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Uber has struggled to make money even before the pandemic hit. Now, it’s coming out of COVID-19 shutdowns with a new set of problems. It’s struggling to find drivers in some markets which is causing long waits and angering customers. Add that to concerns about whether it will have to make its drivers employees in some markets and the company faces a lot of problems. Simon Erickson joins Dan Kline on 7investing Now to discuss whether the company can turn things around.
June 9, 2021
Uber has struggled to make money even before the pandemic hit. Now, it’s coming out of COVID-19 shutdowns with a new set of problems. It’s struggling to find drivers in some markets which is causing long waits and angering customers. Add that to concerns about whether it will have to make its drivers employees in some markets and the company faces a lot of problems. Simon Erickson joins Dan Kline on 7investing Now to discuss whether the company can turn things around.
Uber (NYSE: UBER)
LYFT (NASDAQ: LYFT)
Amazon.com (NASDAQ: AMZN)
Facebook, Inc (NASDAQ: FB)
Apple (NASDAQ: AAPL)
Alphabet (NASDAQ: GOOG)
Tesla INC (NASDAQ: TSLA)
General Motors Company (NASDAQ: GM)
Walmart INC (NYSE: WMT)
Spotify Technology SA (NYSE: SPOT)
Sam Bailey 0:14
Welcome to 7investing Now, a show that teaches you how to take a long term view on investing by better understanding what’s happening in the market now.
Dan Kline 0:24
Good afternoon 7investors and welcome to the Wednesday edition, a breaking news edition of 7investing Now. My name, of course is Daniel Brooks Klein, I’m being joined today by Simon Erickson, our lead topic is going to be Uber (NASDAQ:UBER). Then we’re going to talk about President Biden issuing some new executive orders on TikTok and WeChat, not entirely only covering those companies but those are the headline companies. But Simon, as we move into the delivery discussion, I want to show you just how kind of messed up this whole delivery world is.
Now if I use Instacart, they not only charge me an annual fee, but they mark up the prices on what I’m buying, sometimes pretty significantly. I ordered today from Amazon (NASDAQ:AMZN), from Whole Foods using Amazon Prime, which does not as far as I can tell mark up the prices. Again, I’m not 100% sure what everything costs at Amazon but it doesn’t feel more expensive. There is no disclaimer saying prices may be higher like there is. I ordered exactly four items and that took me above $35. I live walking distance to Whole Foods, and they had to pick that order and deliver that order. That might be cost effective for Amazon. But I think that illustrates what we’re going to talk about which sort of the efficiencies of this whole delivery model? Have you ever done something so ridiculously lazy?
Simon Erickson 1:37
Transportation is a complex one, Dan, I’m kind of looking forward to this discussion, because it just shows you how complex this entire industry is.
Dan Kline 1:44
We would love your questions and your comments, even your ridiculous orders. I think I put it out that when I was in Key West because we were doing shows, that I ordered one single coffee that cost me like $11 because there were added fees with that. But we’re going to talk about what Uber looks like in the future. And Simon I wanted to start by talking about what is it that Uber wants to be?
Simon Erickson 2:05
Well, we all know Uber and Lyft (NASDAQ:LYFT), or at least a large majority of America does. 36% of Americans have used the Uber or the Lyft ride sharing app. As of a couple of years ago, that was up from about 15% just a year prior to that. So this is what kind of has replaced taxis in a lot of densely packed urban locations. Then when you and I go to airports, it used to be, you’d stand in line and you pick up your Hertz, or you’d call a taxi to get you to the hotel. Now you just book the app. And what Uber really wants to do, to answer your question, is just be “that app”, they just want to connect the riders with the drivers – play this network effect where if there’s more riders, there’s more drivers, and there’s less of a time that you have to wait to get your car, they want to play that as well as they possibly can and take between 20 and 30% take rate off the top of the billed fare. So that’s at the end of the day what Uber wants to be, of course, it’s never quite that simple.
Dan Kline 3:00
Yeah, let’s get to the reality of what they are in a second, I will just say there’s some fundamental problems with how both Uber and Lyft launched. So I’ve talked about this a lot. This is an analogy I’ve used before on the show. But taking a cab from the airport wasn’t fun, you had to wait in the line, you have to tip the guy. You’re never sure if it’s $1 or $2, exactly what you’re supposed to tip. He didn’t do anything. It’s not like he was a guy like in a hotel who actually got you a cab, there’s the line of cabs, he’s not even opening the door for you.
But that being said, Uber now makes it so I can have it more convenient. As I’m leaving baggage claim or walking through the airport. I put it in that I want an Uber. I tell it I want it to meet me on the on the ground floor or the second level or whatever it is, or some airports have designated pickup spots. The car shows up, I know what it’s going to cost and then I get there. Here’s the problem in the business model. It is generally somewhere between 30 and 70% cheaper than a cab. That to me is untenable. It’s unnecessary. And it’s one of those cases where if it was 5% cheaper, I would have been like well waiting in a cab line is terrible like this is really convenient. I’ll pay basically the same price. So that’s one of the problems facing Uber. But the other problem is just generally the nature of transportation. Simon, why don’t you take us through some of that?
Simon Erickson 4:13
It is I mean, like if there was a niche that really needed Uber and Lyft right? San Francisco’s airport, you couldn’t get a cab, it would take forever to get from point A to point B and they said, Okay, why don’t we start developing? conveniently, Dan, it’s in San Francisco, Silicon Valley, right? Bunch of developers say hey, the real opportunity for this is let’s start creating the sharing economy. Let’s start taking these underutilized assets, like cars, which are typically parked for 96% of the day and start using them start turning them into moneymakers. And so that the idea made sense. I think that Uber really tried to jump too quickly into bypassing the real understanding of the industry itself of the transportation industry. We’ll talk about that here in a minute, I’m sure but also the economics itself.
I mean, there’s a reason that it was 50% cheaper, because it wasn’t really kind of considering a lot of those other those other costs that were associated with labor, with, with maintenance, things like that they were just kind of push it on the drivers and said, let us just focus on the app. I think that the really interesting thing, though, is that there are a lot of regulations. Not only country to country, but even State to State – Department of Labor, Department of Transportation, these are state based regulations. And Uber is now past that hyper growth mode, where it’s stepping on the accelerator Full Tilt, if you don’t mind the pun. And now it’s kind of saying, okay, there’s some speed bumps we need to figure out, we’re going to be spending a lot of time in court, discussing those with a lot of the powers that be in the regulators.
Dan Kline 5:43
And this isn’t unique to Uber, Airbnb has gone through many of the same things. So basically, the these companies share a sort of ethos, you aren’t staying in your house or you own a property that no one’s in, you rent it out, you have a car, and it’s not making you money. It’s not doing anything, you’re not working at the moment. You use it, you get in it, you drive people around, they pay you money, that makes sense. But there’s a lot of government going, hey, wait a minute, like we sell taxi medallions, like is this even legal?
