UBER是强力买入；市场对自动驾驶竞争的担忧被夸大，因为该竞争影响不到10%的利润，而核心业务基本面（利润率、广告、配送）依然强劲。

Over the last three years, Uber tripled its free cash flow to roughly $10 billion a year. And yet, the stock trades below where it traded when we first pitched it on this show 15 months ago.

With Whimo just recently raising money at $126 billion valuation, it has effectively the same market capitalization as Uber despite having a fraction of the revenues and being unprofitable.

So the market is clearly saying it believes in the future of ABS and it doesn't necessarily see Uber as a beneficiary. So either the market is mispricing one of the best businesses we own or the robots are really coming for our largest holding.

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 connecting supply with demand, whether that be demand for rides or demand for pad tie deliveries.

And so Uber owns no cars and they actually technically employ no drivers, at least in most markets. They're 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 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. 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 Whimo.

So basically what you have to understand is that Uber is just a platform meant to serve drivers, restaurant owners and customers whether that be through food or you know rights as we all know it for.

And when we covered Uber originally one of my hang-ups 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 Google's with the idea being that every incremental ride requires paying a driver for their time and also the insurance. So margins would always be kept well below what other software companies could earn.

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. I literally used Uber as an example.

I think when I talked about Remley'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.

Well, as you know, I love to talk about Uber's swing in operating margins over the last 5 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%. If you're keeping along at home, that is a 55 percentage point swing in margin profitability in less than 6 years for a company that was already doing billions in revenue. And I mean, that is come on, that's astounding.

I'd agree 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.

Just to double down on those points you quickly made there about what could further drive Uber's margin higher. 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 growing 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, Macad Libra, Amazon, all of those companies, right?

And these are the ads that can be shown on devices in the back of drivers cars, inapp ad placements with even just having your restaurant positioned more prominently on the Uber map while people just check on their ride status, for example, right? Or 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 us 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 I know 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 2 hours, right? And you might not have enough time to actually run to the store, but 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 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.

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. They expanded 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 postco because vehicle prices just exploded. And so, if vehicles are more expensive, then obviously insurance premiums must rise correspondingly.

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 could be a tail one 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 singledigit 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.

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 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 the ambition I think Uber 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 uh, 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. [laughter] Let's just put it that way. So, uh, this this new world that we're entering into and that Uber is ushering us into this new age of unrivaled convenience. I'm I'm pretty excited about that personally and I'm pretty excited about it as an investor.

And so, I'm getting 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.

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 add to that, um, I think for a couple of years, Uber's US rights business was noticeably slowing while Europe and Latin America still grew quite fast. I think 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, doubledigit rates and Uber pass those costs onto 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 AB test on price elasticity with America as the test group. I don't really know what I think about that. I think um this is perhaps a bit too important to turn into an AB test.

But anyway, now that insurance has normalized, they are passing those savings back into lower prices and the US business is very much reacelerating, 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. No, no, not at all. And one of the things I've also been most excited about is Uber one. that is uh 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 ondemand 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 it does pay for itself.

And anyways, Uber 1 now has 50 million members. And so that's an increase of 14 million paying subscribers just from when we looked at the business last year. And you could do the math and realize that this amount of subscription revenue for $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 1 drives greater loyalty to the Uber platform. And in aggregate that significantly increases order [snorts] frequency. And so I can attest to it. You I used to order food delivery very infrequently. Maybe once every 3 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 I'm incentivized to do so to capitalize on the perks of Uber Eats.

And you know, as shareholders, we got to test out the product, right? And Uber 1 members really are are they're like super users. They now are driving roughly half of Uber's total gross bookings and about 23 of delivery bookings.

So, you can see that for most Uber 1 members, the Uber Eats perks are what particularly stand out. They're driving a disproportionate amount of delivery bookings.

I'm actually surprised to hear that Uber 1 is 10 bucks in the US. I think I'm paying €5 and even with the conversion of euros to USD that's still quite cheap which kind of makes me question whether I even get the same perks as you.

So I should probably check whether Uber 1 is even giving me the same advantages as it is giving people in the US. Um, I think there was quite an interesting line from Dara, Uber CEO, who compared Uber 1 to Netflix, where you basically pay one fee and then the platform with the most content wins. Except Uber's content is basically cars and 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 Spot Hero, where you can basically reserve spots at more than I think it's 13,000 garages.

