Now, even though the book came out at the end of January, it’s all in here, right? I like to think that the character of Travis, that all these things aren’t happening in a vacuum, but this was apparent very early on. Not only reasons why the company is stumbling now, but really probably why it’s been successful all along. Because here was a company that had so many obstacles to overcome. 

An incumbent industry, very politically connected to navigate in the taxi industry. Travis just charged across and over every barrier in his path, but to answer your questions, let me point out a couple things. You’re right when I did go to ask him to cooperate with the book, his answer was, and this, I assume this is a family podcast, so I won’t use the swear words. But he basically says, “There’s no friggin way. I’m cooperating with a book on Uber right now”. 

So he was combative with me early on. But I did sort of the same thing I did with Jeff Bezos, which sort of worn him down with the inevitability of the project, and ultimately, they kind of came around. But on the positive side of the ledger, I have to say that in my interviews with him, there’s no one more enthusiastic, charismatic and committed to the Uber business, like he is all in. He is very creative and energetic about the business. He is really articulate about the changes that Uber can have in our world. 

And here’s the key point. He’s also competitive as heck. And this is, I think, a lot of the reasons why we see some of the behavior with regard to Lyft and regulators. He’s really unwilling to see any inch of this transportation revolution to a competitor. I want to read you one note from my book, which is early on, it’s when he had been an advisor and an investor to Uber. 

And then, he seizes control of the company when he realizes, a) it’s going to be a huge success and, b) when he realizes it’s a fight. And he’s gotten the first subpoena served by the City of San Francisco. He just goes to war, but I got a lot of the internal email from that time. He says this to one investor. 

Apparently, there was someone on Twitter who was suggesting they might go into competition with Uber. And he writes back in this email, “they will be getting into one of the most complex businesses I’ve ever seen for all the wrong reasons. And they will sorely underestimate the public that they will go through at the expense of my bare knuckles.” All you need to know, right? 

He’s accused of being a bit of a bro or creating a bro culture to Uber, but, 1) total passionate belief in the company and the cause and, 2) just so competitive and partly it’s born from the hardship and failure that he had earlier in his career as an entrepreneur. And it created this kill or be killed mindset that I think helped Uber, but also resulted in some of the problems that it has now.

Preston Pysh  6:14  

So based on what you’re saying there. It seems to me like you kind of came around and kind of liked them in a way.

Brad Stone  6:21  

I’m not one of those guys who would really be in this business if they weren’t energized and really admired the people that I write about. There are plenty of reasons to criticize Travis and Brian Chesky of Airbnb and Jeff Bezos of Amazon, and for that matter, Steve Jobs. 

We’ll get into some of the criticisms of Uber and Airbnb. But fundamentally, I believe that Uber has made the city I live in better. Airbnb has made the city I live in better and it’s partly as a result of the determination and perhaps the ruthlessness of guys like Travis. 

Stig Brodersen  6:53  

After reading multiple books about billionaires. For me and Preston, we’re kind of left with this feeling that the person in question has a unique skill set and drive that he or she would have found a way to become successful one way or the other. And clearly one book that comes to mind is “The Everything Story” about Jeff Bezos that you wrote. Because while Amazon might not have happened in another time and age, his personality just seems unstoppable. 

Now, I guess one could say the same thing about Airbnb and Uber, because this seems to be extremely lucky in the timing of the idea. You could talk about when Apple launched the iPhone, the application, the invention of Google Maps, and Facebook. 

I mean, that was huge for the progress and the validation of these two companies. So, having both arguments, Brad, how much of Airbnb and Uber success do you think can be attributed to luck and good timing? And how much to the unique personalities of the company’s founders?

Brad Stone  7:52  

Wow, good question Stig. I think for Amazon, I would put 100% in the category of the grit, the determination, the unique skill and the genius of Jeff Bezoz. I mean, he picked the worst business model of the age in online retail. And through sheer force of will, brought up the scale, made it efficient, and then leveraged it into other businesses like cloud services and A.I.

Like the story of Amazon. This is the story of a super genius, really. Uber and Airbnb, I would put the percentage down. I’d say, I’m not sure that those CEOs succeed in another context. I mean, I think they’re successful, but perhaps not to this level if it weren’t for the circumstance. 

And on the cover of my book, “The Upstarts,” you guys probably know there’s a picture of a wave. And I play with the image of the great wave a little bit in my book, and you mentioned a couple of the factors. 

