TIP844: Uber (UBER): The Autonomy Referendum — Is Mr. Market Completely Wrong? w/ Daniel Mahncke & Shawn O’Malley

Shawn O’Malley and Daniel Mahncke revisit Uber (NYSE: UBER), one of the largest holdings in The Intrinsic Value Portfolio, fifteen months after they first pitched it. In that time, Uber’s operating profits have roughly doubled, free cash flow has climbed to about $10 billion a year, gross bookings are compounding around 20% annually, and the board authorized a new $20 billion buyback. And yet the stock is flat, with its multiple of operating profits cut from 55 times down to roughly 22 times. Shawn and Daniel discuss why the market is pricing Uber as though autonomy ends the story — Waymo raising $16 billion at a $126 billion valuation, roughly the same market cap as all of Uber, and formally ending its exclusive partnerships in Austin and Atlanta. They dig into the more than 20 AV partners Uber has lined up in response, from Nuro and Lucid to Rivian, NVIDIA, Zoox, WeRide, Baidu, and Pony.ai, plus Uber’s $14.8 billion offer for Delivery Hero, the margin inflection driven by advertising, insurance normalization, and Uber One — and whether the market is writing down the entire company for a risk that touches maybe a tenth of its profits. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:04:06) Why Uber’s stock is flat while its operating profits have doubled (00:07:19) How Uber’s operating margins swung 55 percentage points in under six years (00:08:40) Why advertising, Uber One, and insurance reform keep pushing margins higher (00:28:49) What Waymo ending its exclusive deals in Austin and Atlanta really means (00:41:17) How much of Uber’s profits are genuinely exposed to robotaxis (00:50:29) Why Uber is racing to sign more than 20 autonomous vehicle partners (00:58:04) What Uber’s $14.8 billion offer for Delivery Hero actually buys it (01:06:39) Why Shawn and Daniel are happy to keep owning Uber Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. 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• 0:00Speaker 00

  You're listening to TIP.

• 0:03Speaker 01

  Welcome back folks to the Investors Podcast, episode 844. And today's a special one because we're not pitching a new company. We're here to discuss a company that I feel gets referenced in nearly every episode that we do. So it definitely deserves to be actually be revisited with a full update, especially since it's one of the largest holdings in our intrinsic value portfolio of stocks. So for context, last year, Sean, you pitched Uber to me and we added it to the intrinsic value portfolio with some pretty good timing. It was around the time when the market sold off over tariff fears last April, which by now feels like a decade ago. And I would say both of us, including our colleague Stick, have become increasingly excited about Uber's long-term prospects, while the stock on the other side has been basically flat since we first

• 0:48Speaker 01

  looked at it. So bookings are compounding at around 20% a year. The user base is growing at 16% a year and free cash flow is running at $10 billion annually. And the company is buying back billions in stock, just $3 billion last quarter alone, shrinking the share count, which is something that we always like to see with our portfolio holdings. And the stock has gone, again, basically nowhere. Recently, we just did an episode talking about our biggest losers and our biggest winners. And Uber didn't make the cut because, again, it didn't fit into the conversation because it has just been flat. And so maybe the stock was just a bit too richly valued a year ago, but now as the fundamentals have actually continued to catch up. And we've gotten more clarity on how Uber will partner with all of the AV companies out there to strengthen

• 1:33Speaker 01

  the platform. I think the question we're asking ourselves today is whether this opportunity has only gotten more attractive, or if there's actually something that we're missing, where we might have been blinded by our own confirmation bias. So I would say we just listen to your thoughts on the risks facing Uber the first time we cover the company.

• 1:51Speaker 02

  So don't make the same mistake I made of writing off this company because of distant fears around automation. That is sort of my message upfront to the audience. And at least, listen to the rest of this episode before you make up your mind on whether Uber is a good company to own.

• 2:05Speaker 01

  15 months later, the entire market seems to be making exactly the mistake you warned us about. Or maybe that could also be the case. We've just underestimated the threat of automation to Uber's specific business model. And I gotta say, I find myself jumping a bit from being very bullish on the company to being slightly in doubt. And I gotta say, that's never a good sign for you as an investor, which is also why I look forward to this episode so much, because it does give us the opportunity to dig really deep into Uber again. And I'm also quite sure that you've got some very important updates for us today, right?

• 2:36Speaker 02

  Yeah, that's right. When we pitched Uber in April of last year, the company traded at around 55 times its operating profits, which was a rich price, admittedly, unless you're as bullish on the company's growth as at least I was. And today, now that valuation multiple is at 22 times operating profits, which is much, much more reasonable. So over that same period of time, profits have roughly doubled. So the business doubled, but the multiple got cut by more than half, and then the stock went sideways. So that alone has me feeling very bullish. But all that is for not if the terminal value of Uber is in peril.

• 3:20Speaker 00

  Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Sean O'Malley and Daniel Manca.

• 4:06Speaker 02

  So for anybody new to Uber, how about we start with a 60-second refresher on the company? Uber is the world's largest ride-hailing platform, but it is really three different businesses. Mobility is the rides business, we all know. There's delivery, and that refers to Uber Eats, and actually now includes a growing list of grocery shops and retailers beyond just restaurant delivery. And then there's a smaller freight brokerage business that connects truckers with shippers. And we're going to pay less attention to that today because it's not material to our thesis about the company, nor does it really generate much of a financial impact. And again, for anybody kind of new to Uber, this will sound strange, but the way to think about Uber is that Uber is a marketplace. They are an intermediary

• 4:51Speaker 02

  connecting supply with demand, whether that be demand for rides or demand for pad-tied deliveries. And so Uber owns no cars, and they actually technically employ no drivers, at least in most markets, they are contractors. And then it matches riders with drivers and eaters with couriers across roughly 70 countries, and takes a cut of every single one of those transactions, which is called the take rate. And they earn that for aggregating demand and supply and coordinating the logistics. That's at least part of the value they add. And for context, 200 million or so monthly riders and eaters spent about $190 billion plus through Uber's

• 5:34Speaker 02

  apps over the past year. And that $190 billion figure, that's what the company calls gross bookings, a total amount of the order values that go through the platform. And then Uber's revenue is roughly a 20% slice of that gross bookings number, basically after they pay out the drivers or the restaurants.

• 5:55Speaker 01

  And the fact that Uber doesn't own the cost that people ride in or, you know, the restaurants, it's really the point of the entire Uber thesis, right? Especially later, when we talk about its advantage over AV companies like, for example, Waymo. So basically, what you have to understand is that Uber is just a platform meant to serve drivers, you know, restaurant owners and customers, whether that be through food or, you know, rides as we all know it for. And when we covered Uber originally, one of my hangups was exactly how profitable this business could be, because they have a lot of incremental costs. I mean, you called Uber's economics of scale more like Walmarts than Googles, with the idea being that every incremental ride requires paying a driver for their time and also the insurance. So margins

• 6:38Speaker 01

  would always be kept well below what other software companies could earn. It's kind of similar to what we also discussed with Spotify back when you covered it. So operating margins were about 6% back then, but just in a year, quarterly operating margins have doubled. So even just looking at your financial model for the company, we may have both underestimated what Uber could actually accomplish. And as you know, if you listen to our biggest winners episode, outperforming our margin estimates by white margin is a common denominator with all of our biggest winners. So I literally used Uber as an example when I talked about Remidley's margin expansion and profit inflection. So this is a company that shows, as well as few others do, how you can quickly become a way more profitable company.