By the way we regulate hotel rooms, and there’s all sorts of taxes and rules and other things associated with it. And that is a problem not just on a state by state basis, sometimes in a city by city basis. And I’ll give the example. Uber I forget if they’re back in Austin, or they’re still kicked out of Austin. But Uber was kicked out of Austin, partially because they wouldn’t do background checks, right? And that terrifies me a little bit. So I’m getting in a car with like, you have to have a background check to work just about anywhere that’s public facing. You can be driving a car with me in it with no background check? Like you can have like eight vehicular homicides or or be, you know, who knows what level of criminal? That seems terrible to me. Why is this even a thought?
Simon Erickson 6:52
The interesting thing about that, too, did is I would travel to South by Southwest every year, one of my favorite conferences in Austin, of course. And I still remember when Uber got kicked out and they said, hey, safety concern, Austin said you got to do background checks on all your drivers. Uber said, No, we’re not doing that. Austin said you’re out. And there was another Uber like app, I believe it was called Fast. And I can’t remember if that was correct or not. But there was another one that looked and felt just like Uber and had the map and had the matching and everything like that.
And everyone in Austin at the conference said, Oh, yeah, use this, if you use Uber before this is available for you. And just kind of shows you that you know, with the cloud, and with the infrastructure that is available now at a very low cost, you have to build the capacity for your own data centers anymore, you can spin up solutions on local bases like these, which still need to transport people from point A to point B. And if large companies aren’t going to cooperate with the rules, then there are other solutions that are gonna pop up in a short amount of time.
Dan Kline 7:45
It was actually called Fare. And I’ll push back a little bit that and that. Thank you, Sam Bailey, for sharing that answer with us. We’d love your questions and comments, of course. And we will get to them as we go if they’re not about Uber or transportation or driving we’ll probably answer them after the segment. But that being said, Simon, I don’t think it’s as easy to get to that critical mass because like I know, in Las Vegas, there’s an app that’s very Uber like, well, you can use it to pay your taxi fare, you could use it to get a taxi. And that sounds great. But am I really downloading an app just to use in Vegas when I could use Uber or Lyft. So I’m pretty sure those types of solutions are only going to work in markets that outlaw, Uber and Lyft. But this is going to be a massive regulation headache.
The other issue we’re going to deal with and and let’s talk about this a little bit right now, is they’re going to have labor problems on a bunch of different levels. So first, we’re seeing right now in Las Vegas, there’s an overall shortage of workers and people who were not lifetime Uber drivers. And by that, I mean many times, I’m in an Uber in Vegas, and it’s a former cab driver who’s just a driver. That’s what they do for a living. If you were a blackjack dealer who was driving Uber, and now you can get 50% more money to go back and be a blackjack dealer than what you made previously, which is what’s happening. You’re going to go be a blackjack dealer. So there’s a labor shortage problem. And Simon we could talk about how they’re addressing that.
And then 2) there is a regulatory problem. The whole gig worker economy. They are at the center of it, there was a law passed in California over much fighting that allows them to qualify their workers is sort of like not quite employees, not quite gig workers. But that’s a battle they’re going to face in every, I’ll call it left leaning state without getting into the politics and it’s probably not gonna happen here in Florida, but certainly going to happen across New England and New York and other places. Simon dig into whichever one I just talked for way too long.
Simon Erickson 9:35
No, those are great points. Dan, especially in California, if it was a proposition 20- oh, goodness, Which one was it was one of them. That was kind of how do you consider drivers? Are they employees? Are they independent contractors. I believe that that’s settled out that they were still allowed to be contractors, but it kind of remains in kind of that limbo, regulatory wise. UK just last year had a really big ruling that said, hey, you’ve got to classify -if you’re going to be Uber and you’re going to work in the UK.
You have to to classify the drivers as workers, not full time employees, but also not completely contractors, you’re gonna get holiday pay. And you’re gonna get a little bit of time off and certain benefits that are kind of between full time employee and independent contractor. But this is a really big deal for Uber because the name of the game, when they launched, was just to say, hey, get as many drivers on this as you possibly can, keep the costs related to this as low as possible. And regulations are catching up on thoseand they are incredibly complex based on the country or the state that you’re in. So there’s going to be a lot of discussing this, with the powers that be.
And then on top of that, too, I mean, the economics of this were really built when Uber was scaling as quickly as it was there was on the assumption that it wasn’t to have to play pay for the upkeep of the of the vehicles, they wouldn’t have to pay full time benefits for the drivers, I mean, things like this, this is why you see so much of a talk around autonomous vehicles and self driving cars. And we talk about Uber, because that completely removes the labor component, which is all the cost right now is the paying of the drivers, the benefits, the safety concerns, the background checks, you can remove all of that. But then autonomous data is really, really hard to do. And it’s also going to be really, really expensive, because unless you’re gonna develop it yourself, which is really challenging, you’re going to be paying someone else a lot of a cut to use their autonomous platform.
Dan Kline 11:22
And you’re going to be paying them to not compete with you. So if Tesla really figures out autonomous driving, and it becomes legal, why wouldn’t they allow Tesla owners and Tesla’s are expensive cars to put their cars into a Uber like fleet when they’re not being used? I think that’s actually a pie in the sky solution. And I know everybody sees the pizza commercials where you know, they’re using a Nuro to automatically deliver two medium pizzas, which is not very efficient and an entire vehicle. And of course, the noid is actively trying to thwart this. I think we’re very much in the fantasy stage of this. And we had this little fascination with drones a couple years ago, where there were some test drone deliveries, and we thought, oh, there’ll be drones everywhere. There’s not going to be drones for a decade, there’s not going to be autonomous driving, and there will be select use of drones.
Simon Erickson 12:08
I might disagree with you on that one Dan, personally,
Dan Kline 12:10
There is not going to be drones flying around New York City on a regular basis, there will be drones in remote areas, in rural areas, dropping off supplies, but it is not going to be the vision you’re seeing in pizza commercials right now anytime soon. Simon feel free to push back but I think the autonomous solution is a long way away.
Simon Erickson 12:28
Uber has been it’s been trying this internally, first, they had an advanced driver technologies group that was basically going out and trying to develop self driving cars. And they said, you know, for this to fit just within Uber, we’re not going to make this work economically, we have to open this up to other customers. And so they spun it off to a group called Aurora, Aurora Technologies, which is kind of developing it also for trucking for the trucking industry, commercial fleets and things like this. And then what Uber wants to do is actually partner with Aurora where they’ve invested some money into it, their CEO, Dara Khosrowshahi has taken a board seat with Aurora. So they’re gonna kind of work with him in a partnership to do things like this.
