups. A typical customer would generate around $40 to $50 in revenue per month. And then Uber would keep $8 to $10 in gross profit.

So those kind of numbers were just rare for a startup in Silicon Valley. And this could help attract significant financing for them to invest further into future growth. I think that Kalanick, he had a little bit of PTSD after regulators started to get involved with Uber. So he wanted to try to navigate the company through that the best that he could. So Uber could not market themselves as a cab company, which was a pretty easy compromise. and they needed to drop the cab from Uber cab. And so Uber never actually had to stop their operations as they argued that they were simply an intermediary between drivers and riders, and they were not an actual fleet operator. Since Uber survived that first backlash from government officials,

Kellenick built up the conviction that this was a fight worth standing up for. And it was time to take a more active leadership role and become the CEO. So we ended up negotiating to increase his equity stake from 12% to 23% in taking on the new role, and Kalanick himself delivered the news to the first CEO, Ryan Graves, who would stay with Uber as Kalanick would be the new CEO in November of 2010. In a press release, Kalanick stated, the bottom line is that I'm all in on Uber. The excitement and joy of being Uber is coming out of my pores, and I'll stop at nothing to see Uber go to every major city in the U.S. and around the world. So what's next? Taxi frustration is going down. Reliability, efficiency, accountability, and

professionalism in urban transportation are going way up. Every city Uber rolls into is going to be a better place when we're done with it. And if you live in that city, your world of transportation is changing forever and it will be oh so Uber when that change arrives, end quote. So here you can clearly see the vision that Kalanick saw for Uber when they were still in their infancy. And Uber was also starting to get a decent amount of publicity, which helped the word continued to spread throughout San Francisco. And the number of Uber rides started a rapidly increase at 30% per month, which on an annualized basis is more than 20x per year. But of course, they were starting at a very low base as well. So nonetheless, I think it was real traction they

were getting. Kalanick also put a pause on his angel investing and advising for other companies so that he could truly go all in on Uber. The rise of a hot startup is certainly not all Sunshine and Roses. There were some major problems that needed to be addressed if they were going to have a real shot at being successful. They truly needed to provide an Uber experience to continue to attract new users and keep existing users coming back again and again. On the Uber app, it would show how many cars were available in their area, and oftentimes users would open the app and see that there are no cars available. That's not exactly an Uber experience if you need a ride at that moment,

so the obvious solution is to start adding new drivers and help give them an idea of when and where there would be spikes in demand and encourage them to flock to those areas of the city. And it started to dawn on Kalanick that Uber added a turn, core would not be a lifestyle company that offered these private drivers. It would really be a data-driven technology company, and they were collecting data and starting to understand the swings and consumer behavior and when people would need to order rides. Swings in demand happen both within a single day and at certain points in the year. So for example, today people most often

need to order an Uber to get to and from work, go to and from major events like a football game, or they might need an Uber after a night out of drinking since it wouldn't be safe for them to drive home. So ironically, you might have this surge in demand at 2 a.m. on a Saturday night, a time when drivers would otherwise be asleep. So Uber's job is to crack this issue of how can they supply more drivers at these very specific moments in specific areas of the city. Uber then started to enlist as many drivers as they could and started to raise fares much higher during peak demand times. In early 2011, it was time for Uber to do its first significant round of funding, the Series A. And Kalanick wanted to get Bill Gurley on board, who's a prominent Silicon

Valley venture capitalist. Gurley recognized that there was a huge opportunity here, but at this point, he had already invested in two of their rival companies. Uber did end up receiving $11 million in their Series A round, which was led by Bill Gurley's firm, benchmark. This valued the company at $60 million, so with fresh capital now inserted into the business, Kalanick and Gurley both agreed that the next step was to expand outside San Francisco and into every major city in the world. This, of course, would prove to be a challenge. In order to expand, they would need to methodically enter each market and find employees

in every city who could recruit drivers, promote the service to riders, and talk to regulators. Calanick's first target was New York City, home to half of all cab rides in the United States. New York City was the U.S.'s dentist metro area, and most residents avoided owning cars. To lead the New York expansion, Uber hired Cornell University grad Matthew Kochman. The challenge that Kochman immediately faced was that drivers who provided a taxi service in the city needed to be affiliated with some kind of base, either a professional fleet or a small, local organization that acted as a central dispatcher and assigned rides while ensuring that cars were properly licensed. So it was really difficult for Kochman to recruit drivers who were sitting idle

because they needed to legally go through some sort of central authority, and Kalanick was clear that he did not want Uber itself to register as a base to avoid the various fees and licensing requirements, not only in New York City, but in other cities as well. Since the base law was rarely enforced, Uber was technically trying to entice drivers to break the law by signing them up for a secondary source of rides. But Kochman did find some drivers who wanted to fill their dead time and they were enticed by Uber's offer to give them an iPhone with the Uber app. And they were also guaranteed a minimum of $25 to $35 an hour. So it wasn't long before Uber would start hemorrhaging cash. And even with such an attractive offer for drivers, demand for the app far exceeded supplies.

