Dara Khosrowshahi, Bill Gurley, Brad Gerstner, & Jason Calacanis on Uber's growth and future | E1878

28:42If the number is$1 billion, you got to get to$2 billion in order to raise your next round. So I think it's one of the most nefarious things that occurred in the Zerp environment. And in 20 and 21, I remember talking to founders and I would say, you're going to snatch defeat from the jaws of victory here. You're overpricing your company. When interest rates go back up, which they will as soon as COVID's over, multiples will adjust down. At that point in time, you're going to be forced to do a 30 to 50 % down round And very few Silicon Valley companies, even the best ones, survive the morale hit and all of the challenges associated with the down round of that size.

29:23And we've seen it happen. And in fact, we have over a thousand unicorns that are trying to work that out right now. A lot of these really good companies. But it's very tough when an Instacart has to go from$39 billion to$6.5 billion. So another way to frame this, you know, that even before this all happened, this issue would come up is just and people that have been in public companies know this, but but stock prices represent discounted future expectations. And so if you raise a huge round, the expectations in front of you are huge. And to your point, Brad, if you compound at a cost of capital of 15 percent over five years or whatever, it's a doubling like that's what you got to get to.

30:04And too many, I think, founders lack of understanding. It's really partially just financial, like understanding how financial markets work, right? And understanding, you know, and if you don't have that experience, you don't have that education, there's no way to know. Another thing that really complicates that this issue is secondaries. If founders are taking money off the table, I have found them to be remarkably seniorly focused. Let's say that. It can be a massive distraction. Yeah. Yeah. Well, and they just get very price sensitive. Like it's all about the price, all about price maximization.

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32:58There were people who would use the secondary Dara to win the deal. So imagine you're coming into a deal, Brad's offering, whatever, 100 million at a billion dollars post. And then I come in and say, I'll give you 100 billion, a billion dollar post, but I'm also going to allow you to sell 25, the founders to sell 25 million in secondary. And then those two things being in the same term sheet was insane when you think about the conflict of interest, right, Bill Gurley, I think? Yeah. And look, I think it's still an issue today. I think it is still very common across a broad array of companies. I think it's the number one thing that allows a company to stay private for a very long time because the thing that eventually causes a founder to almost be forced to go public is the employees eventually say, hey, what about me?

33:50But some of these companies are doing broad-based secondaries across the entire employee base almost on an annual basis. Yeah, SpaceX would be the prototypical company for this or Stripe. And Dar, I think to your question, when it's fair and it's, you know, I guess pari parsu and everybody gets to participate and it's modest and controlled, I think it's a benefit to the company because people will stay long-term, right? You're in year six or seven and you got to buy your house or put a down payment on it. It's great. The problem was like, Brad, you saw this up close impersonal with poppin uh which the founder took out 200 million and yeah that was peak zurp and then the founder wasn't motivated i want to go to two issues i've seen i've seen that a lot like like when founders get too much off the table i mean the bird example is a great example and how much did that travis take off the table in bird i think 50 i could be wrong like i gotta tell you when the number starts equaling private aviation or second home that's when i think it's It's super distracting.

34:50Whenever you start thinking about private aviation or a second house, it's very hard to focus at work. Dara, let's get to two really important questions for you. Number one, I think one of the myths about and the attacks that Uber just constantly, even to this day, to a certain extent, there's some people going after this. Oh, they're abusing drivers. Oh, the drivers are making$6 an hour. It's below minimum wage, all this nonsense. And it was really people, I remember during the private days, it was people of such bad faith, because they would say, oh, somebody in this on-demand world who's sitting at home waiting for a ride, they waited for a ride for three hours, they did a$10 ride, therefore four hours divided by, you know,$10 equals this, which is not how the on-demand economy works.

35:36But despite that, the hourly rate has gone up, 15, 20, 30, etc. There are minimums in certain markets. and the number of people choosing to work for uber on a global basis is extraordinary and companies like apple walmart target starbucks are losing their employee base to people who want to work for uber or doordash or any other on demand because it gives them flexibility and and the rates have kept going up so what's the truth the honest truth about what drivers are making and how many drivers are in the network now when compared to Starbucks, Walmart, Target in those places? Because you've spent a lot of time with drivers now.