But the real question I think about Uber is, we always think about this just in terms of ride sharing, mobility, we think about this is you and I were playing with the app, you know, we’re jumping around New York City, and that’s, you know, where places that are densely populated, more and more this business. And the the vision of its management team is not just to be transporting people, but to be delivering goods to people -pharmacy prescriptions, delivery for food, things that businesses want to ship to one another. This is kind of the bigger picture of what Uber wants to be when it grows up. And that’s becoming more important in the economics of the business.
Dan Kline 13:43
It’s worth noting, they make money on mobility, that’s you and I hailing a ride. They don’t make money on food delivery. And there’s a lot of logistical issues. So let’s say they’re picking up your prescription at CVS. One, there’s all sorts of HIPAA and privacy issues with with somebody else picking up your prescription, though there are ways around that. There’s also – can my prescription ride in a vehicle with somebody else? Because if you’re going to maximize efficiency, and do I want to get into an Uber that has somebody else’s Chinese food in it? You know, which I’m just thinking that because I ordered sushi last night, I was actually Doordash (NASDAQ:DASH), not Uber.
I think there’s a lot of problems to that, that makes more sense with a controlled fleet where they can have cabinets and compartments and other methods of dealing with things. The other concern here on autonomy, and we’re going to get to a whole bunch of questions we have for Simon here in a second. We also see some great questions and comments, we will address all of those towards the end of the segment. But Simon, regulation is going to be a big problem here, I could see some closed loop autonomy. Like in Orlando, the airport to Disneyworld. They could even close the lane on the highway for autonomous vehicles. But that’s gonna be a city by city, state by state. And the tolerance for error is literally zero. Like if there’s 52 accidents per 1000 with human drivers, they’re not going to say, Hey, we only had 32 with robot drivers, it’s gonna have to be zero. Am I? Am I right on that one?
Simon Erickson 15:10
That is correct. It’s interesting when you see the investor presentations from Uber, it dreams and has ambitions of becoming a super app, which is actually kind of a real term in this industry, it kind of refers to a lot of the apps that are out in China, right? You’ve got Alipay, which is used for everybody to pay for everything in China use your phone rather than paying in cash. And then you have WeChat, which is used for messaging and kind of communicating with your friends and even businesses and things like this. I mean, these apps have 1 billion users, Dan, they’re huge. And a third of those are using every single day. This has just become so embedded with everybody within the population.
And so when you see what we’re talking about, you know, it wants to go after fast and frequent. Things like rides like food, like pharmacy, like alcohol, like groceries, it wants to become the super app of North America. And globally, it already has about 100 million users that are that are actually paying for rides with this mobility app, can it expand that in a controlled way that appeases the regulators and actually gets commercial businesses on board in a way like he just described, we saw that Uber just signed a deal with Marriott, where you can actually get points on your Marriott Bonvoy. Your loyalty program, if you use Uber, we just saw them sign with Samsung, with Coca Cola. And one other large organization escaping my mind right now.
But you know, kind of these large commercial partnerships that want to have food, or things delivered to their business? Are you more comfortable with delivering things if you know the driver that’s going to be there? And they’re a full time employee of Uber and they’re dedicated for your business? Yes, of course, that’s very different than just hopping in the backseat of somebody that’s driving around the city. Now, the question is, is that a different Uber than we’ve been expecting? as investors, it’s now $100 billion market cap that was shooting the moon? Because they were bypassing all these regulations and rules and how does that going to impact the economics of the business? Those are the questions I’m thinking about as an investor,
Dan Kline 17:03
And Simon, their scale that’s global. Those are laughable rounding error numbers for I’ll just pick two Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB), it seems a lot more logical to me that that Apple or Facebook go to Tesla, or Ford, or Volkswagen or whoever it is, and said, Hey, we offer all these services. Can we have a Ford autonomous driver ride hail button or do you want to offer something like this? It feels to me, like Uber is not even in the conversation to be a super app. They’re like a baby baby super app at this point.
Simon Erickson 17:35
Yeah, I mean, how many? How many billions of iPhones are there out there? Right? How many billions of Android devices are there I mean, it’s kind of the platform, the network effect is going to gravitate to people don’t want to have 17 apps they use on their phone everyday, we probably are using like two or three or four, right? But if you’re one of those two, or three or four that’s being used all the time, you’re taking a small cut of everything, then this works. And I think that Dara Khosrowshahi, his vision for Uber is to become one of those three or four apps that everybody in North America is using, he knows he can’t get China, he’s already conceded China to Didi Huxing, it’s gonna be really difficult to get it to get anywhere in Asia, really, I think that Europe and the United States and maybe a little bit from the Middle East is kind of Uber’s backyard that they really need to scale this business quickly.
Dan Kline 18:21
I have six different apps that I use for food or grocery delivery, I find that frustrating. What I find most frustrating is that Uber and Uber Eats are separate apps, there is no reason that just can’t be a toggle in the same app. And I understand that having different apps shouldn’t matter. Because it’s not like I’m ordering food and getting a ride at the same time all that often. But to me, it’s just kind of counter to this whole strategy if I’m on Facebook, I can see my messenger messages. You know, I guess I can’t see Instagram. So it’s not fully integrated. But we have a whole bunch of questions here that I want to go through before we get to your question. I see a lot of great questions in the queue. So please get them in. Simon I’ll tell you now, we are going to do the what we’re watching and talk about TikTok and WeChat we are going to skip the homestretch. So so don’t worry too much about time here. Question one: is Uber/slash ride sharing, actually disrupting transportation and delivery? I have some thoughts here, but I’m gonna guess Simon has had maybe different ones than I do.
Simon Erickson 19:18
Yeah, I mean, that’s a long term investment. That’s the right question to ask is, did they just grow so quickly? By breaking the rules? And now it’s coming back to haunt them? Or are they really disrupting transportation? Is ride sharing here to stay? Or was it just really kind of neat and a way to bypass the frustrations we had with waiting for taxis at the San Francisco Airport. I think that it’s going to, unless we’re just gonna pile everybody into into Uber cars and just this is the new way of transporting every but I think that it’s got to be more commercial. It’s got to be more of a business logistics play. And that’s why you see Uber freight and you see Uber delivery in addition to the mobility business, I think that that’s going to become a more important Kind of controlled growth than just kind of everybody’s going to be using Uber all the time.
Dan Kline 20:04
I’d argue that Uber and Lyft are each other’s worst enemies. Do you see consolidation? Obviously, in food delivery, there has to be consolidation. The fact that West Palm Beach has nine different food delivery options, some of them I don’t even have on my phone is absurd. But do you think these two companies have to become one in order to have pricing power?
Simon Erickson 20:22
I don’t know about those two, they’ve got a very different culture. I do think that we’ve seen Uber make some acquisitions, they bought Careem in the Middle East, beginning of 2020, 1st quarter of 2020, about $3 billion acquisition there. Postmates for food delivery here in the United States, you see them kind of doing these bolt on acquisitions for controller growth, Uber and Lyft together would be kind of interesting, because they’ve been at each other’s throats for so many years, trying to promote it their own service over the others trying to win over the drivers trying to talk about the culture of being toxic Uber and come work for Lyft instead, I mean, it’d be interesting to see if the two of those were to come together, I think it’s more likely that Uber says hey, I want somebody that’s got 600,000 relationships with small businesses. And let’s plug them into our much bigger app and see how that works out for us.