• 7:19Speaker 02

  Well, as you know, I love to talk about Uber's swing in operating margins over the last five years. It's one of my favorite topics to bring up at cocktail parties. The revenue growth is great, but if you look at a chart of their margins, it really is one of the most beautiful things I've ever seen. From 2020 through today, Uber's operating profit margins have swung from negative 43% to positive 12%. And if you're keeping along at home, that is a 55 percentage point swing in margin profitability in less than six years for a company that was already doing billions in revenue. And I mean, that is, come on, that's astounding. I'd agree

• 7:59Speaker 02

  that Uber's ceiling is higher than I appreciated last year. And the core logic though still holds that Uber probably won't ever have Microsoft's 40% margins, but with further scale, higher margin advertising, cross-selling between Uber rides and eats with lower customer acquisition costs, Uber's membership program driving more order frequency, and then integrating AVs into its app, which comes with a different cost structure, and without totally displacing human drivers, which we can speak more to, Uber could become a structurally better business than was imaginable to anyone just a few years ago.

• 8:40Speaker 01

  Just to double down on those points you quickly made there about what could further drive Uber's margin higher, I think you firstly mentioned advertising and Uber's ads business didn't exist just a few years ago and now it's a business with more than $2 billion annual run rate, so going more than 50% a year and ad dollars are, as we all know, nearly pure profit compared to the core business. That's why we own so many businesses that at least expanding into the advertising space. I mean, MercadoLibre, Amazon, all of those companies, right? And these are the ads that can be shown on devices in the back of drivers' cars, in app placement with even just having your restaurant positioned more prominently on the Uber map while people just check on their ride status, for example, right?

• 9:22Speaker 01

  So you could even have search-based ads where restaurants bid to be the first result when you search something like Chinese food near me in the Uber Eats app. And I still remember standing, I think it was in Lisbon, last year, ordering an Uber and basically discussing how you could best place ads on the map. And it looks like that's what's now happening. And then, as we've alluded to, Uber Eats is no longer just eats. It probably needs a sort of rebrand. I mean, you can now order a whole lot more than just food. And honestly, they're stepping to some extent, at least on Amazon's toes here. I mean, Uber can bring an urgency to delivery that Amazon, at least currently, is not designed to match. I mean, I don't know, let's say you run out of makeup and you have a party in two hours, right? And you might not have enough time to actually run to the store,

• 10:06Speaker 01

  while you also have to do all the other stuffs that you need to prepare to go to a party. Well, then you can just call an Uber driver to pick your order up from, let's say, Ulta Beauty and bring it to you in 45 minutes' time. And I use that example not necessarily because you or me just love wearing makeup, but because Uber literally partnered with Ulta Beauty not too long ago. So this is something that is happening right now in the real world.

• 10:28Speaker 02

  Well, it's also a great example too, because Ulta was actually our first holding in the intrinsic value portfolio. It was the first company we ever invested in and we did very well on the stock before selling. We thought the valuation got a little rich for our taste, but it is a fabulous business. And yeah, I was really excited to see them partnering with Uber. And to your point, Uber has over 1.5 million merchant partners globally. And that ranges from, a lot of that is restaurants, but grocery stores, cosmetic stores, sporting goods stores, alcohol retailers, florists, and really everything in between.

• 11:05Speaker 01

  They expand it much quicker than I think both of us thought they would do. And another thing on the margin front that we didn't yet mention, I think, is insurance. I mean, that became a huge cost headwind post-COVID because vehicle prices just exploded. And so if vehicles are more expensive, then obviously insurance premiums must rise correspondingly. And I think we spent a lot of time on that in the original episode and I didn't know about any of that business. So I think it was kind of hard to fully understand it the first time you hear about it. But you know, there was really an unprecedented inflation in car insurance and especially in the US, which is still Uber's biggest market. But as I come across in my research for an episode that I will soon release, which is Copart, I think those are wins that are now starting to change, right? I think this sort of be,

• 11:49Speaker 01

  I think this could be a tailwind for Uber in the future. So for context, Uber renegotiates rates with its insurance carriers every March. And this year's renewals came in at, I think it was low, single-digit increases, which is the most benign increase in many years. And this happened in addition to receiving hundreds of millions of dollars in savings from state-level insurance reforms.

• 12:10Speaker 02

  It's a great point for sure. And that's not even to mention that in a future where, say, 30% of Uber's fleet is autonomous vehicles and drones and maybe delivery robots, then insurance costs as a share of revenue would just keep dropping. And just a few days ago, on that point, actually, Uber announced that it was partnering with a company named ZipLine to bring drone delivery to millions of Americans by the end of 2029. And so just to kind of go down that tangent for a moment, ZipLine is a company operating across four continents with 135 million autonomously flown miles and 2.7 million deliveries that have helped reduce traffic and carbon emissions. And the ambition, I think Uber

• 12:54Speaker 02

  is hinting at there is really, really big. And they're not even hinting. It's not very subtle. They're pretty explicit about that they want to revolutionize convenience. And that is something that appeals to everybody. Everybody values convenience. And just reading from the press release, Uber said, quote, "It's building the world's most flexible hybrid delivery network, seamlessly integrating couriers, sidewalk robots, and drones to match every delivery with the best mode of transportation." So I don't know about you, Daniel, but I can't wait to get my first drone delivery from Uber Eats. That is going to be a great, great day for me. And just a line here from ZipLine's co-founder, he adds, "Teleportation is not science fiction anymore. It's becoming part of everyday life.

• 13:39Speaker 02

  Every great transportation revolution has changed where people live, how businesses operate, and how economies grow. Together with Uber, we are taking the next step toward building a world where getting what you need is as fast and as effortless as sending a text, no matter where you are." And yeah, we were talking beforehand about how, you know, we're not the most DIY types of people, Daniel and I. We really appreciate convenience. Let's just put it that way. So this, this new world that we're entering into and that Uber is ushering us into this new age of unrivaled convenience, I'm pretty excited about that personally. And I'm pretty excited about it as an investor. And so I'm getting

• 14:21Speaker 02

  a little carried away, but my main point was actually that drones don't come with insurance costs, or at least not the same insurance costs as drivers on a road. And then if you believe that AVs will broadly be safer than human drivers, which does so far to be true in limited cases, then insurance costs as a share of gross bookings or revenue will almost certainly go down. And that creates room for margin expansion.

