TIVP049: DoorDash (DASH): Can It Keep Delivering Returns? w/ Shawn O’Malley & Daniel Mahncke

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27:36And for a limited time, you can use code STOCKS15 for a 15 % discount at checkout. It's funny because I think I'm experiencing hindsight bias in real time right now because I'm sitting here thinking, well, isn't it obvious the suburbs would be a great place and an even bigger value add for these delivery companies? But then again, just because you have a ton of restaurants nearby when you live in a big city doesn't mean you will actually go there. And obviously you have a significantly larger potential pool of customers, a more diversified product offering, and also just shorter delivery time.

28:09So I think sometimes it's easy to fall for a narrative once you know it played out that way, but it's not obvious before the fact. And for as much credit as Tony deserves for that decision, at the same time, there is one really glaring black eye we have to talk about that just seems very exploitive in hindsight. And that was a scandal a few years back where the New York Times published this damning report in 2019 showing how dashers weren't directly getting the tips that customers thought they were giving them. And rather than saying that every dasher is entitled to 100 % of that order's tip, DoorDash would factor the tip into the total transaction value of that order and then give a share to dashers such that dashers only would effectively see part of their tip if they hadn't already met the minimum earnings required for a given order to comply with labor laws.

29:02And so that is to say DoorDash was pretty clearly conspiring to suppress Dasher's earnings, while also blatantly misleading customers about who was getting the tips. And if folks knew that their tips were largely going to the corporate headquarters and not the actual DoorDasher, I'm sure many people would not have tipped at all. And that's how you got a whole lot of lawsuits aimed at DoorDash. And I should say that this has changed for the better now. So if you leave a tip on DoorDash, it does go to the Dasher. But still, for as much praise as the team at DoorDash deserves generally, there are these kind of isolated incidents that make you really question the ethical integrity of the company where it is almost a win at all costs mindset.

29:46And that could pay great dividends when it's about having the owners hustle and make deliveries themselves. but it can be a bit complicating when it means they're really being a bit shady with how things like tips are defined and who's receiving them. So beyond the fact that these kinds of scandals are damaging to the brand, again, I wouldn't say it reflects particularly well on management's decision-making here either. They had to know that this would get out eventually. Maybe that's just hindsight bias, but it seems fairly obvious to say. And I've tried to go back and listen to explanations for why they decided to do this in the first place and be so misleading with how the tips were shared.

30:28And honestly, it just gets worse the more you look at it. All of their excuses are nonsensical. And at one point, they tried to argue that this earnings model would offer more stability and therefore it was actually better for door dashers to not get the full share of tips every time. And I don't know, I think people on TikTok would call that gaslighting. It just sounds obscene. I'm not sure who would buy that. And so even with the most rose-colored glasses, it's just hard to charitably interpret DoorDash's intentions here. And of course, they paid millions of dollars in settlements to move past it.

31:03So yeah, that was a big mistake and they survived it, fortunately. But there are always two sides to every story. And so as impressed as I am with Tony Hsu, thinking about the tipping scandal really does give me some pause as a potential investor in DoorDash. And I just want to share that with you, Daniel. So we're kind of on the same page about the risks that we'd be taking here. And a year and a half later, I should say, DoorDash drivers were still unhappy about the tipping policy and went on strike to protest the lack of transparency from the company. And so at the time of the strike, DoorDash still did not even allow drivers to see the full tip amounts prior to accepting a delivery in the app.

31:46And so clearly that's pretty frustrating when as a dasher, you know that the company knows whether a given order is going to be lucrative or not for you based on the tip. And yet they hide that information from you so that you can't discriminate against customers who don't tip as much. So it's not even like they made a mistake and immediately fixed it. They made a pretty glaring mistake and then they continue to linger in this kind of ethical gray area where in hindsight, it just looks so bad. I cannot say I'm surprised if we go back to the origin story and already see them operating at least in gray areas from the beginning.

32:20But this kind of reminded me of the two of us actually spending a lot of time discussing tipping cultures in different countries and cultures. When we've been in Lisbon recently, me being from Germany, I consider 10 % to be a fair tip size, obviously for Americans, it's closer to 20%, although you happily adjusted your tip size to European standards when we have been in Portugal. But yeah, again, I mean, I feel kind of bad for saying this, but I'm not remotely surprised by this scandal. Whenever I tip for deliveries, even today, I still have a bad feeling that the driver will not actually get the tip, at least not all of it.

32:52But having said all of that, it is really impressive that Tony has apparently done things like worked on customer support from the bottom up daily for the last 12 of years. So he logs in and checks through the sampling of customer emails so he can understand at the lowest level of detail what types of challenges are derailing the user experience. And I'm sure that he's seen just about everything that could imaginably go wrong with deliveries actually go wrong. And it's similar to how Uber's CEO has spent time actually driving around passengers. And the philosophy here is to operate at the most detailed level possible in the real world where unexpected things happen all the time and consistently.

33:32And then building scalable technology requires being deeply involved in the day-to-day operations. You always love seeing founders do that. And maybe it just takes a bit of obsession that goes both ways to the positive and to the negative. Well, you just had to fit in that shot at me about the tipping culture in Europe, huh? I had to. No, but yeah, we had a great time there. And to your points here, One of my favorite things about listening to DoorDash's earnings calls is you can really tell how sincerely Tony lives and breathes the company. You don't continue working in customer support while working in the C-suite unless you genuinely care about delivering excellence.

34:16And that is a degree of obsessiveness that I think is super uncommon. And it reminds me of Brian Chesky at Airbnb. And he's another one of those leaders you only need to listen to for a few minutes, in my opinion, to realize how authentic and devoted to the business he is. I'm not a huge fan of storyteller CEOs, but you do immediately see the difference of someone who's obsessed with the business and then CEOs who really get to the job and just do it on a daily basis, right? I mean, you sometimes talk about Adobe, which is a huge holding in our portfolio, but listening to the earnings calls, it's just kind of boring.

34:49And then when you listen to these CEOs who are so obsessed with their company, it just feels a lot better and you feel like they would do anything for the company and so therefore also to benefit shareholders. But how about we pivot a little bit and we talk about DoorDash Drive, which is where DoorDash acts more like Shopify than let's say Amazon. And the metaphor is that when you order a package, Amazon is the third-party intermediary who runs the marketplace and ensures delivery. So you could say that this very closely resembles DoorDash's core business, but Shopify on the other hand provides the tools and platform for merchants to run their own businesses more independently, not necessarily relying on a third-party ecosystem to drive sales entirely.

