Invest Like the Best with Patrick O'Shaughnessy
00:39:39 · Patrick O'Shaughnessy
[00:39:39] S0: So much of the story is being good at getting the supply. What does excellence look like there? What makes the best parts of Uber that do this the best? What makes them stand out? What is the key to being great aggregating supply?
00:39:52 · Dara Khosrowshahi
[00:39:52] S2: I think honestly, we're okay at it. I think we can get a lot better at it. I think one is I want to get more of our team members to put themselves in the shoes of our suppliers, to drive more, to go stand behind the counter or a restaurant. All of our employees are crazy users of Uber Eats and Uber Rides, but we don't put ourselves in the shoes of our merchants after COVID, partially because I was going freaking crazy at home, but partially because I wanted to understand, well, what does a driver courier experience feel like? I bought an e bike and started delivering food in San Francisco. And our drivers and couriers and merchants are on our platform much longer than the typical consumer. Typical consumer, year in, year out, maybe use us once a day, twice a day, hopefully three times a day, but the interaction is like a thirty second interaction. A driver will have our app open six hours, eight hours, ten hours a day. And as a result, the premium that we have to put on quality, making sure everything goes right, like a P95 bug happened to consumers once a month maybe for a loyal consumer. A p 95 bug is happening every single week for a driver who's on the app six hours a day. We are getting much better. We've got to put ourselves in the shoes of our merchant partners, of our delivery partners. I learned so much delivering food those couple of years in San Francisco, driving people on my Tesla in San Francisco. I think that's what it takes to be a better builder and be better at amalgamating supply, so to speak. We have a value at our company, which is building with heart. I'm an engineer at heart. I'm very numerical in how I look at things, but there's a craft to building. There's a humanity in our service, and we have to make sure that we keep building with heart and I think we can get better there.
00:41:45 · Patrick O'Shaughnessy, Dara Khosrowshahi
[00:41:45] S0: What surprised you most when you were doing the deliveries? All that experience? [00:41:48] S2: How hard it was going into the restaurant, figuring out where to pick up, making sure that you got your orders right. About 50% of orders are batched. So actually you pick up two deliveries, sometimes at the same restaurant or another restaurant, and just making sure that you get everything right. There's a reason why things go wrong in the real world. There's a lot to process for couriers, for drivers, and then you have to deal with the real world traffic as well. So just all of the things that you have to process for a consumer, you push a button, car shows up, you push a button, your food shows up. It's all easy. But for that driver and courier, there's a lot more going on and processing everything could be a challenge. [00:42:25] S0: The thing that you said is interesting is the membership concept, 50,000,000 people. It feels like this is the feature every big business with lots of people on it would want. And some of them have been great stories in business history, Costco and Amazon. What does each side get out of a great membership program and how much do you have to tweak and design that thing versus it being kind of straightforward of what people want?
00:42:45 · Dara Khosrowshahi
[00:42:45] S2: We've been at it for a while. The ideal membership program is one where essentially you have a fixed cost base. So a Netflix is investing a certain amount in programming, and the cost of selling a membership is customer acquisition, And there is no cost for the services that you render. There's no variable cost for the services you render. The benefits of membership programs, travel membership programs are often upgrades to rooms that were empty anyway, or upgrades to seats that were empty anyway. So those membership programs are ideal and that's why membership started in the travel business and entertainment, for example, as well. Cable was a membership program if you want to call it that. It becomes much more challenging if the cost to serve is a variable cost. I think Amazon is the first one that took that on, which is the cost of an Amazon Prime membership is higher the more you use that membership. And Amazon was able to walk through this valley of despair as many people in the public markets didn't understand what it was doing and the losses kept increasing, but they understood the unit economics of membership and they stuck with it and they were able to brave through those early days. And I took a lot of inspiration from that example in the early days of Uber One. And when we acquire a member, you're less profitable. We're essentially trading. We're making a prediction, which is you're going to spend more on our platform, even though your first transaction, second transaction, third transaction is going to be much less profitable because we're giving you back a bunch of money. Over the lifetime, you will be more profitable. And we're seeing that. So the membership program took some time to get up to speed. It is solidly profitable now, but the first year of membership is a year where we lose money on you, but we're going to make money on you two, three, four years from now.
00:44:33 · Patrick O'Shaughnessy
[00:44:33] S0: The next leg of hooking this platform up to the entire world is hotels. It's so interesting that you've gone full circle. Walk us through the decision logic here. I have a question behind the question, which is how you decide to do these big things in the first place. We started the conversation with you to have this bet sport at Spotify. There's all these different ways that capital allocators decide what to bet on. I'd like to
00:44:53 · Dara Khosrowshahi
[00:44:53] S2: talk about that strategy as well. But starting with hotels, why do it in the first place? What was your thinking? We tend to be pretty data oriented. What we've seen, and it's relatively obvious, is that people who travel a lot tend to use Uber a lot. We're available in over 70 countries. What's the first thing that you do when you land at an airport often is you open up your Uber app. Just last year, we completed 1,500,000,000 trips for people outside of their home city. About 15% of our trips are to and from airports. So we can identify travelers. It was a use case that was a headline use case. Can we start thinking to ourselves, hey, what more can we do for the travelers? And what differentiates Uber from some of the other places, again, it's not just about the booking experience, but it's about delivering that experience in a reliable way in the real world. We also go much deeper into the fulfillment stack than let's say the typical online travel agent. We decided as you're able to target more, etc, let's look at other travel products. We started with trains. We've launched it in The UK and Spain. And we saw the same thing that we've seen over and over again, which is the more you interact with our platform, the more services you have, the more you interact with those services, the more you come back. So more content meant more retention. And so we said, well, what content can we find in travel? It was very natural for us to go into hotels. It's a high value decision that you're making. We went out there and talked to the various travel companies to make sure that we had the best supply in the business, and we happened to make a deal with Expedia, my old company. And we're essentially giving the vast majority of the economics of that deal back to Uber One members. The design spec of hotels is, again, how can I make sure that as a person, life is more deeply integrated with our services? 10% off hotels, 20% off, 10,000 hotels. That's a great deal that you're not going to find elsewhere. It's another reason for you to join Uber One.