Go Anywhere, Get Anything
Uber’s Future in Mobility and Delivery
In February, Greylock kicked off “Iconversations,” a new speaker series featuring “icons” across tech, finance, media and culture. We were thrilled to welcome Uber CEO Dara Khosrowshahi as our first guest to the virtual event.
Khosrowshahi, who previously served as CEO of Expedia before taking the reins at Uber in 2017, sat down with Greylock general partner Reid Hoffman to discuss the past, present and future of the mobility and delivery business that now operates in 71 countries around the world and employs around 20,000 people globally. He also shared his perspective on M&A (including Uber’s recent acquisitions of Postmates and Drizly), autonomous vehicles, the complexities of working in highly regulated industries, and how his personal and professional background shaped the way he approaches leadership today.
You can listen to the conversation on the Greymatter podcast here.
Reid Hoffman: Hi everyone, Welcome to Greylock’s very first Iconversations – our virtual speaker series featuring the most innovative and brave culture makers, tech visionaries, and other icons who are influencing how we live, work and play.
Today, it is my great pleasure to introduce Uber CEO Dara Khosrowshahi as our featured guest. Dara manages Uber’s fast-growing business in 63 countries around the world and leads a global team of more than 22,000 employees. Dara, thank you so much for being here.
Dara Khosrowshahi: Thank you for having me. It’s an honor to be your first. Iconversations [guest]. Very cool.
RH: The honor is ours. This is awesome. So today we’re going to talk about a wide variety of topics, including Uber’s pandemic shift from rides to food delivery –which includes a recent acquisition of Postmates and Drizly –; how to think about balancing big bets with core businesses; what the recent sale of Uber ATG to Aurora means for the future of autonomous vehicles (obviously, that’s something Dara and I were working on somewhat together); how you think about M&A and why you’re a big proponent of deal-making; and what you hope Uber looks like once the pandemic is behind us.
Let’s start very early. Dara, you’ve been at the helm of Uber since 2017. Suffice it to say, a lot has happened at the company since then. I’m really eager to dive into all things Uber, but before we do that, let’s spend a little time talking about how you got to where you are today. You came to the U.S. at the age nine. Tell us your story.
DK: Sure, absolutely. We’re going very early. I was born in Iran and I grew up there. My family came from a merchant family and we had a big family business in manufacturing – pharmaceuticals, consumer goods, et cetera, and we had a great life. Then in 1978, the Iranian Revolution happened, and you know, it was a religious revolution, and the folks who were associated with the Shah or the wealthy families et cetera were not safe and not welcome in Iran. We were lucky enough to have an uncle who lived in the U.S., and we fled to the U.S. to be safe and, to some extent, to see if things would return to normal. And things did not return to normal, so to some extent, we became immigrants in the U.S. and we were very lucky to come to the U.S. during a time period when immigrants were welcome, even though we were coming from Iran and relationships between Iran and the U.S. were very, very negative.
So, for me, my family really lost everything. My dad, who had worked his whole life to build up his business, lost it. So he then had to go back to Iran for a number of years, but what we had was always family/ And we had a great education and great opportunities in the U.S. and we rebuilt a bunch of what we’ve lost. And so for me, I truly appreciate what we have in the United States, which is a second chance to rebuild, but also everything that comes with a culture where, Hey, if you earn something, you can keep it, and you’re not going to lose it because of some powers that be taking away from you what Americans take it for granted. It makes me even more thankful for everything that this country represents. So I was one of the lucky ones.
RH: Yeah. It’s a great thing to be reminded of (given of course, all the turbulence we’ve been going through) – that there’s still stuff that we aspire to in very good ways here in the country. You mentioned your father, but also your mother had a lot of influence on you and you haven’t talked about your mother yet. So can you share a little bit of that with the folks here today?
DK: Yeah, absolutely. I’ll start with my dad: he went back to Iran to be at his father’s deathbed. His dad was dying, he went to be with his father, and he was then detained in Iran for six years. He couldn’t come back. So my mom had to get a job. She worked as a sales clerk at a fashion company called Celine. I still remember it – she used to shop at those kinds of places, and she had to become a sales clerk. So it was quite a change for her. And she had to raise three teenage boys, and she got it done.
You know, for me, my family has always been a matriarchal family. Like the women run the show. They were a strong presence in my life. And I think that the effect that she really had on me was she just set an expectation with the three sons, which is, whilst everything I’m working here, you’re getting an education. And without it being kind of this outward expectation, she had this quiet strength and determination that put us in our place and had us, as boys, put our heads down and work really hard because she was working harder than all of us – like, working all day. And then coming in, cooking for three boys at night, all that stuff. She was the only one raising us, and it really set the stage as far as setting expectations and then really following through, and with a kind of quiet leadership that she really showed during those years.