• 14:46Speaker 01

  I don't want to go on a tangent here. And perhaps the ZipLine co-founder has a different definition of what teleportation means, but I think generally, we just had Moderna coming out with, I think, the news that they now have the first vaccine against cancer, at least a form of it. So whenever we have these stories, I just feel about what will the world look like in 10 years' time? You just have to be excited, right? I mean, you might order food and there's a drone coming. And I think it's even happening in some countries. I mean, we covered KuPang a while ago and they already use drones to deliver packages. But all of that, you know, just gets me excited thinking about where the world could be in 10, 15 years' time. And I think that's also a great part of why we like to look at these companies and especially Uber is one of those where you just see so many things that could just make your life better. But anyway, just to

• 15:30Speaker 01

  add to that, I think for a couple of years, Uber's US rides business was noticeably slowing, while Europe and Latin America still grew quite fast, I think it was about 30%. And it turns out that some of this was self-inflicted, in a sense, since US insurance costs were inflating at, I said it before, double-digit rates and Uber passed those costs on to US pricing. And there's no evidence, and I guess it shouldn't really come as a surprise to anyone, that higher pricing slowed down demand. And management actually described it as an accidental A/B test on price elasticity. With America, as the test grew, I don't really know what I think about that. I think this is perhaps a bit too important to turn into

• 16:10Speaker 01

  an A/B test. But anyway, now that insurance has normalized, they are passing those savings back into lower prices and the US business is very much accelerating, which is great because it's obviously one of the most important parts of the Uber business. But also, it's kind of funny to say that the US is not necessarily Uber's most profitable market in terms of per capita economics, because in some countries, and I think it's namely developing markets, Uber isn't even required to provide insurance at all. So each ride there can be more profitable than a ride in the US, at least in percentage terms. But still, we're not complaining that growth in the US is turning up again.

• 16:48Speaker 02

  No, no, not at all. And one of the things I've also been most excited about is Uber One. That is the company's membership program. Proudly, we are both members of it, right, Daniel? And it's increasingly becoming an alternative to Amazon Prime, or maybe better way to put that is, it's like the Amazon Prime of on-demand, same-day convenience. And so in the US, it's something like $10 a month and it gets you free Uber Eats deliveries and then 6% credits on every Uber ride, plus some other benefits there. But for me, it does pay for itself. And anyways, Uber One now has 50 million members. And so that's an increase of 14 million paying subscribers just from when we looked at the business

• 17:32Speaker 02

  last year. And you could do the math and realize that this amount of subscription revenue for a $150 billion company is not terribly consequential. And in other markets, the subscription rate is not even as high as $10 a month. But the way to really think about it is that Uber One drives greater loyalty to the Uber platform. And in aggregate, that significantly increases order frequency. And so I can attest to it. I used to order food delivery very, very infrequently, maybe once every three months, you know, once in a blue moon. But now I actually find myself doing it maybe two or three times a month, which is not a ton, but I'm incentivized to do so to capitalize on the perks of Uber

• 18:15Speaker 02

  Eats. And, you know, as shareholders, we got to test out the product, right? And Uber One members really are, they're like super users. They now are driving roughly half of Uber's total gross bookings and about two-thirds of delivery bookings. So you can see that for most Uber One members, the Uber Eats perks are what particularly stand out. They're driving a disproportionate amount of delivery bookings.

• 18:41Speaker 01

  Let's take a quick break.

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• 21:50Speaker 01

  I'm actually surprised to hear that Uber One is 10 bucks in the US. I think I'm paying five euros and even with the conversion of US to USD, that's still quite cheap, which kind of makes me question whether I even get the same perks as you. I know that especially whenever we talk about credit cards and I've even asked some people or you know, some friends in my circle, we just don't have any good credit cards here. You know, there's no payback to the same extent that you always talk about when you talk about your credit card. So I should probably check whether Uber One is even giving me the same advantages as it is giving people in the US, but that's for another day. I think there was quite an interesting line from Dara, Uber CEO, who compared Uber One to Netflix, where you basically pay one fee and then the

• 22:31Speaker 01

  platform with the most content wins, except Uber's content is basically cars and you know, couriers and restaurants and now also groceries and hotels and parking and all sorts of stuff. And yes, I did say parking, by the way. In February, Uber announced that it was acquiring the parking app SpotHero, where you can basically reserve spots at more than, I think it's 13,000 garages. That might sound a bit random at first, but if you see Uber as a convenience platform in all regards, I think it makes a lot of sense. I mean, especially right now here in Hamburg, when I want to go somewhere, it's not really about will the car take, let's say 10 minutes, it's more about how much time do I need to actually find a parking spot? So I think this is one of the most important problems for all big cities where you have a lot of cars. And it's

• 23:15Speaker 01

  not a huge business, but it's one of those where you just have one more reason to open the app. And if Uber does it well, it can then cross-sell you on, for example, paying for other services from Uber. So they basically bake as much stuff as possible into Uber One as an additional value add, just to get you on the app and then cross-sell you on other things. And what they found is that multi-product users spend more than three times what single product users do. So just by getting existing users to use more different services from Uber, they can drive a ton of growth at lower acquisition costs. And as they say, getting a customer you already have is obviously cheaper than getting a new one. And I think that's also one of the things that I thought about the first time we covered the company where I was like, doesn't everybody already have Uber? How are

• 24:00Speaker 01

  they supposed to keep growing for 20 plus percent? Well, it's exactly this, you know, getting these existing customers and making them more profitable. But anyway, I'm sure we could talk about half a dozen other things that we're excited about for Uber, but I would be more interested today in actually getting into what the market is paying attention to instead, because again, Uber's stock isn't exactly matching its results over the past year. And I assume that largely boils down to our name, which shouldn't come as a surprise, is Waymo.

• 24:29Speaker 02

  Yeah, so let's lay out the facts first. I'll try to do so as neutrally as I can. In February, Waymo, Alphabet's driving subsidiary, raised $16 billion at $126 billion post-money valuation. And they raised that capital from some very well-respected venture capitalists like Sequoia and Dreeson Horowitz, with Alphabet remaining majority owner in Waymo. And so it's another pretty powerful backer to have. And Waymo's vehicles have now driven well over 100 million fully autonomous miles, completed 15 million paid rides in 2025 alone, which is

• 25:11Speaker 02

  triple the prior year. And it's doing something on the order of magnitude of 500,000 rides a week. And they say that they're hoping to expand to more than 20 new cities this year, and that includes Tokyo and London. And maybe they'll be coming to Frankfurt and Hamburg one day soon, Daniel. And all that sounds really impressive, but just to emphasize how optimistic the market is about Waymo's future. You've got the private markets valuing Waymo at roughly the same valuation as all of Uber. A company that I should say in contrast is doing more than

