Ep 78: Emil Michael — the Master Dealmaker Behind Uber's Global Dominance

0:00scarier places were Italy. Really? Italy was scarier than China? Nowhere. Yeah. There's a mafia. But I always think there's like a Chinese mafia, but the Italian mafia is more badass. The Chinese mafia, for whatever reason, wasn't interested in transportation. I guess they're badass, but they're just not working in your area. They were in our area. That's fair. But the Thai mafia was in the taxi area. Yeah. The Italian, and we had a female general manager in Milan, and they posted her face all over the city saying, kill this woman.

0:32My friend Emil Michaels, one of the great operators, dealmakers, mentors of CEOs in the technology world. He was the chief business officer at Uber, which he built with Travis. Some of the most interesting stories of the most intense operational times in the tech world, dealing with the mafia, coming into countries all around the world, learning how they work to fight cartels, to have the good guys win. Before he was at Uber, he sold Tell Me to Microsoft. He was involved in the defense world in Afghanistan. A really great immigrant story where his parents came over from Egypt with him when he was young.

1:02Emil is a great American, has some really great stories, and one of the most interesting guys we know in the world of tech and operations. Let's hear from him. I'm Joe Lonsdale. Welcome to American Optimist, Emil and Michael. Emil, thanks for joining us today. Great to be here, Joe. You were the chief business officer at Uber. You basically built Uber with Travis and the group. And lately, you're doing a lot of investing and other things here in Miami. Tell us about your background. You grew up in Egypt. Is that right? Your family came over from Egypt? Yeah, I was born in Egypt. My family is Coptic Christian, so it's the 10 % minority in Egypt, but the country is now 120 million people, so there's like 12 million Christians there.

1:37And just like a lot of these countries, we have sort of a lopsided religious framework. Well, the smaller religion doesn't get as much opportunity as large ones. So there was a diaspora in the 70s from all the Christians. And frankly, the U.S. was incredible in granting green cards. My dad applied for a green card three times, finally got one. And then I moved here when I was an infant. And my sister was actually born here. And we landed in New Rochelle, Westchester County, of all places in the country to land. Tell me about immigration policy, because obviously it's a huge deal for you. I imagine your family, you came here, you've been very successful in America.

2:16We have a lot of debates what's going on right now. I think we have 8 million people have come across the border illegally. How do you feel about this? Disappointing in so many ways, because for two reasons. Number one, a country is not a country without a border, right? And not being able to control what comes in means you can't serve those who come in very well. And if the idea is we have a melting pot so that everyone who comes in here, we take care of. They're entitled to a public education, to the resources to give them a chance to succeed. Well, you can't do that when it's uncontrolled. So that's one piece.

2:49The second piece is, you know, my family did it the right way. We waited. we couldn't bring our cousins and our families and we had to sort of go through all the rules that are required. And by the way, every one of those that in my family who eventually came in is doing something important and loves their work and is contributing back to society. And we all bought into this melting pot concept. We're all American first and then where we came from second. I love it. I love it. That's the way it's supposed to work. Yeah. We got an interesting confrontation at the border. We're going to see what happens there.

3:24So you went to undergrad Harvard, law school, Stanford. Tell us about your all-matter, what's going on in higher education. Are you one of the people signing up to try to support our friends who are trying to fix Harvard? What's going on here? Totally. I mean, what a disaster it has become. It's embarrassing. And there was an incident even before this latest incident with the Harvard presidents in front of Congress where the Stanford Law School had a conservative professor from the Eighth Circuit or something come to speak. And he got shouted down. And some protesters told him they wish his daughters were sexually assaulted.