36:18That was a big part of your peacetime initiative was to empathize with drivers more. Yeah, it helped us build a better product. The service doesn't exist without drivers. And actually, I say drivers are the number one growth driver for the company. As we get more drivers, the network becomes more liquid. it, ETAs come down, surge comes down, just the demand almost shows up. It's not that simple, but that's the most important element of our growth formula. So it wasn't just peacetime. It was like, I need to understand what it's like to drive Uber. And by the way, it's a lot harder than it looks.

36:57Don't take the job that your drivers are doing for you for granted. And I think for us, The truth is, drivers are making about 30 % more than they were making five years ago, but so is everybody, kind of. So that is the spot cost of labor. It's gone up, but drivers are absolutely doing better. Our take rate, it's affected by revenue recognition and kind of merchant versus agency, etc. Kind of the true take rate of the mobility business has stayed flat around 20 % to 21%. for the past five, six years. And we want to grow the business without taking take rate up because it forces a discipline on the company in terms of cost structure, et cetera.

37:44You know, Bill, if he wants to, can talk about the, you know, take too far, so to speak. So we've kept that take rate flat. And while I do think we've got flexibility to take it up, we don't want to. That's the last lever that we want to use. Now, what is happening in the US? Two things are happening in the US that I do think are affecting driver perception and how they feel, which is real, that we haven't done a good enough job managing through and we have to do better. One is that on the driver side, instead of drivers getting paid a flat rate based on distance and time, in order for us to show drivers, the upfront destination, we now essentially algorithmically price a specific ride.

38:33So we tell you exactly where you're going and we price out the ride. And for example, if you're going to the suburbs and the boondocks, we will price more than what would the normal rate be because you're going to come back, your utilization is going to be low. You're going to have a bunch of empty miles. If you're going from the airport to the center of SF and it's going to be really busy. We take a little bit off that rate for the driver to fund the other route. So our average revenue margin stays the exact same. But by pricing these two trips differently, we're actually bringing in more demand into the network.

39:13And one of the things that we haven't handled well is for that trip into the city, a driver may notice that that price is lower than they're used to, and our take may be higher for that price out into the Boontox, our take rate is lower. Our average take rate is the exact same. People tend to, you know, there's this, the investors, like they remember paying more than they remember doing well. Drivers tend to remember the trips where our take is might be higher than the ones that our take is lower. So for example, we show drivers what's been our take rate for the past week, et cetera, to remind them that our take rate has stay the same, but we've got to do a better job.

39:51How many drivers now, and what's the longevity of drivers? Is it a transient job, or are people kind of sticking with this as a third of their income, part-time income? How would you describe, I know it's not one thing, but I know there's millions of drivers who are active. So how many drivers are active, and how do they fall into buckets of sort of participation in the network, as it were. We've got six and a half million drivers globally. Active drivers. It has active drivers globally. Our driver base has grown over 30 % on a year-on-year basis. So we have a lot of drivers coming into the system.

40:28It's a great flexible work opportunity. The majority of drivers are part-time, but that changes. That's a different geography to geography. So in a England where it's harder to become a driver, the regulatory burden is higher. A higher percentage of drivers tend to be full-time. In Brazil, a lower percentage of drivers tend to be full-time. So you do have a mix of full-time, part-time. The majority of drivers are part-time, but there's a core of full-time drivers that are very valuable to us who really understand the system, you know, just as well as our top engineers do. Now, the other issue that I do want to make sure that I cover too is the cost of commercial insurance in the US has gone up significantly.

41:19It's been a disaster. There was like a Wall Street Journal article about people not being able to get car insurance, you know, home insurance, et cetera. That, so in the US, our take rate, net of those insurance costs are less than 20%. They're 15, 16%. If you include that insurance cost, which is really just a pass-through, they're north of 20%. And that is a pain that drivers are feeling. So in California, for example, commercial insurance costs have increased by over 60 % over the past two to three years. It's a huge increase. We've Pass that on to riders. Most of that cost. Why has it gone up?