35:28And so that's what DoorDash Drive is all about, at least if I understand it correctly, basically providing the templates and consulting insights to restaurants to empower them to manage their own online ordering platforms themselves while still leaning on DoorDash to more discreetly manage the delivery logistics for them. So with DoorDash Drive, a restaurant can set up its own online delivery order system that they control while paying a license fee to DoorDash for the technology and for access to its network of dashes to then fulfill the orders, as opposed to what happens when folks just log into their DoorDash account and make an order for the same restaurant through the DoorDash app, right?

36:07Yeah, so DoorDash Drive is more like a white label service, as you said, with the distinction mattering because it allows restaurants to better monetize their existing customer base via their own website to drive sales. And that has been one of the fundamental challenges for DoorDash because restaurants are happy to pay commissions to DoorDash for every incrementally new customer that DoorDash delivers to them, but they don't want to be paying those fees on customers who already frequent their restaurant and could instead be ordering directly from them. And that's paying a customer acquisition fee for customers that you have already acquired.

36:40And that's painful for these businesses that really tend to already operate at structurally low profit margins. So DoorDash Drive is something of an olive branch. I think it's a recognition that restaurants shouldn't have to pay the same fees for customers already in their ecosystem, while they should still pay up for any new orders that DoorDash can drive through its own app. And of course, restaurants do take an omni-channel approach where they want to make sales for their own website, but also list their store on DoorDash at the same time with the hopes of catering to both existing and potentially new customers and maximizing their visibility as much as possible.

37:16And while DoorDash Drive ends up being less costly for restaurants and also less profitable for DoorDash, it does help preserve the overall relationship. It makes things more mutually beneficial. And that is good for DoorDash in the long run. And I should say it is kind of funny that with a company like Chipotle, for example, you may order from them through the Chipotle app, as I have done many times before. And as a consumer, you may never have even known that delivery was still being fulfilled by DoorDash, actually. I certainly didn't know that before my prep for this episode. And I was also a bit surprised that DoorDash would come up with such a service that is, at least in the short term, less profitable for them.

37:57I mean, for me, part of DoorDash and Uber Eats and their thesis was that people are lazy. And once the habit of ordering on those apps is created, they will stay within that app ecosystem instead of visiting standalone restaurant sites. At least that's how I do it most of the time. But perhaps I'm wrong on that. And DoorDash Drive is an early response to not lose merchants in the long term, which is a great strategic move and shows that the management is really thinking about the long term instead of just short term profits. And the other thing I can't stop thinking about, which we also spent a while talking about the other day, was whether Lyft would make sense as an acquisition target for DoorDash.

38:33Because in many ways, DoorDash and Uber are parallel businesses. They both operate marketplaces for delivery and logistics services. They actually both have subscription services and memberships that cost about$10 per month. But with Uber, not only do you get the benefits like free delivery on Uber Eats orders, but they can also fold them into the Uber One membership discounts on ride hailing. But for DoorDash, at the moment at least, all they really do is delivery and then primarily food delivery, although they have gone into these other directions. And part of what we like about Uber is that it can cross-promote across its two apps and offer more value to customers that drives them to sign up for a recurring subscription, whereas DoorDash doesn't really have the same flexibility on that end.

39:18that if DoorDash would now buy Lyft, they could basically mirror Uber. They would be number one in food delivery in market share terms and a strong number two in ride hailing, at least in the US, while Uber would be the dominant player in ride hailing and the second biggest player in food delivery. In your podcast back then, you even made the example of Uber Eats basically being the number two, where DoorDash is the number one and kind of Lyft being the other part in the ride hailing business. At which point, it would be kind of hard to say who wins, but you can see how that would enable DoorDash to more directly compete with Uber by just leveling the playing field to an extent and trying to create more value throughout the membership program, similar to what Amazon does with Amazon Prime, what makes basically both of us so bullish on Uber, which is the ecosystem of the membership and these recurring revenues they could get over time.

40:07Well, we're putting on our investment banker hats and imagining M &A activity that may or may not ever happen. But it is a really interesting thought experiment because when we looked at Uber, we saw Lyft as this dying competitor that was seeding market share while not even being able to reach the scale needed to attain profitability. And while that is still mostly true, there is an entirely different conversation to be had around Lyft if it's being plugged into another tech giant. Lyft might be worth dramatically more to a company like DoorDash, which can use Lyft's network as a way to scale its membership business and increase customer loyalty than really the earnings power can generate on its own.

40:44And as an Uber shareholder, I guess it's a good intuition when you feel like that's a little bit of a scary thought of telling you, oh yeah, that does give me some pause. And at the same time, I do think that it would be at odds with DoorDash's ultimate goals to acquire Lyft, right? They want to dominate local delivery and ride hailing would be just this totally different market for them to enter into. And they don't have the same experience in it. And it would really just be a point to match Uber. And I think DoorDash is probably more ambitious than that. And there's actually, interestingly, not as much overlap between dashers and Uber drivers as you might think.

41:21So the people who work on the supply side of both of these companies' networks are actually very different. People who do food delivery gigs tend to be much younger and may make deliveries by bike and treat the job as truly just a side hustle. Whereas Uber rides are by car. And as such, the average Uber driver tends to be closer to 40 years old and a higher percentage of them treat Uber rides as a full-time job. So I actually think it would be very unlikely for DoorDash to acquire Lyft, but it does seem like the word on the street is that someone is going to acquire Lyft maybe in the next 12 months.

41:52And I could just as easily imagine Amazon buying Lyft and integrating free or discounted ride hailing into Prime subscriptions, or could also see Waymo buying Lyft as a way to quickly scale its market share and more formidably rival Uber as a ride hailing app. And we're straying a little bit from DoorDash, but I just think it's important to talk about all of this since Uber is, after all, one of our higher conviction bets in our intrinsic value portfolio. And while you could say Uber should just buy Lyfts, I don't think regulators would look fondly on the market leader buying up their second biggest competitor.

42:24So it's not really an option for them. Amazon could really be a big player in here too. I mean, they even tried delivery at some point, not necessarily food delivery, but just in general. So after all the discussions we had on Uber and the presentations we did, among others in Lisbon, I do feel like Amazon would be the perfect candidate to acquire Lyft. And the takeaway it seems to be that Lyft is almost certainly more valuable when rolled into the scale and ecosystem of another tech giant than when just operating as a standard of business. It's definitely a winner-take-most market, where Uber has roughly twice the market share of Lyft in the US, and yet Uber's market capitalization is more than 20 times bigger.