RH: Well, I’m actually having some familiar experience with your own leadership. I can see the parallels, given that we’ve worked together for a number of years, so it makes sense.
We’re going to get to Uber, but let’s start with Expedia. Just one question for these folks. You don’t ever brag about yourself, so I’m going to a little: you had an incredible career at Expedia and you grew it into one of the world’s largest online travel companies. In your time there, you oversaw a number of acquisitions that grew its offerings, and you aggressively invested in mobile, and that’s more than half of Expedia’s traffic. And you were beloved by Expedia employees. I know that personally, not just from Glassdoor and the high ratings. What were some of the key lessons during the time of Expedia? What insights would you say you still use to mentor and teach other people, from the Expedia time?
DK: Yeah, absolutely. Listen, I grew up at Expedia. I was there for 13 years. It was an incredible experience. I have some great friends there to this day. So I really have some fond memories. There were a couple of things that I learned from Expedia. I was the CFO of a company called IAC, which is still around, and which was Expedia’s parent company. But we almost wound up not buying Expedia because of September 11th. We had announced Expedia’s purchase, then the great tragedy of September 11th happened, almost 20 years [ago]. And we had a material adverse change clause in the deal to pull out of the deal. And it was a disaster. Obviously it was a huge tragedy, and then the travel business completely halted. Everyone was on their back foot. There were real questions as to whether people would start traveling again, when et cetera.
And from that experience, I learned the value of convictions. Myself and Barry [Diller] had a conviction that the travel business would go from traditional travel agents and telephone-based and physical-based to online. And at the time, there were these enormous events: September 11th alone, which halted all travel. But if you step back within the timeline, it was a blip [to the overall business]. It was nothing. And so if you believe in long-term, big changes in terms of industries, then you have to believe in your convictions – and have convictions – and don’t let short-term (even huge short-term) events affect those convictions because when you pull out 10 or 20 years, they are literally blips on a graph. I think I’m hoping Covid [is a similar case], but you know, we’ll see.
A second learning for me with Expedia: Expedia was a holding company of a bunch of different operations – Expedia.com, Hotels.com, Travelscape – and Expedia.com was our biggest problem asset. It was a full service travel agency tech platform that was quite old and it was quite problematic. And I had hired and fired two people who didn’t work out. And I went to my board and I said, “Listen. I’m 0 for 2. So for the next one, if it doesn’t work out, you should fire me.” Barry Diller, who was a chairman of the board, agreed. He’s like, “Absolutely.” This one I thought about, and went back to the board and I said, “Hey, I’ll do it myself.” So I was, for a while, the CEO of the parent company. But then I went in and ran the Expedia subsidiary, which was the largest subsidiary and I wound up running it for four years.
And that experience for me was actually the time at which I learned how to become an operator. Before, I was part of a portfolio, so an allocator who buys stuff and sells stuff, but I never ran anything. And I really learned how to run a technology company and how important and fundamental it is to have the tech backend and the systems and the architecture that you need to move forward. [I learned] how you can be the most wonderful capital allocator in the world, but if you’re a crappy operator, you’re nowhere. So that experience taught me the operating chops.
The last experience I would tell you is that, because of the kind of experience with September 11th, the financial crisis, et cetera, we actually weathered through a bunch of crises at Expedia. And we were forced to be very transparent with our employees regarding both the good and the bad. We built a culture of being incredibly open, quarter after quarter. After we announced our quarter, I got up in front of the company. I talked about the good and the bad, and I had just as many bad as I had good. No one wanted to be on the bad list, but I had fostered that culture of transparency. Based on the Glassdoor reviews, et cetera, people knew that whether I had good things to say or bad things to say, they were true and they came from a real place, and that’s something that I’ve taken with me step by step by step. I’ve taken it with me to Uber. And sometimes it’s been pleasant, sometimes it’s been unpleasant, but I think people know that if I say something, I mean, what I’m saying.
RH: One small question for you: Barry Diller – iconic person. Sometimes people rave about him. I think you’re actually one of the killer “Diller outcomes,” which are the people who are really positively impacted.Other people are sometimes critical. But he’s obviously a greater than life figure, awesomely smart, and had an historic career. What’s the key takeaway from you being part of the Diller crew?