4:00That was sort of on the way in. They wish his daughters were assaulted because they disliked his views so much. And it was the DEI dean. I remember she got suspended or something. And she got fired ultimately for this. Which at least is good. But there's like hundreds of other people like that at these schools right and then and stanford law school is 180 people so it's a pretty tight community so it caused a battle um for them and then the dean of the law school wrote you know hey we were first amendment first kind of place and then they're creating a search committee for the new dean and they put the person who said all these office things on the committee the search committee yeah so i just had the call with them the other day and i'm like these these institutions don't really get what's happening in the world around them and that 48 49 percent of the country you know views the world a certain way and we're not going to get to a good place if we're shouting down the other side and that's what that's the opposite of what academia is supposed to be right it seems like these places have just really fallen the last five or ten years i mean you and would you still choose stanford and harvard for your kids right now with what you're seeing there would you like like how do you approach this it's a great question i mean Because you're weighing the prestige of the place against what you know it is.

5:11And what you know it is now is a place where people are walking around with fear to not say what they think. They're not challenging their ideas. That means they're not coming out as fully formed adults with the ability to critically think through problems and solve them. So it is a question whether I would want someone to go there versus University of Florida where Ben Sasse has done a really good job sort of taking the politics out of school and letting people speak and debate and come out critical thinkers. Ben Sass is a fan. We text and stuff. You know, we're building a new university in Austin.

5:43Yes, I do. Create an alternative for your kids. That's right. When ATX is ready for them, which it should be. We got to get the status and the prestige to be above these little places. That's the plan. I don't know if a Harvard guy would allow that. Of course we would allow that. All right. Well, you have more prestigious stuff than Harvard, fortunately. Let's jump to your early career in tech. So you started at Tell Me. It was an early speech recognition company, and you helped to grow it until it was acquired by Microsoft. It was 2007 Microsoft? Yeah. Tell me about that. Yeah. So we started the company in 99 and we were one of the few lucky companies that raised a hundred million dollars, which was a lot of money then.

6:17That was a lot. A lot of money in August of 2000. And the internet economy started to get wobbly in about March of 2000. Peter tells how about they barely got a raise on a PayPal in like early September. So right after that. Right after that. And then everything crashed. Right. So you just in time got like a bunch of money. Right. So which means you were default alive. right to use sax's term and and everything else was down so now you said okay now i have a pile of money does my business model work it certainly doesn't work with all these people so we unfortunately do a big layoff big big riff big riff and then had to take the business model we had which was kind of a consumer thing like you called your on your phone which we didn't have smartphones at the time and said hey i want a my eagle score and i want stock price of palantir and that's why it's It was called Tell Me, you called and asked about it.

7:04It was like a Yahoo on the phone. And, you know, Yahoo used, people used it for information at the time, right? You had your whole day planned in front of you there. That didn't work. So then we pivoted to, it sounds boring, but selling automated phone systems to big companies like American Express, Fidelity, where you'd call up and say, hey, my account number is blank, my address. So you changed enterprise. Yes. Overnight. And speech recognition technology wasn't that good back then. So what worked? Was it good enough to do things with the computer? Did you secretly have people in India on the other side?

7:35Like how did this work? Like Cruz did. No, no. It didn't work well enough, but it worked well with what's called directed dialogue. So I know I'm asking you what your account number is. And then I'm now listing for your account number. Got it. And the chances I got it are really high. And actually, the one big win we had was doing directory assistance. So you called, I don't know if you remember, 1-800-555-1212. You wanted the 800 number for Delta Airlines, for American Express. and we killed it. We got like 75 % of calls automated relative to operators. So we brought the cost down from$2 to 50 cents.

8:10Amazing. And we made a lot of money doing it. So we grinded and grinded and that company got to about a hundred million in revenue, which again was a lot at the time. Yeah. That's serious. In 2007, we sold it to Microsoft and right before 08 had, we tried to sell this thing in 08. So you basically got really good timing, Just enough money and time and then selling it before everything crashed. Although sometimes I was like, maybe I shouldn't have raised that$100 million because I went to Google early on or something. But that didn't work out. I read you had like a few hundred million dollar offer on the table and you spent an hour with Steve Ballmer and got that offer way up to$800.

8:45Yeah. How did that work? So we had an offer from a company called Nuance, which Microsoft also eventually bought. They eventually bought Nuance, yeah. And it was kind of a crappy small company like we were. and their offer is 300 million in their private company stock. So I got Hadi Partovi. I don't know if you know the name, but he and I and Ollie and David Wadon were all tourney brothers at Harvard in the same year. And Alfred Lin and Tony Hsieh. We all graduated. You guys were all the same. Wow. Because it was 1994. So if you were in tech, 94, and you had ambition to be other than a banker or a consultant, you went into tech, right?