Dan Kline 21:06
I’ve always been surprised at how slow Uber has moved for serving niches and like right now I can book an Uber for my mother, like that’s relatively recent technology where you could send an Uber to pick someone else up, I don’t even know if it’s in every iteration of the app. But there’s some things like, why can’t I send a vetted background check appropriate person to pick up my 17 year old. Like, now we’ve sent my son in an Uber a couple of times when my wife had a flat tire and couldn’t get him to school, which technically violating their rules. But it seems to me like there’s so many iterations of what they could be doing that they don’t appear to be doing it. And I like the management but I do question the vision. Simon, let me go to question two here. If autonomous driving happens, doesn’t that also make it easy for competitors or other people to get into this space. We touched on this a little bit earlier,
Simon Erickson 21:56
It’s gonna, it’s going to have to be partnerships with this Dan, you know, the Aurora example is a perfect one of you say, okay, Uber knows it can’t ignore self driving. But it can’t do it by itself, either. And if it wants to go out and contract Google (NASDAQ: GOOGL) Waymo, to do this, or have somebody in a Tesla (NASDAQ:TSLA), with the Tesla network do that, it’s going to be giving up a huge chunk of change because those platforms are going to charge a lot of money for the technology that they built out too. And so I think that there’s two ways to look at this.
You either do it yourself, or you work with somebody else. And you say, here’s the swimlanes, of what we want you to do. GM (NYSE: GM) bought Cruise Automation five years ago for a billion dollars. And people were saying that was ridiculously overpriced. The acquisition was at a premium, it was really just a handful of employees that knew what they were doing. And just recently Dan, we saw that valuation just for Cruise within GM is now north of $20 billion. It’s been 20x. And the value of that business in just five years to show you how quickly self driving is in demand. It’s still very difficult, but it’s moving very quickly. There’s a lot of interest in this, I think that the right play for Uber is to actually find a way to to partner with like Aurora, with somebody who’s got a platform that will work and let them worry about the tech stuff and let Uber focus on the apps and the relationships.
Dan Kline 23:13
We’re going to take your questions in a minute here. And I will point out that I am bullish on ride sharing, I use this product a lot. I use food delivery probably more than I should. And I think it’s one of those scenarios where these products will exist. I’m not so convinced these companies will exist, or they’ll at least exist in this fashion. I also think it’s very possible that there is a go to private play here. Because I don’t know that these are actually giant, high margin growth businesses. But that’s just a guess. And I want to ask Simon a question that Simon asked me to ask him. And I know that sounds strange, but I wasn’t necessarily going to do it. But I want to ask him the question, because I think it’s really relevant. They have 100 million paying riders across the world. How much bigger is that number in three years?
Simon Erickson 23:57
And I love this question, because we’ve always kind of said, like, oh, more people are going to use Uber – the the metric of choice was kind of like the mobility side of this business. I think that’s nominally higher, Dan. I mean, like, I think we might see 15-20% growth in terms of ridership on a on a yearly basis, year over year. But I don’t think that that’s going to be like the 40-50 or higher than that percentage, as we’ve seen in the past. COVID happened this last year, we actually saw a decrease in billings from mobility. 36% decrease year over year mobility because people weren’t going out and doing things right? People weren’t traveling or going to the airports. Weren’t going around places. I mean, you stayed at home and so Uber obviously hurt from that. The interesting flip side of that was the delivery side of the business saw 166% year over year billings growth, right? Everyone wanted to have stuff delivered to them, they want somebody else to do it for them. They don’t want to go out and do it themselves. So like this is kind of the back and forth with Uber. So I think we’ve got controlled growth in the mobility side of it, the ride sharing side of it, we’ve gotten used to. I think you see a lot more growth and delivery and freight and that’s going to be more important what we talked about. as investors,
Dan Kline 25:00
I’ve got two last questions and then we’re going to get to user questions. So first, is food delivery a viable business, I actually think they should not be delivering food, it is an incredibly inefficient, it’s also a really bad customer service thing, chances are, my driver is going to get me where I’m going. He’s not necessarily bringing my soup with my pad thai. And that that creates a lot of ill will, for not a lot of money. Simon, you’ve worked in food delivery,
Simon Erickson 25:25
Oh, it’s a mess, I delivered, I delivered food through all the high school and listened to Led Zeppelin. And you know, it’s kind of a fun job for a high schooler, but it’s hard to make any money on that, Dan, I mean, if you raise prices, you raise the fee for delivery people just, I’m just gonna use somebody else that’s already working with those restaurants, right? I mean, there are other options available – got Doordash, you got Uber Eats, you know, you have 17 apps on your phone, you said you can choose from, I mean, things like this, it’s capped on the fees you can charge, you’ve got a lot of employees/workers/contractor relationships, you’ve got to manage at the end of the day, it’s direct to consumer. And each one of those is challenging by itself. You put all three of those together, that’s not a real lucrative business, I think, as an investor.
Dan Kline 26:06
So let’s forget the regulations, because I would actually argue that of all the companies being talked about in the, is it an employee or is it a contractor? You can make a pretty strong argument that Uber drivers are contractors, you can be an Uber driver and a Lyft driver. At the same time, you can work whatever hours you want, that is kind of the definition of being an independent contractor. Whereas in many cases, you can’t work for Instacart at the same time you work for doordash. So you know, you can work for both those companies, but not for overlapping hours. So let’s forget the legality, which is going to be a giant problem. What about just the overall worker shortage we’re experiencing in the US, we’re seeing wages, I don’t want to say skyrocket. But I’d say $15 minimums are the norm. And you’re seeing higher than that, in many markets, certainly tourist markets, and that’s causing a shortage of Uber drivers. Could this derail the company like I don’t know that I’m waiting 20 minutes for an Uber when I can just hop in a cab at the airport.
Simon Erickson 27:01
The take rates for the mobility side of it, I’ve got some numbers that are important for investors to consider on this. The take rate is the is the percentage of the total bill that Uber takes out the top line, not the profits of the top line. So of $100 of mobility fare, Uber takes an average of 21.5% for mobility. That’s going up, Dan, like you said, economics will tell you when there’s a shortage of workers, and you’ve got all these regulations for classification of how many benefits that I expect the I’m sorry, the percentage that writers that I’m going to start over – the profit for whoever’s going to take out of every one of the rides is going to decrease. It’s going to be a lower take rate than they have currently.
Dan Kline 27:44
Yeah, they’ve got to pay more like that’s Yes, that’s a problem.