43:02And Uber is more international than Lyft as well, But still, the point remains that as the biggest player, Uber captures a disproportionate share of the economic benefits. And at an$8 billion market cap, Lyft's valuation is just a rounding error for some of these bigger competitors who may want to snap it up. Whether that will be DoorDash, Waymo, Amazon,$8 billion to acquire 30 % market share in right-hailing in the US really doesn't sound like it's that expensive at all. and like Lyft and Uber labor is by far DoorDash's biggest cost and as many listeners may know that has come with some controversy plenty of countries and cities have been displeased over the years that companies like DoorDash classify their workers as contractors and non-employees allowing them to sidestep protections that they'd otherwise need to guarantee like vacation time health care paid overtime, all that sort of stuff.

43:57And for now though, the status quo seems to be pretty set. Even if you could argue that gig workers should be employees, as a society, it feels like we've mostly agreed just to overlook that because the value created by these services is so substantial. Food delivery is already expensive. And if prices have to rise another 20 % by having dashers classified as employees, then I think most consumers would just be happy to have them classified as contractors instead. That means getting even just a little bit cheaper prices on what are already expensive delivery orders. And of course, gig workers are consenting and opting to work these jobs.

44:37So it's not like anyone is forcing them, but I don't know, maybe that's the libertarian coming out of me. Well, I'm not sure that that explanation is too pleasing to regulators. But I do think, as you said, we had the same argument back then for Uber and society is just accepting how it is. And if there's one thing that people don't like to see, it's prices going up. And you would see a huge increase in prices going up if this should change and they should be labeled as employees. And as we just mentioned in the beginning, prices are already pretty significant for food delivery. So I don't think there will be any change to regulations anytime soon.

45:10And we have seen some ballot initiatives in places like California with Prop 22, where the public voted in favor of allowing gig workers to be classified as contractors, which was actually later upheld by California's Supreme Court. And California is a big state. I think their economy ranks in the top 10 in the world just as an individual state. So what they do does lead the way and set the precedent for big swaths of the country in many ways. And not every state wants to or can afford to litigate the same battle. Like I said, a lot of these states have been happy to just kind of follow the precedent that's being set in California, which is why I do say that the status quo feels pretty firm.

45:51If the boom in gig work during the pandemic couldn't push through changes in worker classification, then I'm not really sure what type of scandal would have to happen today to be a catalyst that could cause that sort of universal change. And the way DoorDash balances this and accommodates each government's rules is a bit different. But at this point, there just seems to be a tolerance, even if it's begrudgingly so by regulators globally, since services like DoorDash are just seen to be so useful and are so beloved by customers. I mean, whatever city you travel to, and whether it's DoorDash or Uber Eats or some other local competitor, I always see people with the backpacks, on the scooters, delivering orders.

46:30And it just seems to become a ubiquitous part of our lives globally at this point. Absolutely. I mean, at this point, I think we're just way past the question of whether big tech companies are going to be forced to reclassify their entire workforce from contractors to employees. But you do still see some cities on the margins trying to make sure gig workers are protected. I know cities like New York City, for example, have placed requirements on the minimum earnings of delivery workers to ensure that basically people can't work gig jobs without earning a guaranteed hourly rate. That's not as painful as having to classify drivers as employees, but these kinds of regulations are complicating factors for sure.

47:11The way the minimum earnings work is that New York City has set a floor of$21.44 per hour. And so DoorDash must ensure each dash risk pay meets or exceeds this floor under an approved method. And tips for context, which is a sensitive topic, can't be used to meet that minimum comp. and for each pay period doordash does have to pick one of two possible pay calculation methods under the standard method doordash must pay each dasher at least the hourly for 21 and 40 for their trip time from accepting an order to drop off and then across all dashers combined they need to pay enough to also cover on-call time spent by dashers waiting for orders at that same hourly floor rate Alternatively, if dashers have a utilization rate of more than 50%, meaning they spend more than half their total time on the clock traveling to complete orders, then DoorDash can opt to pay them a higher hourly rate in place of paying them for the time between orders.

48:17But again, tips cannot be factored in. With the difference primarily being, under the standard method, DoorDash can pay certain dashers less, so long as in aggregate, their entire fleet of workers makes enough based on the total time they spend on call. And with that alternative method for workers who meet a given utilization rate, DoorDash can't pay them a higher hourly rate for their trip times only without having to worry about compensating them for the entire time that they were on call waiting for orders. So DoorDash does have the chance, as I said, to pick between New York City's two pay formulas, depending on how busy their Dasher network is each week.

48:57But effectively, since March of last year, they have tended to default to that standard method. Okay, so that's the first time I hear about those two methods. And I have to admit, it's a bit complicated, but I think it's good for everyone involved that they settle for the standard method. I don't envy the compliance teams at DoorDash trying to keep up with all that. And sorry to the audience for subjecting them to those different explanations, But yeah, it's a little messy. But sometimes you got to get a little messy in investing. And whether that makes sense or not, and probably not, since I'm sure there are easier ways to explain what I just said, the point is that different municipalities are in the process of trying to tweak the status quo.

49:40Maybe not necessarily dramatically so, but they are looking for ways to try and guarantee workers' earnings. And that will come at higher costs to DoorDash, both in the form of wages paid and also in terms of the cost of compliance with these laws. Okay, with that, how about we zoom in more on DoorDash's unity economics? Because honestly, I still find it amazing that they generate any profits at all. For all the technology, customer support and compliance overhead, plus the driver costs, it still amazes me that they can make a profit while charging low enough fees that clearly millions of people are still happy to pay for the service.

50:21To be exact, as of last year, Dash actually had about 42 million monthly active users who use the service. So there's not a shortage of people willing to pay for food delivery, even though it's not cheap. As I did my own due diligence, I looked into the cost of just picking up a standard chipotle burrito versus paying for the same burrito to be delivered on door dash and with delivery you're talking about a 70 higher price tag and more than double the cost with a tip which makes sense because you know as people joke on twitter sometimes you're literally ordering a private taxi for your burrito so i simultaneously find that to be expensive while also being a bit amazed that, as you said, they can make the economics work without needing to charge even higher fees.

51:09And whether we're using DoorDash or not, though, the company facilitated something like 2.5 billion orders last year, which is only a small fraction of their total addressable market ultimately. So even if it's not our kind of thing to use, people are using it a ton. And without getting into politics, I have seen some short sellers betting against DoorDash on the premise that DoorDash is actually pretty significantly exposed to immigration crackdowns in the US, since a large chunk of their workforce does tend to be immigrants and maybe even illegal immigrants in many cases. And compared with Uber, for example, where you do need a driver's license and a vehicle to do ride hailing, DoorDash has what appears to be less extensive background checks.