DK: Oh he is. A couple of things that I would say about Barry: first of all, a lot of people don’t realize this about Barry, but he is the best listener I have ever met in my life. There are courses on presentation skills, et cetera, but Barry should really be teaching strategic courses about listening. He truly listens to you. He wants to understand what you have to say and he listens because Barry’s ego is not about being right. His ego is about getting to the right answer. There is nothing he enjoys more than you taking him on, and pushing him and pushing him and pushing him and changing his mind about something. He revels in that. And what I’ve found is that a lot of people who’ve had incredibly successful careers, they love being right. Barry loves being proven wrong, if he can then learn something from it. And that is really valuable because people have these biases to ignore signals that disagree with where they are. And I think that is what has allowed Barry to change over time and go through so many different careers. He’s been wrong plenty, but he’s been right way more times than he’s been wrong. And it’s because he’s always looking to learn and he forces you to tell him what he doesn’t want to hear. Then you’ll beat the shit out of you. But then, you know, that process of fighting to get to the ground truth and scratching three or four levels down gets you to a much better place. It’s phenomenal. And remains a friend and I’ve learned so much from him.
RH: Yep, and by the way, part of my own experience: the first time I met Barry, he was part of Ask.com and trying to figure out Google. And so someone had told him, you should talk to this guy, Reid Hoffman. And so literally I get this email saying, “Hey, I’m Barry Diller. I’d like to come by your office and talk to you.” I’m like, sure. And that’s part of that curiosity. And we were talking about search and it was great. So I totally agree.
So now onto the main event, which is on Uber. So, obviously, Uber went through some pretty well-documented challenges. I wrote about a little of them in a LinkedIn essay “Pirates to Admirals.” And I think you’ve shown masterful Admiralty as a captain. But what did Uber look like when you first got there? There’s one of the things that I actually learned a lot from our Masters of Scale interview when you answered this question, because it added to my tool chest. What were your first impressions of Uber, and what were the early initiatives that you prioritized?
DK: Sure, so when I got there, the difference for me between the external perception of Uber and what I found internally was like night and day. It was a group of employees who truly believed in the mission of the company, who truly wanted to do good. As I stepped back – and as I’ve had the benefit of a bit of time since I’ve been running Uber – I think the biggest issue that happened with Uber was that Uber had always been a challenger. This is a company that when they were founded, it wasn’t just that they were competing against other companies, but they were competing against industries and regulations and governments that wanted to essentially regulate them out of existence. So it was like the ultimate challenge a company had to fight for. They had to fight for the right to compete. Then they had to compete and win as well. It was just fighting at so many levels. And I think the company didn’t understand that at one point it went from challenger to incumbent. And when you become an incumbent, and you have responsibilities – societal responsibilities, responsibilities for your team, to your drivers, couriers, et cetera – you have to act in a different way. And it was an incumbent that was still acting like a challenger.
So, using your metaphor, they become the Navy but there were still a bunch of pirates running around. And they didn’t know that they were supposed to be in the Navy. So, I think part of it was having the company understand that the responsibility to shareholders, to governments, et cetera was that there were different responsibilities and a different way of method of operations. The way that Travis had set up Uber was a kind of vertical stack, very loosely coupled efforts, and any GM was essentially the CEO of their own city. They could do whatever they wanted and let a thousand flowers bloom. And that is a great entrepreneurial setup. It is incredibly empowering as it relates to these GMs (or these many CEOs), but it is not an environment for a Navy. It is not controlled in any way or coordinated in any way. So we have to move it from a completely decentralized system to a loosely coupled system that had some direction and had some standards and norms that everyone had to accept and understand. And then they could go out and continue to operate in an entrepreneurial manner.
It required us saying, “Let’s set a new set of norms.” What we tried to do is create a bridge with some of the old stuff that was really cool – like making big, bold bets, and that we believe in ideas over hierarchy – and then putting in some new norms like celebrating differences, doing the right thing, et cetera. We were creating a bridge between what was great about the old pirates and what the responsibilities that a Navy had to have. We have to create functions, for example, on safety – making sure that drivers who are on the system are safe, making sure that we do background checks, et cetera. Those kinds of functions were tail functions, and they became real functions and priority functions that stopped being afterthoughts. You can’t have safety be an afterthought. You actually have to design systems from the beginning so that the system itself has safety in every part and every check of every single product that you build. So certain afterthoughts became forethoughts. Then you have to have more tightly coupled [practices for] certain functions as well. Marketing, for example, customer, product organization, et cetera. You just had to have everything more tightly coupled, but the talent was there. There was this exercise of going to the company and identifying what the norms that we treasured about Uber where it was at that time. Because Uber 1.0 was not all bad. There were so many great things about it. Then we ask what’s the bridge that we have to follow in order to be smarter, be a little more tightly coupled and be more responsible. That kind of magic took some time to get done. But I think we’re well on our journey and, listen – I still want some pirate on us, right? We still want to have fun. I think early on, we might’ve swung a little too far and we’re making sure that, “Hey, where can we push and where can we make sure that the entrepreneurs and the mini CEOs in our company can flourish more responsibly?