• 25:48Speaker 02

  three billion trips a quarter and has $10 billion in free cash flow. So somebody has to be wrong here. Waymo is either grossly overvalued, or Uber is grossly undervalued, at least in my opinion. And don't get me wrong, Waymo is incredibly impressive technology, but there is a difference between novel technology and being a scaled, multi-billion dollar profitable business that can support a more than $100 billion market capitalization. We know that Waymo can plug into cities that already have lots of ride hailing and transportation options, places like San Francisco. But I should mention that a chunk of the rides they've completed were actually ordered

• 26:32Speaker 02

  via the Uber app. And so can Waymo fully replace Uber? That's the question. And then the other question is, can it take enough market share from Uber to undermine Uber's business long term in a space that's already growing incredibly quickly? And so I think they have a lot to prove still to warrant that kind of valuation. And my belief at a high level is that drones and autonomous vehicles are going to make convenience cheaper than ever. And so it'll be so easy to get picked up or to order whatever you want and have it in minutes, maybe not quite teleportation, but something pretty close. The industry is going to expand massively. We're going to find

• 27:14Speaker 02

  ourselves all using these services much, much more often. And I think we'll just become more spoiled by convenience and more dependent on it. And a lot of folks who are on the margins as Uber or DoorDash customers at the moment, I do believe they'll be won over as more frequent users as automation brings prices down. It'll become cheaper to hail a ride or to get food delivered, and then the frequency of order volumes will increase dramatically. That's sort of my view on it. And with the point being, Waymo could take a slice of market share from Uber, they almost certainly will. But if the whole pie is growing fast enough, there will be more than enough room for multiple huge winners.

• 27:58Speaker 01

  You sort of touched on it briefly, but a lot of Waymo rides have actually been ordered through the Uber app, as we all know, and not necessarily the Waymo app exclusively. Reflecting that, until now, the two companies have tried to partner. And I think the bare argument has always been, despite that, that Waymo was just using Uber, right, that they are exploiting their wide distribution to build their own brand awareness. And then they're trying to pull it off by themselves, you know, just sort of pulling the rack out from, you know, underneath Uber and just by breaking up and basically pulling Uber's users to the Waymo app, to the exclusive offering. That's not exactly what we've seen yet, but I think there are signs that this is what could be happening in the future. I mean, Uber's stock was knocked to its 52-week low, and I think it was late July, after

• 28:43Speaker 01

  Waymo formally notified Uber that it will end the exclusive partnerships in, I think it was Austin and Atlanta. And those were two cities where also Waymo's robot taxis were available only through the Uber app, which is not the case in every city that they actually partner in. So Waymo plans to launch its own app in both of those cities. And I think it's early 2028 when their existing contracts with Uber expire. And just to clarify, that doesn't necessarily mean that their partnerships are fraying in every city, but clearly there are tensions between Uber and Waymo, and they are intensifying it. If Waymo were to indefinitely remove their fleets from Uber's app, that would be a setback for Uber, without a doubt. And that's also why Uber is racing to partner with as many other AV companies as they can,

• 29:27Speaker 01

  so that no single AV maker actually comes around the corner and, you know, dominates the entire market. And instead, you have many players competing with each other, and then Uber is sort of the neutral aggregator of demand for customers in that field. And I gotta say, I do actually worry about the Waymo dynamic specifically. However, what gives me some peace of mind is that there's no loyalty in the ride-hailing business at all. And you would probably think that's a negative for Uber, because it's the biggest brand, and you could say, you know, it's the number one, people will choose Uber because of the loyalty. But I actually think it's an advantage, because if there's no loyalty, you need an aggregator of demand. And even if people don't choose Uber because of its name or because of the brand, they just choose it because it will be the best aggregator of demand, because it has the most scale.

• 30:12Speaker 01

  So that means either it's cheapest or just coming faster. You know, if I'm at a restaurant, and I just want to get home, I don't want to wait for 20 minutes if I can go into Uber app, and then it's a 10-minute ride, right? Even if they charge up a bit for that. And Waymo is cool, and it's unique, and I would love to drive one at some point. Unfortunately, I can't here in Hamburg. But when there are 10 AV companies, why would anyone care to order Waymo instead of any other AV? I think it's pretty cool right now, and it's sort of the only one that you actually see on the streets. But 10 years' time, when you have drones flying around you in your food delivery, I think there will be so many companies, and nobody really cares.

• 30:45Speaker 02

  Today is turning into a very futuristic episode, evidently. But yeah, the Uber and Waymo fallout is real, and the Financial Times reported that around this time back in July, the two companies had begun lobbying regulators for opposing frameworks, which is what has put them at odds increasingly. Uber wants these rules in place that enshrine hybrid networks of human drivers and robots working together. So for example, in New Jersey, Uber lobbyists propose that any platform offering robot taxi services be required to have human drivers provide at least 85% of all rides during a three-year pilot program.

• 31:25Speaker 02

  And so that is not very subtly, clearly intentioned at Waymo and setting them back. And you can imagine why this would tick off Waymo. And so things have actually gotten pretty petty, honestly. Waymo has accused Uber of not taking good care of their vehicles, and then Uber has turned around and pointed the finger back at them, complaining about safety issues on Waymo's end.

• 31:49Speaker 01

  It's getting personal, I think. But I think, Sean, you 15 months ago, in your first pitch, laid out a pretty good case for why these hybrid ride-hailing networks will probably, most likely, win out over strictly AV platforms. So instead of me just repeating what you said, I would say we just give that a listen.

• 32:06Speaker 02

  The beauty of Uber's model is that the vehicles are not on their balance sheet, and drivers can opt to make themselves available in response to demand in real time. Thus, Uber drivers can be incredibly flexible about responding to ride requests and elect thereof. Another way to maybe say that is that supply on Uber's platform naturally adjusts to demand. And for, say, Waymo to try and allocate XYZ number of cars through a city that will displace Uber, well, the reality is that they're either going to under-allocate vehicles or over-allocate them at any given moment in time. There's just no way to perfectly match demand with a fixed supply of vehicles driving around, which is why it's better to deploy a more limited fleet and just partner with Uber, tapping into their network for bookings.

• 32:51Speaker 01

  So, grade yourself, Sean. How do you think about that argument today? How does it stack up compared to how you thought about the company and also all the developments 15 months ago? I mean, the market certainly has an opinion, and I think at the moment, it's fair to say that it doesn't exactly favor Uber.

• 33:08Speaker 02

  I'm as vulnerable to confirmation bias as anyone, but I would argue that actually the logic of that clip has been validated. Demand for rides remains wildly spiky, and that is just fundamentally not going to change. The peak-to-trough ratio within a single day's demand for rides is something like four to one, and a fixed fleet of robot taxis that's sized for peaks in demand is going to sit idle during those trough times of the day, while a fleet that's sized for the demand troughs is going to leave riders stranded at rush hour and be completely unreliable. And Uber uniquely solves this by flexing millions of human drivers in and out of the

• 33:50Speaker 02

  market in real time, which is why in Austin, Uber's own data showed with Waymo vehicles on its network were busier than 99% of human drivers. But that's because Uber's demand aggregation kept them full. There are so many people, there's almost a liquidity to the Uber network that is very, very hard to replace.