41:59Are there more accidents and there are more claims? More litigious or? It's more tort reform. People are incredibly litigious, you know, lawyers, fine, you know, people on Facebook, et cetera. So I think that there is work to be done in terms of, you know, these litigation costs are sky high for everybody. and we need to essentially get some control of that. And it does involve some regulations, et cetera, in Florida, for example. Those costs are just too high and they're unfairly high and a bunch of tort lawyers are getting that benefit. And if we can bring that cost under control, then prices for riders are going to come down, demand is going to come into the system, and drivers are going to make more.

42:48But that is absolutely one thing that's affecting perceived take rate in the US. And it's a bad trend that we're doing everything that we can to reverse. Is there a concept of self-insuring to a certain extent or because Uber is such a scaled business? Could you buy an insurance business or somehow do this internally? We self-insure a majority of the liabilities, but the liabilities are still there. Got it. Awesome. uh girly you had some thoughts i think just on uber as a global question uber as a global company as you as you scale uber in you know as a truly global company probably more global than even some of the uh magnificent seven um and you're also simultaneously driving down costs i'm curious how you think about employment and specifically employment in in silicon valley and i was at a I was at a conference recently and a bunch of enterprise CEOs were talking and they said the Valley is a great place to start a business, but a horrible place to scale a business.

43:54And they actively discussed moving headcount away from the Bay Area. And then I work with startups who have a lot. Ironically, their headcount, they're having the hardest time coming into the business, into the office, are the ones in the Bay Area. And if you were going to hire a hybrid worker, the last place on earth you would hire them is in the Bay Area because it's so expensive. So I'm just curious, you know, how you think about that big picture question. Yeah, the majority of our engineering headcount or technical headcount is in the Bay Area, SF, Sunnyvale, et cetera. And the fact is that, like, there is great freaking talent in the Bay Area.

44:39and despite what some people say, it's great talent who works hard. Like our engineers, like I have to be careful. If I ask them a question on a Thursday, they'll be up Saturday, 3 a.m. answering the question and it's awesome, right? So the power and the talent that we have is great. That said, the majority of our growth in Heck Count is coming outside the Bay Area and there are incredible town hubs, India, for example, in Brazil, Sao Paulo for us in Amsterdam. So we are actively looking to diversify our technical talent with a core of, you know, rockstar ninjas in the Bay Area. They really like it is an excellent core.

45:25But just like we've diversified our business globally, we should diversify a talent base globally. And sometimes, you know, having talent outside of the Bay Area can actually help you build better product. And for us, product touches drivers, riders, it's very, very local. It looks really different in Brazil. So having an engineering team in Sao Paulo who sees how our product translates there makes a lot of sense. I have an important question about this cleanup work you did and divesting from a bunch of businesses. Well, that then leads to innovation and new businesses and new business lines. Right now, Uber, I believe we refer to as a three-legged stool, maybe not a four-legged one.

46:08Obviously, you have rides, mobility, you got food delivery, and then, of course, you have Uber Freight. And there's this fourth one. I noticed you ran a test, and you and I talked about it. I was super excited about it, of maybe workers and having Uber, you know, I called it Uber exec, but I think you guys are calling it something else in this test, and you've been public about the test. Maybe you could talk about, is there going to be a fourth leg to the stool? And then how do you think about innovation? Is now the time to think about launching new innovative products? Or is there just still so much growth left in terms of rides and food delivery in the competition with DoorDash and Grab and other places around the world that you should just stick to the three legs of the stool?

46:52So I think that there might potentially be a fourth leg, but I don't have an agenda. Listen, I want growth. I want innovation. I want to build cool shit, right? And so the majority of the growth that you see, for example, in our mobility space, we have a bunch of new verticals, taxi, reserve, Uber for business, low-cost, high-capacity vehicles. All of these businesses have been built in the past five years. It's about$9 billion worth of GBs. That literally has been built in the past five years by our engineers, by our product folks, et cetera. That kind of innovation, which is kind of adjacencies that you have natural rights to win at, who would have thought that Uber would now be powering New York City taxis?