Simon Erickson 27:48
And the delivery take rates are two thirds of that about 14% today and those are rising over time as they’re starting to sign more partnerships. But again, these are not fantastic economics. I mean, like when you when you think about that, in terms of the overall competition, you know, taking only a 20% take of the total top line. I don’t really feel great about the economics of this business. And in addition to that, their cash cow right now has been mobility. Looking at adjusted EBITDA, that’s the only part of the business that is profitable right now, they’re still investing heavily in sales and marketing, for delivery and for Uber Freight, which are kind of the other sides of the business they’re trying to figure out, but we’ve gotten used to as investors with Uber to saying, hey, don’t worry about the economics, hey, they don’t need to show profits, hey, it’s okay that they have $100 billion valuation. Uber’s got $6 billion of cash on its balance sheet right now, it’s got a lot of options of what it can do, it needs to focus Dan. It needs to stop trying to do 27 things at the same time, and really just be like, hey, as a business, let’s really really go after food delivery, alcohol delivery, and prescriptions, or whatever it wants to be. If you can focus a little bit more and get those margins up, I’d be a lot more comfortable as an investor. Otherwise, we’re just gonna see more and more money go down the drain as Uber tries to test these things out, and then concede share to its rivals like it did in China.
Dan Kline 29:03
And I’d like to see them really hone in on their technology. They’ve done some things with ride sharing, you’re starting to see in some of the food delivery apps the option of and I don’t know if Uber Eats does this, I get confused on which app is which, but you can pay a little extra for them to come directly to you. You can pay a little less if you’re willing to wait longer. I would love to see when I’m in my Uber the option would you like it to be $5 cheaper, we can stop right now and pick someone else up and you’ll still be the next stop. But hey, you’ll save a few dollars on your fare. I think there’s a lot of technology they’re not using that they should be using. I also think there’s some holes in their system. If your Uber can’t find where you’re going. They basically have no method to appropriately charge you. And I had that happen. I was going to a rental car place that simply wasn’t where it was supposed to be. And my driver eventually took me someplace pretty far away from it. And what I had to do was hand the person a $20 bill like there was no method for that.
So I’d like to see obviously you don’t want them should just be able to willy nilly charge people. But there needs to be a little more control, I will say that Uber has tried hard to give meaningful benefits to its drivers things like being willing to loan them $50 in the morning, so they could gas up and get a breakfast sandwich and then pay them back from their earnings that day, negotiated discounts all sorts of places, I actually saw Uber speak at a trade show – one of their executives. And they did seem to honestly care about this issue. And I do think that’s going to help them in this battle of contractor versus employee. But I want to get to your questions. We are running out of time, Sam, I’m going to go in order with the questions. And I’m going to let Simon weigh in on each of these we’ll take max Lucas’s first that because that would be the first one: With the increase in ride sharing prices, are we just seeing a true picture of what prices should have been the whole time Simon prices are higher? Because there is a shortage of drivers and an increase in demand? Will this be long term?
Simon Erickson 30:54
The question mark, it’s tough to answer this one, because the question mark still is autonomous. Like if you were having something delivered to your home, and you have a self driving car that delivers it, the price should go down, the labor costs are out of that, right? It’s just to pick it up, and then drop it off and make sure that it’s safe. Now, if that is true, then prices might go down. And we might see a spike in adoption from this. We’ve seen from disruptive technologies, typically what happens is at first, it’s really, really hard. It’s an r&d project. And all of a sudden you get your costs and your economics under control. That’s mass market affordable, and it shoots through the roof. Right now I know a lot of people don’t like paying $5 or $10 just to have food delivered to their home. If that’s $1 or $2. Do you start using that? Maybe. So that could be the new normal? We’ll see how that goes.
Dan Kline 31:40
It’s a very tough balance. So if I’m taking an Uber and it’s a five or six minute, wait instead of a two minute wait, that’s not a big deal. If it’s a 25 minute, wait, I’m looking at other options. And I think about when I when I traveled to Vegas, and I could hop on the monorail or getting a cab or in some cases walk, that there really is an inflection point of like, okay, I’ll pay a little more. I’ll wait a couple more minutes. And I’m gonna walk away. That is a tough balance because it’s going to be different in every person’s head. We’re going to take the comment from David Straus next, thank you for sharing that, Sam.
Q: I’m not an Uber driver, and they have obvious problems. But if I was a cabbie, it would be horrible to have to buy a medallion for a million dollars. For context. I live in the New York City area. So for people who don’t know, you have to buy a medallion. This happens in cities, where the goal was to control the amount of cars on the streets. I actually think Uber is going to face more regulation in cities that had cab, you know, that had taxi medallions. But I don’t actually think that’s that many cities, because you’re right. It’s not to protect the value of the medallion. It’s to protect what is going on in our streets. And do we need cars stopping everywhere and sort of, you know, in New York City, they want to drive you to public transportation. That’s why cabs are expensive to run and expensive to take. Simon I do we have taxi medallions in Houston?
Simon Erickson 33:01
We do not. But those are expensive New York City. We’ve seen the investors, the third party investors that have funded those, write those down for years. Right. David, you know this because you live in New York City. I mean, those have been very unprofitable. Uber has completely disrupted that whole New York City space. I don’t think it’s actually improving things to be honest, there’s just more cars on the road. Certainly when I go to New York for conferences, I haven’t seen a faster trip to the airport in Uber than I did from from public transit. But there’s more money being split up in more ways. So maybe the pie is being divided in different ways. Now,
Dan Kline 33:33
Your ability to get an Uber is certainly easier. But in New York City, it’s not like we haven’t had the issue of illegal livery cabs, which are supposed to be cars you book not cars you hail picking people up. So this is part of a bigger problem, but I actually think you can’t stop disruption. The cities like Austin that have banned Uber, I don’t think that’s going to be what derails this company. We’re going to take spranger 10s. comment next. Q: Hi, guys. What do you think the large marketing costs and losses will stop for Uber? I’m not sure they ever stop in its space.
Simon Erickson 34:06
Never. Promotions, you know, get $5 off your next ride. Book five rides get one free. I mean, this is kind of direct to consumer marketing through the app, right? People are opening and oh, okay, I’ll use Uber instead of Lyft. This time, he’s given me a promotional deal. Same thing they do with the drivers on the other side of the equation. I don’t see how that goes away. If you if you stop doing that, and your largest competitor Lyft continues doing that. Aren’t you giving them share? Are you just giving that away? I don’t think it goes away anytime soon.