• 34:11Speaker 01

  I've actually heard that even today, if you open the Waymo app in California, rate times once for like 18 minutes versus just a few minutes on Uber. So I think the reality of needing to have flexible supply, where drivers can come online to work for just an hour or two during these demand spikes, hasn't changed, and it's already being felt for the people that actually use Uber and Waymo. But again, I think currently Waymo just has this advantage of being more exciting if you get into them, so maybe some people use it. But if you just think about your daily life, right, you don't want to wait, let's say, 18 minutes if you could just wait five minutes.

• 34:47Speaker 02

  Yeah, I don't think that these challenges are lost on Waymo. You know, this is a pretty smart company, and that's why, longer term, I do believe that they will want to continue to work with Uber if that proves to be the best platform for monetizing their hardware. So of course, they want to try it on their own with their own app, but if that doesn't work out as well, they may ultimately revert back to wanting to plug into Uber. And one thing that gives me pause, though, is that Waymo does not necessarily have to be efficient, doesn't have to be profitable. What it's trying to do is be strategic in the sense of, with $16 billion of fresh capital, and really virtually unlimited backing from Alphabet if needed, though that is sort of

• 35:29Speaker 02

  changing, as Alphabet is allocating a lot of resources toward AI and data center construction. But basically, Waymo can afford to have terrible fleet utilization for years if that's what it takes to displace Uber. And you know who proved how to use that playbook? Uber. Uber subsidized rides for a decade to gain scale, and some people thought the business would never be profitable. And so the question now is, really, how ugly does Waymo want to get in this competition with Uber? Are they going for the grand prize? Do they want to completely wipe Uber off the map? Or are they okay with maybe a more secondary role in the market, or, you know, a role where there's room enough for both of them?

• 36:11Speaker 02

  And so if it's the former, they can certainly cause Uber a lot of pain for some time to come, and that could be in the form of burning lots of capital for the next decade and really triggering a race to the bottom in pricing, but I don't think kills Uber long-term, but would certainly set back the returns that we expect them to generate. And so, you know, again, I don't think that they'll be able to just grid it out for so long that they'll inevitably kill Uber, but a subsidy war is really not going to be good for anyone but consumers. I mean, consumers will benefit from cheap ride prices, but for us as shareholders, it'll be a bleak picture for us. And so, like I said, there is, though, a version of reality where they choose to avoid

• 36:56Speaker 02

  this race to the bottom and opt to instead treat Uber as a strategic partner long-term, where both sides can win big by working together.

• 37:06Speaker 01

  When I said in the beginning that I find myself sometimes, you know, questioning my conviction in Uber, I think this is what it actually comes down to. I mean, Google has spent billions of dollars on Waymo, and I just struggle to see how they did that with the goal in mind to, I don't know, become one of 10 AVs integrated into the Uber network. So they must have had the goal, and this is also what they're currently showing with the strategy, to actually dominate that market. And if they do, they could throw so much money at it that it just destroys Uber's margins for many, many years, and therefore also investment. And even if they don't kill it, that would be a sort of a worst-case outcome, at least if you think about it for the next five to 10 years. And whether we like it or not, at least in select cities, the single best autonomous

• 37:50Speaker 01

  vehicle company on earth just looked at everything, which Uber is offering, which is, you know, 200 million users, the demand aggregation, the utilization logic that you basically just talked about, and then said, no thanks, we'd rather build it ourselves. And I don't know, if I were to be a bear here, I would say, isn't this the market's whole point, that they say, well, if the technology leader doesn't need Uber, why would the eventual winner of autonomy, whether it's Waymo or any other company, still need Uber?

• 38:19Speaker 02

  It's a good point. And just to put everything in context so far, Waymo does 500,000 rides a week, whereas Uber does 40 million trips a day. So the entire global autonomous vehicle industry, all the players combined, is only doing something like 50 million trips a year as Uber adds roughly 3 billion trips a year, just in growth. So in other words, autonomous rides today are around 1/10 of 1% of global rideshare volume. And maybe he's biased, but Uber's CFO has been pretty blunt that over the next five years,

• 39:00Speaker 02

  AVs are quote, relatively immaterial to Uber's volume. So he doesn't even see AVs as really being something significant for a while down the road. And the fastest growing AV deployments today are, at best, tripling their volumes each year. And in Uber's early hypergrowth years, they were actually nine to 10 X-ing their volumes annually. So even for the best case scaling curve for robotaxis, things are progressing slower than what we saw during the ride hailing platform wars of the 2010s. And that tells me that the integration of AVs is going to play out over a long, long time. Overnight, every car on the road is not going to become an AV. And so there's going

• 39:45Speaker 02

  to be lots of regulations, there's going to be protests, customers are going to be hesitant to adopt the new technology. And then also, there's just a lot of work to be done for AVs to still operate safely in all environments, not just on the pristine roads of San Francisco and Austin, Texas. So they're going to need to be able to navigate rainstorms and blizzards and chaotic traffic and cities like developing countries and a whole bunch of other really complex problems. And so again, I think we have to put everything in perspective, even if there is some plausibility to the market's concerns about the terminal value of Uber, it's certainly not on any sort of immediate timeline.

• 40:26Speaker 01

  Although the business and the geography are concentrated, I mean, if you decompose Uber's profits, mobility, which is obviously the ride hailing business, is roughly 60% of operating profits. And then the US represents roughly 60% of the mobility business. And then if you just look one way further, looking at the top 20 cities in the US, they're the only places that robotaxis currently realistically operate at scale in the foreseeable future. And that includes about a quarter of US mobility profits. So we're mainly talking about the risk of them getting into the US and then competing with Uber there. And what that comes out to, if you just look at all the numbers, that's effectively 9% of Uber's profits that are genuinely exposed to robotaxis competition, at least in the near to medium term. And what is that? Probably like five to 10 years' time?

• 41:11Speaker 01

  That's what I would label this. And if you include the suburbs, which AVs, if we're being honest, won't reach for a long time, you get to maybe 18%. But actually, again, the suburbs have been one of Uber's, I think you mentioned last time, biggest growth areas with their wait and save initiatives, where you can wait longer and then you get a lower price. And again, it took even Uber a long time until they got into the suburbs, because it's just a lot more organizational things that you have to do to even there, have enough drivers at the right time to actually pick up people. And meanwhile, the other half of the company is just delivery, and that involves a human walking food to your door. And I know that robots are not doing that at scale at any time soon, although we talked a lot about drones today. But I don't know, thinking about drones that can

• 41:54Speaker 01

  do this, I think it will still be, you know, five to 10 years out at a minimum. And before that, you know, you won't see any restaurants setting up to work with delivery drones, assuming that would even be possible for most restaurants. So when Uber's valuation multiple of operating profits gets cut in half, like it has been in the past year, the market is implicitly writing down the whole company for a risk that directly, at least, touches maybe a 10th of current profits. Although we all know it's not how the market works, they look out 20, 30 years at least, sometimes, and this appears to be the thing here with Uber.