9:22The outcasts of us went into tech. and uh and i turned this 300 and i said hottie you got to tell bomber we need we need to talk to him and he's like turns out i'm going jogging with him this morning that's funny he got us a 15 minute meeting flew up to seattle and bomber saw my blackberry on the table he dumped his drink on it because you know windows os was his biggest thing and i was like great now i have no phone no nothing front of steve bomber he literally just destroys your blackberry if you bring it That's hilarious. But we, within two hours, we had a handshake on a deal for$760 million.

10:01His corp dev guys were going nuts because he was making deals on his own. That's funny. He took the computer to do the math on a spreadsheet that showed in a screen on the room. And we stayed there the weekend. We walked out with a term sheet the next Monday morning. Wow. And the rest was history. It was the best deal we could have possibly done. Yeah. So you've had this. You have this big exit. just assume the first time you're very wealthy liquid but you could just move to Miami then and it'd be good so what happened how do you end up at uber what's the next step here right so i've done nine years i tell me from the beginning to end because i'd stay with microsoft for about a year and a half so i was pretty exhausted yeah and you know selling enterprise software because i ended up being salesman i carried a bag i tried i know i built quite a few of these things it's a lot of work it's a lot of work and uh and a lot of shaking hands and kissing babies and steak dinners and all these things.

10:50So I did that for so many years. So I said, you know, I want to do something that's more consistent with the passion I had in college, which was doing something for our country, public service, government. I love it. So I applied to the White House Fellowship Program, which was a nonpartisan program that took 15 people in mid-career and put them at the top of government and said, we're going to attach you to a cabinet secretary. So I got attached, I got selected. I got attached to Secretary Robert Gates, who was a defense secretary. And he was the first defense secretary to be a Republican and a Democrat administration.

11:22He was an old guard. That's good. So nonpartisan, you know, defense works best when it's nonpartisan. Today, too, it's really important. Yes, it is really important. So I got to sit with him as a special assistant. And he was charged with winding down the wars in Afghanistan and Iraq. So I spent, you know, I did six trips to Iraq, five trips to Afghanistan. And that's why we got out of Iraq and Afghanistan in 2009. Thank you, Emil. You're right. I tried my best. But at least I did two things. I was able to deploy some basic mobile phone technology there. Because what was happening is we were paying the local Afghani troops like$200 a month to keep them to not join the Taliban.

12:01Yikes. And the Taliban would then pay them$300. And they join anyway. $500 is much better deal. But more interesting, the warlords who were leading these young men were taking the$200 for themselves. Oh, sure. Yeah. So we then did a mobile payment system so that we could pay them. They got to keep it. And we prevented the warlords from taking it. And then we sort of were able to consistently get them on their side. So they wouldn't be doing IEDs against us. So basically paying them not to attack us. And some of them maybe still were, though. Like, how do you know that? What's a verification system?

12:36What's the anti-fraud system here? It seems like they would just scam us. The number of IEDs on Airport Road. And if you remember, Airport Road. Just to reduce that. Just reduce that. Whatever we can do. And then we built V-shaped hulls, which is trying to get the military to quickly move on a piece of equipment, which is pretty simple. I was already hammering on defense contractors. All we need is the bottom of the car to be a triangle. So it's harder for it to blow up on this stuff. That's interesting. Palantir did a lot of work on the IED stuff in the region, trying to track out the bad guys who was doing it.