47:38But that's a very natural adjacency for us, right? Like we have, you've got to tune the product. Now, there are really important tunings, which is for taxis. They might be full, et cetera. So we send a blast dispatch for taxis. We don't do a one-to-one match like we do with our drivers because we know when a driver is, when a car is open or not. With taxis, we don't. So we send a blast dispatch there. The taxi who's open says yes. The taxi who's not open says no. And we will work to integrate, by the way, with the taxi dispatch system so we can be smarter about that. But that's exciting. It scales.

48:13It's much less expensive to go into, et cetera. Same thing with getting into grocery or getting into the direct business where we deliver for an Apple or a Walmart. These are great adjacent to these. And the great thing about Uber is they're big, right? Grocery is a$5 billion business. It could be a$50 billion business. Direct is a billion-dollar business, multiple billions of dollars. So the reason why I'm a little neutral as to the fourth leg is there are very large opportunities right in my backyard. So that's the stuff that we are focusing on. But what you're talking about, which is this work platform, we do have a global work platform.

48:53It's better than any other work platform. And what we found is the more flavors of work we can offer someone, the more engaged they get with our platform. For example, in India, it's actually pretty cool. We have some of our drivers now working on artificial intelligence labeling, right? We're from home. We drive for Uber during the day. Oh, really? You have a mechanical Turk type business in AI labeling? Yes. High quality mechanical Turk business that we're building. It's a nice little adjacency. I'd love for it to get to a nice big adjacency. And so we are definitely working on different kinds of work because we do have this work platform, flexible work platform.

49:33That's absolutely second to none. This is fascinating that I think, you know, in terms of a framework that I hadn't considered, there's one side, which is customers have the app and they have the super app experience. But on the other side, six and a half million people who you vetted and have done jobs and have been rated, hey, what else could they do? And some of them might want to work from home. Hey, you know, I'm dropping my kids off, you know, and then I do a couple of Uber rides or deliver some food. But there's this other opportunity, hey, I'm home. My kids are doing homework or my kids are asleep.

50:01I can't leave the house, but I could do two hours of work. The Uber app gives me an alert. Hey, do you want two hours at X dollars per hour? Wow. That's quite brilliant. Our driver app is the closest thing, I think, to a Western super app there is, but not that many people see it. Most people don't see the driver app. Most investors don't see it. Yeah. Now, let's talk about super apps for a second. I know Uber had, we have Uber One, right a membership uh i think that's like an incredible product but i don't hear too much talk about it from the company or from individuals uh so maybe you could just talk a little bit about uber one and then how how that fits into everything uh that we're seeing it's not exactly rocket science which is what we find is people who use more of our stuff tend to engage with our platform more they tend to stay longer they tend to spend more and so we actually have uber one which is our membership program.

50:54It's growing very, very well. We'll have more to say about it. And Ernie's coming up, so I don't want to say too much. But Have you ever released the number of subscribers, the number or no? I think the last time it's 15 million and it's grown since. And more importantly, I look at the percentage of gross bookings that come from Uber One members. And for example, with Eats, it's getting to that 50 % mark. And it's priced the same exact as our competitors. And we have more content, which is there's, you not only get delivery benefits, but you get mobility benefits. So over a long period of time, we think that'll be a winning strategy.

51:29But at the same time, we're constantly upselling people from a regular Uber ride to a reserve ride, for example, or from a ride to, hey, you just got home, why don't you have dinner, et cetera, we'll give you$5 off. And what's fun about those kinds of upsells is it used to be a bunch of people kind of sitting around the table having ideas, let's do this upsell, let's do that upsell and then it's like let's put this percentage of our inventory to you know upsell on safety etc all of that is now being driven by ai all of it is being targeted so you know we have algos figuring out you know is bill will he take that upsell going to work for a coffee and will brad take that upsell which is hey if you order because he's got a family he's got kids 50 order you get 10 percent off etc so what it started with like a bunch of people with ideas now it's all algorithmic and and again like i have no idea what the algorithms are going to come up with but we got more consumers more services than anyone else more upsells than any other player that combination is a potent combination even outside of membership is that happening and with ai right now or is it oh yeah oh yeah it's it's it's you know that the team is and and you always start with simple algorithms and the algos get more complex.

