TIP821: Grab Holdings (GRAB): Why Uber Surrendered Southeast Asia w/ Shawn O’Malley & Daniel Mahncke

19:21Daniel Mahncke:And to me, that matters because cross-selling these premium financial products to an existing user base acts as a massive accelerant to the company's overall path for sustainable profitability.

19:35Shawn O’Malley:I appreciate that as much as anyone. Why and how Grab has had success with its fintech business. But I do have one question. How do they actually solve that cash to digital bridge that you mentioned earlier? I mean, how are they able to accept payments in cash for rides ordered in an app? That kind of baffles me how that is working. I mean, I don't know, if I'm a rider in, let's say, Jakarta, and I hand a motorcycle driver physical cash for my ride, how does Grab collect it's 20 % commission. I mean, they can't exactly send an invoice to me via mail.

20:08Daniel Mahncke:Preston Pyshko I'm glad you asked, because this was one of my favorite things to dig into. And that's the genius of their financial architecture. They essentially turned their massive driver fleet into this distributed network of mobile ATMs in a way, which is really, really cool. Drivers have digital wallets with Grab. And in order to accept rides, the driver must pre-fund that wallet, usually by going to a local convenience store. And so then when you, let's say the passenger, hands the driver physical cash for the ride, the driver keeps that cash in their pocket, but Grab instantaneously deducts their commission from the driver's pre-funded digital wallet.

20:47Daniel Mahncke:Meaning the software isn't just matching a rider and a driver, it's acting like a real-time micro-clearing house for thousands and maybe millions of informal cash transactions every single day and every single week. And something like 27 % of all transactions on Grab are made in cash. So this is a significant part of the business. And just to do an example to make it a little more tangible, if a customer places a$20 food order and chooses cash at checkout through Grab, then Grab sends the order to the restaurant and assigns a driver. The driver picks up the food and delivers it, then collects the$20 in cash from the customer at their door.

21:23Daniel Mahncke:And now the driver physically holds the$20, obviously, but Grab's systems record then that the driver was paid in cash. And so later, Grab settles the transaction internally, right? It pays the restaurant its portion. It keeps its own commission or platform fee. And then it adjusts the driver's wallet for the amounts owed to the driver. So the customer paid in cash, but Grab still makes the economics work by treating the driver as the cash collection point and reconciling everything digitally afterward. And it's just incredibly, incredibly innovative.

21:56Shawn O’Malley:That's actually brilliant. I mean, it's kind of exactly what I meant when I said that, you know, it's hard for Western players to win in these markets. I mean, how is Uber supposed to come up with something like this when it has never faced a problem like this before? And a while ago, this kind of reminds me of that, we covered a remittance company here on the show called Remitly. And they also operate in many countries where you could probably say that cash is still king. And they've also come up with these creative solutions to make sure that the money that is sent via an app is actually converted into cash and makes it to the other end of the world and is then paid out by the doorstep.

22:29Shawn O’Malley:And I don't know, I love these sorts of business stories where it's really about solving a problem and making life so much easier for people by doing that. Actually, I think Shopee kind of started in a similar way with their fintech arm. I think we talked about how, what was it called? Shopee Pay or something like that. Initially, it started with basically people going to these local shops, then giving them cash, and then that money was loaded onto their digital wallets. Talking about problem though, or solving problems, how did Grab solve the mapping issue that we talked about before?

23:02Daniel Mahncke:Oh, it's another good question because the way they did it also sounds sort of absurd, but they literally strapped proprietary cameras to the helmets of thousands of Grab bike drivers. And so as these drivers went around, they were effectively helping map these informal alleyways and these hyper-local pickup points that traditional map providers would just completely miss. And so accordingly, they transitioned from using third-party mapping APIs to building their own product called Grab Maps, which is their own proprietary routing engine tailored specifically for the realities on the ground of Southeast Asian streets.

23:40Daniel Mahncke:Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first step yet? You're not alone. And Plus 500 Futures is a great place to start. The futures markets are moving fast. And with Plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more. From crypto to commodities, there's always something happening. The platform is super easy to use so you can trade on the go right from your phone. You can get started with just$100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks.

24:16Daniel Mahncke:And if you're not quite ready yet, you can practice with a free demo account. No risk, no pressure. With 20 years of experience, Plus 500 makes trading more accessible than ever. Check it out at plus500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. Every business is asking the same question. How do we make AI work for us? Sitting on the sidelines is, of course, not an option. Your competitors are already making their move. But with NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP trusted by over 43 ,000 businesses.

24:56Daniel Mahncke:It unifies your financials, inventory, commerce, HR, and CRM into a single source of truth. And that connected data is what makes the AI smarter. It doesn't guess, it knows. Automating routine tasks, surfacing actionable insights, and helping you cut costs and make fast, confident decisions. From software and IT services to healthcare, equipment manufacturing, financial services, and many other great American industries, NetSuite delivers a customized solution for your business. This is not a bolted on tool. It's AI built into the system that runs your business. And if I hadn't needed this product, it is exactly what I'd use.

25:30Daniel Mahncke:If your revenues are at least in the seven figures, get their free business guide, Demystifying AI, at netsuite.com slash tip. The guide is free to you at netsuite.com slash tip. That's netsuite.com slash tip. Before I joined the Investors Podcast, every what if you can imagine was running through my head. What if I'm not the right fit for this audience? What if I freeze up on camera? What if I can't keep up with the level of analysis people here expect? Well, betting on myself anyways turned out to be one of the best decisions I've ever made. And I'll tell you, those early days would have been a lot less stressful with a partner in my corner the way Shopify is to the businesses that work with them.

26:10Daniel Mahncke:Shopify is the e-commerce platform behind millions of businesses around the world, and 10 % of all e-commerce in the US, from household names like Allbirds and Gymshark to brands just getting off the ground. You get started with their design studio, hundreds of ready-to-use templates that help you build a beautiful online store that actually matches your brand with no design background required. It's also packed with AI tools that handle the work you didn't realize you'd have to do, writing product descriptions, headlines, even enhancing your product photography. And what if you get stuck? Well, Shopify is around 24-7 with award-winning customer support to walk you through it.

26:47Daniel Mahncke:It's time to turn those what-ifs into with Shopify today. Sign up for your$1 per month trial at shopify.com slash TIP. Go to shopify.com slash TIP. That's shopify.com slash TIP.

27:06Shawn O’Malley:All right, back to the show. For whatever reason, I immediately think that if you would try that in Germany, there'll be some form of regulation that doesn't allow you to film while you're driving. That's also kind of fascinating because despite the Uber comparisons here, they have very different type of competitive barriers to entry, right? Just by this mapping, for example, having the best mapping makes a massive difference in being able to leverage the economies of scale of this business by just connecting drivers and riders as efficiently as possible, because they know exactly that. Maybe Google Maps shows, you know, that way takes you 10 minutes, but their mapping actually knows, hey, there's this shorter way and you will actually get there in three minutes if you take this route.