13:07I guess you'd find... It's interesting. Do you find times you pay people and they would just trick you a lot? Or was it pretty common? Once they got the money, they were okay. but we had money to burn so was it really about money because i like all these rich people who hate us too though so it's like the law of we're just desperate and just needed the money they didn't care and they just want to be able to feed their families anyone was able able to help them do that taliban weren't we were except when the money was getting stolen so we got it not stolen and i was on jayeto which is the joint uh ied on you know task force so we would do crazy things like sprinkle markers into the fertilizer plants in Pakistan that were used to make the IED so we could track them and track where it's coming from and shut it down so I was because I because I was the tech guy I was involved in all these tech so when you sprinkle the markers into these things and you've later found them did you get to go back and like shut down the plant yeah what would happen to the guys doing the plant you went to Pakistan said this plant is selling um material to terrorists so they would shut the plant down the guys will leave the plant and go start another a plan instead.

14:10Or they do an interrogation of people working on plants, say who is taking material out of the side. Interesting. I mean, I totally believe, obviously, from your success, you guys are very confident people doing this. I never understood the big strategy for the next 10 years. Because we ended up being there 10 years more. It's a mess. What was the plan at the time? That we're just going to be here for 10 years and keep doing this? Was there an end goal in mind? How are people thinking about it? How have we screwed this up? We screwed this up in so many ways um do you remember the surge yeah so so president obama i think the military guys like um uh who were there at the time didn't want to lose and what losing to them a certain loss now versus a a unclear loss later with even with all the expenditures that was okay for the military folks so this is why we have a difference between civilian authority over military it's not their money.

15:04They're fine just to keep going, just not to lose. That's not to lose. And so we ended up putting more troops in there after 09. But without any clear goals of where we were going with the country. And the country's obviously a mess. It's going to be a mess. It's a tribal thing from 2000 years ago. They were never going to fix it all. But did they have in mind, like, I remember they started doing like these things where we're trying to build like educational institutions and infrastructure, but they think they were going to somehow bring them into the 21st century. It doesn't make any sense. There is no way you could take a country that doesn't want to move into the 21st century, into the 21st century, no matter how many schools you bought.

15:37So if we go back to 2009 and you're President Obama or you're the main advisor to him telling him what to do, like what should we have done at that point? Even if you go back to 2001 after 9-11, you have to have more. And this is part of why I like companies that, you know, that Palmer Luckey's building and someone's, you have to use the least amount of force to get the most impact drones you do decapitations maybe you did a lot more bombing in tora borra but sending hundreds of thousands of troops it's not it's a cobble for what to you know to do what the bad guys hit us we got to kill them and deter them yeah we don't need to be hanging out there with bases which that makes sense to me yeah well why should you do that anymore we got sulaiman we got where do we get osama bin laden we got him in some you know country house in Pakistan so we spent 15 years trying to get them in a country house in Pakistan so you know use intelligence special forces smaller weapons smaller footprint make them guess what we're going to do and what we're not going to that was what Palantir was about when we started it was build the very best intelligence possible that's right and then use that to yeah well these days of sending hundreds of thousands of ground troops into a meat grinder it's nothing country this country should ever do again yeah well totally agreed so I mean you served our country you helped make it a little more confident which I appreciate there.

16:52Interesting mess in Afghanistan. And then your next big chapter is Uber. So, so tell us about that. You took a couple of years talking with Travis before you joined. Yeah. He came down to visit me while I was in DC because he was launching DC. It was one of the, it was the third city. So you got to join me. And I said, you know, a black car service for rich people. I don't know. I'd like to use it. Maybe, you know, Garrett Camp would like to use it, but I'm not sure. Because black cars used to be this like super high status thing, right? It was like a marker that you had money. It was like Mr.

17:20Big in Sex and the City. Yeah, right. And it's like when this – but we don't think of it that way anymore. But that's how it was at the time. That's what it was. And it was all Lincoln Town Car. And sometimes they were stretched. I forgot you started with a really nice one. Yeah, yeah. Of course you guys did. And then the Lincoln Town Cars actually got discontinued by Ford. And we started – and they started to say like, well, why don't we make this an everyman product? Everyman with a Toyota Prius and every rider who wanted to get to the airport didn't want to pay more than a taxi but wanted reliability.