52:51But the idea is what's the next best thing, right? What is, here's Jason, what is the next, what's that pixel that we can optimize? Because any pixel that upsells you something takes away from your base experience. And ultimately where we came from the realm of design and opinion, we're going to a realm of data and it's just a much better place. Hey, Dar, with your mentioning AI, we've been through this period where I think everyone got super excited, right? And NVIDIA stock went up and everyone dove in and everyone told every CEO, you got to do it in every department and all this. And I think we're moving towards a more rational mindset of like, where's this stuff really fit?

53:34Where does it really add value? Where do you really get ROI? What's happening inside of Uber and where do you think the big early wins are? So I think one no-brainer win is developer productivity. So we are in, listen, it's actually, it sounds easier than it is because we have a bunch of developers and they're like, listen, I'm working hard enough. Don't tell me you use this thing. Don't tell me how to do my job. Just let me do my job. Let me get my diffs in, et cetera. So we now have a subset of our developers who are power users of GitHub Copilot and it is excellent. And so the job now is to, and it's truly adding productivity, but we now have to sell it from like 20 % of those power users to 50 % to 80%.

54:25And you shouldn't take that for granted. Why can't you do that tomorrow? Because we want developers to do their day jobs while they're training on how to get more productive. That's one angle. It's absolutely going to happen. It will be a home run for everybody. And it takes some of the kind of BS work away from developers so they can truly be creative. So I do think it's a win-win win. Next for us is customer service, which is, you know, actually for Uber, right? When you call in, we have to know what kind of customer you are because there's a lot of fraud in the system. There are a lot of people taking advantage of the system.

55:05Second, we have to understand the context. What happened to Bill in terms of his food didn't, he said he didn't get his food. Is that true or not? And the third is, what's the policy? And the policy is going to be different place to place, although we're trying to make that more consistent. A human being has to go through all that. Now, essentially, and we take the steps, right? First step is AI summarizes all of it. So it's in a nice little package. Now the AI not only summarizes it, but gives the recommendation to the customer service agent. We look at those recommendations, are they right, are they wrong?

55:41And eventually, we'll be able to move much more of the customer service to AIs as well. So that's another one. We are building out customer-facing products as well for EATS, some cool stuff. My instinct is the next 24 months are going to be much more focused on backend stuff. On the customer-facing side, it's still too slow. Like, you know, our responses have to be in milliseconds. And there's, you know, even very small delays can cause drop-off, et cetera. But I'm confident that the customer side is going to come in. And this is a big wave. It just may be a little bit slower than some people expect, but the backend stuff is dynamite.

56:26And Dara, are you building custom models to help drive these? I mean, you mentioned GitHub Copilot, obviously a Microsoft product, but are you, I'm just curious, there's this debate in the LLM land, whether everything's going to be large frontier models. What I hear from a lot of companies is that those are very expensive and they have to figure out how to do this within the context of a, you know, expense side of their business that makes sense. So I'm just curious, are you using open source? Are you customizing? Or are you doing a combination thereof? Right now, all of the above. So we have an application layer that is our own AI layer, and we can plug in public models, open source models, and we work with all of the larger players?

57:13And I actually think the answer is going to be all of the above. There's certain highly idiosyncratic use cases where a smaller custom-built model will be the right solution. And then for, I think, GitHub, Copalets, et cetera, it might be you want more general models than some of these larger models. So I don't think it's going to be an if, or. It's going to depend on the circumstance. I think we're going to use all of them. Like they are, you know, and when you're dealing, we're a little bit of a unique piece, which is our data sources are changing and are so variable so quickly that these AI models are quite, quite powerful with data sets that generally don't change.

57:58And for us, sometimes like we're going to have to layer models on top of each other in order to get that right customer interaction. moving down the docket here as we as we go uh bill i saw on uh the twitter that you are uh taking a board x now oh yeah sorry on x yeah exactly uh your post your post on x i reposted your post um but you're you're going to join the board of zillow uh that's interesting rich barton obviously a friend of everybody here on the pod. What's your thinking there? And is this going to be the trend? You're going to go back on the Uber board or just start being public boards again?