So initially, wait times were long, and oftentimes users would get on the app to see no drivers available. For the next few months, Kochman worked around the clock trying to meet the targets that Kalinick was demanding, and he was just under a lot of pressure. To try and recruit more drivers, he started visiting mid-sized limousine and town car fleets, Justice Kalanick and Graves had originally done in San Francisco. One day, he ventured into Brooklyn to meet with Edward Slinnan, the Ukrainian founder of the Corporate Transportation Group, which had thousands of cars. Kokeman spent two hours pitching Uber to Slinen, and then he

proceeded to receive a barrage of reasons as to why Uber would never work in New York City. Regulators would stop them, drivers were too busy to use smartphones, and the big banks and law firms had already established relationships with existing fleets. Slinn had advised not to launch in New York to try and save him the headaches that it would inevitably bring. And when you think about it, Kokeman was essentially asking an entrenched player to play ball with Uber. Odds are that oftentimes the incumbents just want to maintain their existing position

instead of allowing a potentially disruptive startup to leverage their massive fleet of drivers. So logically, it makes sense that Slinen would turn him down even if it meant more money for him in the short term. By the spring of 2011, the relationship between Kalanick and Kockman was deteriorating quite rapidly. Kalanick was demanding faster growth in New York to help prepare Uber for their next round of fundraising, and Kokeman viewed his boss's behavior as disruptive and bizarre. Additionally, Kokeman ended up discovering that his equity stake in Uber was significantly smaller than he, previously believed. He found out that his portion of the equity was allocated before the Series A round and not after, which meant that his state got significantly diluted after the round of funding,

and he believed that he was misled by Kalanick. Kockman was confrontational about this to Kalanick, and during a conversation about this, Kalanick had said, you're an employee, we pay you a salary, do your effing job. Kokeman was not happy and likely thought that Uber would be destined for failure if it was led by Kalanik, so he ended up submitting his resignation letter and forfeiting the 50,000 shares he would have owned, which would be worth more than $100 million in just a few years. Kochman was so upset with Kalanick that he talked negatively about Uber to the press, advised prospective employees not to take jobs there, and counseled venture capital firms not

to invest. After Kochman's departure, he and Kalinick never spoke again. Austin Gait, who was initially the company's first intern, she played a key role in Uber's rollout across the U.S. She lived on the road, helped get them launched in Seattle, and they followed the playbook of having a three-person team when launching it in a new city. So the general manager was the head person. They supervised the overall business in each city, and they were accountable for growth. The general manager needed to be entrepreneurial, scrappy, and aggressive in talks with regulators. The second person within that three-person

team would be the operations manager. This was the analytical type. They were in charge of signing up drivers, making sure that passengers had cars available to them. And lastly, they had the community manager. This person handled the marketing and stimulation of demand among riders. This type of expansion was totally unique for a tech company, which historically were all about product and engineering. When other companies would scale up, they would do so from their own headquarters. Uber was unique in that they had to get their feet on the ground in each city to really get the ball rolling. Some of the things they did to help spark interest in a new city would be to host a launch party to bring together local media and tech personalities and selecting a local celebrity as the first rider in each city.

which was to be further promoted by the press. So their first market was San Francisco, then they add New York, number three was Seattle, number four was Chicago, number five was Boston. Kalanick mostly stayed at the head office in San Francisco, and he would hold each general manager of the city accountable for maintaining their growth above the trend line of the previous launches in other cities. Austin Guy was called upon to fill in for Kochman in New York, which was Uber's biggest market opportunity. Kalanick wanted to start off on the right footing with regulators, which led him

to hire his first lobbyist, Bradley Tusk, a former aide and campaign manager to mayor Michael Bloomberg out of New York. Tusk charged a hefty fee, so Kalanick ended up negotiating his payment to be in equity, so he would receive the 50,000 shares, the exact amount that had been abandoned by Matthew Cokman. Surprisingly, regulators were actually open to working with Uber because they were more innovative, whereas the taxi industry, they resisted modernizing their vehicles or installing electronic credit card readers. Uber ended up bending the knee to regulators' demands, so they signed up as a base and would have to go through this big regulatory process. And as a result, Uber was no longer asking their drivers to technically break the law by accepting rides through a