It’s the launch of the iPhone, the App Store, Google Maps, yes, real identity with Facebook, the Cloud, and then the unique capital environment where there are billions of dollars available in the private market to these companies. All of these things, propelling a lot of the businesses that arise in this era in Silicon Valley and around the world to great success. And Uber and Airbnb certainly emerged as kind of the kings of this era. 

They start with the right idea. They’re very much at the right time. But look, I mean, Uber was founded and created by Garrett Camp, Travis Kalanick’s good friend; a Canadian who was an entrepreneur. [He] started StumbleUpon and was inspired by a scene in the movie Casino Royale. So, Uber doesn’t happen probably without Garrett. 

Now, Travis really made Uber and did so much obviously pivoting into UberX when he saw he had to. In part because he was inspired by Lyft, and then putting the pedal to the metal and raising money when he could, maximizing the opportunity. 

Airbnb probably doesn’t get to where it was without Nate Blecharczyk, the co-founder, who as a high school and college student was an accomplished spammer. His growth hacking techniques propelled Airbnb to early success and kind of got it out of the awkward early stages of any startup. 

So, both of these CEOs were surrounded by good people. They had key advisors. Greg McAdoo from Sequoia was a key early advisor to Airbnb. Bill Gurley from Benchmark, a key advisor to Travis at Uber. 

I’m in awe with both of these CEOs, but they have a lot of help. They had the perfect timing. They had great ideas. And they lived in this remarkable period where you could raise a couple of billion dollars, now quietly, privately, and ride the wave. So all credit to them, but perhaps a little bit more a degree of good fortune and luck than folks like Jeff Bezos enjoyed back when he was starting Amazon.

Preston Pysh  10:45  

So Brad, the thing that I took away from the book, reading through it, because I read this about two weeks ago. Whenever I finished it up, the thing that I just really walked away from was the sharing economy and thinking, ”Okay, so we’ve done it with hotels. We’ve done it with cars. Where’s this going next?” 

I’m curious, because I know you’re so attuned to everyone out in the Valley there as to what the big ideas are coming next. Are there other things beyond what we’re seeing right now? And not only your answer to that. 

But I also want to give you the opportunity to talk about Travis’ Law because this was another common theme that I found in the book to be really powerful. And it goes hand in hand with the sharing economy. And that if you get enough people behind it, the government and people trying to stop this, the bureaucracy that stands in the way is just going to get crushed.

Brad Stone  11:36  

Let me talk about Travis’ Law. I just turned to the page in the book where I describe it. And I’ll just read it to you real quick. It goes like this, “Our product is so superior to the status quo, that if we give people the opportunity to see it or try it in any place in the world where [the] government has to be at least somewhat responsive to the people, they will demand it to defend its right to exist.” 

And I think in the early years of Uber and Airbnb, this was important. We saw again and again, people in cities loading the Uber app onto their phones, trying out Airbnb, getting addicted to these services. 

Then, when they were challenged by cities or by the incumbent industries, they would come out and make their voices heard. They would protest. They would swamp the city council members or the state legislators with email. And we look across the country now and in a lot of places, Uber is now legal. 

Airbnb is sort of getting there. It’s a large part because they assembled political coalitions. Ironically, something that Bill Gates or Mark Zuckerberg never had to do. These guys had to be politicians and coalition creators. 

It’s interesting, though part of that Travis’ Law says, two things. One, it says in places where the government has to be accountable to the people. And we do see unfortunately places around the world where maybe the taxi industry or the hotel industry have a lot of political power, and ride sharing is still illegal. 

Parts of Spain, parts of Germany, parts of France, and there are other reasons the public transportation system is maybe better. The cities are harder to navigate, and traffic can really shut them down. And so, there might be other reasons to keep ride sharing out. But it also has partly to do with whether the city’s being responsive. 

But the other important aspect that I was going to raise is, these only work when these companies are kind of young, sympathetic alternatives to the status quo. And I would argue now that Travis’ law doesn’t apply to Uber anymore, because it is the status quo. It’s not the scrappy upstart. It really hasn’t been for about a year or so. 

It is now the juggernaut valued at $69 billion. So, Travis’ Law kind of provides a blueprint for a lot of young startups to go and pay attention to your political support/ your base to give your users tools to go and fight battles on your behalf. But there’s only a period of time in which it’s useful. 