58:39As the world knows, because I've announced it like a couple of years ago, I stopped doing new investments. So I've taken boards historically as part of my day job and as part of investing. And as I look towards the future, you say, what board would you take just because it's interesting to you as an independent, you know, human and not as a venture capitalist. And here's a board that I've had an experience on. Rich and Lloyd and the entire team are just remarkable. The level of the strategic conversations that are had in that boardroom are very different, you know, from other places I've been.

59:16They are both engaged, you know, as founders, you know, despite being a decade in, they're hungry. they look at the you know we're talking about the magic of the uber app my my partner matt kohler used to say that the smartphone's a remote control for your life and the phrase one click like can you one click something and one clicking a uber ride you know or an uber meal to you is a is a magical experience but the the real estate industry is still far from a one click if you've been through a transaction, all the different pieces of paper you have to fill out, visits, things you have to schedule, there's still quite a bit of opportunity for innovation.

1:00:01And so I'm excited to be back in the room with that incredible team and board. But also because I know Rich and Lloyd are so hungry still at this point in their career. It's an exciting problem to go work on also. Weren't you on the board? You may not be able to, sorry, you may not be able to talk to this, but do you think this realtor, the antitrust case, is that a good thing or a bad thing for Zilla? My gut, and I'm not a lawyer, but my gut is that if anything, it's probably a positive. I think the NAR operates as a pseudo-monopoly. they've been accused of that a lot by the different governmental agencies and can create constraints.

1:00:48And if you look at countries where there's not a NAR, I think you typically see more innovation and more market cap per home for the leading real estate player than you do here in the US. Yeah. And for people who don't know, National Association of Real Estate is NAR, and they just had a giant$1.8 billion judgment against them based on... As an example, the ridiculous document that you're handed by a realtor every time you want to buy a house, that is a creation of NAR. And the primary objective function of that document is to protect your realtor from liability. And that's why you have to sign it on all 35 pages and initial five different times inside the 35 pages.

1:01:45And that's all about the realtor and it's not about the consumer. And so that's the kind of thing that I think you could see innovation that would be pro-consumer and better for the industry. That was extraordinary to think. I don't know if you guys have ever done a private market transaction, but I bought a home in a private market transaction. It was$12 ,000 initially, and then there was like a$3 ,000 upsell from my real estate attorney. And this was for a non-insignificant home, my primary residence. And I am now hated by real estate agents everywhere in my location because what would have been hundreds of thousands of dollars in commission, I just bought the house from my friend.

1:02:27spent$15 ,000 total, total on the purchase of the home. And there was no commission, zero commission. Going back to even before I invested in Uber, I looked at a lot of the companies that were starting in taxis. And because of the presence of the taxi and the taxi authority, your flexibility around price and how you get the app in the car, all that was regulated in a way that prevented flexibility of innovation. And so I just think if anything, less NAR means more innovation. Yeah, the other piece of this, and I was on that board with Bill and Rich and for probably between 2005 when we led the Series B in 2010 or shortly before they went public.

1:03:12As soon as ChatGPT came out, and this is, you know, Bill said that they've been at this for a decade. They've actually been at it for two decades now. You know, it's extraordinary to see founders in the case of Rich Barton and Lloyd Frank, who care as much. And why do they care so much in this moment? Chat GPT comes out, Rich Barton texts Bill and I and said, hey, I want you guys to come to an executive offsite with me. We're going to red team, blue team AI. What is the impact that AI is going to have on 10 blue links? What is the impact that AI is going to have on vertical search? We're a major vertical search engine that lives in this larger ecosystem.

1:03:50And we think that this might be changing everything. And so I tweeted about this at the time and Rich gave me permission to do it. But the blue team was this idea. How do we make our existing team better? How do we just go through the list of all the things we do? Customer service, all the things Dara talked about, code generation and make it better. Red team was this idea is if we were starting today with the power of LLMs and we wanted to put the magic of the world's best realtor in your pocket, what would it look like? And that to me, that story just captures the founder-led journey of a company like Zillow with Rich.