RH: Yep. Well, before we get to the pandemic, there’s a couple aspects of the culture and revolution stuff that you did that I want to highlight here.
So, one of the classic views of a new phase of culture, moving from pirate to Navy is like this: Dara would show up and say, “I’m the new sheriff in town. Here’s my new rule book and we’re all going to follow my new lead. And this is the new banner of Uber.” You know, kind of idiotically, that was kind of what I was expecting you to say when I asked you this question on Masters of Scale. And instead I got an answer that was more about how you saw at Uber that there were all these really talented people. There were all these really talented, important cultural principles. So you did a survey to say “Hey, what is most important to you about Uber?” So then you could draw from that survey to make that the basis of the rebuild. And I was like, “Oh, it’s so much smarter than the thing I was thinking,” which is this hackneyed, old, clichéd point of view. So tell us a little bit about what you did there, because I think that’s really the playbook for not just quick turnarounds or whatever, but any new revolution – that rebasing to say “This is part of who we are already, and this is what we grow from.” So talk a little bit about what you did and what you learned.
DK: Yeah. And I think it partially came from, I think, a Jeff Bezos thing, which is that, to some extent, your company culture writes itself. And so for me as the new person, who had been running Expedia, to come in and say Uber’s culture should be X, Y, and Z…I was a foreigner, right? I was an alien coming into this entity. Uber had an incredibly strong culture. And again, some of their cultural norms got weaponized, but they came from a place (I think ) of very much good intent.
So we actually went and crowdsourced: What are your favorite cultural norms of Uber 1.0? What norm do you think should be the norm going forward? And I took that as input, and then I got to be the editor. Myself and the senior team then reduced the norms to eight norms that we have that were both a combination of the ones that were most popular with a crowd, and then some that were part of my agenda. So for example, “We do the right thing. Period,” was one where I was putting my mark – but I wasn’t being the monarch saying we could only do X, Y, and Z – but I was putting in my watermark in some ways. And that allowed us to bridge the cultural norms that we have now. By the way, I told them that as the company – just like every company – changes, our norms also change. If our norms don’t change, I actually think I’ve failed. I think some people talk about cultural values as being forever. I don’t think that’s true, because companies have to change. You know, Uber was at that stage one challenger, and as it became bigger and bigger and bigger, it had to change its culture. So the norms that we have were a combination of bottoms-up and then some top-down leaning. Again, you know, we don’t have it perfect. But I think we got a little bit of the best of both.
RH: Yeah, totally agree. Look, one thing that everyone tends to do (in the whole cult of culture in Silicon Valley) is to establish one and then you stay there, almost like the 10 commandments. It’s like, “No, no. Culture evolves.” The question is, how do you grow it? The cultural interview. How does this person add to culture? Not like, you fit in the box or not. That’s one. And then the other part of it is this question that it’s not top-down or bottom-up. It’s always a combination. And if you’re doing it well, you can make the mistake of only doing top-down, but no – the combination is where the real leadership happens.
Now, another part of the culture thing is also how you engaged in dialogue with the critics, like Susan Fowler, and then said, “Hey, these are problems we need to solve. We’re going to do it. We’re going to engage because we want to show accountability, transparency, and trust building. Talk a little bit about how you did that as well. This was early on, because Uber was on its heels being attacked a lot for its company culture.
DK: Yeah, it really was. Listen, I think that you’ve got to take on your biggest critics in order to understand where you have to go. A lot of these criticisms came from a true place. For me, actually, the most important partners that I had in this case were the employee resource groups (ERGs). We have a set of employee resource groups including Black at Uber, Women at Uber, et cetera, and I had a lot of long sessions – and kind of tough sessions – where I’d read everything I’d gone through: the Fowler report, the Holder report. There was this theoretical understanding that I had coming in, but sitting down with Black at Uber, Women at Uber, et cetera was different. We talked for hours about what was going on, and then I specifically asked them, “Hey, don’t tell me what was wrong. Tell me now what we should do.” That dialogue then allowed me to understand what the issues were – and also make sure these team members felt heard – and then put together specific plans going forward on what we were going to do. It goes back to the fact that if you didn’t avoid talking about things like safety and inclusion and diversity, they didn’t become afterthoughts. They were actually system designs that we started with.