I think, at a certain point, if you’re not kind of humble about it, you suddenly are the man. You’re no longer fighting the man, and that’s certainly where Uber is now. It would be interesting if they got into another political battle like some of the early ones. 

I don’t think they would have much success now of getting people to kind of turn out on their behalf because they’re wealthy, they’re seen as a little arrogant, and certainly what they’ve been through recently does not endear people to those. 

So, yeah, that’s Travis’ law, and I think it’s been a kind of key learning for a lot of young startups in Silicon Valley and around the world that we’re getting to the point where every company now has to contend with the reaction of the industry that they’re disrupting, and perhaps politicians as they attempt to regulate. So that’s Travis’ Law and it really did help these companies grow. And now perhaps not as useful. 

Preston Pysh  14:38  

How about as far as other sharing economy type applications out in the Valley? Are you seeing anything else beyond the rideshare and the hotels?

Brad Stone  14:47  

It all sort of hit at the same time and there are a lot of other ideas around it. And, the food delivery was one. And of course, there are great businesses around the world. Some of them seem to be stalling out. Others, perhaps couldn’t be successful. 

Though, you do get the sense that it’s going to be Uber and perhaps Amazon dominating the kind of delivery and logistics space because they’ve got the scale. Other sort of sharing economy type companies, things like babysitting, and services like, fix stuff around your home. There’s of course, car sharing. There’s office space sharing. There’s warehouse and logistics kind of sharing of warehouse space. 

At this point, it all feels sort of like these junior ideas. And the two big ones are home sharing and ride sharing. And, we’re really on to the next thing. It seems to me like Silicon Valley operates in eight year cycles. And this last one was the one that was propelled by smartphones and broadband, wireless, and GPS. And we’re entering into the next phase now, which is really going to be about artificial intelligence, and machine learning. 

I have an Amazon Echo in my house. And we’re talking in a week where Amazon made voice calling on the Echo available, and rolled out a new device that you could talk to but also as a screen. It seems to me that these kinds of devices, and we’ll see them soon from Apple. We already have one from Google that is going to be everywhere. This is like a totally new platform. How many of you agree with that?

Preston Pysh  16:14  

So I totally agree with you. And I’ve got a hilarious story I’ve got to tell everyone that’s listening. So we get one of these Alexa systems. We ran an app, we worked with some good friends, and they built an app for our platform on the Alexa app. 

So, I put this thing in my house, and I’m playing around with it. I’m testing it out. It’s really neat, and it works really well, like, way better than I had ever expected. I go into the kitchen, and I have this thing set up in another room that’s kind of far away from the kitchen. I’m there telling my wife about it. And I said, all you have to do, you could actually make your shopping list with this thing. All you’d have to say is “Hey, Alexa! Add milk to the shopping list.” 

As soon as I was done saying this to my wife, and I’m serious, I’m like two rooms away from where this thing’s at. We hear off in the distance it says, “I just added milk to your shopping list.” I looked at my wife and both of our eyes just about bugged out, like, “Oh, my god! This thing’s listening to every single thing we’re saying in this house right now.”

Brad Stone  17:13  

Well, Preston, the irony is that you just activated my Alexa behind me by saying that.

Preston Pysh  17:20  

So there you go, like I just set off his Alexa and in the back room. And so, you’re right. This is getting crazy, all this AI. And what I don’t think people realize is that the software for this is being “application-ized.” I just made up that word.

It’s being outsourced to other people, programmers around the world, so that if you want to set up an application on one of these platforms that every time your dog barks three times that a food dispenser will drop food up, there’s somebody that can build an app for that. And so, the whole piece of this voice activation stuff is getting really exciting because it’s all being outsourced to third parties. 

Brad Stone  17:56  

It’s already in an unsatisfying way than our cars. We’re gonna bring Amazon or Google or Apple in there to be much better. And then, our offices that haven’t even begun to come into the enterprise yet. That’s next. So that’s the next wave.

Preston Pysh  18:14  

I agree with you. That’s a really exciting subject.

Stig Brodersen  18:17  

So in continuation of this, guys, let’s talk about the old companies. Companies like Uber, Airbnb, Tesla, Apple, and Google, and so on. Because I think one thing I was thinking about when I was reading, “The Upstarts” was how does Brad see how Tesla, Apple and Google might be making life difficult for Uber and Airbnb in the years to come? 

So now, we have you, Brad. We’re really excited about that. So, I can ask you directly, what are your thoughts about that?