Dan Kline 34:32
We’ve got a couple more questions and comments here before we get to talking about the Biden administration and TikTok and WeChat and we’ll do that in as a political way as we possibly can. It is certainly not about the politics. Tristin Wakeley has a couple of comments. We’ll take the first in the second one second. Q: They just bought Drizly – a number one alcohol delivery app. I can get alcohol delivery with Instacart, I am not so sure alcohol delivery is that big a market. It’s convenient. If you’re like having a party and run out of gin, or you’re staying in a city where you don’t have a vehicle and you’d like to stock your hotel room up, I am not so sure it’s all that difficult, like how much alcohol are you drinking, that you can’t just pick it up in the once a week where you’re near a liquor store, like, you know, I have a drink as often as most people and I just don’t see – and I have use Instacart to deliver alcohol. But generally, when I wanted things from a very special liquor store that sells the Keurig pods that I have the Keurig drink machine, and I didn’t want to drive 25 minutes out there. So I don’t know, Simon, I’m not sure alcohol delivery is going to be a big thing. And it has a lot of legal problems too.
Simon Erickson 35:37
That too. Yeah, it’s all kind of the strategy, right? You want to be the super app that’s fast and frequent. They want you to be using this every single day, might not be drinking alcohol or buying alcohol from Uber every single day. But maybe that’s one of the stops that you use on the app, in addition to ride hailing, in addition to having pharmacy ,grocery delivery, I mean, we’re just trying to create behaviors, and they know they can’t just do it with with one, one part of the market covered.
Dan Kline 36:00
Sam, we’re not going to show the next comment and I’m just going to share the spirit of it. This one is from Tristan as well. He asks if Walmart (NYSE:WMT) should buy Uber and I’ll put up – should any of the big companies? I don’t know that that works. Like maybe if one of the big social media companies owned Uber. Like I don’t think regulators are left Facebook by Uber. But if you tie them to one specific retail brand, I see that as a problem. But it doesn’t seem I mean, market cap makes it hard for anybody to buy them. But like would it be crazy for Microsoft to buy, you know, to buy Uber, you know, hey, Spotify just bought Uber like that isn’t financially possible, but it would actually tie in, I think better than Walmart or another specific brand, because Walmart’s not gonna want to deliver CVS, I think that’s you know, that’s an issue. Simon your thoughts here.
Simon Erickson 36:48
It’s too big, it’s too all over the place for someone like Walmart to consider it. You know, Uber is a transportation company, Walmart needs transportation for delivering things, but it doesn’t want to, I don’t think Walmart wants to be shipping people around New York City from the airports and now the mobility side of it, I think they’d rather build out their own fleet and kind of put some autonomy on that perhaps in the future, we’re gonna see how that goes is a buy versus build decision. I think a lot of those companies, especially the retailers that that have interactions with consumers directly, they’re going to be more on the the buy part of this, they’re going to want to work with someone else and let them handle this cost, that is just kind of part of their operations. Build is a much, much harder one. If you were to kind of start from scratch or go out and buy something like an Uber for $100 billion. You’ve got a lot of headaches in your future, and you’re probably a glutton for punishment.
Dan Kline 37:38
I’ll point out also that there’s very low hanging fruit for Walmart, in automating the grocery picking part of its business, there’s about 130,000 people that do that. And as labor gets tight, I expect them to do that. That technology exists, it’s easy, it’s relatively inexpensive, that is much more simple than automating the delivery side of it. So you don’t do the hard things first, you do the easy things first. And I think that’s how it’s going to go in business, we are not going to see humans doing most of the picking of orders for these. Now I do think you’re gonna see some premium services, where you really want you know, the right apple and your salmon to be the right cut, you might pay a premium for someone to go to a nicer grocery store, or whatever it is.
We’re going to close out with a comment close up this topic not close up the show. With a comment from Mike Fee. We’re going to take Mike’s first comment, Sam, thank you for that. Q: Doordash drivers in my area make significantly more per hour on average, versus being an Uber and Lyft driver. Less stress, less risk too. Uber will either have to pay more or charge more for their services, both of which will be challenging. Um, yeah, it’s a problem. Labor is here a commodity like I don’t think anyone’s like, you know what I maybe there’s a few people that have that bartender thing where they like chatting, and they, they want to be in a service business, and they don’t want to be in an empty car. But for the most part, if I’m driving and delivering I’m pretty agnostic on what I’m driving or delivering. And just want money. Simon, your thoughts here?
Simon Erickson 39:01
Yeah, this is my favorite question to ask my Lyft driver every time – I always use Lyft. Dan, that was always the app that I chose, because it was my go to. And I did conferences once every month for four years. So I kind of always like to chat with the driver and say, Hey, you know, did you ever consider Uber or what made you choose Lyft? and 9times out of 10? They said, Hey, I tried both of them. I liked driving for Lyft more. Why is that? Oh, call it you know, it wasn’t getting quite the same volume that Uber was. They always said that Uber was getting them more rides, they were getting paid better and treated better with Lyft. I don’t know if that’s still the case.
Dan, I haven’t traveled quite as much as last year due to COVID. But it seemed like that was predominantly the the personal anecdotes that I was hearing. And again, you know, this is just a cost for both of those companies, right? Uber and Lyft are going to want to maintain good relationships with their drivers. But at the end of the day, it’s not like they want to just go out there and start raising the rates that they’re paying for them. It’s still a cost of the business that’s necessary for them. They would probably replace a lot of their drivers if they could with self driving cars, just to take out the human component. Take out the benefits, take out the safety concerns – all of those things. It’s an interesting relationship, I think that the costs are going up. And Uber and Lyft are kind of competing for a limited pool of people that will run the business operations for both of them.
Dan Kline 39:32
And I’ll also point out that during the pandemic, and I was in an Uber, maybe five or six times, like literally in the past 15 months, but Uber had rules for its drivers. And I would say 60% of the time I was in an Uber, the driver was violating those rules. Now was I going to report the driver, and then maybe the driver realizes who reported him and gives me a bad rating. I wasn’t going to do that. But that is a negative of having a contractor workforce where you really can’t enforce rules. If that was a Wendy’s manager, I could have a district supervisor who pops in every now and then it says, Oh, hey, wait a minute. You can’t mix vanilla and chocolate frosty that’s not allowed. Like, you know, you can’t serve frosty as a dipping sauce. I don’t know why I’m thinking frosty. But I would really like a frosty right now. There’s a lot of problems with this, I guarantee you, we will revisit this topic, I actually think transportation and automation and labor are going to be three of the driving stories of not even the next 10 years, the next one to three years.
Simon Erickson 41:13
Pun intended? Driving stories?