We started with gender and diversity. Now, obviously we have diversity as far as race, et cetera ago, but I treated those areas of the business just like we treat other areas of the business, which is we set targets. We measure, we have programs against diversity inclusion. I have discussions, I have reviews with my teams, quarterly, on diversity and inclusion, just like I do on customer acquisition, just like I do on retention. Like it is another part of the business; a really important part of the business that we are driving operationally. And it’s a first-order citizen rather than what I’ve seen it done with at some other companies, which is you do all the stuff that you would normally do. And then you check to make sure that you’re doing the right thing. No, no, no, no – actually, it’s part of your systems at the very beginning. It’s a first-class citizen [consideration] and it is hard, but we are absolutely making progress,
This also highlights the dashboard. Like everything else, you don’t hire a chief diversity officer and say, “Great, sit there and give speeches.”It’s like, no, no, no. It’s integrated into the businesses, innovated into the goals, in the dashboards into what you’re doing exactly. Our chief diversity officer is as metric-driven as you would see. She’s great.
RH: Is there anything in particular, given the last year and the Black Lives Matter movement (which, obviously in most of our views including yours) was the notion that we all need to have an equal and free society and have opportunity. Is there anything in particular you’d be adding in on the work on the racial and tech pipeline for this? Because that’s something that we all in Silicon Valley [need to do].
DK: Yeah, I think what we had not done, to be fair, is we were very internally focused and focused on kind of our employee base – what it looked like, promotions, recruiting, all the internal stuff that we did. We weren’t focused as much on external things – how do we actually build a service that is fair? So we look at inclusive design, how we build products from the ground up that are inclusive, we make commitments as it relates to Black-owned businesses, Black-owned restaurants, et cetera. What we hadn’t really focused on is Uber as a service and making sure that not only are we inclusive internally, but we’re inclusive externally. We’ve made a number of commitments as it relates to restaurants, couriers, et cetera that we’re driving right now. Each one of them have business owners and quarterly reviews with them. It was a learning moment for us, and has changed not just about what we look at internally, but what it looks like to the rest of the world and how we make sure that we serve all of our constituents.
RH: Yep. So one of the questions we’ve gotten from the chat – and I know that he’s asked you this question directly, so I won’t be a total surprise – Mark Pincus asks, “How do you build the brand trust in Uber as a part of society?” What are the things you’re doing to directly and proactively do that?And then what are the things that you would advise other people with similar experience of building that trust through experience?
DK: Yeah, I think it starts with transparency. There’s a saying that trust leaves in a gallop, but comes back on a crawl. It’s still a process for us to continue to build trust, but let’s see some examples that I’ll give you. We published a safety report last year, and it was a systematic and complete view of everything that happens on Uber and all incidents measured, classified. It was audited. We had all kinds of folks come in. Obviously the trickiest thing is women’s safety, and unfortunate events that happened on Uber (because we’re such a big platform). I was terrified when we released that safety report, but it was so comprehensive and it was completely transparent. And we really had brought in women’s alliance groups, victims’ law alliance groups et cetera as far as how we classified the events and what we were doing about it. Because I had the safety team working – zero is the right number as far as sexual assault on Uber goes – but through a bunch of work, we were bringing the incident rates down. And we’re still the only company in the world who’s ever published a safety report. I’ll pick on our competitor, Lyft: they said they would, they haven’t, I have no idea why. But those kinds of actions are what is necessary for the public to start to trust you again.
Another example I will give you: at the height of a pandemic, we actually came out with a marketing campaign “Don’t use Uber.” Only use Uber when necessary, because we determined that it is more important for society to stay safe than for Uber business to come back. It was the first pitch I’d ever had from a marketing team that was this genius campaign around not using Uber. It was a really smart campaign, because again, we were making a statement, “Hey, think twice.” We also put selfie technology on having to wear masks.These were examples of things where you have to take action that potentially hurts your business, but it’s truly good for society. And if you keep doing that over a long period of time, you can rebuild trust. I think we’re halfway there. I don’t think we were all the way there, but just continuing to act and do the right thing over time, I think it will get us there.
RH: You foreshadow the pandemic a little bit in our earlier discussion of Expedia, because obviously the question is about how to react when an asteroid hits. It was 9/11 in the case of Expedia; it’s Covid in the case of Uber. These are really times where these things get really tough and very difficult. I think that the marketing campaign is right, because it’s saying part of trust is we care about you and your health more than we care about what our quarterly earnings are. And that [concern] is going to be tangible: We’re going to spend money telling you.
DK: We paid drivers for 14 days to not drive. If they felt sick, or they had a sick person at home, again, like it’s insane for short-term business, but it completely makes sense for long-term and your brand.
RH: Walk us through a little bit of where we are now, kind of at the 1-year anniversary of the asteroid having hit the U.S. business anyway (it’s probably a bit more uneven in other worlds, and you are in 63 [sic] countries.