Brad Stone  18:47  

Well, let’s take Uber because obviously, Uber has an existential dilemma here and it’s called driverless cars. And at a certain point, we can argue when that is. I’m thinking it might be closer to 10 years and 5 years.

But we’re going to see driverless cars en masse on our roads. When that happens, and when there’s zooming around picking people up, the price of a ride will fall. And we’re going to have a lot more options. 

So Uber really needs to lead in that revolution. It can’t really even be second or third, or it risks its entire business. And so, the companies you mentioned, Google with its Waymo division, Tesla for sure, and all the automakers, and some of the Chinese internet companies are fearlessly investing in self-driving cars such as Uber. And so, Uber faces a particularly large challenge. 

And of course, there’s an intellectual property lawsuit now between Uber and Google, which could determine some of the flexibility Uber has to use some of the LiDAR technology it acquired. And it bought a company called Otto. And so, it’s got a problem. 

I think life will be made very difficult for Uber. Ironically, Google invested in Uber in a very crucial funding round and yet now, the company is really our arch enemies. 

So, Uber has its work cut out for it. Airbnb, it’s hard to say how the so-called juggernauts make life difficult for Airbnb. I think you have to look at the big travel companies as their potential largest rivals, so I’m thinking of Expedia, which acquired Homeaway. But also, the Priceline Group which has many, many assets. 

And then, the big hotel companies like Marriott and Starwood which merged. Airbnb wants to be more than a lodgings company. It wants to be a full fledged travel company and facilitate various experiences for people. So, that’s a big market. 

It’s going to have lots of competition. It comes at it from a position of great brand and reputation strength. It really does have a great brand among kind of millennial travel set, so that it can use that as a base to expand into other things.

Preston Pysh  20:47  

So Brad, when we’re thinking about the driverless car piece. I think about [how] Apple and Tesla are involved in that. I understand the Google argument. I think that in just my intuition and kind of a little bit that I’ve read on it, it seems like Google really has a strong claim against Uber. 

It’s probably not going to be good for them. But whenever we incorporate Apple and Tesla into this. Whenever I look at Apple, they’re just sitting on so much cash. It’s astronomical. I read something in the Wall Street Journal just a couple days ago that said that their cash reserves were the same level as the UK and Canada’s foreign currency reserves. 

They are a company. I mean, it’s just totally crazy. So what they could do with all that capital is just mind boggling. And then, when you look at Tesla, you got Elon Musk who’s like making all this stuff real. I mean, he’s doing it in time now. 

I guess, for me, I’m very pessimistic of Uber’s ability to go toe to toe with these really big players, especially because they’re not the experts at manufacturing these cars. They don’t have an assembly line, they’ve got an app. So, do you share this pessimism that I have for them in going forward in the next 5 or 10 years? Or do you think that they might come out of this?

Brad Stone  21:57  

It’s hard to argue with anything you’ve said. Apple has stumbled so far with what it calls Project Titan, its internal autonomous car project. We’ve reported on that quite a bit at Bloomberg. They’ve sort of rebooted the effort a couple of times, and now they seem to have narrowed their ambition, no longer creating an actual car but more to some autonomous driving software platform that they might license out to a company like BMW. Tesla, obviously is a tough company to contend with. 

The only thing I could think of to say is to never underestimate a company whose very survival depends on pivoting in this direction. And that does have tremendous access to the capital markets, still. Also, we’ve seen that in the quality of folks that Uber has hired and the tenacity with which it’s gone after the driverless car space. Apple, if it doesn’t wait on driverless cars will be just fine. The company is a cash generating machine with a basis of strength in the smartphone business. Tesla is the future of its business, but perhaps a far off future. Does it need to lead in self driving cars? I mean, certainly, it’s leading in the development of cruise control systems and great automobile, electronics and software. 

But I don’t know that sales [will] fall if it doesn’t put the first generation of driverless cars on the road. However, Uber really does need to get there first, and they do have the resources to go and spend and get there. And of course, they’re private. So, they’ve got a little bit of that currency that does value it to a very high class, world renowned A.I. engineers, and then use it. So, I don’t know. That’s what they have going for them. 

And then, they’re not under estimating the challenge or the opportunity by any means. Travis said it a couple of years ago, that it was existential for Uber. So, half of the battle is figuring out what you’re fighting for, and I think Uber does see the risks and the rewards.