Dan Kline 41:18
Not intended before we get to talking about TikTok and WeChat and what’s going on legally, Simon, we just got close to locking in our picks for next month. So I’ll give you a little peek behind the glass – Simon sends us a Google Doc. And we have to put our top two stock ideas. Why two? Because I assume two of us pick the same one, there has to be some sort of negotiation. So we’re not picking the same stock. I don’t know that that’s ever happened. I’ve never not gotten my top picks. So it’s happened twice. So we send those and then Simon comes back. I think it’s Friday, he goes back and he tells us Yep, we’ve locked in these picks. And then we sit down and write 1500 to 3500 word very easy to digest. They have sections, they’re templated, where you can get all the detail you want or just the overview on why we’re picking that stock, maybe you only care about valuations, you’re going to skip to the valuation or the risk or the management or whatever it is, that’s all there. Then in the third Friday of every month, we do a video presentation with PowerPoint and lasers and then pyrotechnic. No there’s there’s none of that. There’s just PowerPoint. That wouldn’t shock me if Maxx pulled that off. And then we present to our fellow lead advisors. And that can be a 15 minute to a 45 minute presentation. We make that available to our members and Simon, for people who are not members of 7investing. One, what are you doing? But two, you actually only have a few weeks left – a month to lock in our current pricing, what’s our current pricing? It is $49 a month or $399 a year. If you sign up before July 8, you get that pricing forever. When we say forever. What does that mean? That means until the end of time until the zombie takeover, until the murder Hornets come, whatever it is. But Simon, if you do not sign up by then how much is 7investing going to cost you?
Simon Erickson 43:07
Yeah, that’s right, Dan. So a little bit of background on what’s going on out there. As we are increasing the rate for new memberships on July 7 right? The price of 7investing membership will go up to $49 a month or $399 a year if you sign up on July 8 or later. But we also say hey, we really support everybody who’s who supported us so far in getting this business off the ground. And you know, helping 7investing become as great as it is today, we have members in 88 different countries. And we’ve got a top 20 rated podcast, one of the best investing shows out there thanks to you, Dan, doing such a fantastic job with this three times a week. And we said, you know, hey, we want to make sure that that we are in line. And that our price point is in line with the value that we’re bringing.
We have a team of seven advisors now, which is which is three more than we had when we launched last March. We’ve got PhDs on board, we’ve got people that are really looking at the innovative pockets of the market. And we said we really want to make sure we’re aligned to that. And so we’re increasing the price to $40 a month. But we’re also with the important caveat that anybody who signs up by July 7 is grandfathered in at that $49 rate for good, that price will never go up for as long as your membership remains active. So if you join and you want check 7investing out and you say hey, I want to see what these guys and ladies are all about, now’s kind of the right time to do it because you have the option of locking in your rate at $17. For as long as you stay active.
Dan Kline 44:28
You got to tell your friends, this is something where we ask the 7investors to really go out there and say this is a valuable service. If you’re a member, you have a referral code. So put that referral code out there, tag us, tag @7investing and we will share it. We want as many people to be what we’re not officially calling founding members, but that’s how I think of them in my head. We want people to be on board because we believe in long term investing. We believe in what we’re doing. We want all of you to get rich slowly and we know that sometimes that can be difficult when the market is volatile. But we promise we will be here every step of the way to help you with this. So please tell your friends, take it to social media, you know, call everybody.
And of course, we have a waiting list, we’re going to have an $84 student membership. So any person who’s still in school locks in the $84 a year rate for four years, I believe, if they’re actually in school longer than that, that we’ll figure out some sort of way to keep honoring that rate. But right now, four years, it’s just the easiest way to do it. So that is a waiting list at the moment. And yes, if you are a student, I believe we can convert you if if you ask once we once we move over. And we’re excited by so many young investors being part of this, I’ve talked to some young investors and they’re not necessarily even putting money in the market in any meaningful amount. But they’re learning and they’re studying and they’re so excited. And they always bring to me some penny stock, I would never ever recommend that anyone buy. And you get to sort of take them through like why things – it’s so much fun. I really, really like being around just hungry, smart, younger people that’s most of our team is hungry and smart and younger than me. So that is definitely part of it.
If you would like to join if you’d like to come along for the 7investing journey, that is of course, 7investing.com/subscribe, we make all our URLs really easy. So 7investing.com/subscribe, Simon, let’s pivot to what we’re watching. I’m gonna set the table a little bit here. We’re not going to spend too much time on this. President Biden has revoked and replaced two President Trump executive orders that looked to ban TikTok and WeChat. And basically what’s happening is there’s gonna be a commission, it’s the Commerce Department is going to look at these apps, and basically study whether they put American interests at risk. So this takes away the immediate fears of TikTokk, I’ll also point out that with Oracle (NYSE:ORCL) buying TikTok, this is no longer a Chinese company. And they’ve already said their data is not going to be shared with China. So we don’t necessarily have to focus too much on these companies. But Simon, I like the idea that this is being done on a measured governmental basis. And look, do I always agree with say the FCC? Absolutely not. But at least there’s a procedure in place to deal with this. I actually think this is the right way to do it. Without being political your thoughts here?
Simon Erickson 46:12
Dan, you know how it is when you when you want to talk about politics, right? We’d love to help you out if you want to talk about politics, we’ll help you find the door which is right over there. I don’t have a qualified opinion on the politics side of this. Just as the investor might my interest in this is that it’s very challenging for tech companies sometimes to expand into different regions. Other than where they’re personally domiciled, whether the company is domiciled. We’ve talked about this a lot, whether it’s Huawei, whether it’s Bytedance, you know, in the TIkTok thing, whether it’s South America, there’s kind of regional monopolies, that not only exists that way, because of consumer buying habits, but also regulations and kind of things like this, based on the administration. Presidency in the United States, as a four year term, if you get reelected, you might be in there for for eight years. Businesses, when they’re setting up shop in another country, are obviously wanting to think in much longer terms than four or eight years.
And so even the back and forth, even if it’s positive or good for your business at the time, it could always change. And it’s really, it’s really hard. I mean, we’ve seen Netflix, and and Facebook, and so many other companies try to get into China and fail. And you know, and then you see Chinese companies try to set up shop in the United States, and it’s similar frustrations for them. So when we say tech companies, globally scalable, you know, the world is your oyster, international expansion, international revenue growth, it’s a lot harder than I think that just the earnings releases and the takeaways from the conference calls sometimes suggests that it is.
Dan Kline 48:40
I’ll speak in a very base way about Chinese politics, because I think it’s relevant here. And back at the place, I used to work, I did a show with an expert named Ben Ra, who’s actually of Chinese descent and is a wonderful human being. And he sort of explained that in China, people don’t view themselves as separate from government. And I don’t want to specifically, you know, paint any group. But there’s not the privacy concerns we have here sort of endemic, you could see the United States started, we were a country that’s based on freedom and the government, you know, not sticking its nose.
So why is this relevant? It’s relevant, because we’re going to have to have this Commerce Department group, figure out if Okay, if TikTok’s information was shared with with a Chinese company, which it’s not going to be in the US, but let’s pretend it was because it used to be well, is knowing that Simon likes people dancing to Despacito and watches that over and over again, is that relevant? Because it might help you help hack his password or blackmail him somehow? Or is that not all that relevant and we don’t care if the Chinese government has access to that, but through WeChat, you have access to passwords and bank accounts, and maybe that’s something we want.