• 42:28Speaker 02

  Well, what's really interesting is that in Austin, in Atlanta, which are supposed to be two of Waymo's biggest showcase markets, these cities have actually been among the fastest growing Uber markets in the US. And in San Francisco, which is Waymo's most mature market, which is funny to say, mature for a business this young, but still, Waymo does legitimately have a 15% to 20% share of rides, but Uber's trip growth accelerated in San Francisco in 2025. And so if you're asking how it can be, it goes back to a point I mentioned earlier, robotaxis are expanding the market. They are converting people who would have driven themselves or taken public transit into rideshare users. And so the category is growing faster than market

• 43:13Speaker 02

  share is shifting. And rideshare today is less than 1% of the roughly 3 trillion miles that Americans drive every single year. And as autonomy pulls costs down toward being on a closer parity with car ownership, at least in cities, that leaves a lot of room for that 1% number to grow.

• 43:38Speaker 01

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• 46:41Speaker 01

  All right, back to the show. Well, I would say with great opportunity comes great competition, I guess. I gotta say, I watched Spider-Man this weekend, so maybe that came to my mind here right now. But I gotta say, what you said actually reminds me of an argument that we had with Adobe a while ago, where we said that especially in the beginning, there will be even more videos and photos to edit because AI creates them. And you know, before that, they were just not in the system. I think it's again, like a short-term, but it's a long-term thing, where especially right now, Waymo's just get more people to use Uber and Waymo and just ride hailing in general. And then you have to question 10 years, 15 years' time, where will they actually go? Is it still Uber that acquires demand, or is it just a single company where they will go? I mean, Tesla, for example, is also scaling its own

• 47:25Speaker 01

  robotaxis service and potentially has the manufacturing base to just flood the market with purpose-built, let's call it 30K cybercabs, assuming their camera-only technology actually gets to a point of being truly autonomous, which I think is a question for people who have a better understanding of how this technology actually works. But for better or worse, Tesla remains the industry outlier, still refusing to use lighter sensors. Although I think the prices of those have come down, I've learned that a Waymo car by now is supposed to only cost about 25K in terms of the lighter sensors. It used to be 100K just a couple of years ago. And then, if you also look at Amazon with their Zooks subsidiary, they're also playing both sides as well. So Zooks will put its vehicles on Uber's networks in, I think it's Las Vegas and

• 48:10Speaker 01

  Los Angeles, but it will keep its own app too. And I think Amazon's CEO of Devices literally just asked, quote, "Why should we give that out?" right? When discussing owning the customer directly. And Amazon currently has about 260 million Prime members compared to Uber's 50 million Uber One members. And they also have a long history of being willing to burn cash to win the market. And I think we discussed all of this last time, and especially once when we gave a presentation on Uber, that they are competing with all of these companies that not only expanding to the field, but who just have a lot of money to burn.

• 48:43Speaker 02

  I would say Uber's response to account for all this has been pretty dizzying. It feels like every other week, there's a press release with a new self-driving partner attached to Uber. And so a year ago, Uber had 14 autonomous vehicle partners, but today it has more than 20. And more importantly, these partnerships have gone from being abstract deals to concrete commitments with vehicle counts and cities and dollars all defined clearly. With Neuro and Lucid in particular, Uber committed to having a minimum of 35,000 Lucid Gravity SUVs running Neuro's self-driving system, following a commercial launch in

• 49:25Speaker 02

  the San Francisco Bay Area late this year and Houston in mid 2027, and then hopefully dozens of markets after that. And Uber and its fleet partners will own those vehicles. And then what's also pretty cool is Hertz, the rental car company, yes, Hertz, has spun up a new affiliate called Oro Mobility, and they are going to handle the charging, cleaning, maintenance, and depots for these AV fleets. And they've already leased a 50,000 square foot depot in Houston for that exact purpose. And so then there's Rivian with 10,000 autonomous R2 robo taxis that are going to be starting in San Francisco and Miami in 2028. And then they have an option to take that number to 50,000 vehicles across 25 cities

• 50:10Speaker 02

  by 2031, all plugged into the Uber network. And then on top of that, Uber is investing up to $1.25 billion into Rivian based on certain technical milestones, which is another important part of Uber's strategy. They've taken billions of dollars worth of ownership stakes in various self-driving companies, I think probably to hedge risk to some extent, but also mainly to invest in ensuring there's more competition than just Waymo and Tesla. Because in a world where there are many AV options, Waymo pretty much loses all of its leverage and Uber wins by being simply the best place for human drivers and AVs to all come together on one neutral platform.

• 50:53Speaker 01

  That sounds a bit like the circular funding that we see in AI, just on a much smaller scale, I gotta say. And still, I mean, seeing all of the AV players in the game is what makes me most bullish on Uber, because I don't like the idea of them competing with Google. But then you also have Tesla, you have so many OEMs and perhaps the biggest threat that you can have in capitalism lately, which is Nvidia. And Nvidia is putting its full self-driving software stack into robo taxis that will launch on Uber in Los Angeles and San Francisco in the first half of next year, while targeting 28 cities globally by 2028. And Nvidia also shares the thesis that autonomous driving software will become a commodity layer that basically any automaker can license, meaning that in the long run, Waymo is just

• 51:38Speaker 01

  nothing special if you, you know, think about it that way. And internationally, WeRide is already running a fully driverless fare charging service with Uber in Dubai, plus Abu Dhabi with Zurich and Madrid coming soon. So there are just so many players coming in that it's hard to even wrap your head around it. You only hear about Waymo against Uber, but every company is having these cars now.

• 51:59Speaker 02

  Yeah, it's much more than that. We're seeing AV companies roll out internationally, but we're also seeing that it's not just US tech companies working on AVs. The Chinese company Baidu has a product called Apollo Go, and that's coming to Uber in Dubai. And then there's Poni.ai, which is a funny name. That company was relatively new to me, but they're partnering with a European fleet operator called Vern that Uber is investing in, and they're hoping to launch Uber's first commercial robo taxi service.

• 52:29Speaker 01

  I'm glad you also mentioned the Chinese providers, because just like with LLMs, there's very much a tech rivalry in AVs between the US and China too. And I think you would probably argue that, once again, that this is a good thing for Uber at least, because Uber's management has said that Chinese AV companies, hardware and software costs are, quote, "better than anything they are seeing anywhere else." And Baidu's robo taxi costs under $30,000 to build. So while everyone in the US watches Waymo, there's a parallel autonomy race in the Middle East, in Asia, and in Europe, but Uber has skin in the game, and it's essentially every horse in the race.