smartphone app. And after a couple of other strategic adjustments to their strategy in New York, usage really started to take off. So Uber then transitioned to launch in Paris. That would be their sixth city. This would introduce a whole new set of challenges. So they were accepting foreign credit cards, dealing with currency conversions, and translating the app into French. The engineers said that the launch internationally cannot be done in a matter of weeks, but Kalanick made sure that it happened. One of the breakthroughs in Uber's disruption of the taxi industry is that the market price on the app is constantly adjusting to the supply demand dynamics. If there's a shortage of drivers, the price of an Uber rises to incentivize drivers to start offering rides, and it also

incentivizes those who are more cost-conscious to go look for alternative solutions, such as walking or waiting for a cab. But it took time for riders to sort of get used to this flexible pricing. So if you're used to using a cab, you know, costing a certain amount of money to get a cross-down, then it might be surprising to get onto the Uber app on New Year's Eve, and all of a sudden, you see the rate that's three times higher than you're used to. As Uber experimented with this system, they found that offering a better rate for drivers was a strong incentive for them to, you know, get on the app when these price surges would happen. So for example, many cab drivers didn't like to offer rides to people who were out drinking past 1 a.m. So they typically just

would go home, say, at midnight or sometime before one. But when Uber offered a better rate to drivers during those times, they saw more drivers started to show up. But Uber was very clear about not price-gouging customers. The only reason that prices would increase was to incentivize more drivers to come online because if they didn't increase the prices, then there would be countless riders who would not have their rides fulfilled by Uber. In 2012, Calanick stated, our principles are clear. Number one, Uber is always a reliable ride. Always. You can't say that for some of the alternative transportation systems in the city. In fact, probably none. Number two, we only implement dynamic pricing if it will increase the number of rides that happen. When prices go up,

more drivers come out. When more drivers come out, more rides happen. That means less people are stranded and more people have an option, end quote. So this explanation didn't always sit well with customers, though. Some simply can't accept the fact that the same ride can have drastically different price points at different times the day. In the fall of 2011, it was time for the next round of fundraising. In that September, Uber generated $9 million in fares and kept $1.8 million in commissions. 9,000 customers were on the app, 80% of which were in San Francisco with all cities growing rapidly. On average, each user at the time took three and a half rides per month and showed the app to seven of their friends. Kalanick's pitch caught the attention of Andresen Horowitz, who had just led the Series B funding round for Airbnb,

but Kalanick wasn't too fond of Horowitz wanting to hand out large option packages to new executives and employees going forward. so we ended up going with VC firm Menlo Ventures, which made a $25 million investment at a $290 million valuation. It didn't take long for Andreessen Horowitz to realize the mistake he had made in missing out on Uber, so just a bit later he would fund a round with Lyft, which is Uber's biggest competitor in the U.S. today. Although Horowitz was one of the biggest names in the VC world, one of the things that Menlo Ventures brought to the table was their social connections with high-profile celebrities and politicians. Now, with Minlo on board, this meant that names like Ash and Coucher, JZ, and Britney Spears were also invested in Uber. Minlo even got Jeff Bezos and Google CEO Eric Schmidt

included as well. In less than five years, their investments would increase by more than 20 times. This celebrity access made Uber's launch in Los Angeles successful as well. Their launch party featured several celebrities and it didn't take long for the city to embrace Silicon Valley's newest, hottest startup. By early 2012, Uber was in a dozen cities and had 50 employees. With the secret officially being out, Kalanick knew that a host of potential rivals were likely just around the corner. So he was ready to hit the accelerator to try and reach escape velocity. Austin Geith has stated, I was waiting for Travis to say slow down, but that never happened. At this point, Uber was by and large a law abider, not a law bender. But it wasn't

always viewed that way by some regulators. Uber launched in Washington, D.C. in December 2011, and the launch was led by Rachel Holt. The D.C. area had more than 8,500 drivers, and regulators initially were not too happy about the newcomer in town threatening the entrenched taxi industry. Regulators told the taxi drivers that Uber is operating illegally, and they plan to take steps against them. In January 2012, Holt came across a tweet from the Rider Advocacy Group, DC Taxi Watch, that stated Uber DC is operating illegally. A couple of days later, one Uber driver in DC received a $600 fine for driving an unlicensed vehicle and not having proof of insurance on hand.