51:55And all you really need is a bike to begin delivering orders in some places. So yeah, there was some concern earlier this year that DoorDash's labor force could be materially impacted by ICE crackdowns. So that's a challenge for all gig work companies, but DoorDash may be even more exposed than others just because of the nature of the work. But we really haven't seen this become a problem yet. Sometimes I think it's good for the economy overall that there are not that many value investors. Because if I look at the difference of the Boruto calculation you just did, paying a 70 % premium for just ordering food online does seem like it's a huge burden.

52:36And I probably wouldn't do that more often than let's say once a week, but people do. So how about we talk about the key metrics you look for to understand the unit economics even better. So how much is DoorDash making per order? How much do Dashers make? All of that stuff. door dash generates revenue through commissions from restaurants for order source via their app plus service and delivery fees paid by customers at checkout as well as recurring subscription revenue from dash pass and from advertising by merchants that bid on keyword searches to try and rank at the top of the results when you look for a certain type of food in your area so for the core business dash is charging a delivery and service fee to users as well as a fee to restaurants while also charging the consumer a suggested tip amount, which effectively subsidizes some of its labor expenses.

53:28And typically, the fee that DoorDash charges merchants is 15 to 30 % of the food's order value on top of a one-time fee of$350 for initially activating a merchant account with DoorDash. And for the consumer, if the cost of your food is, let's say,$22.40, the tax you pay might be about$1.70, with$3.30 for tip and then service fees of$5.50, which brings your total order to$32.90 in this example. And the restaurant gets the cost of the food net of fees to DoorDash. So they might only see$20 on a more than$22 order while DoorDash keeps$4.90 for itself after subtracting about almost$8 for the Dasher and paying the restaurant its share.

54:18So it's kind of a lot of numbers. We do have a graphic on screen for anybody who's been watching to make it a little easier to follow along. But the plain and simple takeaway is a delivery order is getting divided in a lot of different ways. And if we think of$33 as being about the size of an average food delivery, which I would say it is, about$5 of that total transaction is being captured by DoorDash. So So that's kind of the mental framework you can use to think about it. And the next time you're getting pizza delivered on DoorDash, just keep that in the back of your mind, I would say. And you could argue that as restaurants have taken on delivery as a larger percentage of their total business, driven by these services like DoorDash, they've had to adjust to the reality that delivery is less profitable because of the fees and middlemen involved.

55:07And as such, part of the inflation in restaurant pricing that has been breathtaking to a lot of us in the last few years, I think does reflect the fact that to some extent, dine-in customers now must subsidize the costs incurred by these restaurants to do more delivery. So if a restaurant is paying 15 % to DoorDash for every delivery order, then that drives them to raise prices across the entire menu by 15%, affecting food costs for both online orders and dine-in customers. So dine-in is actually maybe subsidizing online. And for annoying as that is as a consumer, and trust me, I know, during the pandemic, Dash's chief operating officer claimed that they did an analysis of restaurants that were relying on DoorDash versus those that weren't.

55:54And those that had partnered with delivery services were eight times more likely to survive. So that was an extreme example. But they did provide a lifeline in a crisis. And now the question is where the relationships should balance out longer term as restaurants are less dependent existentially on DoorDash, but also have now gotten used to working with them for years now in a mutually beneficial way as our customers used to using DoorDash to be able to get really whatever they want. And just to look at some statistics here, for full-service restaurants, delivery orders as a percentage of their total customer traffic has risen 150 % from 2019 to 2014, going from 2 % of total customer traffic to 5%.

56:41So restaurants really are relying on food delivery more than ever. We talked about this change with Gen Z customers who are getting used to getting everything they want today rather than tomorrow. And I think the extra fees are the price for that. And most people are just willing to pay that. I mean, personally, I like to cook myself, although I don't cook good. So I usually don't go out to eat more than once or twice a week. But even if I do, I try to get my food myself because I just can't handle seeing that a$15 meal suddenly costs$22 or even$25. dollars and I tend to go to places that are close by anyway so it's kind of a nice break getting outside and then just going there myself and getting my food but I can totally see or understand how it's valued for many people to choose from so many different restaurants and not having to worry about how to get there how much time to spend getting there so there are certainly times where I feel like the value is worth paying even seven or eight dollars more than the food would actually cost Well, in a lot of ways, I think maybe it's clear to the audience that Daniel and I are wired.

57:44Similarly, we are value investors. So it's not a huge surprise that you kind of think of it the same way as me. about to go back to your question, the key thing from a unit economics standpoint is net revenue margin, which is effectively DoorDash's take rate. That is how much revenue they generate as a percentage of their overall gross order volume through their marketplace. And the formula for net revenue is the commissions and consumer fees they generate minus the payouts for dashers, refunds on orders, and any special credits or promos that discount the price. And whatever is left over is the take rate for DoorDash.

58:23And that take rate, despite the regulatory obstacles imposed on them in places like New York City, has actually been rising over time as the business scales. And since 2018, the company's take rate has risen from 10 % of gross order volumes to 13.4 % in the last 12 months. That doesn't sound like a lot, but from a percentage change perspective, that is a 30 % increase, right? And that's pretty good. And what has primarily driven this improvement in unit economics for Dash has been advertising. And it's no secret. Management will tell you that this is primarily from advertising. In 2024, their ads business hit a run rate of$1 billion.

59:01And naturally, those advertising dollars come with much higher margins. So that's helped profitability a lot with the ads business only really being launched in just the last three years. So it is still pretty young and better batching of orders and logistics planning has helped their efficiency too. Since 2020, DoorDash has been able to increase the average customer's orders per year from 39 to 62, which if you do the math of that time is a 10 % annual growth rate, significantly outpacing the growth rate that Uber and Grubhub have seen. For Uber, it's about 3 % a year and Grubhub, it's been about 1 % a year.

59:37And so that industry leading engagement rate lowers the costs per order while improving operating leverage across their fixed cost base, which is to say higher order volumes in specific areas allows Dash to batch orders together and optimize routes, which improves margins through greater order and route density. And maybe a simpler way to say that is if you can have a driver pick up multiple orders at the same time, reduce the amount of back and forth they have to do, not only is that a better experience for customers, but it makes the economics of each order more attractive since the cost of a Dash strips are basically being spread across multiple orders.