1:04:30He's not 20 years in resting on his laurels thinking, I've done great and now it's just time to serve. We are all enthusiastic to see what AI is going to do to actually put the power of that one click the power of that remote control in everybody's pocket and for those of you don't know red team blue team that's like a generally a cyber i think the origin is cyber security blue team tries to protect red team tries to attack and you get you get both teams uh making a company more secure uh brad maybe we could wrap here uh since we have dara uh and talk a little bit about markets and just where we're at in terms of i saw the the interest rate print was a little bit hotter, I think.

1:05:14I'm sorry, the inflation print was a little bit hotter than people thought it might be. Concerning, not concerning. And then maybe we'll go over to you, Dara, just in terms of how does this stuff impact you as a CEO? It's amazing as we look over the last five years. I think all of us spend our time thinking about technology, super cycles, internet, mobile, cloud, AI, how that's going to change the world. But really, since the start of COVID, we've all been overwhelmed by macro, right? Like, you know, Dara had to lay off 25 % of the company, not because anything idiosyncratic about marketplaces or mobile or anything else, but we were fighting a global pandemic and rates went negative.

1:05:56And so, you know, as we come out of this, I think it's important for us to keep our eye on that prize, you know, and understand, you know, and I, you know, Dara and I talk about this often, is the world look normalized or not. And I think if you look at that first chart that I shared with Nick, just the CPI glide path, there's really nothing to see here today. There was some noise this morning that it came in a little bit hotter. But I mean, if you just look at this longitudinally, where the dotted line represents the consensus forecast of where inflation is going to go. And Bill and I talk about this all the time.

1:06:32Of course, nobody knows with any degree of accuracy exactly where it's going to go. But I think it's important to understand what's baked into the cake. If you go to that second chart, Nick, we've talked about this a lot, 10-year tips. This measures the restrictiveness in the economy. So effectively think about what is the future interest rate less the future inflation rate. And as you can see, we're as restrictive really as we've been since 2008 and 2009. This is above the Fed's neutral rate. That's why the third chart I sent you, which is what is the Fed fund's projection? We expect rates to come down this year.

1:07:08So if you just look at the Fed's own forecast, a point and a half and 1.5 % positive growth on GDP, that inflation is going to follow that consensus curve and that rates are going to come down. That to me is the backdrop for a very healthy economy. Now, of course, there's a lot of stuff that can go wrong. but you know uh yesterday i think it was feds uh uh williams was out and he said listen i think rates are high enough um restrictive enough remember every month that inflation goes down the effective restrictiveness of the economy goes up holding all else equal so you got to take rates down just to keep it at the same level of restrictiveness um and so i think that's where we're seeing you know we started the year mag 7 was down 10 15 percent there's a bunch of jitters around interest rates.

1:07:59They popped up from 3.5 % back to 4 plus percent. So we're coming out of this from my perspective, from the cheap seats. It seems like we're on the glide path. Things are normalizing. And that for a CEO like Dara, there's a lot of predictability in the world, hell of a lot more than there's been over the last four years. And I guess I'll kick it over to you, Dara. Is that the way that you see it relative to the challenges you've had trying to manage the business through the ZERP period over the last few years? Very much. I mean, I can't comment on rates and where they're going, but we had to fight.

1:08:36We felt inflation hugely post-COVID, which is the cost of bringing drivers up, the cost of labor, and we had to translate that into more expensive rides, et cetera. If you look at this year, we have actually actively been trying to keep the cost of rides lower, and essentially, it's been flat. We've been working with our restaurant partners. If the economy weakens, you know, building out a tool set of kind of merchants able to fund promotions to being prices down. So like the focus of our business is how do we create a win-win and try to keep prices down for riders and keep prices down for eaters and really drive volume through the system as much as we can and i say so far so good we haven't seen you know let's say inflation rearing its ugly head again but uh i've i've uh i've seen a lot of very fast changes in the marketplace so i take nothing for granted by the way i wanted to give a little nod to brad i thought using the word glide path in a cpi slide is very suggestive of a soft landing like a really good very subtle language.