The incident appeared to show that regulators were trying to keep new drivers from signing up on the platform through intimidation instead of going directly after Uber. On Travis Kalanick's trips to Paris and other European cities, one emerging rival was catching his eye. Halo was a startup based in London that had an app for customers to hail London's iconic black taxi cabs, which was the equivalent to the yellow taxis in the U.S. Halo was the first of several international players that would be on Uber's radar in expanding internationally. The company was started by Jay Bregman, and by early 2012, the app had been downloaded 200,000 times it was being used by 2,000 drivers. The company raised $17 million in VC funding,

and in their press released, they announced plans to expand to Chicago, Boston, Washington, in New York, all of which were markets that Uber was in, so it appeared to be the start of an all-out war in the ride-hailing business. This caused real concern within Uber because Halo would work directly with the Yellow Cab fleets, while Uber had positioned itself as being more classy, upscale, and pricey, as an Uber ride at that point was around 50% more expensive than a ride in a regular taxi. This move by Halo caused heated debates within Uber. Many felt that partnering with the yellow cabs would hurt the Uber brand due to the poor experience associated with such rides. But Kalanick came to the conclusion that the luxury of

Uber was not about the car the customer rode in. It was about time and convenience. And I think this statement rings true even today. Oftentimes when I myself take an Uber, the cars usually are not all that luxurious since I typically choose the cheapest option available. However, Uber always delivers on getting me a ride in a timely manner and making the overall experience very convenient. Bill Gurley urged Kalanick to not get undercut on price, and Uber decided that they didn't necessarily need to be the high-end brand. It could compete against all forms of alternative transperation by presenting the most efficient, most luxurious option at any price. This led Uber to roll out its taxi service in April of 2012.

This allowed users to choose between black cars and taxis. And it turned out that Halo made a major error by announcing that they were expanding to the states, but taking five months to actually do it. This led Uber to beat Halo by a mile because Halo allowed Uber to get way ahead of them. And the fundamental strategy between the two companies was also much different. This also helped contribute to Uber's success. Kalanek stated at a conference, we have not built our product around a market, we've built an experience around a customer desire.

In October 2014, Halo would end up shutting down its operations in North America due to the intense competition and high marketing costs from Uber and Lyft. So now Uber offered customers two different options at two different price points. In both businesses flourished. This led them to also launch two additional offerings to expand options for customers. One was a fleet of luxury SUVs for larger parties, and the second was a fleet of Ford-door hybrids. This second offering would be referred to as UberX, which was Uber's lowest-cost service that used professional licensed drivers to make Uber more accessible to the mass market. In 2012, Uber was still growing at 30 to 40% each month, even surprising.

its managers. Rachel Holt, who started in Washington, D.C., was asked to reach $7 million in gross bookings in her first year. She hit that mark by April. In D.C., Kalanick would go through some hearings with politicians and stand for Uber's right to operate with some reasonable guardrails that weren't there just to protect the taxi industry, and this was really the first time where Uber's customer base would support Uber and their right to operate and expand in the city by voicing their opinions directly to policy. Which is really pretty remarkable that an app can launch in a city, and in less than a year, the city's people are speaking out for this new entrant that is competing with the taxi industry.

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This is a paid advertisement. All right. Back to the show. The other part of their battles with local governments that I think is important to touch on was that Kellanick was pretty ruthless in trying to get the best deal possible for Uber rather than taking his lawyer's recommendations of seeking compromise and testifying with humility. If we could put Calenix view on this issue into one sentence, it would be this. Uber's product is so superior to the status quo that if we give people the opportunity to see it or try it,

in any place in the world where the government has to be at least somewhat responsive to its people, they will demand it and defend its right to exist. As the company was on pace to generate $100 million in revenue over a 12-month period, Kalanick rented a house in Tahoe for the team to celebrate. This moment would lead to another breakthrough in the industry. Up until this point, Uber allowed only licensed chauffeurs and taxi drivers to use its system. But what if you open the service to anyone with a car and allowed them to pick up passengers through the smartphone app?

One could fill the empty seats in their car, reduce chronic congestion on a car, American highways and allow drivers to make money on the side. It's like carpooling, but on a mass scale. This idea first gained traction not at Uber, but at a company called Zem Ride, which was being run by Logan Green and John Zimmer. The project was initially named Zem Ride Instant, but would be renamed to Lyft, which is the company that we're all familiar with today. The app would include a voluntary donation to pay for rides, driver and passenger ratings,

and a background check on drivers. This experiment, of course, brought a whole new set of challenges because they were tasked with turning a ride with a stranger into a comfortable and safe experience. To try and make the interaction less awkward, riders were told to sit in the front seat, not the back, they were instructed to exchange a fist bump with the driver, and conversations were encouraged. And every lift driver would have a pink car stash on the front of the vehicle's grill, which was sort of an attempt to make the vehicles less intimidating, but also command attention from