We want to put a technological barrier or insist that that that data be housed in US servers. So I actually think this is a very nuanced issue and it, it really does affect every big tech company because obviously, Facebook has bank account information for all over the world. So does Apple. So do lots and lots of other companies. So I think what we’re doing is just putting framework in place to deal with these things. And, and as investors, and I’ll give you the last word here, I think we need to know that this is an issue, we’re going to struggle with. That global security is going to be a giant area. And just how is my data shared, like I’ve accepted that my phone number and email are not difficult for anyone to get or buy nefariously, what is going to be our standard for that with like our credit card info and our social security numbers, or even things like you know, my garage door opener has a password, that wouldn’t be difficult to figure out, because I believe it is the birth year of my landlord, which is probably on Facebook, but there’s a lot of steps you’d have to connect to get that.
But I actually think this is part of a much larger global privacy discussion that we need to put the government mechanisms into place. And I’d argue the tech companies need to be part of this, because we saw the congressional hearings on Facebook, and I don’t think this goes to either party. I don’t think your average person in Congress understands what these products are, or how they work simply based on age and inexperience. And I’m not saying there aren’t some super hip tech, older people. My wife’s grandfather was on all of these apps in his late 90s and was super hip. But I don’t think that’s true of the average Congress person. Simon last word here.
Simon Erickson 51:34
We’re in a data world right? There’s information out there everywhere. And the nature of this conversation is where are the vulnerabilities that hackers can take place? Wherever it is, wherever the data is staying, wherever the servers are, whoever’s got access to it, where are the vulnerabilities? And how are we addressing those? We know from the cybersecurity industry that it’s very hard to, for attribution, if hacks take place in other countries, right, it’s very hard to go into some other country and say, Hey, you did this and we’re pointing the finger, because we know it came from here. And then you try to have, you know, some kind of way to take action. It’s very challenging, right?
So you want to put something in place, you wanna have a bigger move, and stronger walls in place to protect important data. We’re started talking about things like genomic sequencing, healthcare data, you know, privacy data on consumers, business information is going to the cloud. I mean, stuff like this is going in a completely new direction than when it’s been protected in the past. And so this is why these conversations keep coming up, because there’s trillions of dollars at stake here.
Dan Kline 52:36
Yeah, we’re living in the Batman world where people are stealing fingerprints and retinal scans, and, and other things like that. So this is – I don’t even think we’re in the first inning of this discussion. And it’s really easy to point out okay, this company is housed in China and has really sensitive information. But we’ve seen that plenty of good old American companies are not necessarily treating our data correctly. So there is going to be something bigger – there also might be a cameo for my cat who just woke up. That being said, we’re nearing the end of the show, Sam Bailey, why don’t we hit our finisher?
So this one, I was so excited Simon this got 2360 votes. So obviously, people cared. Which of these has the biggest risk of collapse over the next decade. 47.3% said Bitcoin, 7.9% said Spotify (NASDAQ:SPOT), 20% said Tesla, 24% said Uber, Simon, I actually think they all have a chance. I actually think it’s Spotify. I don’t think Spotify can diversify its business fast enough to get away from the fact that the artist middleman, then their being the third part of the chain, I don’t think there’s enough money to go around. So I think with how easy it is to record an album, I can record an album on my MacBook with like a couple $100 worth of add on equipment. If I’m a pro musician, a couple $1,000 I no longer need a million dollars to make an album. So I feel like we’re gonna see massive disruption. And artists are gonna say I’m not taking 10 cents on the dollar. I want 80% here.
We’re seeing that in small levels with that with NFT’s and, and Bandcamp and other places. I think all of these companies are risky plays. But I don’t think the model works. And that is true of Spotify, of Apple Music, of anybody’s music service. Apple Music doesn’t have to make money. It just has to keep you sticky to Apple. I don’t think Spotify with the ringer podcast and Joe Rogan can make up the revenue for if all of a sudden Taylor Swift puts out her music on a different platform. And I think if there’s anyone who’s going to do it, it is probably going to be Taylor Swift.
Simon Erickson 54:41
Yeah, great points. Spotify is probably the right answer, Dan. I mean, the question itself says collapse which means that something really big is gonna happen really, really bad. So I hope not Tesla I don’t think Tesla collapses under any circumstance, they’re too established out there. There’s a risk of Bitcoin collapsing. I think I might vote with the majority on this just because there’s a million Bitcoin that’s sitting in Satoshi Nakamoto’s bitcoin wallet, right? That has been untouched since it since the very establishment of Bitcoin. And so if he or she or they or whoever is Satoshi is were to touch that were to sell some of those and everybody sees that address and sees what’s going on. I mean, I that’s kind of like that long tail, nuclear bomb explodes on the price of Bitcoin. I think something like that could have some really big repercussions. So maybe I vote with the majority on this. I might vote with Bitcoin, just in case.
Dan Kline 55:30
Yeah, and notice that my question was Bitcoin and not cryptocurrency. I think there is a strong future for cryptocurrency. We just don’t know what that’s going to look like from a regulatory point of view. Let’s close out with a comment from Mike Fee, which I’m going to pick because it supports what I am saying. So the last one there, Sam, we appreciate it. Q: Spotify is failing miserably on their attempt to capture the podcast marke. Overpaying and not seeing a meaningful benefit to new subs. So the problem Spotify has, and I am a giant fan of Bill Simmons and The Ringer – I listen to, to their media podcast I can’t believe the name of it’s escaping me. I listened to the Bill Simmons, I listen to Ryan Russillo, all sorts of things on that network.
And I do it through Apple, even though Spotify owns them. So did they get some benefit that I’m listening? Yes, they get whatever their their ad cut is on another platform. But there’s no driving reason for me to switch to Spotify. And they can’t pull it from Apple. Because maybe I would say you know what, there’s 10 other podcasts I listened to? And I probably wouldn’t, I probably would be the example of person who would follow them. But it’s just like listening to 7investing now or the seven investing podcast, which I know many of you listen to this and don’t watch it as a video television show is that it’s on every single platform. And if we went exclusive, someone would have to give us a lot of money to do that. Because you’re losing out on just people who reflexively use what comes with their phone or their diehard Spotify or diehard Tidal. That’s the other one that’s out there.
I don’t think there’s there’s a lot of play there. So we appreciate so many of you watching, so many of you asking questions. If you would like to get in touch with us. It is firstname.lastname@example.org. That is questions about your memberships, questions that you’d like to join. Questions about how things work on the site. If you want to interact with us, we are on Twitter that is @7investing, feel free to shout us out include us and things. We did a really fun Twitter spaces last night with me and Matt and Simon and Steve Symington impromptu last night with with our good friend Max Bosenko and Wolf Financial I’m sure we’ll be tweeting that out the tape of that at some point in the next day or two. So we appreciate your support. And we will be back on Friday with at least Matt Cochrane, probably Matt and a surprise appearance by Anirban Mahanti taped that yesterday. Until then, thank you for watching. Sam Bailey thank you for directing, for Simon Erickson. I’m Dan Klein. We’ll see you tomorrow or we’ll see you Friday.
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