Uber’s Potential Acquisition of Expedia, Why Is Europe Always Lagging Behind the US? and How to Outsource to Grow Your Company

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1:28Welcome to the Prof. G. Pod's Office Hours. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to officehours at prof2media.com. Again, that's officehours at prof2media.com. So with that, first question. Hey, Prof G. This is Ryan. I'm coming to you from Denver, Colorado. I have a question just regarding the recent rumors that surfaced about Uber's potential acquisition of Expedia. We'd love to get your thoughts on just the financial feasibility of this deal.

2:02Thanks for all you do, Prof G. I'm a weekly listener of all the pods and love the content you put out. Keep doing what you're doing. Ryan from Denver, Colorado. Thanks for the question and the kind words. By the way, I think just Colorado should run America. I think they do a great job there. A, it's spectacularly beautiful. I just bought a home in Colorado. Anyways, where am I going with this? All right. So the Financial Times reported that Uber recently explored the possibility of buying Expedia, the$20 billion travel booking giant. By the way, they have a fantastic new CEO. They do a great job.

2:33I actually use Expedia. I think they are incorporating AI in very subtle ways to kind of remember who I am when I show up at the site and they know my economic weight class, kind of tells I stay up. They do a very good job and I like kind of the UI, if you will. Big picture, this would be Uber's largest acquisition to date and would further diversify the ride-hailing company. In the past few years, Uber has expanded into other businesses, including train and flight bookings, food delivery, logistics, and advertising. Some of Uber's deals since it went public in 2019 include its expansion into food and beverage delivery via the acquisition of Postmates for, I think it was about$2.7 billion, and Drizzly for$1.1 billion.

3:10I bet they overpaid for that thing. Drizzly,$1.1 billion, really? It also went into the freight and logistics business through a$2.25 billion purchase of TransPlace. Uber also purchased Kareem, a Middle Eastern ride-hailing business, for$3.1 billion. Wow, that's serious shit. So this is essentially, companies can either expand horizontally or vertically, and that is they can go after similar businesses or they can try and find, basically offer more businesses to the same consumer. I kind of like the idea of one app that uses AI and I say okay so tonight I'm going home to London I like the idea of hitting the app and then using AI it says okay when do you want to travel how many people and it kind of does the whole thing it says all right uh you're these are the flights we think you'd want to go this is these are the hotels we think you'd want to stay at by the way we're gonna it's asking you a bunch of questions once you figure it out and say I want this, use voice-enabled AI.

4:12We're going to set up the Ubers. We're going to set up the right seat for you on the plane because we know your preference. There's going to be a travel app that just takes you off the table. And I also think that Uber has such an incredible, Uber's primary asset is it has user interface and custody of the consumer, incredible trust with, I don't know, I don't know what they have, 100, 200 million people. Also, I would absolutely be going shopping if I was Uber's head of corporate development right now. The stock is up 56%, meaning they're kind of playing with the house's money. And Expedia's market cap, just under 20 billion, they'd probably have to pay 25 or 30.

4:48Their stock is up 24 % year to date, but Uber's market cap is 173 billion. So you're talking about what is potentially probably about a 15 % dilution. For them to have those assets and those additional consumers, I do think there'd be synergy there. More Uber towards Expedia than Expedia towards Uber. Also, Dara knows the company really well. What are the successful acquisitions? Well, first off, very few of them. Only one in three acquisitions works or pays off. Why? Because it's kind of the lazy CEO's way to greater compensation. What do I mean by that? All behavior in a company can be reverse engineered to the compensation of the senior executives.

5:28And the way compensation works for a CEO is the following. The compensation committee looks at the compensation of CEOs in that industry of companies that size. So there is an incentive to get bigger. Also, there's an incentive to diversify into other fields such that it smooths out your earnings. And everyone's looking for the transformational acquisition that's going to do for their company what Instagram did for Meta or what YouTube did for Alphabet, right? A great acquisition can be transformational, but you almost always overpay because the assets you want are expensive and they want a premium and they can only sell once.

6:06And they almost always, generally speaking, overpay for the acquisition. So most acquisitions don't work out well. And the most valuable company in the world, Apple, effectively does almost no acquisitions because they see their culture as being very important. They don't want to overpay and they'd rather build stuff. Anyways, in this instance, I think it's a really interesting idea. I like it. The dog likes it. Question number two.

6:57higher and more secure quality of life. What am I missing here? And what do you think the U.S. can do to ensure that security while maintaining growth? Barton, that is a really thoughtful question. And also, I just want to acknowledge there's some truth to what you're saying, because most of our stats look at economic growth in aggregate, look at household income in aggregate. First off, let's acknowledge the U.S. has been driven by the prosperity of the top 1%. And I think one of the unhealthiest metrics we have out there is the Dow Jones or the NASDAQ, because it gives you the impression that the economy is doing really well.

7:36Well, guess what? 1 % of the American populace owns 90 % of the economy. So essentially, the Dow Jones industrial average and the NASDAQ are metrics on how well the 1 % is doing. And guess what? 71 new highs this year. So, okay, spoiler alert, the top 1 % are absolutely killing it. but also the American public lets it happen because one of our superpowers is our optimism and people believe there's a shot they're gonna be in the 1%. So how would you categorize or how would you summarize the American economy? I still believe that America is the place that if you're talented and wanna go flat out, you just wanna run so fucking hard, you wanna leave it on the field, you're not working to live, you're living to work, you wanna be economically secure, you really want to go after influence, power, and economic security, America is absolutely the best place.