others on the road, wondering why there were these pink car stashes everywhere. And now with the rise of Lyft in San Francisco, the real war for Uber had begun. Uber and Lyft picked up some new tricks from each other, so Uber, for example, they began furnishing their drivers with a windshield decal of the Uber logo. And ironically, before Lyft had launched, Kalanick always believed that unlicensed drivers were just against the law and they would not be allowed to operate, which is why Lyft was first to the market on this. Only after Lyft made it clear that it was possible to run this model and not get stopped by regulators, would Kalanik come around to changing his mind on this. There was another company implementing a similar idea. This was a company called Sidecar. Lift would soon

expand to Los Angeles and sidecar moved aggressively into L.A., Philadelphia, Boston, and several other cities. In January 2013, Kalanick felt like he had no other choice but to join them in allowing non-licensed drivers onto their platform, otherwise they would be undercut on pricing. So Uber rolled out their ride-sharing service nationwide to compete head-to-head with both Lyft and sidecar. This was truly one of Uber's most pivotal moments in its history, as the ridesharing market would prove to be a significantly bigger market than it was prior. In this example, showcase that Uber was not willing to surrender their leadership in transportation apps for smartphones. So as Facebook IPOed in May of 2012, it showed the world what was possible by capitalizing

on the smartphone wave. They successfully transitioned to benefit from the mobile wave, and with rising ad revenue, the stock price started rising quickly in 2013. At every step of the way, Facebook's backers were deemed crazy for investment. in a social network at seemingly elevated valuation levels, but conventional wisdom had been wrong and optimism paid off handsomely in this case. Simultaneously, tech companies were taking longer to go public, and investors who wanted to buy the success story of the mobile wave would need to look in the private markets. This pushed the valuations of multiple private firms to billions of dollars, which reminded investors of what happened during the tech bubble. Except with these

These companies, they earned real money on advertising and subscriptions. At the start of 2014, Uber raised over $300 million and was valued at $3.5 billion, but that would just be the beginning, as over the next two and a half years, Uber and the Chinese ride-sharing giant D-D would together raise more than $15 billion. And as Uber continued to grow, the world grew increasingly concerned about their impact on society. would attract a large number of critics since they used contracted drivers instead of full-time employees and sparked an endless litany of controversy related to proper background checks, adequate insurance, and the safety of both the drivers and riders using its service. Taxi drivers and their

representatives had their livelihood squeezed by Uber, and other ride-sharing services then led the anti-Uber crusade with angry and sometimes violent protests in cities all around the world. For For example, Uber was not particularly well received by some in London. Prior to the arrival of Uber, taxi drivers had people fighting for them. And not too long after, it was a miracle if taxi drivers even had a job. One taxi driver noted that many Uber X drivers were immigrants that were happy to work 18-hour days for less than minimum wage. Similar controversy came with the rise of Airbnb as well as they were having an impact

on housing affordability all around the world. In the summer of 2013, Kalenick set out to raise Uber's fourth round of financing. So, as you can see, Uber's constantly raising money because they're just burning through so much cash. And he was starting some discussions with a number of investors. So he didn't just want the most amount of capital this time. He also wanted a powerful partner who could help facilitate Uber's global expansion that was to come.

Calanick started going back and forth with Google's investment division, Google Capital, and their venture capital group, Google Ventures. Kalanick was, he was pretty intrigued by the idea of partnering with Google, but he wanted reassurance from the founder and the CEO at the time, Larry Page. In August of 2013, David Crane from Google Ventures had Kalanick stay at the Four Seasons Hotel in East Palo Alto. And this was paid by Google, and Kalanick, he woke up in the morning. He had a 10 o'clock meeting, and when he exited the hotel lobby, a prototype driverless car was sitting in front of the hotel, and it was waiting to take him to his meeting with Larry Page.

And that was Calendix's first ride in his self-driving vehicle, and sitting in the front seat of the driverless car was a Google engineer who could answer all of his questions. A partnership with Google could be mutually beneficial because it could help Google develop Google Maps, which Uber relied on for navigation in its apps. But the more important thing from that meeting was really getting the juices flowing in Kalanick's mind for how technology could radically change Uber's business model in the future. So at the time, Kalanick theorized that autonomous vehicles would be very good for his business as it would remove the cost of needing to pay drivers.