27:44Shawn O’Malley:So that obviously helps a lot. And I would imagine that even if a well-funded startup would kind of come in tomorrow, they don't have access to that data and their service is going to be a whole less efficient if they rely on maps from, you know, satellite data providers. So to offer a remotely one-to-one product, a competitor would actually have to build cash reconciliation networks across, you know, thousands of convenience stores and map thousands, maybe millions of unmapped alleys, which is going to require, you know, a lot of cash burn upfront, to say the least, which is kind of where you showed that there were eight quarters of just completely burning through cash that Grab has experienced.

28:22Daniel Mahncke:Yeah, emphasis there on, to say the least. Unsurprisingly, I do agree that once you have the infrastructure and network effect in place to support a ride-hailing and delivery business, it becomes nearly an insurmountable moat. And that's exactly why we love Uber as an investment so much. And Grab has sort of another layer to that moat that Uber doesn't have, admittedly, with this mapping data advantage. But you can also see why Uber looked at the Southeast Asian market, realized they were clearly number two, and decided to cede market share rather than try and navigate eight different regulatory frameworks while also just being slower to roll out cash payments and better localized mapping and burning cash all along the way while you're trying to compete with a competitor that's just much better positioned to be able to do that.

29:10Shawn O’Malley:And just for the listeners, since I know that you know this, John, but Uber took a very sensible approach, in my opinion, kind of mirroring what they did in China too, ahead of their IPO, which is a time you want to get all your ducks in a row. They made the very pragmatic decision, I would say, to sell their operations in Southeast Asia to Grab in exchange for almost 30 % of the company. I think it was 28.5 % equity stake in Grab. And that has since been diluted down, it significantly less today. But I do think it's fair to say that we both love the idea that rather than burning cash indefinitely against a better positioned competitor outside of their core market, you can leverage the success that you have had and turn that into an investment in what's supposed to be the most likely winner in that region long-term.

29:55Daniel Mahncke:Absolutely. And so in a limited sense, we do actually already have some exposure to Grab in our intrinsic value portfolio. right? After Grab's IPO and stock-based comp dilution, Uber's position in Grab is about a 13 % stake now. So we'll call that worth being maybe$1.8 billion. But Uber's market cap is about$160 billion. So 1.1 % of Uber's market cap is its Grab stake. And then with Uber being a 10 % holding in our portfolio, we have what, maybe a 0.1 % exposure to Grab. So I don't know, that's just some quick mental math there.

30:31Shawn O’Malley:There you go. So we're already talking about a portfolio holding here today. So maybe that means that we should just call it a day and say, okay, well, we've looked into Grab now. It's already part of the portfolio. But obviously I would say it's much more, let's say, additive to our knowledge base and also the listeners if we actually discuss it even more, if it's already part of our portfolio. So one of the things that kind of goes through the mind here with Grab is a problem that a lot of international businesses face relative to the US, which is that for a company starting its life in the US, you kind of have the benefit of expanding into the world's biggest domestic market rate.

31:05Shawn O’Malley:So by the time Uber reached scale in the US, they were already one of the biggest companies in the world. And that obviously gives them the resources to take a new market head on. And if you, I don't know, you would say that you'd be the Uber of Germany, you can only grow so fast before you kind of have to expand and learn to navigate this cultural, legal, and also the political differences of operating in, I don't know, let's say France, the UK, Italy, Spain, those types of countries. And actually a dozen other countries before you even begin to approach the scale of a business that simply expanded across all the 50 states in the US where you have this much more unified market to actually operate in.

31:41Shawn O’Malley:And so that point goes for Southeast Asia as well, right? I mean, it strikes me as being incredibly difficult to operate across so many different countries, which on the one hand, it's impressive. But on the other, perhaps tell you why Grab is a$15 billion market cap company. another$150 billion market cap company like Uber.

32:00Daniel Mahncke:Preston Pysh, MD, That's a good point. And think about the friction of entering a new city in a developing nation for grab. You're maybe telling the local taxi union, which might have deep political ties, that you're going to digitize their industry, and then that's probably not going to go very well. And so if you come in with this Silicon Valley arrogance, and you're lacking in corporate humility, local regulators could just simply shut your servers off, or the local drivers might actually blockade the streets. And so Grab has succeeded instead, then, by explicitly focusing on economic empowerment, by proving to local governments that its platform actually increases the daily take-home pay of a previously marginalized workforce in many ways.

32:43Daniel Mahncke:And so, in other words, they have to buy political capital. And so far, they have a proven adept at doing so. But really, it is a highly precarious balance of power between the technology platform and Grab, the gig workers, and the state across multiple different countries?

32:59Shawn O’Malley:I got to say, it's somewhat difficult for me to figure out how different those markets are and how hard it would be in Southeast Asia to expand. But looking at Europe, which is generally pretty similar across countries in terms of regulation and maybe also culture, and then seeing how many problems there still have been for companies like Uber, for example, to operate in these markets, it does give me some pause. But before we do go deeper into that, and we will, how about we talk about delivery? Because we've studied delivery businesses twice now with Uber and DoorDash. And we like Uber's prospects better of the two, but still, it's a difficult business to be in.

33:37Shawn O’Malley:That's something that we've definitely seen when we covered DoorDash. During the pandemic, you had these VC funded subsidies on all kinds of deliveries. And now on the other side of that, the prices of food have risen dramatically. And energy prices are much higher for delivery workers too, which has to be baked into the pricing. And at the same time, customers need to have the spending power to pay a platform fee to the delivery platform and also tip the driver. And that's where we've joked in the past that who actually has the money for doing that consistently. Maybe on a Friday night, you do it because you don't want to go out, it's rainy, but to actually do that multiple times a month, it's pretty costly.

34:14Shawn O’Malley:And you kind of have to figure out how many people are there that actually want to spend that money. And people, of course, are doing it at scale, but I know it violates especially our value investor sensibilities.

34:26Daniel Mahncke:It does. It's not a cheap habit to have, but man, it did feel worth every last cent back in college to get a Chipotle burrito delivered to your door after a long day of studying, right? But for Grab, the deliveries business includes Grab Food, Grab Mart for everyday essentials. in Jaya Grocer, which is an actual physical supermarket chain they acquired to anchor their supply chain, sort of like Amazon with Whole Foods. And like with Uber, I wouldn't say the delivery business in a vacuum is hugely attractive to investors, but it's all about combining restaurant, grocery delivery, ride hailing, and a consumer finance business into one super app, right?

35:10Daniel Mahncke:That's the holy grail. And so we can see the power of this flywheel by looking at the number of users using two or more services from Grab on a monthly basis. And in 2025, they had 62 % of their total monthly transacting users, which by the way, sits at around 50 million people, 62 % of them use multiple services monthly. So that's incredible.

