CEO Uber, Dara Khosrowshahi, Discusses the Company's Path Forward | DealBook

good to see everybody again and I hope you had a great little break and got to use your cards this morning to introduce yourselves to each other and ask each other questions but it is now time to ask some questions of Derrick Kawasaki who is the CEO of uber and it's a privilege to have you here in part because we got to spend some time together right here two years ago its intellect forever what I'm sure it does which was your very first interview after you got this job and so there's so much that has happened since then six months ago of course you had the big IPO today is this lockup expiration on the company and a lot has changed so I want to get into all the details and I think there's a big shift that's clearly taking place in Silicon Valley terms of the marketing markets growth versus profits and I want to get into that but I'm just curious if you were to go back to years ago and think about what you thought was going to happen when you first took this job and we were talking about it here and what has actually happened what you think well everything that I predicted in my presentation to the board happened perfectly to the team not really you know I I came into the job knowing and expecting that it was going to be an enormous challenge knowing that I would be hit multiple times kind of kind of in the head from something unexpected because this is an important company that reaches into so many different parts of society markets and was really a leader in terms of these large private companies that were becoming public so I expected entertainment I expected challenges I expected them to come from all corners and I got exactly what I expected I'm imagining there's one part of this that you didn't expect because clearly the markets didn't expect it which was when you first joined the company this was a company that people were valuing and bankers value and and investors even private investors we're talking about a hundred plus billion dollars for this I wish I'd kept that pitchbook and clearly the market has shifted in a profound way yes you announced earnings this week arguably they were better than the market had anticipated the stock goes down peloton same thing happened this week market goes down or stock goes down another so the question is what you think where what do you think has happened to the unicorns of Silicon Valley and what do you think that shift is really about so I think what's happening is that there has been a fundamental revaluation of revenue growth and the value of profits and on you know in an increasingly uncertain world right so the world around us everything going on in politics the global landscape has fundamentally changed over the over the past two years and I think that the appetite for the unknown and high risk in the public markets it's just gone down and that has consequences you've got some of the safety stocks doing much better utilities etcetera what do you think I understand you look at this and say this is a private versus public situation meaning that somehow private investors are fundamentally different then public investors do you think this is a shift in in just the way investors are thinking because it's fundamentally gonna change the model the growth trajectory of your company because everybody is having to now react to this new reality private and investment private investors fundamentally have a greater risk appetite they pay a higher bonus for growth so to speak and public investors historically the premium for growth isn't quite there and they look for growth as well as profits etc that shift now private investors what I found always do follow public investors with some kind of a delay and I do think that you're seeing the same kind of reckoning that is hitting the public markets is happening in the private markets and from my standpoint I think a couple of things thank God we went public when we did rightly absolutely work you think you'd be we work otherwise we're very very very very different from we work okay so I mean this is you have you you have you you have you have a rideshare business that this quarter delivered 22 percent i Badal margins up from even a couple of quarters ago eight percent margins fundamentally the rideshare business is of scale is global is an attractive business and it's only gonna get better within a competitive environment right but the expectations for and trade-offs between growth and profitability those formulas have changed we've got over 12 billion dollars in cash we've got twelve billion dollars in investments as well in the bank we've got a great balance sheet we've got all the cash that we need to to get to profitability so i actually think one thing God we want public and to in this environment we our advantage against our competition and at the same time in this environment the hurdle for success and the demands of the market are higher and one of them is great one of them is tough but I think it's gonna force us to perform so when you went public we sat together actually outside the New York Stock Exchange that morning and I asked you when you thought you'd ever get into profitability and yeah and back then you seem to be in no rush there was at least a couple of years out nobody was saying when profits were coming yeah now you've put a marker in the ground about those profits 2021 how much do you think though you've had to dial back the idea of growth as a result of that the good news for us is that if I look at where we were about a year back the rideshare business had not rationalized on a global basis the way that it has now and the profitability that we have seen the margins coming on a rideshare have increased frankly at a substantially higher rate than we expected internally and we now have a team that is executing at a level like every single piano we're going after the teams are building technology that is automating a bunch of tasks that were done manually so we'll do it cheaper better etc and so the rideshare business is actually looking better today than it was six months ago and substantially better and that has allowed us essentially to move up the paths of profits that said you know before all the we were stuff we made some painful choices internally right we we lived a thousand thousand yeah over a thousand people it happened before the we work stuff and it was because we started recognizing that this is a business that's expected to return on capital this is a business that we are enormous transactions but have very very low margins and if you're running