Sorkin is an award-winning journalist and author. He is a financial columnist for The New York Times and a co-anchor of "Squawk Box," CNBC's signature morning program. Sorkin is also the editor-at-large of DealBook, a news site he founded in 2001 that is published by The Times.Sorkin is the author of the best selling book, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, which chronicled the events of the 2008 financial crisis. The book was adapted as a movie by HBO Films in 2011. Sorkin was a co-producer of the film, which was nominated for 11 Emmy Awards.Sorkin began writing for The New York Times in 1995 under unusual circumstances: he hadn’t yet graduated from high school.View the profile
About the talk
CEO Uber, Dara Khosrowshahi, talked to Andrew Ross Sorkin at the New York Times DealBook Conference on November 6, 2019.
Could you see everybody again? And I hope you had a great little break and got to use your card this morning to introduce yourselves to each other and ask each other questions, but it is now time to ask him to the dark husband Shahid who is the CEO of uber and it's a privilege to have you here in part because we got to spend some time together right here two years ago in forever. And I'm sure it does which was your very first interview after you got this job. And so there's so much that has happened since then six months ago. You had a
big IPO today is this lock-up expiration on the company and a lot has changed over the details and I think there's a marketing markets gross profits and I want to get into that but I'm just curious if you were to go back two years ago and think about what you thought was going to happen when you first Took this job. And we were talking about it here and what has actually happened. What you think well everything that I predicted in my presentation to the board happens perfectly to
the to the T not really why I came into the job knowing and expecting that it was going to be an enormous challenge knowing that I would be hitting multiple times in the head from something unexpected because this is an important company that reaches into so many different parts of society markets and was really a leader in terms of these large private companies that were becoming public. So I expected entertainment I expected challenges. I am not expecting them to come from all corners and I got exactly what I expected. I'm imagine there's one part of this that you didn't expect cuz
clearly the markets didn't expect it which was We the people were Valerie and bankers value in and an investment in private investors were talking about a hundred plus a billion dollars for this company. And clearly the market has shifted in a profound way. You announce earnings this week arguably. They were better than meat market had anticipated the stock goes down at what time same thing happened this week Market goes down or stock goes down the other
what do you think is happening to the unicorns of Silicon Valley and what do you think that shift is really about? So I think what's happening is that there has been a fundamental revaluation of Revenue growth and the value of profits and the inner in an increasingly uncertain world price of the world around us everything going on in politics. The global landscape has Fundamentally changed over the past two years and I think that the appetite for the unknown and high-risk and public market. It should come down and have consequences. You got some of the safety spots doing much
better utilities etcetera versus public situation fundamentally different than Public Adjusters. Do you think this is a shift in in just the way investors are thinking because it's the company because everybody is having to know react to this new reality private investment private investors fundamentally have a greater risk appetite they pay a higher bonus for growth. So to speak in public as investors historically the premium for growth isn't quite there and and they look for growth as well as profits etcetera that shift now private. What I found always do
follow public investors with some kind of a delay and I do think that you're seeing the same kind of Reckoning that is in the public market is happening in the private markets. And for my standpoint, I think a couple things thank God we went public when we were very very very very different from we work. Okay. So, I mean you have you have you have if you have a Rideshare business that this hoarder deliver 22% ebitda margins up from even a couple of quarters ago 8% margin fundamentally, the Rideshare business is
upscale is global is an attractive business and it's only going to get better within the expectations for and trade-offs between grow. Probability those formulas of change we've got over $12 in cash. We've got twelve billion dollars in Investments as well in the bank. We got a great balance sheet. We got all the cash that we need to do to get the profitability. So I actually think one thing God we we we want public into in this environment. We are advantage against our competition
and at the same time in this environment the fertile for success and the demands of the market are higher and one of them is great. One of them is tough, but I think it's going to force us to perform in public. We sat together actually outside the New York Stock Exchange that morning and I asked you when you thought you'd ever get to profitability and back then you seem to be in no rush. There was at least a couple of years out. Nobody was saying when profits were coming now, you're put a marker in the ground about those profits 2021. The