35:32Shawn O’Malley:I would say there's a general trend that we do see in Asia, right? I mean, I'm talking about the trend of super apps. Super apps that basically connect many different use cases and become these huge ecosystems over time. And we talked about it with C Limited, literally starting out as a mobile game company and then deciding to go into e-commerce, fintech and banking and all those types of fields. And I just can't imagine that would work in the US or in Europe. I mean, it's also part of this mobile first culture in Asia and also many developing markets in the world. I mean, you could say that the same is happening in Latin America.

36:05Shawn O’Malley:You could also say that, you know, delivery and ride hailing work well together. And that's something that we have also seen from players like Uber operating in the US and in Europe. But generally speaking, delivery and ride-hailing are just a lot better at scale. So you can increase order density by reducing the amount of idle time for drivers and increasing the number of trips they can complete in an hour by, say, picking up multiple food orders from the same restaurant at once. And that would obviously make the economics much, much better for the business. So in some ways, having an existing user interact with Grab more can actually be more valuable than acquiring a new customer actively using Grab.

36:43Shawn O’Malley:But let's just take a moment to better understand the unity economics here. Because if someone orders a bowl of pho for delivery, for example, how much actually goes to the restaurant? How much goes to the driver? And then how much goes to Grab?

36:56Daniel Mahncke:That's a good question. So let's say somebody orders a$15 bowl of pho for delivery in Ho Chi Minh City, which for the record, I know from experience is way more than pho costs in Vietnam, but just let's use simple numbers here. So answering your question requires getting comfortable with two quirks of Grab's accounting that can sometimes make reported revenue look different from the underlying economics. So that's how Grab treats the incentives it pays out across its ecosystem. and correspondingly, the distinction between agent and principal revenue recognition. That's what I'm referring to. And so just to start with the simpler structure, Grab is a matchmaker.

37:36Daniel Mahncke:It connects the consumer who wants pho with the restaurant that makes it and the driver delivers it, and it earns a fee for arranging the whole thing. And so Grab is purely acting as an agent by accounting considerations here. So the$15 pho order might break down as roughly$11 for the food, $3 of delivery fees, and maybe$1 of service fees. And with this agent accounting model, Grab might record, say, a$1 commission from the restaurant, a 50 cent commission from the driver out of that delivery fee, and then a$1 service fee paid by the consumer. And so that's$2.50 of revenue for anyone who's doing their math alongside us at home that is being recorded on grabs, income statement derived from a hypothetical$15 order, and everything else, the food costs and the driver's base pay, none of that is ever touching the top line.

38:27Daniel Mahncke:And under the principal accounting model, the full$3 delivery fee hits revenue instead. And the$2.50 paid to the driver is recorded as a cost of revenue instead. And so the merchant commission of$1 and the service fee of$1 still appear in revenue too. And so the reported revenue goes from$2.50 to$5, twice as much recorded revenue on the exact same transaction, even though economically speaking, grab share of things has not changed at all, right? Their gross profit is still$2.50. And so the driver still got$2.50, the restaurant got$10, and the consumer still paid$15. And so nothing about the underlying transaction actually changed, just the way that you record the accounting of it.

39:13Daniel Mahncke:That's sort of the important takeaway, is that under these two different revenue recognition models, they can either record twice as much revenue or half as much revenue, in some cases, sort of on the extreme, right? That's an extreme case. But for the majority of Grab's businesses, revenues are recorded under the former model. We talked about the agent accounting approach, where they would sort of understate their revenues comparatively. But in at least one market, Grab takes on direct contractual responsibility for the delivery itself legally, and that makes them a principal for accounting purposes.

39:47Daniel Mahncke:And so Grab disclosed exactly this in its 2023 results, where a change in their business model in one market shifted certain deliveries from agent to principal accounting. And that added$180 million to reported revenue that year, but increased cost of revenues by roughly the same amount. So economically, again, there's no difference in the agent versus principal accounting. You can do the same volume, but legitimately record different revenue figures. And that's what makes it challenging, at least looking at this 2023 period, looking at Grab's revenue numbers straight up. It's not an apples to apples comparison across a multi-year period.

40:25Shawn O’Malley:It's one of those things that you just have to be aware of to understand the results that are posted by the company. And personally, I don't know, I feel like the agent accounting approach is a much better representation of what Grab actually earns, because ultimately, the$3 driver fee is not really what Grab makes. So it's just one part of this three-sided business model. Anyway, though, I think this is a bit too complex. And I think you kind of made the case in a way that everybody can understand it. So I want to get back to the elephant in the room regarding the super app business model, which is that, the prevailing wisdom of being a jack of all trades means you're fighting very costly war on three fronts.

41:03Shawn O’Malley:So you're battling pure play food delivery apps, pure play ride-hailing apps, and then also traditional banks simultaneously now going into this fintech part of the business. So how do you avoid bleeding capital to incentivize all these different users to stay on their platform?

41:19Daniel Mahncke:It really plays into the super app flywheel that is designed to address this in in the sense that each touchpoint is meant to reinforce the value and positioning of the other touchpoints. So if you think of traditional customer acquisition as being like a standalone store on a desolate highway, to get a customer to pull over, that store has to spend a fortune on billboard ads, TV ads, and maybe promotional discounts. And that's kind of similar to how a traditional bank might try to acquire a new user too. They almost have to bribe you to open an account with, if you deposit$6 ,000 in your first six months, you get a$50 or$100 bonus or whatever it is.

41:59Daniel Mahncke:But Grab's financial services are more like a small kiosk located in what is essentially a bustling grocery store. The customer is already walking past it three times a week. And so when Grab launched their GXS bank, their digital bank in Singapore, over 90 % of the depositors were already active Grab ecosystem customers. And so that just completely flips the economics of banking. They didn't have to spend millions on advertising or use huge signup bonuses to bring those people in. They just push an in-app notification to someone who was already opening the app to order a taxi to the airport, meaning the cost to acquire that depositor was practically zero because the user trust and the digital real estate were already established for them to be able to do so.

42:47Daniel Mahncke:And they further actively engineer retention through a program called Grab Unlimited. And this is their paid subscription tier. And it's very similar to Uber One, where for a modest monthly fee, you get discounts on food orders, delivery, subsidies, vouchers toward rides, stuff like that.

43:04Shawn O’Malley:Psychology behind that is that just by paying a flat monthly fee to waive delivery charges and get ride discounts, the user experiences this sunk cost fallacy. So saying that if I already paid my$5 for the month, I kind of feel financially obligated to order my lunch through Grab rather than a competitor just to make sure that I actually get my money's worth out of the subscription. We've actually seen those across many businesses that we've studied. And we sometimes talk about these subscription fees that make so much sense that you just wouldn't cancel, right? Amazon Prime is one of those examples.