a big scale global low margin business you have to start acting like it okay so but you remember when we would talk in years past we often talk to her you talked about uber being like Amazon and I always thought that one of the reasons you you you like that comparison beyond the ultimate success of Amazon was that for a very long time Amazon was allowed and given license by the market if you will not to make profits having said that they they they weren't losing on the order of seven billion dollars a year which is which is the number that Huber's lost and so the question though that I that I have about that is do you think it's fundamentally changed the ambition of the company in terms of what it ultimately becomes no the reason why we admired Amazon was one they built a great company and they've gone from books to all of retail essentially and we want to go from car hailing to all of Transportation we got its corner shop now as well to go from food to essentially local commerce as well their formula of opening up into additional categories and opening their marketplace the third party's is a formula that we want to follow in the transportation space and by the way it is a global company that has been able to thrive with low margins that they deliver to consumers and because love them as a result of it so from a model standpoint from modeling another great company it made all the sense in the world and the fact is that Amazon didn't make money for a while but was very much focused on their cash flows and they did flow cash for a long period of time and I think for us between now and 2021 our plan is to improve our margins by 30% we're going to do so and we're going to be able to lean forward and invest we're perborate there'll be some investments that we make that don't work and we'll kill them but I think the momentum that we're gonna have in margins in 2021 2022 is gonna be a very profitable year etc so I think we're we are set on a very strong path and now we have to execute and you know the markets betting is against us they are with me so it's fine with you yeah how much though do you even in the past couple of weeks ahead of this lock up and when I say lock up there's an expiration today so that early shareholders can get out and sell their sell their stock have you how much have you felt like you've had to either go on a trauma ffensive of sorts either internally with employees or venture capitalists or others into to try to suggest to them that they stay in well I'll tell you it's a it's better than my first apology offensive you know I can talk about the numbers we are reaching out to investors and I think that the lock-up because there's a lot of supply that potentially could come into the market I think they'll be less than people think but there's a lot of support that could come to the market there were some larger investors who were waiting because there was no fear of missing out now the supply is the lock-up is behind us I think we're gonna have a couple of weeks that frankly I have no idea exactly what's gonna happen during those couple of weeks but then I do think that we are going to find great fundamental long-term investors who believe in a story and believe in our numbers and I think we're showing the how the rideshare business can be profitable and I think that each team is right behind the rideshare business that each business is much younger than rideshare and i think the same kind of methodology that we're driving margins on rideshare is that is going to work on the as well take us inside the room when you've been thinking about how you've had to adjust the idea of growth versus profit tonight I'm specifically thinking about some of the investments you're making in self-driving cars and some of the other sort of more shoot the moon Orianthi you might not think of Massoud the moon oriented projects but to some of the investors who look at the losses that are related to them and look at them as far out investments how you thought about whether to stick in something or to get out of something and do you expect that we're gonna see you get out of a lot more we've certainly gone out of a number of countries in which we've operated right so we got out of China we got out of Southeast Asia we got out of Russia recently with eats we we got out of South Korea so we will get out of something's not working and for example with each we were very clear we're either gonna get number one or number two in every country that we operate in in the next 18 months or we're gonna get out because the TAM of that business the size of that business the big is big enough for us already on a global basis as to some of these newer businesses they absolutely have to perform everyone has a performance bar if they don't perform then you know it shut them down and we'll move on to the next great idea do you have any investors that are saying actually no Dara I want you to grow I want you to focus the the other way do you master son calling you and saying look actually I want you to be thinking about the future I want to ask you by the way what you think of what's happening a Softbank well but but he's there any investment that's actually coming to you right now and saying no no no no don't you know put your foot back on the gas no no no I think that our investors at this point believe that the discipline that we need to get to profitability in 2021 it's the right thing to do for the company and but at the same time they don't want us to make the fundamental trade-offs you know you don't want to hit 2021 and not grow any more and I think the plan that we have in place is a plan that absolutely hits our profit targets but leaves the high-growth nature of this of this business intact and now we have to execute behind it I mentioned basa Massa runs south bank obviously as a big taken your company had it has a big stake now in we work there's a big question about whether this vision fund the first vision funds a gonna work looks like there's some news reports today that suggest that the second he's actually gonna make the second vision fund and it's gonna happen do you think when you look back at at that at what Softbank did to valuations in Silicon Valley do you think that was healthy I think he definitely pushed up valuations and I think the question is will it stand the test of time right I think that to score someone's career based on a very unusual moment in the market you and I just asked about how the markets have completely changed right in the past month I don't think it's proper or fair so I think that using what's proper fair to judge Massa