17:47Why don't we do that? Then I saw it. And I was like, okay, this product's for everybody. Got it. And then I came to him and I said, okay, now it's time for me to join. So you started, basically you were skeptical when it was a high-end thing. But then when you realized, but a lot of things are like that. They start at the high end and then they come to everyone, right? So as a chief business officer, I mean, you guys had a crazy run. You raised what, like for the$15 billion in a few years? How much did you raise? We raised$15 billion between June of 14 and June of 16. So in two years. So all that fundraising we did, I was there four years.

18:20I was concentrating in two years. I remember there were like all these people trying to invest in tech in the US at the time. You guys took full advantage of this. It was very impressive. It was like, oh, you're only a Zerp, you know, phenomenon. I was like, no, we weren't. We would have done it anyway, but we were leading the charge. You went much faster because of that. You had to open like dozens of cities. Did you help create the playbook for this? Like how would you open a new city? How much work was it? Were you running all around? So I did the hardest countries. I did China. I did Russia.

18:49I did Saudi. Just the places that had a mixture of you couldn't just drop a money bomb there. You had to, you had a political thing. You had a PR thing with the US given our relationship with them. Did people ever get put in jail in these places for anything? There were people, I think in some places people did a trip to jail and trip out like in Hong Kong. with the rules are strict or in Japan or in France where, you know, certain traffic tickets got you put in jail overnight. I wasn't, it wasn't me thankfully, but, but yes, mostly it was because it was a corrupt taxi system and we were trying to blow it up.

19:26And that corruption was everywhere in the world. I mean, every transportation system. Yeah. Basically as taxis places have like some kind of version of medallions, cartels everywhere. Cartels are scary though. Cartels find ways to put you in jail when you fight them. Like going to China to fight a cartel would to me be like the stupidest thing to do for your career like are you ever nervous like going into these communist countries that you're in you're fighting these guys who are connected so here's the crazy part the chinese loved us you know why it's because we had a competitor dd a local competitor and if you're a mayor in china you're like the last thing i want is a chinese tech you know ride share monopoly so uber come in here why don't they want the monopoly for themselves um they weren't on so this was in the early part of g's term where they were like no corruption so you got cock being corrupt it was bad this was such a visible thing it was useful to actually scare people to behave yeah so it was useful scare people hey there so then they loved having uber and dd there because that meant lower prices for consumers and so on um scarier places were italy really italy was scarier than china nowhere yes because because the mafia was there and but i always think there's like a chinese mafia but the italian mafia is more badass yeah the chinese mafia for whatever reason wasn't interested in transportation i guess they're badass but they're just not working in your area that's fair but the time off you was in the taxi area yeah the italian and it was there we had a female general manager in milan yes and they posted her face all over the city saying kill this woman um they snuck into her apartment at night and hung a sign from her apartment to the apartment across the road saying she you know she has a relationship is the nice word of saying with the taxi commissioner um they really targeted her for for physical harm.

21:07Wow. And so Italy today still barely has true ride sharing because of that. Yes. The mafia successfully puts us back on this. The one country. That's amazing. Are there certain playbooks when you like, when you open a city, what does that look like? Yeah. So here was the idea. You took a 30 something former Bain consultant because they had a little chip on their shoulder relative to McKinsey consultants. The one step down. I got it. They want to win. they're more analytical so less theoretical and strategy and more like okay i'm gonna do this and we create a launch team and we said your job is to go launch kenya and yeah you're you're american you don't speak the local language you're gonna go there and you can't leave until you do two things you create liquidity in that market liquidity meant you could get a ride in 10 minutes or less anywhere in the city that means you have to find out where the drivers are you have to market to consumers you have to do all this stuff to get to liquidity and number two you had to like hire a local to replace you and you do those two things then you can go off and launch that's cool you get to the next one yeah and what was the incentive you get like more shares for having launched new cities you get more bonuses you were higher up on the leaderboard that everyone in the country saw everyone's on this leaderboard and you get higher up yeah this human competition and it was fun it was fun competition but sure those people got rewarded more stock more were So did a lot of people who like climate leaderboard end up going on to build great companies?