• 53:05Speaker 02

  And there's one other thing I think we should mention. Uber launched something called Uber Autonomous Solutions, creative name. And this includes insurance, customer support, fleet management, and remote assistance that any AV operator can buy instead of having to build themselves. And so the other reason Uber is excited about this part of the business is for the data they'll get. Uber is putting sensor kits on regular human-driven Ubers. And because Uber does 40 million trips a day, those cars see every weird edge case on earth multiple times a day. And by the end of the year, they're expected to be collecting up to 2 million miles of training data per month, and then actually selling that data to AV partners.

• 53:50Speaker 02

  It kind of reminds me of Reddit selling out their data to LLMs to train on. So Uber is basically monetizing data from its human driving network to help AV competitors and companies that they've invested in catch up to Waymo.

• 54:07Speaker 01

  Which is a pretty smart strategy, I gotta say. I want to touch on one of the things you mentioned in our last episode on Uber, which is that you think there will be financial companies that arise similar to REITs for hotels and office buildings, but instead for fleets of basically AVs that will be run as businesses through Uber. And I think that idea being somewhat similar to how Marriott operates hotels, but doesn't own the real estate, is there anything new on that end or that front?

• 54:35Speaker 02

  It's probably a good way to think about it, and that's an insight I got from Uber's CEO, Darko Zoszahie. And to be honest, it sounded a little like science fiction when we first discussed it, but this is now Uber's literal official corporate strategy. Per Uber's CFO, the autonomy ecosystem has five layers. So there's the marketplace facing the consumers, and that is Uber. There's the AV software developer, so that's Neuro and Waymo. Then you have the automakers who are building the cars. You've got the fleet operators that are running depots and charging stations, so think Hertz. And then fifth, you'll have third-party financing to make this all happen. And these are the institutions that will actually own the vehicles that comprise these

• 55:19Speaker 02

  AV fleets and take on those balance sheet risks. So Uber runs the network, someone else owns the cars, and that is how Uber stays a capital light business.

• 55:30Speaker 01

  But still, I mean, today we have Uber signing off tech agreements, guaranteeing it will buy cars rolling off assembly lines, kind of like the deals that we also see from hyperscalers guaranteeing compute demand to support data center construction. And Uber is basically leasing depots in, I think it's Houston, and investing in Vern and Rivian and Neuro. And if you would add it all up, it's something like $10 billion that has been committed to the AV build out, and that would have sounded like a lot more money just a few years ago, but gosh, nowadays, that does sound modest compared to the investments that especially the Max 7 are making into AI. And still, I mean, the financialization, if you want to call it that, of AVs where, you know, pension funds and REIT-like vehicles take these assets off Uber's balance sheet

• 56:15Speaker 01

  is the promised phase two that we got last time, right? I mean, for the time being, Uber is increasing its capital intensity by owning these assets on its balance sheet compared with their normal model where, of course, there were no human drivers owning the vehicles and they aren't on Uber's balance sheet. So that's just some perspective to keep in mind, but there's some really big news that we've made it this far into the episode without even mentioning, and that is, while the market was reacting to the news about Uber and Waymo having sort of a fallout, Uber was attempting the largest acquisition in its history, which is the company Delivery Hero.

• 56:51Speaker 02

  Delivery Hero is a food delivery company, actually headquartered in Berlin. So I thought at first that you were going to be very familiar with it, but actually it's a German company with no business in Germany after they actually sold off their German operations a few years ago. And what it does have is leading delivery platforms across the Middle East, Asia, some other parts of Europe, and then also Latin America. And these are brands like Talabat in the Gulf, which most listeners probably won't know. And then there's Bayman in South Korea, and that company basically dominates the Korean market. And so what happened was Uber quietly built up a stake of about 25% in Delivery Hero.

• 57:31Speaker 02

  And then on July 16th, it launched a formal offer valuing Delivery Hero at about $14.8 billion or $13.7 billion net of the stake that Uber already owned. And so what happened next is you had Proces, which is a big Dutch investment firm that's pretty well-known in value investing circles. They irrevocably committed to tender their shares, where tendering just means agreeing to sell into the offer. And so correspondingly, that takes Uber past 50% ownership, and really it guarantees that the deal will succeed because they have the voting power to make it happen, barring any regulatory concerns. And then on that front, to preempt antitrust concerns, Delivery Hero is selling its operations

• 58:13Speaker 02

  in 14 overlapping markets to a third party for about $1.6 billion. And so the deal should close in the second half of next year without any hiccups.

• 58:25Speaker 01

  Just for the sake of the audience, what would you say is the logic behind this deal? I mean, they're not necessarily buying Delivery Hero at a bottom bin price and ride-hailing and food delivery industries that don't exactly create economies of scale benefits for users. I mean, the fact that Uber has more operations in the Middle East does basically nothing for me here in Germany. And your experience with Uber is entirely contingent on the density of their presence in the city that you actually live in.

• 58:52Speaker 02

  It's a really good question. And the short answer is that it's all about expanding the number of places where Uber can make its full range of products available. So Uber operates both rides and delivery in 34 markets. But after this deal, that number will jump to 58, and that opens the door to them selling Uber One more. And you know, we talked about at the beginning of the episode, how cross-selling between its mobility and ride apps, where they encourage Uber riders to try to order food on Uber Eats and vice versa. That is one of the most reliable value creation levers Uber has at its disposal. And so Delivery Hero brings them 50 million new consumers and two dozen new markets to run that playbook

• 59:35Speaker 02

  in, plus, again, the extension of Uber One into all of those places or the possibility to do so. And so the first time we looked at Uber, we talked about how it was very pragmatic for Uber to recognize which markets they were losing in globally. And instead of racing to the bottom there, they chose instead to invest in the local winners. And so they did that by taking passive stakes in Didi in China and Grab in Southeast Asia. But the Delivery Hero deal here flips that upside down a bit and shows that they can go from taking a passive stake to making a full acquisition and integrating that company into Uber.

• 1:00:12Speaker 01

  You often hear about a lot of synergies in corporate M&A, and these so-called synergies have been used to justify many bad deals over the years. But in this case, Delivery Hero does have a big disparity in margins compared to Uber, despite actually having a higher tech rate. And that's because of their substantial technology costs. I think Delivery Hero spends far more on tech as a percentage of bookings because it basically lacks Uber's scale. So Uber runs its entire global delivery business on one tech platform. And for Delivery Hero, I do think it's quite plausible that this will really help the business, but just tying into Uber's backend instead of building out their own. And there's also a really interesting ads angle to their deal, too, because Delivery Hero monetizes

• 1:00:56Speaker 01

  about 3% of its gross merchandise value through advertising, which is a good bit ahead of Uber. I mean, if you compare that, for example, to Macadulibo or Amazon, 2% to 3% is quite high. So I was surprised to learn that. And if Uber's ads business were to converge toward those penetration levels across a delivery business that post-deal exceeds $100 billion of bookings, you get several billion dollars of incremental, very high margin revenue over four or five years.