to say is Massa good or bad based on today like Martha's track record is going to be determined over a long period of time and he has been one of the great investors over a long period of time I think this is a difficult moment of adjustment for them and I think that they are adjusting and making some pretty strong pivots and we'll see but there's no question that the amount of capital that went in was soft Bank was did raise the market and it has created some behavior in some of the other players where they're overspending listen the the when the reward for growth is high the price that you pay for a growth can go high and we do have a market that needs to rationalize for example especially in the end the food delivery space and as it rationalizes we're the largest player in the world outside of China it's gonna put us in a very very strong position what do you make of your critics there are there are critics who say look Travis kalanick who was in your role prior to this may have had his problems but he was a swashbuckling ambitious big vision kind of guy and we have heard from people like Bradley tusk who was an early investor in others who say you know what I like Dara because he sort of helped maybe right the ship but maybe this company needs somebody who's got big vision all over again you know I think Travis did an incredible job in building this company I couldn't do what Travis did but I do think that I'm the right guy for the company now right in just two years since I took over the company think about where we are now versus some of the messes that we had in terms of governance etc we did take the company public at the right time our bookings are up seventy seventy-five percent since the time that I took over and now when the markets are demanding this path to profitability and growth I think we're gonna deliver it and we're determined to deliver it and we have a team who can get it done what does he think travis has been very supportive he's on the board and he's engaged you don't have to ask him that question but in general what does he want you're put more on the gas does he want it more on the brake you know Travis is there to help he's got his opinions about the different businesses but I think generally we're aligned with the direction of company you don't want to get into the debate I imagine there's got to be some debate I do want to ask about some of the challenges and these are now policy a lot of conversations we've been having today have been about the intersection of business and policy and one of those is about how drivers are treated as employees or not employees what benefits they should be getting what benefits they shouldn't be getting obviously a law was put in place in California that would treat these employees effectively as in treat these drivers you would call them drivers as employees and you say from what I understand that you believe that this law somehow doesn't apply to you well I have to admit I do not understand because it seems like the law was created for you the law is actually based on a dynamics decision that was that was decided by the court about a year and a half ago right so we've been operating under the law in one way or the other in one way or the other for a year and a half we do think that based on how we run our marketplace you know we are a technology services company especially now that you see us being in other businesses like and Freight etc we're not in the business of driving our drivers are in our drivers can or independent and they can get on the service anytime they want and they can get off the service anytime they want the law is quite technical as to as to how it deals with these issues and just because a hurdle got harder doesn't mean we don't think we're gonna pass a test that said we do understand that there is another model and for example in France we have our drivers who are independent contractors but they do get health care benefits and other protections which are entirely appropriate and so we are running this ballot initiative in California that gets drivers minimum earnings it gets them reimbursement for driving health care protections discrimination etc of protections and it allows them to have flexibility 92% of our drivers drive less than 40 hours a week okay the only that is it's a respectable job it serves their needs it serves their lifestyles and I think that this law is misguided and we're gonna fight it if if the law of the land became the law that's in France mm-hmm across the board what would it do to the business the business will continue to grow the drivers drivers would have the flexibility that they want but a machine the lorry the margin in France has to be meaningfully lower than the marginal store no not necessarily I mean our business and France is actually doing really well there is a balance and and we do think now that we've got four and a half million drivers on a global basis we do think that these protections are appropriate and we're willing to engage in these discussions and we're looking to engage in these discussions although I will tell you any time we talk to our drivers number one thing that they that they value flexibility and when we tell them what do you want healthcare or more money they want more money so doesn't mean that now society wants these protections we will absolutely be a part of that dialogue and and we already are providing these these protections in Europe ok I'm going to open just a minute I know there's so many great people who want to get to I care of Swisher's here and I want to I want to find her in just a minute but I did want to ask you a little bit about uber money yes and also your role in Libra because I see David Marcus from Facebook and Libra who's gonna be speaking a little bit later you've you stuck in the Libra project yes a number of other companies have been have gotten letters from senators and others who said you stay in this project we're going to scrutinize you why have you decided to stay because we think that the core of what Libra is about which is to get financial services to everybody in the world including people who don't live in developed countries that are have great credit card penetration etc there is a massive population that is under banked if they are banked they are incredibly ill-served by their banks all kinds of fees they pay you know much more friction than any of us do there's a better system out there and I think that the powers that be don't want things to change but it is absolutely dollars that be don't want things to change them they don't like Facebook both both