Um, and 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 not a huge business.

Um, but it's one of those where you just have one more reason to open the app and if Uber does job well, it can then cross-ell you on, for example, paying for their services from Uber.

So, they basically bake as much stuff as possible into Uber 1 as an additional value ad just to get you on the app and then cross-ell 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 they supposed to keep growing for 20 plus%? 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 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 Whimo.

you've got the private markets valuing Whimo at roughly the same valuation as all of Uber, a company that I should say, in contrast is doing more than three billion trips a quarter and has $10 billion in free cash flow.

Whimo is either grossly overvalued or Uber is grossly undervalued. At least in my opinion.

And so, can Whimo fully replace Uber? That's the question. And 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.

a lot of folks who are on the margins as Uber or Door Dash customers at the moment. I do believe they'll be one over as more frequent users as automation brings prices down.

And with the point being who 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. You want Uber's gross bookings, it's there.

And I know because we pulled these metrics for our podcast on Uber and Caspie.

a lot of Whimo ridites have actually been ordered through the Uber app as we all know and not necessarily the Whimo 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 Whimo is just using Uber, right? that they are exploiting their white distribution to build their own brand awareness and then they're trying to pull it off by themselves and you know just sort of pulling the rug out from you know underneath Uber and just by breaking up and basically pulling Uber's users to the Whimo app to the exclusive offering

I mean, Uber stock was knocked to its 52- week low in I think it was late July after Whimo formally notified Uber that it will end their exclusive partnerships and I think was Austin and Atlanta.

And those were two cities where also Whimo's robot taxis were available only through the Uber app, which is not the case in every city that they actually partner in. So, Whimo 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 if Whimo 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. 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 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. Then 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.

So that means either it's the cheapest or just coming faster. You know, if I'm at a restaurant, 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.

But yeah, the Uber and Whimo fallout is real. in 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 robo taxi services be required to have human drivers provide at least 85% of all rides during a three-year pilot program.

And so, that is not very subtly clearly intentioned at Whimo and setting them back. Honestly, Whimo 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 Whimo's end. It's getting personal, I think.

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 a lack thereof.

Another way to maybe say that is that supply on Uber's platform naturally adjusts to demand.

which is why it's better to deploy a more limited fleet and just partner with Uber, tapping into their network for bookings, and then the vehicles could be used for other purposes or as just an occasional alternative to a regular Uber.

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. 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 peakto trough ratio within a single day's demand for rides is something like 4:1 and a fixed fleet of robo 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 market in real time. Which is why in Austin, Uber's own data showed with way more vehicles on its network were busier than 99% of human drivers. But that's because Uber's demand aggregation kept them full. There were so many people. There's almost a liquidity to the Uber network that is very, very hard to replace.

I've actually heard that even today if you open the Whimo app in California, rate times run something 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 doing these demand spikes hasn't changed and it's already being felt for the people who actually use Uber and Whimo.

Yeah, I don't think that these challenges are are lost on Whimo. 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 in to Uber. But basically, Whimo 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 Whimo 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?

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 that 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 I don't think that they'll be able to just grit 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 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.

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 Whimo, 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 our investment.

And even if they don't kill it, that would be sort of a worst case outcome, at least if you think about it, for the next 5 to 10 years.

And whether we like it or not, at least in select cities, the single best autonomous 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 Whimo or any other company, still need Uber? It's a good point.

And just to put everything in context so far, Whimo 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.

And you know, maybe he's biased, but Uber's CFO has been pretty blunt that over the next 5 years, 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 hyperrowth years, they were actually 9 to 10xing their volumes annually.

So even for the best case scaling curve for robo taxis, 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 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.

Although the business and the geography are concentrated, I mean, if you decompose Uber's profits, mobility, which is obviously the right 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 robo taxis currently on 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 taxi competition at least in the near to medium term.

You know what is that? Probably like 5 to 10 years time. 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 weight and safe 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 do this, I think it will still be 5 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 tenth of current profits.

Although we all know that'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. What's really interesting is that in Austin and Atlanta, supposed to be two of Whimo's biggest showcase markets, these cities have actually been among the fastest growing Uber markets in the US.