1:00:16And I think that's fairly intuitive. My bullish take on DoorDash would be that those who argue that food delivery has always been low margin are focusing on the wrong thing, essentially. What you want to focus on is whether Dash can generate sustainably good economics and returns on capital as the market share leader once they reach a mature scale. And I do think the answer to that is a resounding yes. In market share terms, Dash is a gross order volume of about$80 billion globally, while Uber Eats is at$75 billion. And all other competitors are just fractions of their size. So Dash's lead is substantial, and it's actually even bigger in the US compared to Uber Eats.

1:00:55So to me, this really looks like a case of the low margin business they operate in and dominate actually being part of the moat, which sounds kind of counterintuitive, but it has required the management team to deliver at a very high level of execution to win and achieve massive scale, which opens the door to all kinds of other business models beyond pure delivery from advertising and DashPass subscriptions. Okay, one quick comment before you have to tell us about the DashPass subscriptions. It's funny to see that it's one of the first companies that actually has a rising take rate instead of a declining one.

1:01:31Most of the companies we look at have take rates that decline. I mean, PayPal is such an example. And it's incredible to see how the ads business can really inflect the margin of a business that is usually operating in a bad industry and having low margins. And of course, we hope that some of the companies we own and definitely PayPal can have the same inflection point using the ads business and most of the value added services to basically achieve the same tape grade. But now, since you mentioned it, you're going to tell us a bit about the DashPass subscriptions. So this is our attempt at rivaling Uber One.

1:02:02by offering free delivery on food orders and by partnering with Lyft to offer ride-hailing discounts. But folks can only get up to four discounted rides per month, so their partnership structure is more limiting than what Uber is able to offer via its owned business and Uber Eats, despite costing about the same as Uber One. And that's why I suggested earlier they might want to go ahead and outright buy Lyft. Effectively, what's happening is that Dash is accepting a trade-off of earning lower margins per order with DashPass in favor of driving higher order frequency. And it's difficult to get people to meet a required minimum order size for delivery, but if they can get people into the habit of ordering food more frequently, that makes it easier for dashers to group orders together to improve their unit economics as we've discussed.

1:02:52And so for folks who signed up to DashPass back in March, 2023, 69 % were still subscribed after one month, 36 % after six months and 28 % after 12 months. And so they've also tried to use DashPass as a way to encourage people to order more than just food for delivery on DoorDash, which plays into that ultimate goal of enabling all forms of local commerce from alcohol to deodorant, pet supplies, flower bouquets, and everything in between. There's just so much stuff that you can order on DoorDash. If you don't believe me, I would say just open up the website and see for yourself. It's sort of mind boggling.

1:03:27And as they've expanded into more new verticals for delivery, that has also improved customer loyalty and retention over time. At the end of last year, more than 25 % of monthly active users had ordered from one of these non-restaurant merchants. And that was up from 20 % a year earlier. I think it might be important to basically take a step back and to understand why restaurants can't replace DoorDash themselves. because almost no retailer can do delivery themselves because the fixed costs, given the unpredictability of the business, is just too high. It's kind of like why we think it would be hard for any AV company or the networks, like Waymo, for example, to displace Uber.

1:04:09You have a fixed supply that doesn't match well with peaks in demand. And as a restaurant, for example, if you hire a couple of delivery drivers, they might consistently be busy, but you wouldn't have enough of them to meet peaks in all the demand. And if you just hire too many drivers, who can manage the peak surges, well, then you have a team that otherwise sits around idly most of the time before and after the peaks, which is just too expensive. So it's just hard to underwrite the cost of an own delivery network when there are major lulls in activity, given that delivery volumes are high valuable during the day.

1:04:43And it's also impressive to me that you would think in a downturn, spending on private taxis for our burritos, as you would say, Sean, would be the first thing that gets just budgeted away. But we haven't really seen that. I mean, the business has shown no signs of being cyclical or economically sensitive, which is not intuitive, given the premium that people must pay. Let's say paying a 50 to 100 % markup on your order or more to just have it delivered. It's just no joke. But once people get into this habit, if we're lying on DoorDash, it's so hard to go back to picking up the food yourself and even harder to just start cooking at home.

1:05:17So you can see why the service is so sticky. It kind of enables a certain amount of laziness to put things into a less favorable perspective. And yeah, nobody likes having to go back to doing tasks that were previously able to effectively outsource or automate. And on another note, though, I've heard about these so-called ghost kitchens that DoorDash runs, as well as their Dash Mart stores, where DoorDash has moved from being just this third-party deliverer to actually a first-party retail operation. So that seems like a totally different business model and also a different role for them to explore.

1:05:52So I'm curious, how do you think about this and how do you factor things with this new business model into the overall picture of DoorDash? Yeah. So ghost kitchens just means big commercial kitchens run by DoorDash, essentially where restaurant brands can be spun up to sell their products exclusively online. And it's like getting rid of your space for sit down customers and really any customer facing part of a restaurant and just opting to use these nondescript kitchens to produce your food and then to be delivered via DoorDash. And you've seen some celebrities like Mr. Beast try and take advantage of these kinds of things with his Beast burgers.

1:06:30But it does turn out people like to know that their food is coming from a legitimate restaurant and not just some commercial kitchen warehouse that comes up out of nowhere and the branding exists only virtually. And if you can order a burrito to be delivered from a restaurant you've been to before versus a ghost kitchen burrito, I would guess almost nine out of 10 people will go with the former restaurant unless the ghost kitchen burrito is just sold at a dramatically lower price. But I think you can see why the idea is appealing for restaurants if they can gain scale by removing major expenses like real estate and also reducing the labor needs without servers or cashiers.

1:07:09And so this was a phenomenon that really took hold during the pandemic. And in 2021, you had groups like CBRE predicting that this could be a trillion dollar market. And in hindsight, I mean, that's like, it's just laughable. It's way too optimistic, but I don't think we can write it off entirely either. It does effectively add more options onto the supply side of their platform, providing consumers with more choices and dashers with more income opportunities, which helps to maintain that virtuous cycle of supply reinforcing demand and vice versa. That's the flywheel effect that's being spun. With Dashmart, this is where they've specifically set up warehouses for them to stockpile inventory and directly deliver from.