and listen our our drivers these four and a half million drivers most of our drivers in many of these developing countries they don't have a bank account and so we have to as they sign them up we have to sign them up for a bank account and so we think our money project is all about getting our drivers on to kind of digitize them etcetera get them financial services that they need at low cost or no cost because the situation right now and they don't have you know the voice that we do the situation is not good okay but uh turn the lights on and try to find some some questions I knew I said I wanted to go to Kara where's Kara Kara's over there she looks so bright in here she's got sunglasses which we could use up here Andrew you gotta stay on brand nice socks speaking of which Dora they're lovely he's doing thank you fantastic I can't stop staring at them and yet so look I think you're a great guy I do think you're a shift of major shift from Travis but it's extremely low bar the same thing with moms come on thank you for your question no same thing with me without it yeah no no but but but I gotta say I got a push back on this economic model that you're talking about one of the reasons that we work was so easy to pull down in that regard is because most people can do math but most people can do that some of these times when you look at the the just the recent quarter it looks relatively economically unsustainable to continue at this even though if cash flows up even if numbers are up I'm gonna give you a positive question here because I think your business is economically unsustainable the way it is right now what is your AWS what is your what is what is the business it's gonna take you because you won't you don't have the time you don't have the patience and you are pulled into this idea of what's happened with we work which I think was the firewall it just felt what is the business that will bring you away from this a similar fate our rideshare business is our eight of us the two are one the core one we had twenty two percent margins this quarter when we look at our top five markets the EBIT down margins went from 17 percent to 62 percent all right in our rod share business in the past two quarters eighty percent of my revenue growth ran through into ebay doc so when I look at the next two years my growth is gonna be probably I'll do eight billion and revenue growth hold on a billion and revver growth and I need three billion to drop to the bottom line it's about you know call it a thirty eight percent flow through and I just demonstrated an 80 percent flow through in two quarters so this is like you actually do have to do the math and the math works so this is without raising prices and without paying drivers more because in a lot of weight a lot of people you're gonna still continue to get that pushback this is all based on there's going to be some price increasing we're gonna be going to the enterprise segments for example that is willing to pay higher prices at the same time we're gonna make investments in pool and auto rickshaws motor motorcycle etc this is business as usual for us we don't I mean we need to execute well but if you can take 80 percent of your revenue growth into the bottom line with rod share then in the next three years if I need to take thirty eight percent I can do that I can a hundred percent deliver on it not with higher prices does one of their issues know this there'll be some higher prices so for example with an enterprise sometimes regulation forces us to increase prices but higher prices will be a small part of that growth and much more of it is gonna be so that's part one of the famous things of Travis said to me on stage in a moment of truth actually honesty of which was incapable of most of the time was that I said what do you what's gonna make this model work and he said you know Kara the problem I have is the guy in the front seat if we get rid of the drivers that would work great that would be a great thing which was shocking everyone the room had a sharp intake of breath I had an internal cheer that went on thank god that's what these truth is that a solution for you autonomous driving which you guys were into and sort of have pulled back on me we're an autonomous driving autonomous driving is going to be an important development longer-term so what I'm talking about is the next three years we're gonna be all drivers all the time right but when you look closer to seven to ten years I do think that autonomous will be an important element in our transportation and it will only become that element when it's safer and it will be cheaper as well now it won't be cheaper seven years from now but it will be cheaper kind of ten to fifteen years from now but first of all it will be safer and it'll be a part of what we do there's not there's not going to be this like all drivers to full automation there's going to be a long period to get there but it is absolutely important investment that we're we're doing in partnership with Toyota that's the best car come seen no other business bride sharing is your business ride sharing and delivery and and food delivery there's some other businesses that were developing but we don't need some things you know what grab is doing for example this is in Southeast Asia over time they play they think the ride-sharing is gonna be one component of a much larger ecosystem of all sorts of other services that they're gonna well listen that's which they believe are ultimately gonna be actually problems much more profitable business in that that is that's surely the potential I think the ride-sharing and the each business together are are going to be the core of our business and and for perspective a lot of people by the way eighteen months ago people thought ride-sharing was no good and each was great now it's the exact opposite right our each business has been around in its average market for eighteen months it's an incredibly young business and there's a lot of capital that's fall into this business but I have zero doubt that the each business will turn just like rah chair it's becoming a much better business than anyone expected people thought you needed AWS to make it work not true it is the AWS and each is gonna be a second one great thank you so much you're welcome thank you Kara we are out of time I want to thank Derek house was shocking for being here thank you so very much thank you

Channel: New York Times Events

Views: 53,821

Rating: 4.6600909 out of 5

Keywords: uber, lyft, taxi, cab, taxi cab

Id: -hrTNF5dVLs

Length: 27min 42sec (1662 seconds)

Published: Wed Nov 06 2019