Uber CEO Dara Khosrowshahi

Summary Notes


In this candid conversation, hosts Ben Gilbert and David Rosenthal of Acquired sit down with Uber CEO Dara Khosrowshahi to discuss the company's evolution since its IPO. Khosrowshahi shares insights into Uber's transformation, including its significant revenue growth from $10 billion to over $30 billion in two years, the divestment of non-core businesses, and its unexpected journey to profitability. The discussion also delves into Khosrowshahi's personal experiences, from his pivotal moments at Expedia during 9/11 to the high-stakes shareholder negotiations at Uber involving SoftBank's investment. Additionally, Khosrowshahi reflects on the future of self-driving cars, Uber's commitment to providing the best platform for earners, and the complexities of operating a global service with a significant societal impact.

Summary Notes

Introduction to the Podcast Episode

  • David Rosenthal and Ben Gilbert are the hosts of the podcast "Acquired."
  • They discuss the transformation of Uber since their 2019 IPO episode.
  • Uber's revenue has increased significantly in the past years.
  • The company has achieved modest profitability, which was unexpected at the time of their IPO.

"So I came up here. We scheduled this time to record. What are we talking about today?" "That's right. A lot has happened since we did the IPO episode." "It's been, what, four years? That is crazy. All right. Yeah, let's do it."

The quotes introduce the episode's focus on Uber and set the stage for a reflection on the company's progress since their IPO episode four years prior.

Uber's Business Evolution

  • Uber has two main businesses: Eats and Mobility.
  • The company has divested from hardware, international, and speculative future ventures.
  • Uber has achieved profitability, which was not anticipated during their IPO.

"And that's not TMV. That's revenue." "They've divested anything, hardware international or that's too far in the future or speculative." "Now, it's very modest at this point, but we wouldn't have dreamed Uber could even get to break even back when they burned David, what was it, $3 billion the year before the IPO?"

These quotes highlight Uber's significant revenue increase and the strategic decision to focus on core businesses while achieving profitability, despite previous high capital burn rates.

Dara Khosrowshahi's Career and Uber CEO Recruitment

  • Dara Khosrowshahi is the CEO of Uber and has a history of making impactful business decisions.
  • He shares stories from his career, including buying Expedia around the time of 9/11 and meeting Barry Diller.
  • The podcast explores the financial mechanics of replacing Uber's entire shareholder base since Dara joined the company.

"Yeah, not to mention the Uber CEO recruitment process, which I don't think Dara's talked about anywhere else before."

This quote sets up the anticipation of exclusive insights into Dara Khosrowshahi's recruitment as Uber's CEO and his career journey.

Dara Khosrowshahi's Experience with Expedia

  • Dara was the CEO of Expedia for 13 years.
  • He discusses the acquisition of Expedia by IAC and the decision to proceed with the deal despite the 9/11 attacks.
  • Dara reflects on the impact of the pandemic on Uber and the tough decisions made to focus on core businesses.

"I can't tell you." "But it was a good board meeting." "It was a long time."

Dara's response to the board meeting question is appropriately discreet, and he acknowledges the significant duration of his tenure at Expedia.

Insights on Career and Opportunities

  • Dara emphasizes the importance of seizing opportunities and not over-planning one's career.
  • He advises young people to be open to possibilities and to go all in when an opportunity arises.
  • Dara attributes part of his career success to luck and the willingness to take advantage of opportunities.

"I always tell people that the most common mistake that I see in young people is that they overplan their career." "But while you're in, you go all in. But at the same time, keep your eyes open because you never know."

Dara advises against overplanning and encourages young professionals to fully commit to their current opportunities while remaining open to new ones.

The Role of Supply in Marketplace Businesses

  • Dara discusses the importance of focusing on supply in marketplace businesses like Uber.
  • He shares lessons learned from booking.com's focus on hotel supply and how it influenced Uber's strategy.
  • Dara explains how Uber uses Eats as a recruitment tool to build driver supply and improve marketplace liquidity.

"Our growth is also supply led." "And as you build up the supply, the liquidity in the marketplace gets better, surge comes down, pricing gets better, eta gets better, your ability to price gets better, and the demand shows up to some extent."

The quote explains how a supply-led growth strategy improves the overall marketplace performance, leading to better pricing, reduced surge, and increased demand.

Conclusion of the Podcast Episode

  • The episode concludes with a candid conversation with Dara Khosrowshahi and a focus on his personal experiences and stories.
  • The hosts invite listeners to join their Slack community and listen to other episodes on their second show, ACQ2.