1:07:47So it's a lot like Amazon. They've got more than 100 of these micro-fulfillment locations across the US, Canada, and Australia. And yeah, it's becoming an important part of their ability to expand into delivering more types of products and ensuring faster delivery times too if they can place a dash mart in a central location and i think really the way for us to understand doordash is they are the amazon of local delivery that is kind of the ultimate goal the ghost kitchens i think at least are one of those ideas where the bull thesis just sounds super exciting but when it comes down to simple things like trust i think you get to a problem and i wouldn't trust that the pizza i ordered is actually the same or made by even the same person that I ordered last week.

1:08:31I think that's just a problem for consumers. But the warehouse idea does sound pretty promising in my eyes, especially when you see how it could expand the business into all sorts of products that you can deliver. But then again, you kind of compete with Amazon, which is always a tough battle to win. And my impression is that DoorDash has generally been a pretty acquisitive company. Maybe we can link on that for a bit and try to understand how they've used M &A to address their broader goals of dominating local commerce globally instead of just delivering restaurant orders. Yeah, there's been a handful, that's for sure.

1:09:05I mean, back in 2019, DoorDash used$410 million to acquire one of its competitors in Caviar, which was, funny enough, owned by Square, which is not something I would have expected. And I don't know, from the name, you can probably guess that Caviar targets a higher-end customer segment. The idea being that Caviar partners with these sort of top of the line restaurants that may not normally even allow for delivery. And while the business model isn't scalable nationally, since not every place has this high concentration of premium dining, it does make a ton of sense from a unit economics perspective because the gross order value is so much higher that a fixed percentage fee on a single delivery can generate much more total profit for the company.

1:09:48And one of the other big acquisitions they've made was of a Finnish firm known as Volt, which also is a pretty strong market position in Europe more generally. And that was an$8.1 billion deal in all stock back in 2022. And then most recently, Dash announced plans to acquire Deliveroo, which is this UK-based food delivery platform for$3.9 billion. And that was made at a 30 % premium to Deliveroo stock price at the time for a company that had just barely become profitable for the first time in 2024. So for the most part, I do like these acquisitions because they've allowed DoorDash to grow its geographic footprint into 26 countries at this point.

1:10:26And the Deliveroo deal actually closed this past October and added 7 million monthly active users to DoorDash's global customer base and expanded their market power in the UK and Ireland, France, Italy, Belgium, Singapore, the UAE, Kuwait, and Qatar. Well, I know you know this, Sean, but historically, M &A tends to destroy more value than it creates. So I can see why adding further scale to DoorDash's business could be equative. But at the same time, you could also see these as expensive acquisitions of marginally profitable businesses, where their local operations doesn't really actually provide economies of scale, or at least economy of scale benefits to DoorDash's business overall, right?

1:11:08I mean, a greater presence in Ireland doesn't add economies of scale to DoorDash's operations in New York City. Nobody in New York who uses DoorDash cares or really benefits from DoorDash acquiring a presence across the pond. So that's kind of my hang up with all these acquisitions. I can see why they want the scale globally, but also don't entirely see how that improves the business and the business's unit economics in its core markets. Well, it's a really good point. And I also think Tony's Drew is very well aware of the challenge of making these kind of deals work without even talking about the scale question that you're raising.

1:11:45But I think I'll just quote him directly. He told the Financial Times that the track record for M &A is littered mostly with failure. And so my ongoing thought on M &A is why is it going to be any different for us? The bar remains extremely high. You can't just do it because it looks good on a sheet of paper or an Excel model. For me, it's can we execute against it? And so my words, apparently he has been encouraged by the integration of Volt and how that opened the door to new markets for them. And you're right, more customers in Europe doesn't do anything for US customers for the most part. But it does give Dash runway to expand to new marketplaces that would otherwise be very costly, if not impossible to gain market share in from scratch.

1:12:26Then on the margins, as they continue to spread fixed overhead costs across a wider and wider revenue base that should ultimately produce a bit of operating leverage that generates greater profit margins or enables Dash to lower prices for customers a bit everywhere. And we talked about it with Uber, but there is no secret sauce that makes DoorDash fundamentally special. Anyone could have seen what they were doing in the US and copied it locally, launching the DoorDash of Thailand or Mexico or Norway or wherever. And with that first mover advantage, that would give competitors pretty good leverage over DoorDash once DoorDash finally had the time to try and address that small market.

1:13:04And obviously, they can't expand into every market in the world at the same time. So Dash had to make these strategic tradeoffs about where to prioritize growth. And you could really say that these acquisitions are now trying to correct for that now that they're at a bigger financial scale. And as such, revenue from its international operations grew at more than 50 % in 2024. which is significantly faster than the 20 % growth in the US. So DoorDash is increasingly becoming a global story. And I should also mention that not all of Dash's acquisitions are focused on international expansion and delivery, simply.

1:13:39DoorDash acquired a hospitality tech company known as Seven Rooms for$1.2 billion back in June. And the playbook there was just totally different. This one was more about diversifying DoorDash's value add to restaurants. And for context, Seven Tables is almost like Shopify for restaurants. They provide CRM software for tracking reservations, making customer profiles, managing seatings, and all that kind of stuff. And so this deal will help the company to be more involved in dine-in at restaurants beyond just delivery and pickup by providing restaurants with reservation management and analytics dashboards that help them better understand the behaviors of repeat customers.

1:14:20customers and such that doordash can now provide insights and analytics into all aspects of restaurants operations and that should come with higher margins over time than delivery and also just makes restaurant partners even more dependent on doordash's ecosystem so i actually think i like this deal with seven rooms even more than i do just buying market share in these other markets globally. I can really see how this benefits them strategically and strengthens their relationships and just creates more potential for operating leverage. The risk that you have with international expansion and such a business is that they never turn profitable.

1:15:00So the top line grows and it looks pretty good. But then at the bottom line, you never really see those profits going to the company and then to shareholders. But I do think they have some pretty interesting acquisitions. and I would say to better understand the company's M &A, one thing that I love to do is just keep looking at the executive comp because depending on how management is paid, they may be incentivized to do acquisitions that simply make the company bigger without generating any intrinsic value. I don't necessarily think that's what's going on here, but can you paint some more color around what this has looked like and how the executive comp is set up at DoorDash?

1:15:35Yeah, so what you're alluding to is the kind of 101 case study you'd get in a business school where management gets some kind of bonus for reaching a revenue target. And rather than growing the existing business to hit that target, they just take a couple billion dollars and buy another business. And oh, wow, I unlocked a$50 million bonus for myself. And as a shareholder, that's not what you want to see. And I should say, there is a lot to say here. Your question is ultimately about governance. So before I even can get into the comp structure, I should say that this is yet another tech company where you have multiple share classes where basically the founders are granted shares with extra voting power that gives them disproportionate control over the company.