43:36Shawn O’Malley:And I actually used Uber One recently and signed up for it. And as people who listen to our original Uber episode would know, I wasn't a big user of the app before that. But now that I'm paying$5 a month, I see myself ordering food way more from Uber because I just feel that, why not? This charge of just getting the food here being like$3 or$4 seems like a lot of money. But if I don't have to pay for it anymore, I sometimes see myself ordering food that I didn't order a year ago. That warms my heart, Daniel.

44:05Daniel Mahncke:It took me a long time to sell you on Uber, both as a product and as an investor. So that's really good to hear. And I think grab unlimited subscribers do tend to transact at significantly higher frequencies, sort of like Daniel with Uber, generally shown much higher retention rates than non-subscribers. It just locks them in. And again, we've seen this as kind of a phenomenon against so many companies that we've studied. It also transitions the company from a defensive posture where they're constantly having to offer promo codes per transaction to win every single meal to a more offensive posture based on just cultivating habitual loyalty.

44:48Shawn O’Malley:I got to say that in theory, the logic of the flywheel is pretty elegant. You have lower customer acquisition costs, you have higher retention and obviously high cross-selling opportunities for these high margin financial products to ride-hailing users. But the only problem is that theory doesn't pay any dividends, as we know. And if I look at the financials of 2022, the investments into the flywheel seem to be quite expensive. I mean, Grab posted a net loss of over$1.7 billion. And we've seen these type of investments for other companies, but it does seem quite intense for Grab. So what happened here?

45:23Daniel Mahncke:Robert Leonard The spending definitely wasn't going toward building factories or laying fiber optic cables, nothing like that. Instead, it was a massive portion of that was going toward incentives. And that was a big cash burn, right? In 2022, partner and consumer incentives, so not just the incentives paid to customers, but also the incentives that they give to motivate drivers to go out and fulfill deliveries and participate in the network, that was running at 13.3 % of their on-demand gross merchandise value. And that is sort of jargony, but that's a very big number. And so they felt they needed to put the paddle to the metal to keep drivers on the road and to ensure customers would continue to choose Grab over other competitors as economies reopened post-pandemic.

46:11Daniel Mahncke:It was incredibly important that Grab made sure that as we're going through so much economic change, that people are still thinking about using Grab in this way. And so Grab was heavily subsidizing both sides of the marketplace, the supply in terms of the drivers and the delivery folks, and like I said, the consumers. And again, it's a pretty classic blitz-scaling playbook to try and gain market share, or in some cases, protect market share. And I think it was a little bit of both here, but that game only works when capital is free, or it certainly works better when capital is free. But when the macroeconomic environment shifted, you had a lot of inflation, Interest rates started to surge globally.

46:53Daniel Mahncke:All of a sudden, capital is no longer free in terms of the interest rates on debt. And so from here, this is where we see a real dramatic pivot in strategy. And how does that pivot look like? So the era of buying low value transactions was over, right? And I say buying as in subsidizing, right? That's another way to think about it. It just didn't make sense anymore. So instead, they began aggressively weeding out unprofitable subsidies. And so they focused intensely on what they termed high-quality users. And they define that as the demographic that relies on the platform out of convenience, not because they're hunting for a 20 % discount code.

47:31Daniel Mahncke:And so by 2024, they had driven incentives down to roughly 10 % of gross merchandise value, which is more than 20 % contraction. But they didn't just cut marketing spend, nor did they simply fire staff to save money and try to boost operating leverage. They optimized the underlying algorithms. And so what they did is they improved their AI-driven dispatch system to reduce the time a driver spends idling between rides, for example. And obviously, if a driver is earning more money per hour because the routing is more efficient, Grab doesn't have to pay them as many direct cash subsidies out of the corporate treasury to keep them happy and to keep them maintaining the supply side of the network, which ultimately ripples across into, if you can order delivery and get it delivered quickly, you're probably going to order more frequently.

48:21Daniel Mahncke:And so supply drives demand in some ways.

48:24Shawn O’Malley:We actually saw this with Uber, right? Efficiency is everything for a scaled three-sided marketplace business like this. And even just small things like having a driver be able to pick up multiple autos at once can make a massive difference to profitability. And this is really, at its heart, a logistics data business.

48:41Daniel Mahncke:Yeah, I think that's right. And so we saw the culmination of that leverage in 2024 going into 2025, where they posted their first full year of operating profitability. And maybe that doesn't sound so impressive, but for operating margins to swing from negative 22 % in 2023 to 3 % today in the last 12 months, I mean, that's a massive 25 percentage point swing, right? And that happened in just a few years. And so we saw the exact same thing happen with Uber a few years earlier, but grabs swing toward profitability actually looks more dramatic than Uber's, honestly. And it's important to say that they were both businesses.

49:17Daniel Mahncke:That just a few years ago, there were serious questions as to whether they could ever be profitable. And now Uber has 10 % operating margins. And we think that can double, if not more than double in the coming years, thanks to further scales and autonomous vehicles and advertising. So there's no reason not to expect something approximately similar to happen with Grab. And autonomous vehicles, I don't think will benefit them in the same way for at least a longer period of time, with the exception of Singapore, where they could see that sooner. Because I just think that AV rollouts are going to be slower in places like Jakarta, Indonesia than in most of the US naturally.

49:55Daniel Mahncke:But still, that will eventually come and that will position them to cut out drivers on the margins. And drivers are their biggest expense in ride hailing. And so of course, that's going to help with profitability. But for now, I don't think it's something we need to linger too much on. I know we spent a lot of time talking about AVs in our Uber deep dive, which you can find a link to in the show notes. But it is safe to say Grab is very much doing some cool stuff in this space. And like I said, a lot of that's happening in Singapore in particular. Let's take a quick break and hear from today's sponsors.

50:54Daniel Mahncke:and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account. No risk, no pressure. With 20 years of experience, Plus 500 makes trading more accessible than ever. Check it out at Plus500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's Trading with a Plus. Every business is asking the same question. How do we make AI work for us? Sitting on the sidelines is, of course, not an option.

51:29Daniel Mahncke:Your competitors are already making their move. But with NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP trusted by over 43 ,000 businesses. It unifies your financials, inventory, commerce, HR, and CRM into a single source of truth. And that connected data is what makes the AI smarter. It doesn't guess. It knows. automating routine tasks, surfacing actionable insights, and helping you cut costs and make fast, confident decisions. From software and IT services to healthcare, equipment manufacturing, financial services, and many other great American industries, NetSuite delivers a customized solution for your business.