idea of growth as a result of that the good news for us is that if I look at where we were about a year back the Rideshare business had not rationalize on a global basis the way that it has now and the profitability that we have seen the margins coming on a Rideshare have increased frankly at a substantially higher rate than we expected internally and we now have a team that is executing at a level like every single p&l we're going after the teams are building technology that is
automating a bunch of tasks that were done manually. So we'll do it cheaper better etcetera. And so the Rideshare business is actually looking better today than it was six months ago in substantially better and that has allowed us essentially to move up the path of prophets that said, you know before We work stuff. We made some painful choices internally Riley. We let it happen before the we work stuff and it was because we started recognizing that this is a business that's expected to return on Capital. This is a business that we are enormous,
but I very very low margins and if you're running a big scale Global low-margin business, could you remember when we were being like Amazon and you like that comparison beyond the ultimate success of Amazon was that for a very long time Amazon was allowed and given license by the market if you will not make profits have you said that they weren't losing on the order of 7 billion dollars a year. The ambition of the company in terms of what It ultimately becomes know. The reason why we had marred Amazon was one day build a great company and
they've gone from books to all of retail essentially and we want to go from car-hailing to all of transportation. We got his Corner shop now as well to go from food to essentially local Commerce as well their formula of opening up in two additional categories and opening their Marketplace. The third parties is a Formula that we want to follow in the transportation space. And by the way, it is global company that has been able to thrive with low margins that they deliver to Consumers and consumers love them as a result of it. So from a model standpoint from modeling
another break company, it made all the sense in the world. And the fact is that Amazon didn't make money for a while but was very much focused on their cash flows and they did Flo cash for a long. Of time and I think for us We now in 2021 our plan is to improve our margins by 30% we're going to do so and we're going to be able to lean forward and they'll be some of that don't work and will kill him. But I think the momentum that we're going to have in margarine 2021-2022. Is it going to be a very profitable year is that we are set on a very strong
and now we have to execute and you know, the Marcus bedding at the pit against last night and they are with me it's fine with you today. So that are the shareholders can get out of this. How much have you felt like you had to either go on a charm offensive either internally with employees or try to suggestion that they stay here and I'll tell you it's it. It's better than my first apology defensive about the numbers. We are reaching out to investors.
And I think that the lock up because there's a lot of Supply that potentially could come into the market. I think they'll be less than people think but there's a lot of stuff all that could come to the market there were some larger investors who were waiting because there was no fear of missing out now, the supply is behind us. I think we're going to have a couple of weeks that frankly. I've no idea exactly what's going to happen during those couple of weeks. But then I do think that we are going to find great fundamental long-term investors who believe in the
story and believe in our numbers and I think we're showing the how the Rideshare business can be profitable and I think that the eats team is right behind the Rideshare business that needs business is much younger than Rideshare and I think the same kind of methodology that we're driving margins on Rideshare is that is going to work on the east side as well. Yeah, give growth versus profit and some of the Investments you're making a self-driving cars and some of the other more shoot the moon oriented,
but some of the investors who look at the losses that are related to them and look at them this far out Investments how you thought about whether to stick in something where to get out of something and do you expect that? We're going to see you get out of a lot more. We certainly gone out of a number of countries in which we've operated right? So we got out of China. We got out of Southeast Asia. We got out of Russia recently with eats. We we got us a creosote we will get out of something's not working and for example with eats we were very clear where you're going to get number one or
number two in every country that we operate in in the next 18 months, that business the size of that business a big is big enough for us already on a global basis ask to some of these newer businesses. They have to perform everyone has a performance bar if they don't Form then, you know great idea. No, I want you to I want you to focus the other way. You can be the boss of time calling you and saying look actually I want you to be thinking about the future and I want to ask you about what you think
of what time do yourself? No, no, no. No, no don't you know what your foot back on the gas? No. No, no, I think that's our investors at this point believe that the discipline that we need to get the profitability in 2021. It's the right thing to do for the company and but at the same time they don't want us to make the fundamental trade-off that you don't want to hit 20 21 and not grow anymore. And I think the plan that we have them plays is a plan that absolutely hits a profit targets Bud leaves the