DK: I still remember it. We had a management offsite plan. It was early March. The team in Asia saw the trends as it relates to Covid, and we just canceled the whole thing and kind of repurposed it into our Covid relief action. How do we take this thing on? There is a saying, which is “Never let a good crisis go to waste.” For us, when we saw what Covid represented – which was a complete disaster and listen, it’s within the context of there being profitable companies who obviously took a hit on their business, and we were a company that was losing $2 billion a year that whose mainline business, our mobility business found us out down 80%. So, it was a complete disaster for us. We knew we couldn’t take incremental action on this thing. We had to take hardcore action.
So I sat down with my team and we very clearly delineated, “What do we consider core to the business and what do we consider non-core?” And one of the areas where we got lucky was that which we had made in my first two years at Uber: we had made a big bet on Uber eats. And while the mobility business was way down, Uber eats started absolutely exploding. So one of the great assets that we had was we had this incredible growth vector of our business get way, way bigger, and that allowed us to say, “Hey, let’s double down on this delivery thing.”Well, if you’re going to double down on the delivery thing, you can’t do everything at once, especially with within Covid.
So we said let’s take anything that we’re doing that we consider non-core – and we were in bikes and scooters, we were developing autonomous technology, we were in Uber elevate, we were thinking about building a payments business – all of our non-core activity. We said instead of building it ourselves, let’s build it with partnerships. Obviously, one great partner that we found was Aurora, and we merged ATG into it. Essentially, we decided that here’s this stuff that we’re going to do (which is mobility and delivery) through partnerships that would allow us to lower our cost base pretty significantly. On the other side, we decided to lean into delivering in a big way, so we bought Postmates. We had bought Cornershop as it relates to grocery, we recently announced Drizly as well. So we doubled down in this area that we found there was this enormous acceleration of on-demand, local commerce. So we doubled down on that side of the business, and then the other part is like good old fashioned cost cutting. Which…I’ll say it sucks, but it’s something that we have to do. We laid off, ultimately, 25% of our workforce, some of which were associated with these non-core activities, some of which were associated with projects that no longer made the cut. We were working on a bunch of stuff that if it didn’t make the cut, that team got cut. That combination of focusing on the core and essentially cost-cutting where it was necessary, then doubling down on a delivery business, actually has us in a really, really good spot. Now we’re going to 2021. We’ve got a delivery business that is at a $45-plus-billion-dollar run rate now. Our mobility business is poised to come back at a P&L that’s actually very, very tight. So I’m optimistic. But I’ll tell you, 2020 was hectic.
RH: Yeah, you were in one of the ones where there were a few [business aspects] that were accelerated, like digital transformation: “Hey, we’re doing stuff through online Zoom teams, et cetera already.” And then there was stuff I was like, “No, no, we’re about how people do stuff together.” That’s much more painful in a pandemic because it’s like, people first, humanity first, health and safety first. And the business has to take a backseat or the trunk depending on that.
Let’s talk a little bit about M&A. Among your many skills – I think baseball has this metaphor of five tool athletes, and I think you’re a five tools CEO. M&A is one of those tools, obviously with the IAC experience with Expedia. As part of this transformation, you didn’t just go, okay, we need to do these things with partners and we’ll come back to Aurora and ATG and those types of things, but also we need to make some acquisitions to shore it up. What do those decisions look like, and what did the execution look like?
DK: One, I think that M&A has to be a part of the tool chest of any company, but it can’t be [too much]. If I were to talk about the growth of the company, 80% always has to be organic, 20% could be M&A. Any company that leans too hard on M&A is going to start chasing dumb deals. So our focus on M&A was two-fold, which is in the mobility business. There were certain areas where we wanted to consolidate. So for example, Careem in the Middle East. Then there are certain areas where we were looking for capabilities that we wanted to add on to our ecosystem. And what we do have is we operate in 63 countries. We have a huge audience of a hundred million monthly active users using either our mobility services or delivery services. So where we saw teams that had built verticals, usually on a local basis, we could go out and where those verticals were quite idiosyncratic, we could buy that vertical capability and then we could blow it out all around the world. Like Cornershop the grocery side: we thought grocery is a great vertical for us to go after, and it’s there in Latin America. We know that the U.S. is very competitive, but Latin America is there for the taking. With Cornershop, we have a team that is very, very strong in execution on the grocery side. We could have built it ourselves in three years, or we could have brought it in-house and essentially expanded on a global basis at an accelerated pace.
So usually kind of what I tell the team is there’s consolidation, and consolidation is definitely worth something (Careem in the Middle East was more along the lines of consolidation), and then there’s capability (the acquisition of Cornershop). The acquisition is truthfully, more about capability. Buying a capability and then extending it across the footprint and the audience that we’ve got. You gotta be very clear about which it is, because if it’s about consolidation, you’ve got to have a very, very strong integration plan. If it’s about capability, you almost don’t integrate. The integration is about the audience and it’s about geography. And you want the teams that build the service to continue to be able to build the service and innovate on that specific service.