Preston Pysh  23:53  

So Brad, I’ve got to ask this question because I’m such a huge fan of your first book as well. But Jeff Bezos, whenever you were talking with Jeff Bezos, and you think back to those interviews that you were conducting. What’s the one thing that really sticks out in your memory about Jeff? What were you awestruck by?

Brad Stone  24:13  

Of course the laugh is the thing that yeah, you can’t believe that this hardy, somewhat maniacal and jarring laugh that was incredibly endearing and also unsettling because sometimes it emerges when something isn’t noticeably funny, or he’s laughing at his own joke, or it’s like throwing your brushback pitch in baseball. 

He’s kind of weaponized a laugh. But two things – fierce discipline. It is so hard to get Jeff Bezos to go off script into a revelatory anecdote. He says a lot of the same things. You can see in any public speech, if you were to watch a couple of them, you’d see some of the same points repeating themselves. So, the discipline. 

But on the other side, like, he’s so personable, and he does really devote his full attention to you when you’re in the room with him. And that’s something that you don’t always see in interviews with CEOs. 

Despite the millions of things that must be on his mind, you really do feel like you are in the room with him, and you’re getting his full attention. I always enjoyed talking to him. And then, the intellect is obvious. He’s a great CEO. 

And you know what’s funny, since he bought the Washington Post a couple of years ago. The class of things he can talk about now is so expanded. He used to be the CEO of an online retailer. Now, he’s the CEO of one of the most diversified technology juggernauts of our time. He has a space exploration company. And, he’s a man of the world that owns a newspaper. All matters of international and national news kind of fall under his bailiwick. He’s also pretty impressive about the challenges facing the news media.

Preston Pysh  26:00  

Was there anything that he ever said to you that was just like, you just never would have expected that he would have said something like that?

Brad Stone  26:06  

This is in the context of what I just said, which is he seems like he’s so consistent. He does play it safe with the media. Do you remember in the introduction in my book when I’m pitching the book to him, and he suddenly leans forward and says, “Brad, what do you think of the narrative fallacy?” That threw me off because I had no idea what he was talking about. It felt like a pop quiz. And I felt like I was failing. 

So that one, and it was a little bit of like a challenge, which of course, I failed. Of like, how are you going to deal with the messiness of events that don’t conform to a straight line? I had to go back and think about that. That’s the thing that pops into my head as his being sort of surprising and off script. But let me be frank here. 

Also, that book came out at the end of 2013. The reception from Amazon, as you might recall, was not that glorious. They didn’t like the book much, and I’ve seen Jeff a couple of conferences, but I haven’t interviewed them since. So, it’s been a couple of years.

Preston Pysh  27:04  

Well, I’m really surprised that they didn’t like it. Because after I read it, I had such a favorable opinion of Jeff, first of all, and a favorable opinion of Amazon. I was just so impressed with how operationally sound and intellectual the company was. 

I guess I remember some pieces in the book getting at the employee relations, and how it’s all so customer-focused, and kind of the employees take a second seat to that. But I mean, that’s the fact of the matter. I think anyone that would work there would probably tell you that, too.

Brad Stone  27:33  

Well, there was also my exploration, and [so] do his family history, which they might not like. Then the depiction of Jeff as someone who, like Steve Jobs, [was] a little bit, maybe unintentionally cruel to colleagues, who aren’t meeting his standards of excellence. There are a bunch of anecdotes like that throughout the book. But when the book came out, Jeff’s wife, you might recall, gave me a one star review on Amazon. 

Preston Pysh  27:57  

I didn’t know that.

Stig Brodersen  27:58  

Really?

Brad Stone  27:58  

You could go check that out on my Amazon page. I would like to say that it’s the most famous review in Amazon history. I don’t think it’s a decoration because it really made the rounds. It was quite ignominious even though it’s good for book sales. But no, there’s a sparkling one star review there. I’m going through with this book. too. 

Airbnb, I don’t get the sense [of] love [with] this depiction. Perhaps he’ll like being grouped together with Uber in “The Upstarts.” But these companies, you have to understand, particularly technology companies, they invest so much in cultivating and protecting their brands. And I like to think that I kind of paint outside the lines. There’s always going to be tension in that relationship.

Stig Brodersen  28:43  

Yeah. And I guess at the end of the day, it’s also a question about values. If you read “The Upstarts” or read “The Everything Store,” these guys are really, really hardcore. I guess if that’s also how you feel like how good business PR should be, you might have a very positive impression, but definitely. 