52:05Daniel Mahncke:This is not a bolted on tool. It's AI built into the system that runs your business. And if I hadn't needed this product, it is exactly what I'd use. If your revenues are at least in the seven figures, get their free business guide, Demystifying AI at netsuite.com slash tip. The guide is free to you at netsuite.com slash tip. That's netsuite.com slash tip. What's the one thing in business that's spreading as fast as AI? AI risk. Every new tool your team signs up for, every vendor that turns on AI features, every new integration, each one has a chance for something to go wrong. And most security programs just weren't built for AI's pace of growth.

52:47Daniel Mahncke:Enter Vanta. Vanta is the number one agentic trust platform used by over 16 ,000 fast-moving companies like Ramp, Cursor, and Harvey to stay audit ready. And now Vanta is helping companies like yours watch for the risks that show up between audits across your vendors, your AI tools, in your whole environment. How? The Vanta agent works like a 24-7 GRC engineer in the background, finding issues, drafting fixes for you, and cutting vendor assessment time by up to 50%. Whether you're a fast-growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn and prove trust.

53:29Daniel Mahncke:Get started today at Vanta.com slash T-I-P. That's V-A-N-T-A dot com slash T-I-P. All right, back to the show.

53:41Shawn O’Malley:It'll be interesting to see if we see AVs on the streets in Germany or in Jakarta. I kind of would bet on Jakarta, probably. But as you said, we can talk more about where perhaps margins may settle out as the business matures. But this is really what, if I could speak for you, Sean, too, makes you think about the investment opportunity in terms of being interesting right now, right? I mean, we mentioned before the call that this is basically a play that if the margins will actually see anything like a similar development as they did for Uber, this will be pretty interesting. And the market sees a stock that's down, what, 70 % since IPO, and I think just 30 % since last year.

54:16Shawn O’Malley:So for you and me also, we do see a business that's inflecting to profitability with a lot of room to run on top line and also the margin, while enjoying some similar advantages to, again, one of our favorite businesses in Uber, but adapted to these diverse markets that they actually operate across. To say nothing of the opportunity in the fintech business, which obviously is also still there.

54:38Daniel Mahncke:That's exactly right. They've stopped the bleeding and reached this critical threshold where I don't want to say it's all smooth sailing from here, but at the same time, the biggest questions facing the business, the possibility of being profitable at scale, right? Those are behind them. And of course, the flywheel can really start to spin once you're able to fund reinvestments into the business without needing to use debt or relying too much on stock issuance and stock-based compensation. And beyond that, what this hopefully means is that we see some curtailment in dilution. Stock-based comp as a percentage of revenue has come down by about half since 2023, but the total share count has still compounded at more than 2 % a year during that period.

55:24Shawn O’Malley:Whenever you increase the share count, I mean, you're not just hurting, let's say, your earnings per share this year or the next year, but really it's kind of a permanent consequence, right? I mean, all of your future earnings will be divided by a larger denominator, which in plain English just means that you're spreading your profits across more shares and sort of more people. So everyone gets a thinner slice of the pie than they otherwise would have, all else being equal. I mean, to some extent, it sounds pretty good if Uber owns almost 30 % of the company, but now it's only 13%. So you kind of see the dilution play out in real time.

55:57Shawn O’Malley:And 2%, I mean, that's a serious headwind if you invest in that company, right? It's not like we've never seen this before with the businesses that we've studied, but still, I mean, to the extreme, that's how you get a situation like Snapchat, where they have created more wealth for employees and insiders than they have ever for outside shareholders, right?

56:14Daniel Mahncke:Oh, gosh, Daniel, come on, don't bring up Snapchat. I don't even want to think about Snapchat. That's pretty much the only company we've ever pitched before where we just came out incredibly bearish on the other side of looking into them. And we don't love every business we cover, but yeah, there was not a lot for us to like about Snapchat. And so fortunately for Grab, they have announced a$500 million share repurchase program. And so over the last year, the share count does look steadier, but still that gets into this whole debate, which is something Michael Burry has written about, Michael Burry of the big short fame.

56:50Daniel Mahncke:And there's this dynamic where you have companies diluting themselves for cheap by issuing employees options to buy the stock at much lower prices than the levels that the company later does share repurchases at. But I digress. I don't want to go down that rabbit hole too far because sometimes you just got to take your wins where you can get them, right? Grab is flattening out dilution and buying back more stock. And that's not such a bad thing.

57:19Shawn O’Malley:And I would give Grab the benefit of a doubt here when it comes to SBC, simply because they have shown such an impressive business turnaround and already brought it down to some extent, so that I at least know they are aware of it and they will work on it in the long term. And until then, it obviously hurts a bit, but if the company keeps growing at, let's say, 20 plus percent on the top line and then margins improve over time. I think I can take that at least in the short term. I actually saw a line from the CEO, Anthony Tan, where he described their management philosophy during his turnaround as having strategic patience, but technical impatience.

57:54Shawn O’Malley:So the strategic patience was believing that the super app flywheel would eventually work, but the technical impatience was ruthlessly shutting down unprofitable business lines and aggressively restructuring their fixed costs, which seems to have succeeded in bringing their breakeven timeline forward by several quarters. So going back to this discussion of margins, what catalysts do you see mattering most to whether in 10 years from now, we look back and say, wow, I mean, look at how far margins have actually run up in the last 10 years.

58:27Daniel Mahncke:Let's start with one of their most promising cash engines, and that's the lending business, because the loan portfolio growth, I mean, it's staggering. It grew 65 % year over year, hitting nearly a billion dollars. And as we know, with lending businesses, growth is sometimes good, but not always good, right? If they're making super risky loans that won't ever be paid back, well, that's a huge liability and a big problem. And underwriting loans to gig workers and street food vendors and emerging markets, I mean, that sounds incredibly risky, doesn't it? And the traditional banks are probably not totally crazy for avoiding these lending opportunities or minimizing their exposure to them.

59:06Daniel Mahncke:And yet the difference is that a traditional bank looks at a loan application from a noodle stall owner and sees a blank slate. And so they have no visibility into the stall's daily cash flow. So the bullish argument for Grab is that these traditional banks would either just deny the loan or have to charge an exorbitant interest rate to offset the perceived risk because they have to assume the worst. But the advantage that Grab at least arguably has is that they're not blind in the same way. If that noodle stall uses Grab food and Grab pay, Grab has a real-time minute-by-minute ledger of that business's economics.

59:40Daniel Mahncke:Grab knows exactly what time the stall opens every day. They know the average basket size. They know the cancellation rate, the customer review scores, and the seasonality of that business's revenue. And so Grab is literally processing the revenue for them after all. And so they can assess the probability of default with a level of precision that a traditional bank simply can't match. And because of that, they can extend microloans for working capital to these merchants or cash advances to drivers like we talked about earlier and do so with incredibly low non-performing loan rates. And so in earnings calls, management has noted that their 90-day non-performing loans were well within their risk appetite.