"On to our conversation with Dara." "Cheers, Dara." "Thank you very much. Happy to be here."

These quotes transition from the introduction to the main conversation with Dara Khosrowshahi, setting a casual and welcoming tone for the interview.

Uber's Post-Pandemic Execution Machine

  • Uber has taken steps post-pandemic to merge technical and marketplace teams, creating a more unified and efficient structure.
  • The merger allowed for a focused technical team that could concentrate on demand-side improvements.
  • Eats, once a small segment, now benefits from the larger audience of the rides business, making it a cost-effective customer acquisition channel.

"We did take a big step post pandemic... to merge all the teams together, the technical teams together, the marketplace teams together, single earner team, etc."

This quote explains the organizational changes Uber made post-pandemic, which streamlined their operations by combining various teams into a more cohesive unit.

Customer Acquisition and Internal Pricing

  • Uber's rides business serves as a significant customer acquisition channel for Eats, outperforming other external channels like Google and social media.
  • The internal cross-promotion is proprietary and more cost-effective than external advertising.
  • Experimentation is necessary to optimize the balance between promoting Eats and maintaining the quality of the rides experience.

"Yeah, we get more new customers from rides than we do from Google, meta, Instagram. All of these other channels come."

This quote highlights the effectiveness of Uber's strategy of using their rides business to acquire new customers for Eats, surpassing other traditional advertising channels.

Compounding Growth and Market Dynamics

  • The benefits of Uber's strategic changes are compounding over time, with noticeable improvements in margins and proprietary traffic after several years.
  • Uber's supply, particularly drivers and couriers, is now growing faster than demand, leading to a more balanced marketplace.
  • The company's profitability is increasing due to proprietary traffic and efficient market dynamics.

"What we're doing is essentially our margins are growing faster than our competition because we have a bunch of proprietary traffic that's coming over."

This quote signifies that Uber's strategic decisions are leading to a competitive advantage, with margins growing faster than those of their competitors due to unique traffic sources.

Market Self-Regulation and Economic Cycles

  • Uber's platform is open, and the economics of supply and demand self-regulate the marketplace.
  • During economic downturns, more drivers may join the platform, which can lower prices and increase trip volumes.
  • Uber's marketplace has countercyclical characteristics, adapting to changes in the economic environment.

"No, because one of our core philosophies is this is an open platform, and if your background check comes in, okay, et cetera, then you can have access to earnings opportunities."

This quote underlines Uber's commitment to maintaining an open platform, where the market self-regulates based on supply and demand, rather than the company imposing restrictions.

Pricing and Marketplace Efficiency

  • Uber's focus is on scaling transportation options and improving marketplace efficiency through machine learning and data analysis.
  • The company is expanding beyond rides to include various transportation methods and delivery services.
  • Continuous improvements in matching and pricing are expected to contribute to Uber's growth.

"So the more we wire up, the... more efficient way. I think one of the secret sauces that we have is we have a very large and capable marketplace team."

The quote emphasizes Uber's strategy of expanding its services and improving marketplace efficiency as key factors in its growth and success.

The Complexity of Uber's Business Model

  • Uber's business involves considering multiple stakeholders, including customers, drivers, couriers, and regulators.
  • The responsibility towards these stakeholders makes Uber's business model complex but also impactful and interesting.
  • The dynamic nature of Uber's operations requires constant attention and adaptation to real-time events.

"Uber is like a incredibly important service to the cities of the world."

This quote reflects on the significance of Uber's services and the complexity of managing a business that has a major impact on urban transportation and logistics.

Dara Khosrowshahi's Recruitment to Uber

  • Dara Khosrowshahi was recruited to Uber through a headhunter and influenced by conversations with peers such as Daniel Ek.
  • The recruitment process was kept confidential, and Dara maintained a close relationship with his former employer, Barry Diller.
  • Dara's decision to join Uber was driven by the potential impact rather than the pursuit of fun or ease.

"So I was reading about the news just like everyone else was... And a headhunter called me about this role."

This quote describes the beginning of Dara Khosrowshahi's journey to becoming the CEO of Uber, which started with a call from a headhunter and evolved through various personal interactions and reflections on the potential impact of the role.

Key Theme: Criteria for Choosing a Company to Work With

  • David Rosenthal discusses the three things he looks for in a company: working with likable and knowledgeable people, individual impact potential, and the company's impact potential.
  • He was unsure about the first criterion when joining Uber, but as CEO, he had the opportunity to build his team.
  • The team is a mix of existing and new members, including notable additions like Tony West and Nelson Che.
  • As a leadership team, they have the ability to impact Uber significantly.
  • Uber, as a company, has a unique impact on cities, which fulfilled the third criterion for David.
  • The financial aspect was also a factor, as Uber was a young company with growth potential.