1:16:15So the public gets the class A shares, but the co-founders get the class B shares that come with 20 votes each. So regular shareholders are treated as second-class citizens in a way, and that's frustrating. It also helps to ensure that the company remains founder-led. And that is something we do like to see typically. So maybe there's a positive argument for that. And Tony Zhu has a$2.5 billion stake in DoorDash. So it'd be hard to argue that he doesn't have skin in the game alongside other shareholders. But the long story short is that DoorDash has substantial stock-based comp that runs at about 9 to 10 % of revenues.

1:16:54And that's really not likely to get better soon, since at the time of recording, the company has more than$2 billion in unrecognized stock-based comp expenses that will materialize over the next two years as RSU's best so that at a minimum is going to continue to be a headwind to their net income. And of course, if you have more shares outstanding, then that increases the denominator in the earnings per share calculation, which means the company's same profits are now getting spread out across more and more shares such that each shareholder is getting a smaller claim on those profits. And that is, in simpler terms, what we call dilution.

1:17:30And it's like inflation, really. And so now, unfortunately, DoorDash authorized a$5 billion buyback earlier this year to offset some of the solution, but they haven't yet repurchased any shares with that authorization. So we haven't seen any real counterbalance implemented this year. And in past years, they have repurchased a few hundred million dollars worth of shares, but it just hasn't been enough to stop the company's total share count from ballooning, rising by a third over the last five years. Wow, a third. That's way more than any other company we've covered yet. And sometimes we decide not to invest in a company because they cannot significantly decrease the share count.

1:18:10So a third of the illusion is just a whole lot to digest. I don't think you're wrong. And in terms of the specifics of how the long-term comp is structured for the management team besides the co more than 90 is tied simply to rsus which has become something of a curse word on the show i've talked about in the past how i how i don't like them the rsus are the equivalent of participation trophies i've joked because they're stock grants that you earn simply for staying with the company for a certain period of time and i just i don't get it i'm still waiting for somebody to explain it to me it doesn't click because I would rather just pay higher base salaries in cash than give out stock grants to bribe people for not leaving.

1:18:55And for Tony, as a CEO, he does not receive annual stock grants that vest like this. So that's great. But the reason for it is because he received a mega RSU package back in 2020 that awarded him millions of shares that vest over the next few years as certain stock price targets are met. So again, I really do not see that comp structure specifically being shareholder aligned at all. And generally we like to see more of the Berkshire model, right? Where management is paid a cash base and the cash bonuses based on KPIs and performance goals that are really indicative of what they control over the company, you know, what business unit they're directly working for.

1:19:34And then they are encouraged to use that cash to buy stock themselves rather than being handed shares willy nilly. And especially not for something as simple as just biding their time, right? It's really not treating sharers as sacred as they should be. And there are some performance factors baked in here for Tony, but the primary consideration for the rest of the management team is just one's continued employment for investing. I mean, that's all. That's not good. Yeah, we really don't like to see those compensation structures. I mean, I can at least understand why companies pay out stock bonuses if certain ambitious performance goals are met, But in this case, it seems like giving out stock just for the sake of doing so.

1:20:17And they're not modest about it either. If there's no real performance component and the comp is based just on time, then I'm not sure, honestly, why you wouldn't just pay them higher base salaries. Because I feel like that would accomplish the same thing. You could just pay them well enough so that they don't need these unnecessary stock grants to be incentivized to stay. And I know we talked about it a lot in our Transom episode. but I think if you just see how you incentivize people the right way and that immediately fuels perfect execution and then also shareholder returns, people might understand why we focus so much on the compensation structures of management.

1:20:53And having said all that, how about we turn to looking at your assessment of DoorDash's valuation? It's been a long episode, but now we get to it. What is DoorDash worth? Should we buy it or shouldn't we buy it? Yeah, that's the question always. So with this company, we can really think pretty accurately about what it may be worth by just looking at the addressable market. And so last year, they facilitated over$80 billion worth of orders. And that was double what they did back in 2021. And some of that is from people in places like the U.S. becoming more dependent on DoorDash thanks to DashPass.

1:21:27While some of that is in the form of these acquisitions of other delivery companies globally. So you can take that$80 billion worth of orders and multiply it by their take rate of 13.4 % last year. That actually gets you pretty close to the revenue that they actually generated. It's a pretty good heuristic. And so we know that take rate is relatively stable and maybe modestly growing thanks to advertising. While intuitively, it's fair to say that the market opportunity for them remains huge. Globally, there's$3 trillion worth of commerce annually that flows to restaurants. And if we assume about 25 % of the global grocery market is possibly addressable for them, then And that's another$3 trillion in addressable market.

1:22:08And so obviously people will always go to the grocery store or want to dine in at restaurants. So DoorDash can only ever capture a fraction of these massive pies. But even just modest increases in that pie can result in tens of billions of dollars more in gross order values and therefore billions of dollars more in revenue for DoorDash. So I'd say$300 billion in gross order value at some point down the road, which is about 2.5 times the order value they facilitated over the last year. You're talking about an in-state or a maturity state where they're capturing about 5 % of global spending on restaurants and grocery.

1:22:44And that sounds maybe reasonable, ambitious, but not impossible. And on top of that, something like a third of full service restaurants even use third-party delivery services in the first place. So there could just be a much bigger opportunity and continuing to onboard more restaurants in Dash's core markets. And so all that just sounds really bullish. And with that basic math at$300 billion in order value, with let's say a 13 % net revenue margin on those orders, they would be generating$39 billion in revenue and maturity. That's the kind of very rough math we like to do, Daniel, right? We're not trying to model every possible variable in a DCF, but we're just trying to give us some kind of napkin math to think through the scale of the opportunity based on all the other qualitative factors we've talked about today.

1:23:32And so this is even more of a guessing game trying to figure that out, but we have seen Dash's operating margins inflect pretty dramatically toward profitability in the last few years as the business has rapidly scaled. So with 5 % operating margins today, I don't think it's unreasonable at all to think that by the time the company has tripled or quadrupled in size in terms of gross order values, they could probably be generating about a 15 % operating margin. And that's actually not too far from what we think Uber can generate in operating margin perspective, kind of longer term. And so just to walk us through that math some further, let's take that$39 billion in estimated net revenue and multiply it by a 15 % operating profit margin.