1:00:22Daniel Mahncke:So at least so far, they've been able to safely monetize a segment of the population that traditional finance just structurally abandoned. And so, in other words, they're leveraging the sunk cost of their delivery network to underwrite a highly profitable lending business. And Daniel, we were talking about this before the call, but one of the yellow to red flags here is that Grab does not disclose a ton of data around their lending business. And so that makes it very difficult to underwrite the risk that you're taking because the growth is very, very promising. But we don't really have a lot of data on what percentage of loans are non-performing and what the net interest margin after losses are.

1:01:02Daniel Mahncke:And so it's going to be something that they'll probably be increasingly transparent about over time. But, and this is sort of a scary thought, at the moment, you're just going off management's word. And so they're saying it's well within the risk appetite and whatever that means, right?

1:01:18Shawn O’Malley:Yeah, I had to ask you about it because I feel like I'm a bit spoiled by now by looking at, you know, especially Melly. I mean, C-Limited also had, I would say it's problems with giving us all the numbers that they should. But I mean, Melly's reporting, they are just incredible at that, right? They give you so many insights into how they think about this business. And I do think that's pretty important. I mean, lending in these regions, as you said before, I mean, that comes with plenty of risks. And I always say that credit businesses, again, have this asymmetry to the downside. So you want to know exactly what risks you're actually buying into.

1:01:48Shawn O’Malley:And, you know, I don't know about the economics of a noodle stand. And I could imagine that the data insights that Grab have actually are a benefit to them and adventurous, you know, compared to these other banks. But I could also imagine that the cash flows are quite volatile, right? And it's not the same as lending to merchants that they'll send on that then sell their products on, you know, Melly or Sharpie with probably significantly more cash flow. And again, Melly gives you all sorts of data. And that's something that I would expect Grab to do at some point as well. And you could argue it's still a small business, but also you said it's like 13 % of revenue, right?

1:02:23Shawn O’Malley:And if we talk about a loan portfolio of a billion dollars, that's growing at over 60%, I do want to know what their risk appetite actually is and compare that to some of the other players.

1:02:33Daniel Mahncke:So I think those are all really important points, but we are talking about things to be optimistic about here, right? And something that I am optimistic about on top of at least the potential of the loan book is their B2B software offerings are really interesting too for growth and for margins. So they took the maps that they've built and that we've talked about, and they turned that into a B2B software as a service offering, meaning they're licensing their proprietary mapping tech to other companies. And on top of that, there's the same advertising opportunity here that we talked about a lot with Uber in the past, when you have 47 million people opening your app with high intent to purchase, whether it's for a food or for a ride, that just creates incredibly fertile digital advertising, real estate.

1:03:19Daniel Mahncke:And so merchants can, for example, pay to boost their visibility with the app, promoting their food and their restaurant as a recommendation to people hunting for lunch or dinner on the platform. And while for Grab, that ad revenue is essentially a pure profit margin, and has hit an annualized rate of several hundred million dollars for them. So it's an increasingly material part of the business for Grab.

1:03:45Shawn O’Malley:I mean, I certainly see a lot of stuff to be optimistic about with Grab. And intuitively, I think seeing the stock price so beaten down, even before we've gotten to the valuation, does make me, I would say, excited when we look at everything going in Grab's favor. And also the fact that the business model generally is something that we know and we like. But I also know some things on the regulatory front have, well, let's say not been going in their favor. So perhaps you want to elaborate a bit on that.

1:04:10Daniel Mahncke:We always talk about wanting to use consumer insights to inform our investing opinions. And that's not simply a question of having used the product or not, but it also extends to having a feel for popular sentiment and in which way the regulatory winds are blowing for a company. And that really has been a big challenge for Grab. And so in Thailand, the government officially categorized food and parcel delivery under the Department of Internal Trade, which legally opened the door for the government to impose strict price controls on the delivery fees that Grab can charge. And in Malaysia, there's new regulatory frameworks that require delivery platforms to apply for specialized, highly monitored licenses.

1:04:51Daniel Mahncke:And in Vietnam, there's bureaucratic friction that's so high that Grab's application for a specific trading license was delayed for years due to this opaque and shifting administrative procedures. And Daniel, I know you have an appreciation for bureaucracy in Germany. You like to joke about it a lot. And beyond all of that, there are still these things like data localization laws that require servers to physically reside within a country's borders. You've got massive foreign ownership restrictions, constant legal battles over whether their drivers should be classified as independent contractors or full-time employees entitled to benefit.

1:05:30Daniel Mahncke:So it's messy.

1:05:32Shawn O’Malley:I think we thought that Uber's legal challenges over the years have been a nightmare, but I don't know, this one's much worse and also somewhat intimidating as a potential investor.

1:05:40Daniel Mahncke:And so that's to say nothing of them becoming an increasingly important lender either, right? I mean, that just doesn't amplify their business risk at a downturn. It also exposes them to even greater regulatory scrutiny and potential penalties. And so that all does make me nervous and would maybe be my biggest hesitation to investing in Grab besides not having better insights into their loan book, which could go hand in hand with regulation. Those might not be totally unrelated things in the future for them. They might spend three years optimizing their routing algorithm to increase margins by 2%.

1:06:15Daniel Mahncke:Then with the stroke of a pen, a regulator in, let's say, Bangkok just caps your fees and wipes out that entire margin gain. That's brutal. And more recently, we saw this come to a head in Indonesia. And as of May 2026, at the time of recording, the main issue here is that Indonesia is forcing Grab to give drivers a bigger share of each ride. And so previously, the platform could take up to about 20 % of a ride fare, leaving the driver with roughly 80%. But under this new regulation, Grab can deduct only 8 % from the transaction amount for themselves. And so drivers must receive at least 92 % of the fare.

1:06:54Daniel Mahncke:And the regulation also pushes the company toward more driver protections like health coverage and work accident coverage. And so plainly, this is a take rate cut for Grab. Their business overnight became vastly less profitable in Indonesia. And on the bright side, management has suggested that the regulations are only focusing at the moment on two and three-wheel vehicles. So Grab's entire ride hailing businesses is definitely not being affected, but who's to say whether that comes next, right? I certainly don't know. I'm not closely dialed into Indonesian regulatory politics. And so on the other hand, Indonesia is just one market and ride hailing is just part of their overall business.

1:07:33Daniel Mahncke:And the regulations are, like I said, targeting a subset of that business line. So I don't want to frame this as being a devastating issue for the company, but it's not an inspiring precedent for investors either to see being set. And naturally, when you go and listen to Grab's most recent earnings call, it was a question that came up multiple times.

1:07:55Shawn O’Malley:I mean, if you see a take rate declining from 20 % to 8%, and you basically take so much time to even just get your take rate to that level, that's certainly a risk. And I got to say this probably even is a potential deal breaker. I mean, companies like Grab and Uber have to fight for one percentage point of margin, basically for years, and build their flywheel that we discussed today through huge investments and the billions of dollars. And then when it's time to benefit from all those investments, their tailgate is cut in half by regulators, even more than that. So that's the type of stuff that can actually break the entire investment case.