"I always tell people, like, I look for three things, right? It's, do you work with people whom you like and you can learn from? Can you, as an individual, make an impact? And then, is the place or the company that you're at going to make an impact?"

The quote outlines David Rosenthal's three main criteria for choosing a company to work with, emphasizing the importance of team dynamics, personal contribution, and the overall impact of the company.

Key Theme: Uber's Position and Turnaround

  • Uber had a global position, talent pool, and brand that were exceptional despite going through a hard time.
  • The company was described as a "verb," indicating its widespread recognition and usage.
  • David's father advised him to accept the CEO position at Uber simply because of the company's status as a verb.
  • Ben Gilbert expresses surprise at considering Uber a turnaround, given its growth and revenue.
  • Despite its success, Uber faced challenges like the "delete Uber" movement, cash burn, and competition.

"All turnarounds are hard. Tech turnarounds are especially hard. But I think Uber had a global position, a talent pool, a brand that was absolutely exceptional, that was just going through a really, really hard time."

This quote emphasizes the difficulty of turning around a tech company, but also acknowledges Uber's strong global position and brand as a solid foundation for recovery.

Key Theme: Competitive Landscape in Ride-Sharing and Food Delivery

  • Dara Khosrowshahi discusses the competitive landscape, acknowledging Lyft as a stronger competitor than some might think.
  • Lyft has a new CEO making aggressive moves, and while Uber's position is better than five years ago, Lyft should not be counted out.
  • In food delivery, DoorDash is a formidable competitor, larger than Uber in the U.S.
  • Uber aims to maintain share in the U.S. and gain share internationally, eventually leveraging structural advantages to compete against DoorDash.
  • DoorDash's success is attributed to its bet on the suburbs and restaurant selection, which differed from Uber's urban focus.
  • Uber's past focus on speed led to a trade-off in selection, which in hindsight was a mistake.
  • Uber is now expanding into the suburbs and internationally, adjusting its business model to legal frameworks in various countries.

"But Doordash is a tough competitor. Like DoorDash is larger than we are in the U.S. We are focused on keeping share in the U.S. and then gaining a bunch of share outside the U.S."

This quote highlights the competitive nature of the food delivery market and Uber's strategic focus on maintaining and gaining market share both domestically and internationally.

Key Theme: Uber's Strategic Focus and Expansion

  • Dara Khosrowshahi outlines Uber's strategic focus on three segments: ride-sharing, Uber Eats, and freight, while divesting other ventures like autonomy, bikes, scooters, and planes.
  • The pitch to the board when joining as CEO was centered around operations and profitability rather than strategy.
  • Uber's growth strategy includes expanding into countries with legal business models, new transportation bets, and diversifying into groceries, liquor, and other categories.
  • Uber is separating its tech stack to offer marketplace and fulfillment services independently, aiming to empower local businesses to compete with Amazon's same-day delivery.
  • The vision for Uber has always been to provide a seamless transportation service, but realizing this vision has been challenging.

"So the pitch to the board was really different in that it wasn't about strategy, it was about operations and how you take the business to break even and profitability, et cetera."

This quote reflects the initial focus on operational efficiency and profitability when Dara Khosrowshahi was pitching to the Uber board as a prospective CEO.

Key Theme: Uber's Shareholder Base Turnover

  • The turnover of Uber's shareholder base was painful and marked a shift from shareholders interested in hyper-growth to those focused on disciplined, profitable growth.
  • The changeover was challenging, but it resulted in a more consistent shareholder base that is increasing their stakes as Uber delivers results.
  • The IPO and lockup period were particularly difficult, with Travis Kalanick selling all his shares, causing panic and speculation.
  • In hindsight, Dara respects Travis's decision as it allowed for separation and focus on building the company.
  • The power struggle between Benchmark, Travis, and other high-vote shareholders was resolved by converting high-vote shares to low-vote, allowing Softbank to invest in Uber and ending the control struggle.

"It was the displacement in terms of shareholders. It was tough, right. And there's a certain cohort of shareholders going after hyper growth, et cetera, especially in this marketplace, where it's much more about discipline, growth, profitable growth, et cetera."

This quote describes the difficult transition from a shareholder base focused on hyper-growth to one that values disciplined and profitable growth, reflecting the evolution of Uber's investor profile.