My only question to him would be, okay, what happens with the revenue side of the equation? What if the cost of a ride goes from $30 to $10 or $5? Google would end up investing over $250 million in Uber after that meeting. And TPG Capital also pitched into the funding ground, which had more connections globally to add to the table. But the assumptions that both Kalanick and these two investors were operating on at the time back in 2013, these assumptions really turned out to be at least partially incorrect. Google would eventually be reluctant to see the results of its driverless car research to another

company. And less than a year later, Kalanick would realize that Google, you know, it could potentially be a key competitor in the ride-hailing business and that Google did, in fact, have plans to compete directly with Uber. Furthermore, expansion into Asia would prove to be much more challenging and more costly than Kalanick ever anticipated. Uber had a more established brand than their competition in addition to having just more money in the bank. And this led it to go from just non-existent in 2008, 2009, to ubiquitous nearly overnight in cities like San Francisco, L.A., D.C. and Boston, Kalanick was then taking steps to try and further propel the growth of UberX. So this is their cheapest offering. First, it was assisting Uber drivers and financing the lease of new vehicles,

so many people wanted to drive for Uber, but their biggest obstacle was lack of a vehicle. A lot of them did not own cars because they were immigrants. They might have had bad credit or no credit. So Uber helped these drivers obtain car leases and then diverted a portion of their earnings towards paying for these vehicles. This arrangement really paid dividends for Uber, not only by putting more cars on the road, but by ensuring that drivers devoted their energy to Uber rather than to one of their rivals. The other thing that Kalanick did to help stimulate growth was cut the price of rides by up to 30% in several U.S. markets. Lower fares would encourage customers to use the service more and bypass rental cars,

public buses, and subways, and with more passengers, drivers would spend less time idling between rides, replacing lost income from fair cuts by completing more rides. This accelerated the growth of UberX and forced Lyft to cut their prices as well, which wasn't ideal for them since they were not as well financed as Uber was. Kalanick was experimenting with the Uber Flywheel, which looked something like this. Lower prices would lead to more demand for rides, both in terms of the number of customers and the frequency of usage. More demand for rides would lead to a larger supply of cars and busier drivers,

and a bigger supply of drivers would allow Uber to cut prices further, putting more and more pressure on their competition. Because Uber was able to lower the cost of transportation for everybody, they were expanding the overall market itself, which led to even their most fervent supporters underestimating the true potential of this business. Venture capitalist Bill Gurley stated, I knew Uber was going to be big, but I did not know it was going to be so outlandish. Gurley was especially surprised to see how much demand picked up as Uber was testing out these lower price points. Travis Kalanick was one of the most interesting figures, in my opinion, outlined in the book. Oftentimes, he was hard for regulators to deal with, and he was intensely driven and just relentlessly

competitive. He almost viewed business as a zero-sum game, wanting to crush his competition at all costs, even if it meant pushing ethical boundaries or pissing off regulators. All of the ride-hailing apps made an attempt at poaching drivers from the other apps? Because an app was only as strong as the number of drivers willing to open those apps. Uber would offer free gas cards, signing bonuses, and other perks to try to persuade drivers from rival services to switch to their app. And it went even further than that. In January of 2014, the Israeli startup called Git reported that over a three-day period in New York City, Uber employees offered rides on Git and canceled them so they could get the driver's phone numbers and try to convince them to switch over to Uber.

Git made the mistake of not using a service that would disguise the driver phone numbers, and this allowed Uber to make such an attack on their business. In Kalanick, you know, he didn't really show any sense of appreciation, even for his own drivers. When he was asked about driverless cars at a conference, he said that he was excited about the technology because it could bring prices down, but he didn't really express his concern about unemployment for the tens of thousands of drivers that used Uber to support their families and, of course, helped create his business. He was indifferent to how others might perceive as comments, which repelled some investors and some colleagues, and likely some drivers as

as Uber became more of an established, mature business, the company started to take some steps to try and professionalize its image. The company was no longer about destroying the taxi industry, but about providing transportation that was as reliable as running water, everywhere and for everyone. By 2014, Uber sat on the threshold of corporate maturity. But first, it had to get through its final years of awkward adolescence. Uber was like a tall and awkward athlete that grew a foot in the span of two years and no longer fit in his clothes. And who always was a lot of a little also had problems with aggression. It was quite frankly, a marvel to behold. At that time, Uber had introduced UberX in 28 cities, and by the end of 2016, it was available in more than

450 major cities around the world. Allowing non-professional drivers to pick up passengers in their own vehicles had now become a global phenomenon. In June 2014, Fidelity and BlackRock made investments when the company was valued at $18 billion, which, of course, seemed to be a global phenomenon. seemed insane at the time and just two years later, that valuation more than tripled, making Uber the most highly valued privately held tech startup in history. Uber was and still is a highly disruptive company. And like many disruptive technologies, about any publicity brought to them, can be good publicity. When 10,000 London taxi drivers went on strike, Uber signups jumped by over 800% after the strike,

only bringing them more attention. And while it might seem that 10,000 taxi drivers might be able to persuade politicians, it was nothing in comparison to their 200,000 customers who put their signatures on a petition that dropped restrictions on Uber. Like in most cities, Uber had the upper hand because the residents loved the service. But other areas of Europe were more successful in limiting the growth of Uber. In 2015, Spain banned Uber for a year, charging it with, quote, unfair competition, and ordered internet providers to block access to the app in the country. In Germany, required Uber to only be used with professionally licensed drivers.