1:08:28Shawn O’Malley:And it's close to impossible to account for that. In terms of other risks, competitively, we might want to talk about C Limited. did. I recently pitched C on the podcast again, and you told me prior that Grab is a competitor. So I expected to come across it quite frequently. To be honest, though, that wasn't really the case. There wasn't too much I looked into Grab for my C Limited episode. And I think Sharpie has a food delivery service called Sharpie Food that directly competes with Grab. But I at least got the feeling that probably it's an afterthought for Sharpie. So I would expect Grab to win that game.

1:09:00Shawn O’Malley:And then a greater long-term threat to Grab is money, I think. And money is basically sees payment and credit business. And I think there are just much greater ecosystem advantages for an e-commerce player in the payment space generally. So I don't know, I think this could hinder Grab's progress in payments. And ultimately, if you would think about Grab as a super app and payments is a huge part of the flywheel, I could also see how that's a problem if they lose that game to money, especially in the biggest markets like Indonesia, for example. But if we were to get bullish on Grab again. What kind of things would you want to highlight to say, well, this is what makes Grab stand out in comparison to Uber and some of the other companies?

1:09:39Daniel Mahncke:Firstly, Southeast Asia is an incredibly young and fast-grown corner of the world. And it's also one of the largest smartphone markets in the world, where there were more than 90 million units sold in 2020. And correspondingly, Southeast Asia has one of the most digitally engaged populations in the world to spending on average more than eight hours a day on the internet versus 6.9 hours on average globally. And so the point being, both of these dynamics are very favorable for Grab as a smartphone native business, being able to gain market penetration and scale. And so at the same time, underdeveloped infrastructure is also a huge obstacle that Grab can aid governments with by helping them find the best ways to route traffic.

1:10:27Daniel Mahncke:And maybe if they're able to be helpful with that, that might increase the reluctance of regulators to crack down on take rates and stuff like that. And so for context, the Asian Development Bank estimated that there's an annual infrastructure investment shortfall of more than$100 billion dollars in Southeast Asia outside of Singapore. And that has resulted in increasingly crowded mass transportation as population density is high and increasing. And yet, private car ownership is prohibitively expensive for a large segment of the population in Southeast Asia, making them potentially more reliant on Grab than most users in the US might be with Uber comparatively.

1:11:09Daniel Mahncke:The average passenger car ownership rate is about 80 per 1 ,000 people across this region of the world. And for context, it's about 167 per 1 ,000 people in China own a passenger car. And in the US, it's as high as 436 per 1 ,000 people. But Southeast Asia is among the fastest growing economies in the world still, and is expected to become the world's sixth largest economy by GDP in 2030. So that alone is very, very promising.

1:11:41Shawn O’Malley:Before we get to the valuation section now, maybe we can just run down some comparisons between Grab and Uber, because I think ultimately any dollars from our portfolio that we would invest into Grab would also implicitly have to basically say, okay, well, no money invested into Grab is money that we don't invest in Uber. So they are kind of competing. You know, we often talk about opportunity costs. And I think the opportunity cost of investing in Grab is most likely the cost of not putting those monies to work in Uber share. So what can you tell us about the differences there, maybe especially looking at the financials?

1:12:14Daniel Mahncke:Well, Daniel, don't forget we would get that 0.1 % exposure through Uber, right? They do have a stake in Grab, but no, I'm kidding. I mean, from deliveries to mobility, Uber has better margins than Grab. And that's not too surprising because Uber is a more mature business in some ways. But due to the regulatory restrictions we mentioned earlier, I do wonder and worry that it might be challenging for Grab to reach the same level of margins that Uber has. And also because they just don't quite have the same potential for scale that Uber has. Uber is operating across much larger markets around the world, whereas Grab is focused on really one specific region.

1:12:58Daniel Mahncke:And so Southeast Asian consumers are also more price elastic, which means they're more sensitive to price increases and don't have the same marginal propensity to spend. And so Grab has kept fares low on purpose due to competition and to try and gain market share and increase the number of users of the platform and the frequency of service usage. Whereas Uber can raise prices more aggressively in developed markets without risking their volume in the same way, which is, again, another relative advantage for Uber from an investment perspective for us. We were recently in Omaha for the Berkshire Hathaway shareholder meeting, and we were talking about we were Ubering everywhere.

1:13:37Daniel Mahncke:And sometimes for the same ride, the price was$15, and it was$18, and it was$22. And for the most part, we didn't really care. I mean, it wasn't like a deal breaker. Maybe if it was$50, that would be a deal breaker. But the point being, Uber has, when you're dealing with wealthier populations, there is a much higher tolerance for being able to absorb higher prices, which gives Uber much higher margin potential than Grab, generally speaking, has. And so another important difference is also the composition of the vehicle fleets on Grab versus Uber. Roughly 75 % of Grab's mobility trips are done on a two-wheeler.

1:14:18Daniel Mahncke:And so those rides are just generally going to be cheaper and shorter. And again, that compresses the take rate that Grab can justify. And since Uber operates an overwhelmingly car-based fleet, trips tend to be longer and of higher value to people. And that opens the door to a higher take rate and better margins. Uber also has more capacity to lean into premium experiences for its riders that Grab just can't recreate at the same scale based on the populations they're dealing with. And so for Uber, those premium rides also come up with higher margins. So I don't think Grab will be as profitable as Uber, as a steady state business, at least in comparing the segments that they overlap in.

1:15:01Daniel Mahncke:But Grab's advantage is that Southeast Asian cities are so densely populated that they really can benefit from having a much higher utilization ratio and greater efficiency with their gig workers. And so that could certainly boost Grab's margins comparatively. We've talked about how order density in idle time for drivers. That is such an important factor for whether the business at scale can be profitable. But for me, I do like to simplify things. And I got a bit less excited, admittedly, when I saw that despite Grab supposedly being so much earlier in its growth story, its monthly users is growing at 16 % year over year, while Uber is actually growing 17%.

1:15:45Daniel Mahncke:So for as big and mature as Uber is, they are growing their user base faster in percentage terms than Grab. And of course, that's just one year. So we don't want to make too much out of that data point. But it actually makes me even more bullish on Uber than it does make me excited about owning Grab.

1:16:06Shawn O’Malley:It's just incredible how Uber achieves that. And also, when we had the apps that we call it, I think last year, I was asking myself, where do all of those users come from? It feels like Uber is such a household name by now that everybody knows it. And everybody who would actually take an Uber has already done so. But apparently that's not the case. And it kind of goes back to this dynamic that you mentioned that, you know, basically Grab, and you mentioned that I think before the call, we talked a bit about, you know, Grab, Uber, and the dynamic. And you said that Grab kind of feels like public transport in Southeast Asia so that it's just needed for people because they don't have cars, for example.