Key Theme: Uber's Integration with Taxis and Technology Challenges

  • Uber's integration with taxis represents a shift from seeing them as competition to including them as part of the service.
  • The technology required to integrate taxis into Uber's system posed challenges, such as acceptance rates and dispatch methods.
  • The team developed blast dispatch technology to address the unique needs of the taxi market, demonstrating the complexity of seemingly simple service ideas.
  • The ongoing development of technology to improve service and efficiency is a testament to Uber's commitment to innovation.

"What we found in taxi markets is that when we made the one to one match, if we weren't integrated into the taxi meter, and that's something that we will build over a period of time, the taxi might be full, but the acceptance rate of the taxis was much, much lower and we didn't know why."

This quote explains the technical and operational challenges Uber faced when integrating taxi services into their platform, highlighting the importance of adapting technology to fit market needs.

Energy Costs and AI Infrastructure

  • Energy is the second largest cost in running AI, with the first being the price of chips.
  • Lower energy costs are beneficial for customers.
  • Data centers for AI can be located in remote locations where energy is abundant, unlike traditional data centers that need to be near major internet traffic hubs.
  • Crusoe Cloud offers lower cost and performant infrastructure for AI workloads.

"Energy is the second largest cost of running AI, after, of course, the price." "It's super cool that they can put their data centers out there in these remote locations where quote unquote energy happens..."

The quotes emphasize the significance of energy costs in AI operations and the strategic advantage of placing data centers in energy-rich, remote areas.

Twitter Account Management Styles

  • There is a spectrum of how public figures manage their Twitter accounts, from Elon Musk's spontaneous style to Barack Obama and Tim Cook's more measured approach.
  • Dara Khosrowshahi considers himself closer to the Obama/Cook end of the spectrum, preferring not to use Twitter to express himself fully.
  • He prefers long-form discussions over tweets, which can be taken out of context.

"I'm not using Twitter to express myself. I'd rather have a long form discussion like this." "Twitter tweets can be taken out of context, et cetera. So I'm not there to stir the pot."

These quotes reflect Dara Khosrowshahi's cautious approach to Twitter, highlighting his preference for more nuanced conversations.

Learnings from the New York Times Board

  • The New York Times has transitioned into a technically advanced publishing company.
  • They have a strong learning culture and made a significant bet on subscription models over advertising.
  • The organization maintains a strict separation between content creation and business operations.
  • The successful subscription model was a non-obvious choice at the time but was based on the company's core identity of quality content.

"One of the fascinating parts about the company, and it's both a superpower, or it could be a weakness, is total separation of church and state in terms of content and business." "The bet that they made on subscriptions was amazing."

These quotes outline the New York Times' commitment to content quality and the strategic decision to focus on subscriptions, which paid off despite not being data-driven.

Self-Driving Cars and Societal Acceptance

  • The development of self-driving cars is ongoing, with the last 2% of use cases being difficult to predict.
  • There's a philosophical question about how safe autonomous vehicles need to be.
  • Society may struggle with accepting the fatalities associated with self-driving cars, even if they are statistically safer than human drivers.
  • Uber has shifted focus from developing self-driving technology to partnering with other companies.

"It's unknowable what it'll take to get past that last 2%." "How safe does a robot have to be... Society is very, I would call, forgiving, but they understand humans are human, and humans make mistakes."

The quotes discuss the challenges of perfecting self-driving technology and the societal implications of shifting from human error to machine error in driving.

Uber Eats vs. Uber Transportation Business

  • High take rates can be dangerous for business sustainability.
  • Uber's goal is to grow volume while keeping take rates low and ensuring drivers and couriers are paid well.
  • Dara Khosrowshahi prefers a business with a lower take rate as it allows for more extended growth and is more sustainable in the long term.

"High take rates are dangerous. So our job as a company is to grow volume as much as we can, as fast as we can, and make our shareholders happy enough minimizing the take rate." "I take the 20% take rate business. It's more lasting. The growth can go on for much, much longer."

These quotes highlight the strategic approach to balancing growth and profitability by maintaining lower take rates to benefit all stakeholders in the long run.

Building the Best Platform for Earners

  • Uber's future depends on creating the best platform for earners (drivers and couriers).
  • The company aims to provide a good experience for the majority of earners on the platform.
  • Uber is the largest source of work globally, with a significant number of earners.
  • Dara Khosrowshahi is proud of Uber's role as a technology company with a real-world impact, especially for earners.

"Ultimately the future of the business as it stands now depends on our building the best platform for earners." "Uber is unique in that it's a technology company that's built for the real world."

These quotes convey the importance of focusing on the experience of earners on the Uber platform and the pride in being a technology company with tangible impacts on people's lives.

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