So if we moved to the east to China, a talented young salesman named Chang Wei was not happy about being passed up for a promotion. So he started doing some research on potential ideas for a new internet startup. In 2012, he read about the taxi wars that were happening in the U.S. and the UK. and he knew that China just had a massive taxi market that was regulated, stubbornly analog, and highly fragmented with dozens of taxi companies in every major city. So he left Alibaba to launch his own taxis-hailing company, D-Dash, which translates to Hong Kong, call a taxi.

Chinese cities did not make life easy for D-D. Some prohibited commissions on fares and some ruled the apps illegal, although drivers would use them anyway. There were several different startups, and D.D. was scrappier than most of their rivals. They promoted their app in the city's biggest railway stations and focused on getting the app in the hands of younger drivers who already had phones rather than handing phones out, and they were also well-financed by Tencent, one of China's biggest tech conglomerates. For U.S. tech companies, expanding it in China have long been considered what we can call a suicide mission. Google, eBay, Amazon, Facebook, and Twitter,

They had all tried and failed to crack the world's second largest economy. Kalanek, however, was undeterred. In 2014, Uber rolled out its services in an attempt to now dominate the Chinese market. Around the same time, they found a strategic partner who could offer money, valuable technology, and political connections with the Chinese government. That company was Baidu, which operates China's leading search engine, and this would help helped him establish 30% market share in China for on-demand transportation apps. Kalanick would meet with Chang Wei from Diti, and he just straight-up asked for 40% of Didi's equity in exchange for Uber just exiting the market, which Chang, we thought was ridiculous,

so he declined. So the two unicorns, Didi and Uber, they would just battle it out. And it seemed that at the time that Uber enjoyed just these insurmountable advantages. It had the better app, it had more stable technology, and investors valued Uber at $42 billion. That was 10 times the size of D.D.D. wanted to try and limit Uber's power because they knew that the bigger Uber got, the more difficult it would be to dismantle. So they considered entering the U.S. market themselves, but they instead decided to just invest and to Lyft, Uber's biggest competitor. So in September 2015, they invested $100 million into Lyft. At the peak of hostility, Didi and Uber were each burning through a billion dollars a year

through their operations in China. They were subsidizing both drivers and riders. And as Kalanik expected, the market opportunity in China was massive. Six of Uber's top 10 cities were in fact in China. To be able to keep funding their business, both Uber and Didi were. were raising billions of dollars and D.D.D. would end up coming out on top. So they claimed over 80% market share in China. They operated in 400 cities relative to Uber's 100, and Uber's institutional investors were urging Kallanik to negotiate a truce with D.D. Both sides agreed that

it was time to focus more on profitability after burning billions and billions of dollars, and they just wanted to start investing in new technologies for the future, such as AVs. Uber would agree to depart China and hand over its operations in the country to D.D. And in exchange, Uber ended up receiving a 17% stake in DEDA and DD actually invested a billion dollars in Uber. Over time, Uber steak would get diluted a little bit and they did sell some. So today it looks like they own around 12% of DD. Now, a lot of business books will tell you about the importance of making the values of the

company clear to your employees. A clear set of values can be like a rudder for large companies, especially if it has thousands of employees across different cities. And it can also serve as a guide for new employees. Kalanick seemed to have really taken his time in establishing a clear set of values. But he did outline the values in 2015. They're all short and sweet, so I'll just quickly read through some of them here. We have customer obsession, make magic or seek breakthroughs that will stand the test of time, inside out, which essentially means finding the gap between popular perception and reality, be an owner, not a renter, be your true authentic self. A few months later in early 2016, Uber would again reduce their fares in many cities to try

and stimulate even more demand for rides and put more pressure on lift. This led to protest from hundreds of drivers who felt that they were now earning below minimum wage, and they also weren't happy that Uber had consistently refused to allow passengers to leave tips over the app. In addition to drivers earning less, Uber also ran advertising campaigns to recruit more drivers, which led to an oversaturated market that made it more difficult for drivers to get the same number of rides as before. This ties into the ongoing debate of companies classifying workers as part-time contractors instead of employees, which is really a way for some companies to circumvent minimum wage, and other protections for employees, labor groups and lawyers went to court repeatedly