1:24:23If you round up a little bit, you get about$6 billion in operating profit. And who knows what the timeline is, maybe a decade from now. And none of this clearly is an exact science, but investing is not an exact science anyways. We're just trying to calibrate the thesis and get a ballpark idea of the range of possibilities. And so yeah, if they can generate like$6 billion in operating profit at a more mature scale, let's call it 10 years down the road, you could estimate the company's equity value by slapping on a range of different multiples. So think about what the market would be willing to pay for this company.

1:24:57And at a 25 times operating profit, DoorDash would be valued at$150 billion. At 35 times operating profit, which I don't think would be unreasonable for this kind of wide-moded and growing company, then the equity value DoorDash would be about$210 billion. And that would imply that the company could almost double from current levels with a hundred billion dollar valuation or so okay so over 10 years with an optimistic but not crazy level of growth and an exit multiple you're talking about a realistic estimate of the stock maybe being a double that's kind of directionally how we're thinking of it and maybe that sounds good and again i have no idea how long if ever would take for dash to scale to that size but just to walk through the basic math again if it takes a decade when you discount that $210 billion of anticipated equity value by 2030 or by 2035 to a present value from current share prices, then that's an implied annual return of just under 8%, which is, well, pretty average, actually.

1:26:02That's what we would expect from the market more generally. But if you think they can grow to, let's say,$300 billion plus in gross order value in just five years from now, while tripling operating profit margins in the same way, then the math just looks totally different because there's a lot less opportunity costs going on in the time value of money. So to some extent, the question is really how quickly you believe they can continue to grow and for how long after that they can continue to grow faster than the market average. And let's say they reach that kind of scale in six years, your very rough expected rate of return calculation jumps to almost 12%.

1:26:37But it's just hard for me to justify being that optimistic when we saw this type of growth really only during the COVID era for them. So I would be impressed and probably am skeptical that they could sustain that kind of momentum over the next five to 10 years without a pandemic type of catalyst. Well, it does certainly sound like sort of an elaborate way to say the stock is definitely not cheaply priced to an extent that we feel like we have an asymmetric opportunity or even just a chance to realistically clear our 12 % hurdle rate. And then more practically, there are all kinds of complicating factors like whether they make expensive acquisitions or continue to aggressively dilute shareholders, which would further reduce expected returns.

1:27:25And even if the market cap did double, if the share count rises by a third again, while the outcome for shareholders at a per share level isn't going to be a double. We are also not being that conservative in our projections either. So projecting the business to more than triple from its current size over a decade and after already growing extremely rapidly for years, I would say that's not necessarily conservative. It's possible, but when a stock looks expensive still with that kind of implied growth, well then the company would actually probably need to grow even faster for us to do well on the investment by buying today and holding it for the next few years.

1:28:04I think we're in total agreement then, even after initially being excited to really think about DoorDash and think of them as a competitor, but also, you know, I kind of started to gain more appreciation for what they've done really well. You know, they're not the Lyft to Uber. They really stand shoulder to shoulder with Uber just competing in slightly different ways. And so when I put this all more formally into a bit of Excel modeling, I actually thought the stock was looking pretty attractive around this time last year at a price between$120 and$140 per share. But yeah, kind of like with Robinhood, we're just unfortunately a little late.

1:28:42And that's true of a lot of stocks in the market these days. After rising 70 % or so in the last 12 months, I mean, it's just hard not to feel like the shares have gotten a little ahead of themselves and are, maybe to put it nicely, priced for perfection. perfection. And all that said, I do think I really like Tony Hsu. And I think their market positioning in the US is pretty well entrenched. While there's tons of room to continue soaking up market share internationally, and we didn't even talk about it, but partnerships with drone companies, autonomous delivery vehicle makers could further boost their profitability by cutting out labor costs on the margins.

1:29:15But that's just such another big and speculative conversation. So don't get me wrong. There are some factors that could continue to make this a much better business to own, but I don't think the risk return profile today is meaningfully skewed in our favor. And the market is just more optimistic than I'm willing to be about Dash's future. And that's just another way of saying we're going to pass on the company for now. Well, I think it's always difficult if a business that has proved a lot of doubt is wrong to be just generally skeptical about it. But in order to grow its valuation, it has to perform just incredibly well for many, many years to come.

1:29:55And I wouldn't bet against it and certainly not against the CEO. I think he's done a phenomenal job. But at the current valuation, it is just far from being an asymmetric opportunity, just as you said. And if anything, it's skewed to the downside. If the business performs very well, you'll likely perform in line with the market just slightly better. And if things go just well, they still go well, you will likely underperform the market significantly. So while I think the company is interesting, that's just not the type of setup that we're looking for here on the show. And when we bought Reddit, it was a company in, I would say, kind of a similar situation with the difference being that the company wasn't already valued for success.

1:30:32And today it is. And I would say that changes the trade-off between the risk and the reward. And that's why we probably wouldn't invest right now into Reddit, but it has been the right decision a couple of months ago. And I kind of see DoorDash in the same situation right now. Yeah, if DoorDash can get their stock-based comp under control, it could really round out our position with Uber between the two of them where you're making this bet on the increasing importance of the convenience economy. And I mean, it's no secret that our generation values convenience more than really any others. According to the National Restaurant Association, 64 % of Gen Z say that they use food delivery more now than they did a year ago versus just 15 % for baby boomers.

1:31:13And whether we use it or not, people 26 and 100 just love delivery services. And with Gen Z moving up the ladders of the workforce and being positioned to inherit trillions of dollars in wealth from their parents and grandparents over the coming decades, and that we talked about a lot in our Robin Hood episode a few weeks back, I suspect per capita consumption of ride hailing and food delivery will only rise. But I think that's enough on DoorDash for today. So how about you give us your hints for next week's pitch? Well, this time we actually, we do not have hints because our next episode will be number 50.

1:31:47And that's a special one. So we thought it's probably time for another portfolio review. We did one a couple of months ago, but this time we specifically focused just on our newest additions to the portfolio and our highest conviction bets on names on the watch list. So I think it will be an interesting one. And I'm looking forward to kind of digging into the companies that we covered on this show in the last basically year by now together again. Okay, as always, We'd like to leave everybody with a quote. Today's comes from Ernest Hemingway, who says, There is nothing noble in being superior to your fellow man.

1:32:21True nobility is being superior to your former self. And in that spirit, we aren't aiming to compare ourselves against any other investors, really. We want to continue to learn and be better investors than younger versions of ourselves. And if we can continue to do so, we think that will compound very powerfully in our favor over time. See you all next week. Thank you.