RH: Yep, absolutely. Let’s go to the other part of it. Part of the whole strategy is more of this instance of partners. Your own experience is, “Hey, look, we can find partners versus close this down, and we can still use this to a massive strategic advantage.” I’ll leave it to you for your side, because obviously Greylock is an investor in Aurora and they’re one of the things we were working together. What made you decide, “Ok, ATG, Aurora – this the right thing for Uber to do. This is the right thing that’s going to create the following kinds of things in the world.” What was your thought pattern there? Describe a little bit about it (whatever we can be public about), because you probably know this better than I do about the strategy of it.
DK: First of all, I’ve always viewed autonomous as a capability that we wanted to make sure we secured for our network. The reason why we originally went into autonomous is because we have competitors. Waymo and Cruise, for example, and we’ll see what happens going forward. That’s data. Not only did they want to build a capability, but then they wanted to build a network on top of it. So we weren’t sure that we could actually go out and secure that content ultimately. Just like I want every driver in the world to be able to sign up for Uber, I want every robot driver to be able to sign up for Uber. So we wanted to make sure that we had access to the content. So I came in with a point of view that Uber’s future is not based on building autonomous capability. It’s based on making sure that we have access to the best autonomous capability out there. So I was always open-minded about what we wanted to do. Then, as it relates to autonomous technology (which is going to take some time to commercialize), it was my opinion that the most important factor was team. How do you actually go out and build the best team out there? With ATG, we had a really strong team where we were very, very strong on the data that we had as it related to our understanding: What are the needs and the skill sets that you need to have to build for an autonomous driver? How do we think about commercialization, and how do we think about actually scaling this business, once you build autonomous technology? I met Chris a bunch of times and I knew him from the wonderful Allen & Company events, et cetera. I had a lot of respect for him. Chris and I got talking and we came to the conclusion, “Hey, you could actually put ATG and Aurora together, that specific combination of skill sets (plus the teams really knew each other very well). Chris has deep, deep experience and a great team that he had complimented by the ATG team with data from Uber on what’s the kind of the easy stuff. And then on the hard stuff – how do you commercialize, and then how do you scale that, some of the relationships that we had with vehicle providers – you just build a thing that will be very, very valuable. It was a win-win, as it related to that deal.
Aurora now: I’m on board, you’re on the board. It’s a big investment for us, but Aurora can focus on just one thing, which is to build autonomous capability. And with an Uber ATG: Uber was 90% of our network, 10% of our autonomous tune was building autonomous tech. And if there’s one player who was thinking a hundred percent of the time about doing something versus 10%, I’ll bet on the hundred. So that ultimately led to the conclusion of putting the teams together. And I’m super, super optimistic about what they are going to build.
RH: Yeah. I think one of the signs of a great deal is both sides being pleasantly surprised. Once they look under the hood of the other side, they go, “Wait, we got this and it all makes sense.” It’s like the peanut butter and chocolate concept: Look at it now, and that’s better than I thought. I think that’s been the experience on both sides so far, so I completely obviously agree.
Let’s shift to another area, unless there is anything else on any of the other partnerships and refactoring?
DK: The biggest one was obviously ATG. We replayed the hand and some of the other partnerships and we’re pretty optimistic about it, but the thinking was similar to strategic thinking.
RH: Let’s go to regulation. Obviously one of the things that’s generally happening in the world is we’re getting more tech nationalism. People are realizing that technology is becoming infrastructure in various ways. Obviously the thing that’s most often in this discourse – that media is information and truth is a different ecosystem. Uber is infrastructure too. It’s logistics infrastructure, it’s an infrastructure that plays the jobs. Say a little bit about the new Uber strategy with how you engage with regulation, what you anticipate coming, what you think the right balance is for understanding. Because the mistake (I feel) with techlash is that tech is part of the solution. It’s part of what we can get better: “Focus on this, don’t focus on that…” Tell me your version of this and how you think about it.
DK: I’m still kind of new to the highly regulated industry thing, but I will tell you that one of the weird things about Uber is that as a technology company, we’ve been regulated from the very start. And in some ways, actually we have wanted regulation. In 2013, California was the only place that had regulations on ride sharing. And in a weird way, we’ve actually been going country by country and state by state, et cetera, working with the government to regulate rideshare, because often it was in this unregulated gray zone where we could operate, but the government would tell us not to operate. And it was just like, well, can we, or can’t we? So this was one unusual step here. I think a lot of companies want to avoid regulation, but we’re like, “No, please regulate us so that we understand the rules of the road and we can operate freely in a green zone.” And there has been progress. When we came on, we were still unregulated, and in 50% of the places it was in this gray zone and. And we’ve become regulated. And that’s a good thing, because it creates a safe environment for our drivers that drive riders and take food to.