high-growth nature of this of this business intact and now we have to execute behind at Southbank obviously has a big stake in your company had it has a big stake noun in we work. There's a big question about whether this Vision fund the first Vision Hyundai going to work looks like this news reports today that suggested that he's actually going to make a second Vision fund and it's going to happen when you look back at that. I took what SoftBank did to valuations in Silicon Valley. Do you think that was healthy? I think he definitely
pushed up valuations and I think the question is will it stand the test of time right? I think that the score someone's career based on a very unusual moment about how the markets are completely changed right in the past month. I don't think it's proper or fair. So I think that is what proper fair to say. It's good or bad based on today track record is going to beat this term in over a long. Of time and he has been one of the great investors over a long. Of time. I think this is a difficult moment of
adjustment for them. And I think that they are adjusting and making some pretty trumpets and we'll see but there's no question that the amount of capital that went in with soft ban was did raise the market and it has created some behavior in some of the other players wear. What's the reward for growth is high the price that you pay for a grow can go high? And we do have a market that nice to rationalize for example, especially at the end of food delivery space and acid rationalizes. We're the
largest player in the world outside of China. It's going to put us in a very very strong position critics. Are are are are critics who say look Travis kalanick was in your role prior to this may have had his problems, but he was a swashbuckling fishes big Vision kind of guy and we've heard from people like Bradley tusk was an early invest in others who say you know what I like Tara because he sort of help maybe right the ship but maybe this company needs somebody who's got big Vision all over again. You know, I think Travis did an incredible job in
building this company. I couldn't do what Travis it but I do think that I'm the right guy for the company now right in just two years since I took over the company think about where we are now versus some of the messages that we had in terms of governance Etc of we did take the company public at the right time are bookings are up seventy 75% since the time that I took over and now when the markets are in demand in this path to profitability and growth, I think we're going to deliver something. Travis has been very supportive. He's
on the board and he's engaged you'd have to ask him that question. But in general you don't Travis is there to help he's got his opinions about the different businesses, but I think generally were aligned with the direction of company. I want to get into the debate. I imagined I do want to ask about it some of the challenges in business in policy in one of those is about how drivers are treated as employees or not employees what benefits they should be getting with benefits. They shouldn't be getting obviously a law was put in place in California that would
treat his employees effectively hasn't that ever treat these drivers and drivers as employees. And you say from what I understand that you believe that this law somehow doesn't apply to you. Well, I have to admit I do not understand because it seems like the law was created for you that was started by the court about a year-and-a-half ago. Right? So we've been operating under the law in one way or the other and one way or the other for a year-and-a-half. We do think that based on
how we run our Marketplace in a we are technology Services Company, especially now that you see is being in other businesses like he's and Freight etcetera. We're not in the business of driving our drivers learner drivers can or independent and they can get onto the service anytime. They wanted they can get off the service anytime. They want the Law's quite technical as to how we deal with these issues and just because it got harder doesn't mean we don't think we're going to pass a test that said we do understand that there is another modeling for example in France. We have our drivers
who are independent contract. But they do get Healthcare benefits and other protections which are entirely appropriate and so we are running to spell initiative in California that gets drivers minimum earnings. It gets them reimbursement for driving Healthcare protections to discrimination etcetera protections, and it allows them to have flexibility 92% of our drivers drive less than 40 hours a week. The only that is it's a respectable job. It's serve their needs it serves their Lifestyles and I think that this
laws misguided and we're going to fight it if if the law of the land became the law in France across the board. Did you do the dishes? The business will continue to grow are the drivers drivers would have the flexibility that they wanted in France has to be meaningfully lower than the marginal store no business doing really well. There is a balance and and we do think now that we got four and a half million drivers on a global basis. We do think that these protections are appropriate and we're willing to engage in these discussions and we're
looking engage in these discussions. Although I will tell you anytime we talked to a driver's number one thing that they that they value flexibility and when we tell them what do you want health care or more money, they want more money. So doesn't mean that now Society wants these protections. We will absolutely be a part of that dialogue and and we already are providing these these Protections in your I want to open up in just a minute. I know there's so many great people going to get us which was here and I want to find her in just a minute, but I did want to ask you a little bit.