8:27Things just go slower in Europe. Average incomes in Europe lag 27 % behind the U.S. with wages that are 37 % lower. If you took out London out of the U.K., essentially the household income is lower than it is in our poorest state in the U.S., Mississippi. Between 2010 and 2023, the U.S. saw its GDP grow by 34%, while the EU managed only 21%. So a lot of people say, what's the difference between Europe and the U.S.? I mean, it's a few things. On a very base DNA level, the U.S. is everyone who decided to leave, and Europe is everyone that decided to stay. Think about that. The people who left, and by the way, they're selfish.

9:09My mom left two siblings that were still in an orphanage. Both her parents were gone. That was a selfish move. But she came to America and off a secretary's salary, my mom lived and died a secretary, but we, as an upper, lower, middle-class family, I think we had better lives than the majority of our family that stayed in the UK. Now, why is that? Risk-taking, infrastructure, natural resources, incredible education institutions, geographically blessed with friendly Canada to the north and harmless Mexico to the south, more oil reserve you know we're the largest energy producer in the world largest coal large i mean we're just so blessed we're one of the largest agricultural producers in the world we produce the brightest minds and not only that the brightest minds in the world all want have one thing in common they want to come to the u.s so we're just blessed with a ton of attributes and back to risk aggressiveness one of the stats i love is that there are dramatically more per capital entrepreneurs in the u.s coming out of college but even more importantly we have the capital to fund their dreams.

10:12For every startup in Europe, there's 1 million in venture capital raised. For every startup in the U.S., there's 5 million in venture capital. So we have five times the risk capital. Anyways, long-winded way of saying I'm not entirely sure, but I think it's about risk aggressiveness. It's about capital and some of the natural blessings we have. And if Europe wanted to inspire growth, they would need to have government subsidies to tech companies and also a bigger investment in a world-class engineering educational institutions. Thanks for the question. We have one quick break before our final question.

10:48Stay with us.

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12:36See a Lowe's Red Vest Associate or visit lowes.com slash holiday install to get started. Lowe's. We help. You save. Basic install only. Date restrictions apply. Subject to availability. Install by independent contractors. See associate for details. Contiguous U.S. only. Welcome back. Question number three. Hi, Scott. I'm in my mid-30s, married, and have a two-year-old. I managed three properties while working two jobs. Growing up, my parents always did everything themselves to save money, so I've had a hard time outsourcing tasks to contractors. Even though I know hiring help would make things easier, I tend to focus on money I save doing it myself, which ends up taking more time and adding stress.

13:24It's becoming harder to manage, especially with the two jobs and caring for my toddler. I want to scale up and start investing in commercial properties, but the amount of work I already have is holding me back. Do you have any advice on how I can change my mindset to be more comfortable with outsourcing so I can grow my business? So Anonymous, first off, you're a young man who's raising a kid and you own real estate. This puts you in the top 10 % of men in terms of your success. You're already building a future for yourself, for your family. So the first is, yeah, you're stressed out, but just be clear, don't be hard on yourself.

14:07You're doing really well. And if you are feeling stressed and occasionally sort of overwhelmed, that's kind of where you should be. The arc of happiness where you have the y-axis is happiness and the x-axis is age, it looks like a smile. And that is zero to 25 is beer, prom, you know, making out. It's a lot of fun, Star Wars. 25 to 45 is what I call the shit gets real part of your life. It's hard. Economic stress. Kids are stressful. I mean, I know it's supposed to be all like fun and hallmark moments and things to make TikTok. It's not. Generally speaking, when people have kids, they're less happy.

14:43They're happier over the long term. But during the child rearing years, it is stressful. So look, in terms of how you develop a mindset around growth, what I have found, I mean, it's a double-edged sword because you kind of want to be all over everything. I think that's the attribute of a founder and an owner. But at the same time, if you're fortunate enough to find someone good, a good property manager, someone who comes to work with you as an intern and they're good, this is what you got to do. You got to be generous with that person and make it near impossible for them to leave. Why? Because greatness, right?

15:22And a more boring word for that is scale. Greatness and scale is in the agency of others. And my kind of core competence is storytelling, but my superpower is the ability to attract and retain really talented people. And by the way, that's not just paying everyone more. If someone isn't working out, you got to get rid of them. You're a small company. You don't have time to find the right role for them. I am pretty harsh that way. To get to the first 10 or 20 super people, it takes me 30 to 50. And it's not fun. It's not aspirational. It's not pleasant, but it's hand to hand combat in the beginning.

15:55But when you find someone really good, you got to sit them down and you got to say, this is our plan. We're going to buy commercial property here. We're going to build this asset and I'm going to give you, you know, one, two, 3 % of the profits, whatever it is. Give them ownership. You want them to act like owners. And the only way to make them act like owners is to make them owners. And that is say, I have my shit together. This is my plan. This is how we're going to raise capital, buy commercial properties is the opportunity. And this is why you are going to participate in our success. You should be able to recognize those people and to let go and to not be all over them.

16:32So give them some slack. But the key to any type of scale, the key to you not being totally stressed out, and by the way, you're going to be stressed out. Owners have to be all over almost to everyone almost all of the time. Greatness is in the agency of others. Focus on finding the right others and keeping them. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com.

17:12This episode was produced by Jennifer Sanchez and Caroline Shagrin, and Drew Burrows is our technical director. Thank you for listening to the Prof. G. Pod from the Vox Media Podcast Network. Please follow our Prof. G. Markets Pod wherever you get your pods for new episodes every Monday and Thursday.