Also, when you talk about some of the more personal aspects, and I guess also in the research, it must be hard, I guess to be a multi billionaire and not have someone say something bad about you. When that’s to be covered one way or the other, I guess, it’s hard not to probably read that over 100 times instead of all the good things that you also include in your book.

Brad Stone  29:18  

That’s a good point. They can control everything in their world, except how they’re depicted in the media. And that gets frustrating.

Stig Brodersen  29:27  

Yeah. So just to wrap up this discussion about Amazon. I just want to point everyone at Episode 11, where we’ve discussed “The Everything Store” that Brad wrote. It was one of the very first books we actually did here on the podcast to We Study Billionaires. So, I’ll definitely recommend everyone to pick that one up. And also, we’ll provide a link in our show notes. 

But Brad, one of the things I would really love to talk about is the stories you have about raising venture capital in “The Upstarts.” In your book, you really are taking us through all the power struggles between founders, billionaires, venture capital. This is probably an ungrateful question, could you come up with one of your favorite stories that you really feel catches the very soul of one of the companies?

Brad Stone  30:14  

Well, let me give you one for each of them. I’ll go quick. I’m banking off the notion here perhaps celebrated in the press that investors and venture capitalists are like the soothsayers and the fortune tellers of our age. They’re supposed to see around corners, and they always know what’s coming next. 

So, for Uber, a fundraising email went out in the very earliest days of Uber to the 165 members who are on an angel investing list called AngelList. It talked about the company. It offered the opportunity to invest in it. 150 of those 165 people who got the email did not even respond. And the head of AngelList, Naval [Ravikant] told me that one person actually unsubscribed. So, only 15 people thought Uber was a good idea out of 165. 

And then, some fraction of that actually invested. And this Airbnb story is similar. The Airbnb founders like to tell the story, but apparently, Joe Gebbia and Brian Chesky, two of the Airbnb founders were meeting with investors and they were meeting with one investor in Palo Alto. And they were telling them the idea for this service, then called, airbedandbreakfast.com. And halfway through a coffee, the investor stood up, turned around, and walked out. 

They didn’t know if he was coming back or not. But he thought it was such a bad idea. I think the moral of the story is these guys, unfortunately, they are mostly men. They often have no greater idea of what’s coming next than anybody else. And the best ideas often look bad. And these ideas were unconventional founders. 

The Airbnb guys came from design school. At the time Travis Kalanick wasn’t in the run *inaudible* Uber. They were going to deal with heavily regulated industries. They were based on, in the case of Uber, smartphone technology that was still immature. So, there are a lot of reasons not to believe. 

And it just turns out that the stories of these companies getting funding early on are really the stories of how hard it is to be a venture capitalist and what good investing looks like. Because in the case of both companies, as I mentioned earlier, they found sponsors that kind of had been investigating these industries and believed in the businesses perhaps more than even the founders themselves. I talked about that a lot in the book, and I think you get a picture for what good venture capital looks like, and what bad venture capital looks like.

Stig Brodersen  32:34  

Yeah, and what’s really the picture? I mean, one thing is how I would look at the very beginning, but also like, if you look at some of the later rounds. I think Uber’s latest valuation was around $60 billion plus. I mean, they lost $1 billion the last quarter. How much money would you pay to lose a billion dollars? A quarter? How do you come up with a valuation like that?

Brad Stone  32:54  

Stig, it’s even crazier than that. It’s close to $70 billion. So, but yeah. It has nothing to do with the numbers that are out there now. Certainly not the losses. They’re looking at the top line growth, which is still remarkable. It’s interesting because they may not get there. The strength of Lyft in the US and DiDi in China, does suggest that Uber no longer has the landscape to itself. 

And then, of course, you have the questions that we’ve already raised around driverless cars. So, the profitability isn’t a worry to me. Perhaps having studied Amazon so much, I think Uber will get the leverage it needs over its own business model and can cut its costs and get to profitability. But how big the market is, is really the question. And whether Uber can dominate it in the way that its investors perhaps expected.

Preston Pysh  33:41  

Just to put this conversation in the context for the people listening, I want to say off the top of my head, isn’t GM [General Motors] and Tesla hitting around $50 billion in their market cap or somewhere around in there? And what was the number you just said, Brad?

Brad Stone  33:54  

Yes, around $69 billion there for the last round of Uber.