over the years to reclaim employment rights on behalf of truck drivers, waiters, house cleaners, and even yellow cab drivers. Deep-pocketed corporations would tend to win these cases in court, and in 2011, a Supreme Court ruling allowed companies to force their workers to sign arbitration clauses that prevented them from bringing class action lawsuits. So Uber wanted to really avoid classifying drivers as W-2 employees, arguing that most drivers did not consider themselves full-time chauffeurs, and they wanted to remain independent, flexible, and free to take on other work. Kalinick wrote in a blog post, drivers value their independence, the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the

week or just a few hours. Uber presented a new way of working. It's about people having the freedom to start and stop work when they want at the push of a button, end quote. What I really appreciate about Uber is that they just easily allow anyone to start earning money rather quickly. You know, the world is unpredictable and bad things happen. So if someone is in a cash crunch and they need to start earning money as soon as possible, then Uber gives that person the ability to do just that. Or if someone wants to start earning more money outside of their regular job and also need the flexibility, Uber can be a great way to earn some additional income and, you know, despite it not being the best level of pay. As of the time we're recording, the majority of Uber drivers work part-time

rather than full-time, so around 80% of them work fewer than 20 hours a week, and the vast majority work less than 40 hours per week. The epilogue of the book is titled The Fall of Travis Calanick. One of the challenging things for some founders is steering the ship for a company throughout different phases of its life cycle. So taking a company from zero to one million of revenue requires a certain skill set. It's almost entirely about raw execution, you know, finding product market fit, selling relentlessly, wearing every hat, improving that someone is willing to pay for what you've created. Scaling from 10 million to 100 million requires an entirely different skill set. At that stage, the CEO must shift from being a hands-on operator

to an architect, focusing more on strategy, culture, capital allocation, and empowering layers of management rather than solving problems personally. A CEO, it just needs to be a special type of person in order to remain CEO from zero to a trillion dollar market cap. That's what happened with Mark Zuckerberg and Elon Musk, for example. Unfortunately, this was not the path for Travis Kalanick. In 2017, Uber had grown to more than 15,000 employees, and they're just seven years into their operation. And there were just several high-level managers who had never run departments for a company

of that size. And Kalanick seems to be wired to just be really good at running a small startup, as he resisted hiring accomplished leaders with real experience running larger companies to try and keep that bureaucracy at bay. So Uber at this time was going through several issues. So they had some backlash from customers due to Kalanick's involvement with President Trump's Business Advisory Council. He was sitting alongside Elon Musk and Bob Iger from Disney. And Uber was also facing a number of scandals internally related to their management team. So Kalanick found himself without a formal CFO, a chief legal officer, or a VP of

engineering. Several things were happening within the company that hurt the reputation of the Uber brand. There was a terrible situation that happened to a passenger of Uber in India, and there was a sense that people just were not proud to work at Uber anymore. Many people were pointing fingers at Kalanick in his management style. The board proposed that Kalanik take at least a three-month leave of absence, and more than a dozen people were fired to try and clean house after several Several investigations were done. But it was really difficult for him to actually step away and disengage from the company. This was his entire life for nearly a decade at this point.

Brad Gurley from Benchmark Capital had grown increasingly worried about Kalanick's behavior, and he had a good reason to be worried as Uber was his firm's most lucrative investment. In June 2017, Gurley decided that his firm needed to take drastic measures. They determined that Kalinick had to go, not temporarily, but for good. This was a pretty big deal and was taken very seriously as firing a founder in modern Silicon Valley, it was kind of considered a no-no ever since Apple's board dismissed Steve Jobs way back in the 80s. Six Uber investors signed a letter imploring Kalinick to resign permanently. And to girly surprise, he agreed to step away from the company he started. Uber then hired a new CEO, Dara Koshashiari. Dara was a long-term

CEO at Expedia, and he seemed to be a much better fit, and to this day, he is still the CEO of Uber. Since Dara took the helm in 2017, he's successfully shifted Uber from a culture of principled confrontation to one of corporate maturity and profitability. Under his leadership, the company has seen massive growth, reaching a market cap of roughly $160 billion while expanding into food delivery and global logistics. Nonetheless, I found the story of Uber to be so interesting in a lesson on the power of network effects, data, and the flywheel effect. Uber helps turn a luxury service into a global utility, as the world now has access to a new

way of going from point A to point B. So with that, I think we'll close out the episode there. Thanks a lot for tuning in, and I hope to see you again next time. Thanks for listening to TIP. Follow We Study Billionaires on your favorite podcast app and visit The Investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice.

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