22:31Absolutely. It must be a great talent pool. An amazing talent pool. Very aggressive. Now, these are not tech engineer type product types. These are operational, you know, business unit owner types. And they've spread all over the valley and it's great positions. I've encountered a few of them over there before. Some really good people to hire from. That's awesome. I'm very bullish now on operations alongside tech because of everything going on. You know, I remember going to walk with you after you joined Uber. Or is it just a really, really intense thing that you were in the middle of? Is there something about your personality that helped you confront and deal with that?

23:04Yeah. I mean, I'm a night owl. Maybe it was because during the day I was with Travis all day. And he was intense. And we sort of fed up each other and that. But when you're a company of 300 people, say, and you're operating already in 24 time zones, that means the missiles are flying at you all the time. regulatory there was an accident uh i assume you'd wake up and you check and there'd be a bunch of new things going on yeah and that's when you get to sleep at midnight because you know china was 15 hours ahead from west coast time right so you finish your chinese calls on at midnight and it was just a barrage of opportunity and a barrage of problems and then and then every day of getting up and saying how do we finance this incredible juggernaut and then how do we finance uber eats and then how we finance what would have been Instacart had Travis and I continued there.

23:58So we were just ambitious. And I feel like this was one of the first companies. It was right around the time when the press really started to turn on tech. And they really turned on Uber. Like how and why did that happen? I think it's just a broader societal thing and you guys were the obvious target. Was there something else that you think you could have done differently? So a couple of things. So compare Brian Chesky and Travis personality-wise. start at the same time. And some of it has to do with just how the leader approaches it. And now I would argue that Brian Chesky could not have built Uber with the personality.

24:34You've had to be a little more aggressive. Yeah, you had to be because your people are going to jail. Yeah, the taxi medallions are much more, the taxi cartels are much more intense than he was dealing with it. The hotels are not quite that mean. It's not a cartel. It's a bunch of corporations and more labor unions. So a different fight. And then number two, 2017, 16 election happened and we're on the West Coast and the anger from the population that was like, couldn't believe that the president was elected. January 20th, Trump put the Muslim ban into effect. And a few days later, we had the first delete Uber campaign, which was the first true blow up.

25:17And it was because we decided to reduce surge for the protesters at JFK airport. And we said, hey, you want to protest? We'll take you home. We won't raise the prices on you. The taxi guys said that we were undercutting their own protest on the same thing. And it turned into a nationwide delete Uber campaign. We lost half a million customers. Hold on, but you were trying to help the protesters. So that was a mistake. I mean, you shouldn't have done that. It doesn't. You shouldn't help these people. That's funny, but you got to get punished for trying to help these guys. That's hilarious. And so half a million customers Uber, that was like, you know, $500 million of market cap.

25:56We just lost that one day. Wow. Because of that. And it was very easy to protest. I'm against whoever made this policy, delete this off my phone. Yeah. Screenshot it, Instagram. It's one of the first times this happened. Yeah. But ultimately, it didn't hurt you that much or did it? No, it did. There was the beginning. And then, you know, we took the thing about our set, taking investments from the Saudis, Susan Fowler, workplace culture. They just kept finding it. Yes. The workplace culture obviously had to be intense. It was intense. I mean, are there other cultures today you see that are as intense as Uber was back then?

26:26Is that a thing you've seen around otherwise? Yeah. I mean, look at Coinbase and like Brian Armstrong's statement about what is culture. Well, I really like that. He's just trying to take out some of the politics out of that. Yeah, which was. That's what you guys did too. Yeah, that's what we did too. It was very similar. And it was a very transparent, radical candor place. And 99 % of the people who went through Uber say it was the best experience of their life. What you read about is that 1%. And I think people are really longing for that culture again in business. Like you're mission oriented.

27:01You're intense. You're trying to win. I can't imagine Palantir was that much different. We were skipping weekends the first few years for sure. I totally disagree with Dustin Moskovitz's thing where he's like, oh, you can work 40 hours a week. You can be just as successful. I'm like, I know. They were working 90 hours on Facebook for the first several years. I'm like, come on. Come on. I mean, sure, there are types of work-life balance that are healthy in some context. But when you're creating like a hyper-growth startup, it's like trying to win a gold medal in the Olympics. You're going for it.