1:09:51Yes. I mean, listen, listen, listen, let's be clear. He's hoping the Fed listens to this. Just listen. I know that there's some people who told us to go into cash at the beginning of last year. Some people in our group who said hard landing, Mike Wilson, Q1, go into cash. And then surprisingly, even at the end of the year, they thought that that was a good decision. 5 % on cash versus 30 % to 40 % in the market seems like a pretty bad decision to me. And I think it will be a bad decision again this year. That's not to say that there aren't risks in the world, but when I look at the balance of risk, I would say that these seem like pretty decent environments, whether it's soft or medium or whatever.

1:10:35I think it's a pretty decent environment for Dara to build the business this year. So with that, thanks so much to Dara for coming on and being so candid with us. Gurley, Gerstner, you're incredible. And none of this is investment advice. Make your own decisions. Do your own underwriting. Disclaimer, disclaimer, disclaimer. We all are absolute degenerate gamblers at the poker table and thoughtful bettors on public markets. That does not mean you should do what we do. I have watched Gurley lose his entire stack with bottom set to lunatics who hit runner-runner. I've seen Gerstner lay down pocket aces to people with seven high.

1:11:18Do not follow us in making bets. Make your own goddamn decisions. Reminder to self, don't go to Vegas with any of this group. Thank you. And Dara, do you have an interest in learning poker? Because we know you have a little bit of money to put to work now. My daily job is a gamble, you know, kind of running this company called Uber. So after that, I like to just stay still. Oh, you know, one thing I didn't ask you. It's one more thing there. This is my Columbo after I do the outro. Drizzly, Postmates, you did a couple of acquisitions years ago. The market's been closed for acquisitions. Do you just put that out of your mind?

1:11:56Or are bankers calling you about acquisitions? What do you think is going to happen in the next two or three years? Or do we have to wait for a regime change, Lena Kahn to get out of there for maybe acquisitions to happen again? Is it even on your radar? Do you think about it? Listen, it should always be on our radar. But one thing that I've learned with Uber is running a business and trying to integrate other businesses into a two-sided marketplace is really hard. And the organic path for the company is great, unless I screw it up, but it looks great. So the cost of an acquisition in terms of just the distraction from the daily grind, which is a wonderful grind that we love, it's pretty high.

1:12:43So it would have to be awesome for us to look. We should. It's part of my job to look. But it's not the baseline of what the next three years is going to look like. Do banks pitch you regularly? Hey, buy this, buy this startup, buy this startup? Is it like a constant stream? And especially, listen, the public markets are closed. So the only M &A is the way forward. So I get a lot of pitches and free drinks and leave it there. Well, the public markets aren't closed. They just think that you're dumber than the public markets and that you'll pay a bigger price. But I think what they're finding, the reason we don't see a lot of M &A is because folks like Dara aren't willing to pay the big bucks.

1:13:25and the public market is sober. And the reality is, if you're trying to sell a business today, you got to get on the same page as the public market. Your multiple is going to reflect your growth rate and your profitability that's demanded by the public markets. And all those people still living in make-believe land that there's some strategic inherent value to their business that's losing money and it's just not going to end well. I think we've seen it this week, a bunch of layoffs again at Amazon, at Google, and others. And what it tells me is, if 2023 was the beginning of time to get fit, I really see it kicking into high gear right now.

1:14:07And you heard it from Dara, they're not growing headcount a lot. Amazon's not. Apple's not. They're doing more with less. AI is enabling that. And to me, M &A is only going to happen for those companies that are accretive and profitable and, you know, they're going to have options. They could go public today or they could sell their business today. But the broken things, you know, that are still expecting high prices, I don't think are going to find a home. I agree with that. I think you got another year of people getting in touch with the reality that exists, which is the real issue that prohibits both of those transactions.

1:14:45Yeah. Accepting reality. That could be a theme for 2024. All We'll see you all next time on this round table with no names. Bye-bye. Bye-bye.