1:16:40Shawn O’Malley:And then I said, well, in Germany, Uber, for example, just feels so premium. Like if you're an Uber user, you just don't care if, you know, the ride costs like$10,$15,$20. Because if you take Uber, that's a decision that you make that you don't take your own car and you don't take public transport. And if that's the case, I don't know what your reasoning is, but you certainly don't care so much about the pricing. So it's just a significantly better business model if you cater to people who don't care how much they spend on the ride. And that's basically, you know, the core markets for Uber. Whereas, as you said, for Grab, it just feels like they will always compete on price because that's the most important thing for their main customers.

1:17:16Shawn O’Malley:And, you know, that's just difficult to get into. But then also, as you said, I mean, I would have expected them to grow users significantly faster than Uber did. And apparently that's not the case. And that's also at least something you want to have an eye on, right? Like how does that develop in the next couple of years? Will they continue to accelerate user growth or will they actually only trail what Uber is also doing in developed markets? But enough of that. How do you feel about going into the evaluation section? Tell us what is Grab actually worth? For sure.

1:17:48Daniel Mahncke:Yeah, let's do it. I don't want to spend a ton of time on this because I don't want to pretend like the numbers matter a ton. If qualitatively, we can't be comfortable with the regulatory concerns or the loan book or having more emerging market consumer credit exposure in our portfolio generally, since we already have investments in MercadoLibre, in Nubank, and there's some exposure through Uber as well. And so modeling only takes you so far, and it can't be the rationale alone for an investment decision. But I'll get off my high horse and stop preaching there. Just to say that if Grab can hit, let's say, 20 % operating profit margins in the next five, six, seven years, while the business continues to grow strongly, I could easily see Grab being effectively a double from current stock prices using a 10 % discount rate.

1:18:40Daniel Mahncke:And in a base case scenario, Grab would probably be worth, yeah, call it, I don't know,$6.50 per share today, which is a pretty hefty premium compared to the$3.55 price that the stock is trading at at the time of recording here. But the problem is, I can't underwrite a base case to factor into my intrinsic valuation of Crab with any confidence because what you don't know in this case just feels so extreme. I worry about the direction of regulatory crackdowns across Southeast Asia and how they're moving against Crab. And I worry about the risks that they're taking in their loan book. And I just see these as being really big considerations for potential shareholders and also the economies of Southeast Asia just on their own are notoriously volatile in the currency risk that you're taking.

1:19:30Daniel Mahncke:Lots of currency depreciation for a business where its stock trades in dollars. So if you're earning in Thai bot, you're really taking a lot of currency risk. That bot will have a favorable exchange rate with the US dollar over the course of a year or two years or several years. And especially in Latin America, it's a huge issue we've seen there too. But Mercado Libre and Nubank, for example, have grown just so ridiculously fast that they're able to really make up for a lot of that concern. And so anyways, we've seen these Southeast Asian economies be hugely disproportionately impacted by the war with Iran.

1:20:07Daniel Mahncke:And that's constrained oil flows through the Strait of Hormuz. And many of our colleagues in the Philippines at this very moment are dealing with power outages related to that. And so the ripple effects of that from defaults on loans to to cutbacks on spending. I mean, that could all be devastating to Grab's business and be beyond their control. So I just think it's hard to even define what degree of margin of safety I would need here to feel comfortable with Grab. Even though I say in a base case, it might be undervalued by up to half as much, we just don't know how much the downside is. And that really concerns me.

1:20:44Daniel Mahncke:And you would need to factor that into your fair value assessment of the company. So I would say it's important to notice that I'm not entirely ruling out investing in Grab, because I see a lot to be excited about. And if I had to guess, I think it could be a very good investment at current prices. But it's just one of those things that I need to do more homework to get comfortable with the risks before I could consider recommending it for a portfolio. And that's sort of where I'm at with it. Yeah.

1:21:11Shawn O’Malley:I said to one of our Mastermind members in Omaha after my Mellie presentation that besides the credit situation, what gives me some pause is that I don't have consumer insights. And in Melly's case, I understand the company pretty well, I think, and it doesn't worry me generally. I do feel like I have a good picture of what they are trying to do. And also they're communicating a lot in terms of what their strategy is. And you see that play out in the numbers. And with these consumer-facing companies, you just have a massive advantage if you are a daily user. And that's why I was biased against Uber in the beginning, because again, in Germany, it was illegal for quite some time.

1:21:46Shawn O’Malley:And even now, you just don't need Uber to the same extent as in the US, thanks to public transport. So that's why I said that I don't have many friends who actually use Uber that much. With Grab, I don't necessarily need to have that consumer insight to the same extent, at least not to figure out the competitive dynamics, because it feels that Grab has by far the strongest position rather to its competitors. But if regulation is an even bigger threat than it was for Uber here in Europe, that's a pretty strong headwind. I mean, I would need more information on, you know, the business and also details on the unit economics to kind of get comfortable with that, I guess.

1:22:21Shawn O’Malley:And we might actually get those insights, you know, after talking with the CFO, which is again, planned soon. But until then, you know, hearing something like the takeaway being cut in half just by regulators is just, it's a pretty massive headwind compared to, you know, what we faced with Uber. And then you add to that, all of the pressure that comes from currency. And even that's probably one of those other deal brokers for me. The fact that you don't see them outgrowing Uber to the same extent that I would have hoped and kind of thought they do. Again, like Melly is growing 30, 40, 50%. Some businesses are doubling every single year.

1:22:54Shawn O’Malley:So they are outgrowing these headwinds. And it doesn't look like Grab is doing that to the same extent.

1:22:59Daniel Mahncke:Okay, folks. Well, it's been a fun one. On that note, let me leave you with a quote from Grab's CEO, Anthony Tan. When asked about one piece of advice for aspiring entrepreneurs, he said, quote, It has to be your life calling. And fortunately for Grab shareholders, I do think that for Anthony, this very much has been his life calling and having a deeply aligned and inspired founder CEO. And I know we didn't talk about him a ton today, but having somebody like that at the helm, that can lead to wonderful outcomes. And so on that note, we'll see you all again next time.

1:23:42Shawn O’Malley:podcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax, or legal advice. The content is impersonal and does not consider your objectives, financial situation, or needs. Investing involves risk, including possible loss of principle, and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell any security or other financial product.

1:24:11Shawn O’Malley:Hosts, guests, and the Investors Podcast Network may hold positions in securities discussed and may change those positions at any time without notice. References to any third-party products, services, or advertisers do not constitute endorsements, and the Investors Podcast Network is not responsible for any claims made by them. Copyright by the Investors Podcast Network. All rights reserved.