Secondary to that was a real learning that we’ve got to lean into regulation. I think a lot of companies don’t want to be regulated because it slows you down, et cetera. But the impetus behind regulation comes from a real place. For us, the most important area right now is with independent contractors. What that means, and what’s become very clear, is that there are really cool things about being an independent contractor. You’ve got flexibility. With Proposition 22 in California, I think our drivers are very clear. The majority of drivers don’t want to be employees. They want to be flexible, et cetera. But I do think that our expectation should be that you can give flexibility, but there are certain protections _ healthcare protections, minimum earnings protections, et cetera – that should also come with the benefit of flexible work. It’s not either/or. We attempted in the past saying, “Hey, let’s just leave this and hopefully nothing happens.” That’s not good enough. So I think on independent contract, for example, we’re leaning in and we’re seeing, and it’s going to cost us, but we think while short-term, it’s going to cost us, long-term, it’s a better way, which is there’s a system that is going to provide maximum flexibility and should provide some protections (not as many protections as you would being an employee, because it’s different because you lose all kinds of flexibility), but some protections that are important to society and are important to people. So we’re leading in on that. We’re having those conversations in the U.S., and I wrote a white paper in Europe as well. This is something that I know it’s going to cost me, but I think it will create a better solution and a more permanent solution for us.
The other area that I would just point out along the regulatory front is that we’re leaning in environmentally and we made a commitment that by 2030, we’re going carbon neutral. We’re going to be essentially all electric in the U.S., Europe, Canada, and in 2040, all over the world. Again, that is not something that is great for us near term as it relates to economics, but if I’m going to be a gas guzzler, and every single mayor in every single city has a goal to have less cars and less of Uber, so we need to lean in and have a program where we go all electric; where we create economics for drivers. For example, I’ve introduced Uber Green: drivers who drive hybrid and who drive electric make more money. So there’s an economic flywheel for my drivers to be able to make the transition to electric. And it puts me on the path of where the cities and the mayors of the big cities want to go, rather than fighting it. Sometimes companies fight it when you should actually understand where the regulatory impetus is coming from, and then be a part of the change. It hurts short-term, but long-term, I’m convinced it’s the right way to go.
RH: One of the questions that is being upvoted – and it’s by Greylock’s own Corinne Riley – is a fascinating question. You could spend the entire interview on this question and we only have five minutes left. How do you internally manage the process of exploring new bets, while maintaining discipline of shutting down those that need to be ( like Super Pool, et cetera). What’s the, what’s the process and an investment decision-making that you run?
DK: Within every business we have, every one of them can come up with new concepts that they want to sponsor. We then challenge the team to write, essentially, a very short business plan – like a three-pager on how big the marketplace is, what the investment is, and how they will be able to launch it within six months. [This is how we developed] everything that was originally part of what became Uber Eats. Obviously, Uber Eats is a huge part of the business that we started, and now are leaning into. But now, for example, something we are starting to build out and is not big yet is high-capacity vehicles. It’s the equivalent of Uber Boss, our pricing algorithms, with routing algorithms instead of fixed routes and fixed schedules. You should be able to build a better bus network that comes from one of these little concept papers. We’re now running high-velocity vehicles in Cairo. And it’s a really, really promising part of the business. So they come in as ideas, they get small pieces of funding, and then if they show signal, they get to be part of other rounds until they grow up to be a part of the core. I don’t think we perfected it, but we’re creating an environment where some of these ideas can eventually turn into big bets.
RH: Yep, and this obviously plays into the Silicon Valley heritage of entrepreneurship, et cetera. Last question: what does Uber look like post-pandemic? What’s the way in which the pandemic has forged Uber in the crisis, and what will it be coming out of the pandemic. What is the new world?
DK: The way I think about the new Uber is this: if Amazon owns “next day”, we want to own “next hour.” Any place you want to go and anything you want to get within the next hour, Uber is going to be there for you. And by the way, whether it’s a car or a bus or the subway or a bike or scooter, we’re going to have an open marketplace. And it’s not just food. It’ll be grocery, pharmacy, alcohol, packages, your Apple iPhone, anything that you want to get – we’re going to be there for you. It’ll all be underlined by a membership program. So if Prime is the best next-day membership program, our pass is going to be the best next-hour program for anywhere you want to go and anything you want to get. We’re going to be there for you.
RH: Well, I have complete confidence and I agree with your next hour goal as a strategic framework.
Dara, as always, it’s a pleasure. I always look forward to talking to you because I learn stuff. It’s been amazing. Thank you for joining us.
DK: You’re very welcome. It’s a real pleasure. Thanks for having me.