About Uber money and also your role in Libra because I see David Marcus from Facebook. And Libra was going to be speaking a little bit later. You you suck in the Libra project a number of other companies have been I've gotten letters from senators and others who said you stay in this project. We're going to scrutinize you why if you decide to stay because we think that the core of what Libra is about which is to get financial services to everybody in the world including people who don't live in
developed countries that are have great credit card penetration excetera. There is a massive population that is under vent if they are blank they are incredibly ill-served by their backs all kinds of fees. They pay me know much more efficient than any of us. Do there's a better system out there and I think that the powers that be Don't want things to change but it is absolutely not and they don't like Facebook developing countries account. And so we have to say signmeup we have to sign them up for a bank account. And so we think our money project is all about getting our
drivers on to digitize them etcetera get them financial services that they need at low-cost or no-cost because the situation right now and they don't have you know, the voice that we do the situation is not good turn the lights on and try to find some some questions. I I knew I said I wanted to go to Kara where is Kara Kara is over there. She is looking so bright in here. She's got sunglasses which we could use up here. And you got to stand brand nice speaking with starrah and lovely.
I think you're a great guy. I do think you're a shift of major shift from Travis, but it's extremely low bar and the same thing with we wolves come off we work so easy to pull down in that regard. This is most people can't do math most real men do that some of the times when you look at the the just the recent quarter looks relatively economically unsustainable to continue at this even though if cashews up even if numbers are up, I'm going to give you a positive question. Here's the way it is right. Now. What is your AWS? What is your
what is what is the business is going to take you cuz you won't you don't have the time. You don't have the patience and you are pulled into the idea of what's happened with we work which I think was the firewall that just fell what is the business that will Bring you away from this a similar fate order. When we look at our top five markets. The ebitda margins went from 17% to 62% All right business in the past 2 quarters 80% of my Revenue growth ran through into ebitda. So when I look at the next two years my growth is
going to be probably I'll do 8 billion in Revenue growth hold on to drop to the bottom line. It's about, you know, call it a 38% flow through and it just demonstrated at 80% flow through into quarters. You actually do have to do the math in the math Works without paying drivers more cuz it a lot of lot of people you're going to still can't You get that push back. This is all based on there's going to be some price increasing we're going to be going to the Enterprise segment. For example that is willing to pay higher prices at the
same time. We're going to make investments in pool and autorickshaws motor motorcycle Etc. This is business as usual for us. We don't you well, but if you can take 80% of your mind with Rideshare then in the next three years if I need to take 38% I can do that. I can a hundred percent deliver on the Enterprise. Sometimes regulation higher prices will be a small part of that growth and much more of it is going to be the last part one of the famous things Travis said to me on stage and it in a moment of truth actually honestly of which he was incapable of most of the time.
Model work and he said, you know Kara the problem I have is a guy in the front seat. If we get rid of the drivers that would work great. That would be a great thing which was shocking everyone the room had a sharp intake of breath. I have an internal fear that went on thank God. That's what he's truth. Is that a solution for you autonomous-driving what you guys were into and sort of have pulled back on important development longer-term. So what I'm talking about is the next three years were going to be all drivers all the time, right?
But when you look closer to 7 to 10 years, I do think that autonomous will be an important element in our transportation and it will only become that element when it's safer and it will be cheaper as well. Now it won't be cheaper now but it will be cheaper, 10-15 years from now, but first of all, it will be safer and it will be a part of what we do. There's not there's not going to be this like all drivers to full automation. There's going to be a long Song. To get there, but it is absolutely important investment that we're making and we're doing a partnership
with Toyota. That's the best car company other businesses that were developing but we don't need something you need a larger Central. I think the rice sharing and the East business together or are going to be the core of our business and end for prospective great. Now it's the exact opposite right? Our eats business has been around in its average market for 18 months is incredibly on business and his lot of cat. 08 business will turn a w s going to be second one. Thank you, Carol. We are out of time. I want to thank Derek husband shining for being here. Thank you
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