And in San Francisco, which is Whimo's most mature market, which is funny to say, you know, mature for a business this young, but still Whimo does legitimately have a 15 to 20% share of rides, but Uber's trip growth accelerated in San Francisco in 2025.

So if you're asking how they can be, it goes back to a point I mentioned earlier. Robo taxis are expanding the market. They are converting people who would have driven themselves or taken public transit into rid share users.

And so the category is growing faster than market share is shifting. And as autonomy pulls cost down toward being on a closer parody with car ownership, at least in cities, that leaves a lot of room for that 1% number to grow.

I think it's again like a short-term versus long-term thing where especially right now wayos just get more people to use Uber and way more 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 echo gets demand or is it just a single company where they will go?

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 into the field but who just have a lot of money to burn.

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 in dollars, all defined clearly.

and then hopefully dozens of markets after that. And Uber and its fleet partners will own those vehicles.

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 Whimo and Tesla.

Because in a world where there are many AV options, Whimo 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.

That sounds a bit like the circular funding that we see in AI just on a much smaller scale, I got to 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.

So, there are just so many players coming in that it's hard to even wrap your head around it. You only hear about way more against Uber, but every company is having these cars now.

I'm glad you also mentioned the Chinese providers because just like with LLMs, there's very much a tag 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.

While everyone in the US watches Whimo, 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.

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. 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 Whimo, which is a pretty smart strategy, I got to say.

And 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 four fleets of basically AVs that will be run as businesses through Uber.

Is there anything new on that end or that front? It's a probably a good way to think about it. And that's an insight I got from Uber's CEO, Dar Koser Shahi. 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 developers. So that's Neuro and Whimo. 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.

These are the institutions that will actually own the vehicles that comprise these 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.

But still I mean today we have Uber signing oftake 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 depot in I think it's Houston and investing in Vern and Rivian and Nuro and if you would add it all up it's something like $10 billion that has been committed to the AV builder

and and that would have sound like a lot more money just a few years ago but gosh nowadays that 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 readlike vehicles take these assets off Uber's balance sheet is the promise phase 2 that we got last time right

I mean for the time being Uber's increasing its capital intensity by owning these assets on its balance sheet compared with their normal model where of course as we all know human drivers own the vehicles and they aren't on Uber's balance sheet

while the market was reacting to the news about Uber and Whimo having sort of a fallout, Uber was attempting the largest acquisition in its history, which is the company Delivery Hero.

And so what happened was Uber quietly built up a stake of about 25% in Delivery Hero. 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 Process, which is a 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

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 here at, you know, bottom bin price and right hailing and food delivery are 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. your experience with Uber is entirely contingent on the density of their presence in the city that you actually live in.

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 in, plus again the extension of Uber 1 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 DD and 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.

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 back end instead of building out their own.

And there's also a really interesting ads angle to the deal too because Delivery Hero monetizes about 3% of its gross merchandise value through advertising which is a good bit ahead of Uber.

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 a hundred billion dollars of bookings, you get several billion dollars of incremental very high margin revenue over four or five years.

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 robo 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.

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 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, 700,000 plus properties that offers Uber 1 members a chance to earn 10% back in credits.

And they also acquired, going back to where I live, another German company called Black Lane, which is a premium chauffeur service operating in 500 plus cities. So, it's quite big. And that very much complements the luxury end of Uber's offerings that we haven't touched on at all today, but 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 women 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 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 Darra 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.

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 well thanks to the inflection in Uber's margins when you're profitability doubles year-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 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 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 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 Whimo. So it seems like it's Whimo against Uber and who's winning and it's just pretty white or black in this case. But in reality, Whimo is competing with all other AV players. And if Whimo can't reach global scale before any of them expand, it will be Uber's markets to win.

And while has made tremendous progress, and 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. Well, there you go. Uh, 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.

And so I think the market will weigh Uber properly over time, and that would mean dramatically pushing the stock price higher.

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 a lack thereof. Another way to maybe say that is that supply on Uber's platform naturally adjusts to demand.

and for say Whimo 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 underallocate vehicles or overallocate 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. And then the vehicles could be used for other purposes or as just an occasional alternative to a regular Uber.