• 1:01:24Speaker 02

  There is one other more strategic point that I think we should mention, too, and that I'm sure the market is underappreciating, which is that the deal is also sort of an autonomy hedge in the intermediate term to some extent. So if robot taxis do eventually pressure the economics of Uber's US business, well, now they'll have a bigger global delivery and local commerce machine in markets where autonomy is going to be a more distant concern. It's just a fact that we know AV adoption will roll out more slowly in most international markets than in the US. And as such, having more geographically diverse revenue, at least, you know, helps sort of further to minimize the threats from Tesla and Waymo in the immediate

• 1:02:08Speaker 02

  future as the company continues to prepare basically its counter response to the threats from those businesses.

• 1:02:17Speaker 01

  We've been going for a while now, and I still feel there's so much for us to discuss and to cover when we talk about Uber. But when you're truly excited about a company and, you know, one of our investments prospects, it's just so easy to talk all day about it. And do you think there's anything important that we have missed and not yet covered here?

• 1:02:35Speaker 02

  One big thing not related to AVs or Delivery Hero is that Kroger, the second-largest grocer in America, added roughly 2,700 stores onto the Uber Eats app nationwide in January. And then we mentioned Ulta Beauty earlier, and they've also partnered with some other familiar names like GameStop. And, you know, I haven't been as excited about grocery long-term because I can imagine a lot of big grocers, I'm thinking Walmart and Target in particular, will want to control the relationship with their customers directly. So they won't want to have a middleman like Uber in the way. And so they may have the resources to build

• 1:03:15Speaker 02

  out their own version of the delivery service, sort of like what Amazon has with Whole Foods. And so that was my worry. But again, what has actually happened, at least so far, is that Kroger, a company with every resource to go it alone, has chosen to plug into Uber's network instead.

• 1:03:32Speaker 01

  And to just quickly list a handful of other things that Uber has unveiled in the last year, I think I should mention that Uber partnered with Expedia to sell hotel bookings inside the Uber app with 700,000-plus properties that offers Uber One members a chance to earn 10% back in credits. And again, actually, you've got to check if that's also the case for me of its US-only, which I hope it isn't. And Expedia, you know, might have a US buyer, so perhaps I can't benefit from that. And they also acquired, going back to where I live, another German company called Blacklane, which is a premium chauffeur service operating in 500-plus cities, so it's quite big, that very much complements, you know, the luxury end of Uber's offerings that we haven't touched on at all today. But

• 1:04:17Speaker 01

  I think we covered it last time we talked about Uber, at least to some extent. And they also added in a feature they refer to as woman preferences. So it basically allows woman riders to match only with woman drivers. So you can imagine that's pretty attractive to many women for safety purposes and just makes it all the more likely that people will use Uber on the margins. I mean, if you're partying and you're out and, you know, you just want to have an Uber and get home, it's way better if, you know, if you're a woman, you can also have a woman driver compared to a man. And I think this is where we would normally go through the valuation in detail. But we already own Uber, and as we've shared today, we've arguably gotten more optimistic about its growth runway, while the valuation has become more and more reasonable over the last year. So I don't

• 1:05:02Speaker 01

  think we need a model to tell us that we are very happy owning Uber and may even continue to add to the position. But I did want to play another clip from our last episode together, which was a response from Dara, the CEO of Uber, to a Financial Times column criticizing Uber's buybacks instead of using, you know, that capital to just invest in growth. And let's listen to you reading Dara's letter from last time.

• 1:05:25Speaker 02

  I believe Uber's best days are ahead. We have a large utility-like business that is still in the early days of penetrating its market. This has led us to conclude that a consistent buyback program is the right answer for Uber. We are taking the humble investment route of dollar-cost averaging over what we hope will be multiple years. So at that time, the buyback was a $7 billion program, and there was real concern that Uber was either overestimating its growth prospects to Wall Street or misallocating capital to conduct buybacks when it would be better spent on growth investments. And while thanks to the inflection in Uber's margins, when your profitability doubles year

• 1:06:09Speaker 02

  over year, they have found the cash to comfortably do both. And so actually, what has happened is the board authorized a $20 billion repurchase program while making all the investments and partnerships that we've talked about for the last hour and not stretching their balance sheet either in doing so. So I think that's incredibly, incredibly impressive. But how about we bring it all home? I think the evergreen lesson of this episode for me is whatever happens to Uber, the thing is markets can watch a business get objectively better quarter after quarter and simultaneously decide to pay less for it. And in many cases, that is for good reason because they're right about anticipating future growth decelerations

• 1:06:52Speaker 02

  or decline in the business in light of maybe current success. But that is where we see things differently than the market with Uber. And ultimately, to outperform the market, you do need to have some strongly held contrarian opinions. So this is maybe our most strongly held contrarian opinion.

• 1:07:10Speaker 01

  I think the only other option is to perhaps be early to the party. And that's, you know, part of why I like companies like Remidly or Delocal that we've also covered on the show, because I think you don't need a highly contrarian opinion on those companies. Of course, the market had its doubts. For example, if you talk about Remidly, how profitable can that company actually be? And I thought it was quite obvious that they can be very profitable. So to some extent, it's still a contrarian take, but I don't have to bet against, let's say, the market on the terminal risk question, where also technological process plays a big role. And all of that said, I must say that I feel even more confident now than I did prior because a lot of news is about Waymo. So it seems like it's Waymo against Uber and who's winning. And it's just pretty white or black in this case.

• 1:07:55Speaker 01

  But in reality, Waymo is competing with all other AV players. And if Waymo can't reach global scale before any of them expand, it will be Uber's markets to win. And while Waymo has made tremendous progress, I think the technology itself is just astonishing, right? But I don't think they have a chance at monopolizing AV demand globally, which is probably what they would need to do to actually kill off Uber. So I guess that means that after this episode, I have to log into my personal account and buy some more Uber.

• 1:08:27Speaker 02

  Well, there you go. I've successfully made Daniel more and more bullish on Uber over the last year, and hopefully that doesn't come back to bite us. But to close things out, I think the quote really kind of picks itself for this week. And it's a quote we've probably used in the past, but it's such a good one, I can't help but use it again. Ben Graham, the father of value investing, Warren Buffett's mentor, told us that quote, "In the short run, the market is a voting machine, but in the long run, it's a weighing machine." And so the voting machine idea is sort of, you know, a popularity contest. And then in the long run, this idea of being a weighing machine is about recognizing the weight of something properly. And so I think the market will weigh Uber properly over

• 1:09:12Speaker 02

  time, and that would be dramatically pushing the stock price higher. So with all that, we'll see you again next time.