Preston Pysh  33:58  

Uber. So this is application, which is helping people get around via taxi service that they don’t even own. It’s outsourced. Its drivers that are stepping up to the plate here. That app is valued at $70 billion. And you got GM valued at $50 billion. You also got Tesla valued at $50 billion, which is a whole ‘nother conversation.

Brad Stone  34:19  

It’s also an incredibly efficient business model. They don’t own any of the cars. We sort of think of that as a defect, but they have no factories. The employee to revenue ratio is, I don’t know what it is at the top of my head, but something that GM can only dream of. It’s a severely cash generating business. It’s taking a 25% commission. Every ride was really, what’s the variable cost of that ride? 

Now, the app is running, and maybe there’s some wireless charges, and there’s the subsidy perhaps that they paid to sign up the driver in the first place. But it’s a pretty efficient business. So, I think investors fell in love with the business model. 

And then, the way it ported so quickly around the world. And the way it really did change cities for the better. And now, they’re facing some of the blowback in terms of all the industry issues that we’ve talked about.

Preston Pysh  35:11  

You have a wonderful quote in your book, and I’m going to mess it up severely. So, if you could help me correct this, but it goes on the lines of, “The largest park company in the world doesn’t even make a car, and the largest hotel company doesn’t even have a hotel room. Really makes you think.”

Brad Stone  35:27  

Although, now actually, it’s sort of not true, right? Because Uber does own part of its fleet of experimental self-driving cars, and it’s rolling out some self-driving trucks. And Airbnb is actually building some very experimental kind of hospitals to kind of control the experience. But then, it’s minor stuff. And you’re right. These are these hyper efficient, new age businesses that don’t own much in the way of assets or the responsibility that comes with it. 

Now, the dark side of that is that they can’t control the experience. You might have a bad experience at an Airbnb or a bad experience in the back of an Uber. And leaving a one star rating is only going to be so satisfying. So, they’ve got to deal with the downside as well. 

Preston Pysh  36:08  

That’s true. All right. 

So Brad, this is the last question that we have for you. And usually we ask people to talk about a book. But the thing that I really want to extract from your knowledge here is who’s a person out in Silicon Valley that is just not somebody that anyone else talks about, but is a huge resource or somebody that we could turn to, either a blog or a book that you think is way underrated, that a lot of people don’t know about, but you put in very high regard?

Brad Stone  36:41  

Well, I don’t know if this will be a surprise, or an unknown name to some of your listeners, but I really have recently become quite enamored with an Israeli author and academic. You all know Harari [Yuval Noah Harari] who wrote the incredible book, “Sapiens” or a new book, “Homo Deus: A Brief History of Tomorrow.” 

The first book is the history of humankind and evolution and that kind of exploration of the natural laws and why human society developed. But the new book really does project forward to look at some really important issues like what automation will do to human labor, how people can occupy themselves in a world where perhaps labor isn’t needed. 

And he draws such interesting comparisons between things like virtual reality and religion. To me, he’s like asking and answering some of the most interesting questions of our age. What is our future when we start to create machine intelligence that’s smarter than us? 

I mean, if you just look at the number of American males who are occupied by driving in some respect, you start to get really nervous for their future and for the political implications. Because so many people will be out of work in our lifetime, when this technology does get good enough. Machine automation, the stuff that Amazon is working on for their warehouses. 

Preston Pysh  37:59  

All right, so Brad’s new book is called, “The Upstarts.” This thing is flipping phenomenal. It’s all about Uber, Airbnb, [and] the whole sharing economy. It is fascinating. And I can’t promote this book highly enough for our audience to go out and read this. And also not just to read this book, but go back and get his book, “The Everything Store by Jeff Bezos” because, wow. 

I mean, Goldman Sachs, it was their book of the year. It was a 2013 winner of the Financial Times and Goldman Sachs Business Book of the Year. So, if that gives you any inclination as to how good the book is. And Stig and I can absolutely attest. It’s just amazing. 

So, we are starstruck to have you here. I’m not even making this up, because I’ve recommended your book so many times to various people, that to have you here and to have this conversation is really exciting for us.

Brad Stone  38:54  

Awesome. Well, guys, I appreciate it. I appreciate the kind words, and it’s great talking to you.

Stig Brodersen  38:59  

Okay, guys. That was all that Preston and I had for this week’s episode of The Investor’s Podcast. We’ll see each other again next week.

Outro  39:07  

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